How Healthcare Organizations Are Approaching Financial, Operational, and Strategic Decisions to Drive Long-term Value in a Challenging Economic Environment

Summary

Podcast Episode Summary:

Episode Overview

Podcast: Becker’s Healthcare Podcast
Episode Title: How Healthcare Organizations Are Approaching Financial, Operational, and Strategic Decisions to Drive Long-term Value in a Challenging Economic Environment
Date: March 27, 2026
Host: Erica Spicer Mason, Becker's Healthcare
Guests: Adam McDonald (Managing Director, KPMG), Karishma Sharma (Managing Director, KPMG), Ross Nelson (Senior Partner, KPMG)

In this episode, Becker's Healthcare host Erica Spicer Mason is joined by three senior leaders from KPMG to discuss how healthcare organizations can achieve financial sustainability and strategic growth amid a turbulent economic landscape. The discussion covers evolving deal trends, integrated operational strategies that look beyond cost-cutting, optimizing portfolios, investor criteria for value creation, and each expert’s top lever for driving long-term value.

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Key Discussion Points & Insights

1. Introductions and Current Environment

• Ross Nelson [01:04]:
  • Leads KPMG’s deal advisory and strategy in healthcare, working with payers, health systems, and multi-site providers.
  • Notes a dynamic market shift: corporates are taking more market share compared to private equity (PE), which is at a 5-10 year low in activity.
  • Influences include Medicare/Medicaid rate and eligibility pressures, select market growth, and diverse entity performance across sectors.
• Karishma Sharma [02:33]:
  • Focuses on health system performance improvement and translating strategy into execution for value creation.
  • Emphasizes operational transformation as critical to broader enterprise and deal strategy.
• Adam McDonald [03:32]:
  • Specializes in healthcare M&A, particularly diligence and performance improvement, mostly on the PE side.
  • Highlights investor selectivity, with focus on assets that are scalable, defensible, and have long-term growth potential.

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2. Moving Beyond Cost Reduction — Creating Value through Strategy

• Ross Nelson [05:27]:
  • Growth strategy is no longer solely about cutting costs but involves:
    • Portfolio strategy (doubling down or exiting certain businesses)
    • Active deal work
  • Five Key Categories for Value Creation:
    1. Expansion into New Markets
    2. Expansion into New Services
    3. Vertical Integration/New Business Models
    4. Capability Add-Ons
    5. Cost Leverage/Economies of Scale
  • Example: Payers pursue capability add-ons, tech enablement (e.g., Cigna), and divestitures (e.g., CVS, Cigna's Medicare Advantage exit). Providers show activity in joint ventures, mergers, especially between health-system owned and independent physician groups for shared services, risk arrangements, and operational efficiencies.
  • Notable Quote:
    "We're seeing physician groups that are owned by health systems partner with independent physician groups to create value... offering more services, ensuring better share of wallet... and creating more efficient combined managed services organizations." (Ross Nelson, 07:17)

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3. Operational Excellence for Margin Expansion

• Karishma Sharma [08:38]:
  • Margin compression remains a key challenge.
  • Leading organizations use an integrated, service line-driven approach:
    • Holistic assessment from demand and access to care delivery and throughput.
    • Combine revenue and cost strategies: pricing, value-based contracts, reducing clinical variation, and optimizing care models.
  • Notable Quote:
    "It's less about isolated initiatives and more about a coordinated approach that drives both growth and efficiency." (Karishma Sharma, 09:37)

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4. Signals of Readiness for Sustainable Value Creation (Investor View)

• Adam McDonald [10:31]:
  • Investors assess an organization's defensibility in two dimensions:
    1. Revenue Defensibility:
       • Analysis of reimbursement rate trends, payer mix, volume/utilization patterns, and demographic impacts.
    2. Integration & Scalability:
       • Consistent, sustainable operating models across clinical delivery, tech, systems, and back office.
       • Broad, standardized, and centralized operations are favored.
  • Notable Quote:
    "We're going to be wary of success on an island... disconnected from a broader network or system." (Adam McDonald, 12:38)

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5. Top Lever for Long-Term Value: Expert Recommendations

• Ross Nelson [14:01]:
  • Focus on building the right asset portfolio and aligning physicians effectively for maximum value and mission fulfillment.
  • Quote:
    "Having the right portfolio of assets and the right alignments of physicians... is an important characteristic to follow." (Ross Nelson, 14:05)
• Karishma Sharma [14:23]:
  • Enterprise-wide, scalable performance improvement is the key multiplier for margin expansion, adaptability, and strategy execution.
  • Quote:
    "Organizations that invest in building a scalable, repeatable performance engine... are the ones that can sustain margin, adapt to market shifts and execute on strategic ambitions." (Karishma Sharma, 14:28)
• Adam McDonald [14:56]:
  • Echoes the emphasis on scalable platforms, adding that strong governance and data infrastructure are essential to maintain and track performance over time.
  • Quote:
    "Step one... is building that platform, building that foundation... then... having the operating model, the governance and the data infrastructure... to track [and] maintain that performance." (Adam McDonald, 15:01)

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Timestamps for Important Segments

• Introductions and Current Market Trends: 01:04 – 04:39
• Expanding Beyond Cost Reduction & Five Categories of Value Creation: 05:27 – 08:05
• Operational Margin Expansion Strategies: 08:38 – 09:55
• Investor Perspective/Readiness for Value Creation: 10:31 – 13:22
• Single Most Important Lever for Long-term Value (Expert Recommendations): 14:01 – 15:42

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Notable Quotes

• "We're seeing more integrated and joint venture activity with PE on non-acute care services to leverage operating scale and cost." (Ross Nelson, 07:52)
• "A coordinated approach... drives both growth and efficiency." (Karishma Sharma, 09:37)
• "We're going to be wary of success on an island... disconnected from a broader network or system." (Adam McDonald, 12:38)
• "Organizations that invest in building a scalable, repeatable performance engine... are the ones that can sustain margin..." (Karishma Sharma, 14:28)
• "Having the right portfolio of assets and the right alignments of physicians... is an important characteristic to follow." (Ross Nelson, 14:05)
• "...having the operating model, the governance and the data infrastructure... to track [and] maintain that performance..." (Adam McDonald, 15:01)

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Tone & Style

The conversation is thoughtful, direct, and rooted in practical expertise, blending analytical insights with real-world operational and investment perspectives. Each guest brings a specialized viewpoint, advocating for holistic, integrated approaches over siloed or short-sighted tactics.

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Takeaways for Healthcare Leaders

• Move beyond cost-cutting; embrace integrated strategies that combine growth and efficiency.
• Build defensible, scalable platforms with standardized operations and strong data/governance.
• Align asset portfolios and physician strategies with organizational mission and value creation goals.
• Prioritize enterprise-wide performance improvement infrastructure to adapt and thrive long-term.

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This summary captures the full depth and actionable wisdom from KPMG’s healthcare leaders for anyone seeking to drive long-term value in a challenging economic environment without having to listen to the full episode.

Transcript

[A]

Hello everyone. This is Erica Spicer Mason with Becker's Healthcare. Thank you so much for tuning into the Beckers Healthcare podcast series. Today we're going to talk about how healthcare organizations are approaching financial, operational and strategic decisions to drive long term value in a challenging economic environment. And joining me for this conversation are three leaders from KPMG. We have with us Adam McDonald, Managing Director Karishma Sharma, also a managing director, and Ross Nelson, Senior Partner. Adam Karishma. Ross. Thank you all so much for being here today. Welcome to the podcast.

[B]

Thanks a lot for having us.

[A]

Well, it's great to have you all on the line today and I wanted to get us started with some introductions. But in addition to that, you know, we know that healthcare organizations are navigating a very complex set of demands right now. Growth constraints, financial sustainability, shifting care delivery models. So as you each share a little bit more about yourself, can you also share your area of focus in this environment? And Ross, let's get started with you.

[B]

Sure. Thanks Erica. So this is Ross Nelson. I'm a partner with kpmg. I lead our deal advisory and strategy sector for health care. Our practice, which includes Charisma Adam and various other partners, managing directors and staff, works with payers, health systems and multisite providers on a variety of mandates and engagement that span growth strategy, enterprise strategy, tactical strategy work, performance improvement work, business cases for strategies and deals, and commercialization of opportunities. We do cross functional diligence for transactions and we do integration and separation work on the back end of transactions. Right now what we're seeing is a dynamic environment within the corporate landscape, with corporates commanding more of a market share of activity lately with PE activity near 5 to 10 year lows, but we're optimistic that that activity will rebound this year. The activity that we're seeing is driven by pressures from Medicare and Medicaid on both rates and eligibility levels, as well as continued growth in select markets and a continued wide dispersion of performance and profitability amongst the various entities within each of these sectors.

[A]

Ross, thank you so much. Great to learn more about you, Karishma. Adam, would you like to share a bit more about yourselves as well?

[C]

Yeah. Thanks Erica. It's great to be here. I'm Karisma Sharma. I'm a Managing Director with KPMG Healthcare Advisory Practice. I'm a physician by training and bring 18 years of consulting experience. I focus on health system performance improvement and value creation both within standalone organizations and and in the context of transactions. A big part of my work is helping health systems translate strategy into execution, whether that's unlocking margin, improving access or driving more sustainable operating models at the service line and network level. Increasingly in the environment that Ross was referring to, we are seeing more that that also means thinking about how operational transformation supports broader enterprise and deal strategy. So this is a very timely conversation.

[A]

Absolutely, Krishna, thank you. And last but not least, Adam, tell us a little bit about yourself and your focus area as well.

[D]

Yeah, absolutely. Thanks Erica. Adam McDonald, also a managing director in our healthcare deal advisory and strategy practice. I support some of the areas that Ross and Kurzwe have mentioned, but in particular my focus is in healthcare M and A for both private equity and corporate, but a little more on the private equity side. And my focus is really in the diligence phases for both commercial and operational due diligence as well as pre and post close performance improvement initiatives, also often tied to those key deal theses that are identified by either the buyer or the seller during the process. I think to piggyback off of Ross's point around where we're seeing the slowdown, I think what we're seeing is an increased select selectivity, right. Of what assets they're going after. I think certain organizations and firms are being very particular about where they want to invest and particular about the types of assets they invest in and making sure that the performance is scalable, defensible and something they're looking to be involved in long term.

[A]

Adam, thanks so much for rounding us out with the intros and it's been great to learn about each of the lenses that you're all bringing to the conversation today. I think this is going to be very helpful for our listeners and I wanted to turn the first question over to Ross. Ross, I know you had mentioned that you have a close eye on your work on kind of the enterprise level deal strategy that's taking place in hospitals and health systems and with PE activity as well. But I want to back up and just acknowledge that the conversation around healthcare financial strategy has historically skewed toward cost reduction. So can you share with our listeners where you're seeing organizations move beyond just cost reduction, whether that means partnership affiliations, portfolio strategy in order to actively create value?

[B]

Yeah, sure, Erica. So amongst the growth strategy work that we see, portfolio strategy of folks looking at doubling down or exiting businesses and the deal work we're seeing, it falls into five basic categories. So one would be expansion into new markets, second would be expansion into new services, third would be exposure to vertical integration or new business models, fourth would be capability add ons and fifth would be cost leverage or economies of scale. So for example, we're seeing payers focused on doing capability add ons to a lot of their work as well as new services while rationalizing various lines of businesses. So for example, for UHG or UnitedHealth Healthcare they've continually had a provider focus and have continued to kind of double down on their commercial business, acquiring various assets from other folks. Cigna continues to be focused on tech and tech enablement and membership enablement and CVS continues to be a broad services provider on the deal front. With regards to payers, we recently helped Cigna with their Medicare Advantage business exit and have helped CVS with various divestitures in the market. On the provider side we're seeing a range of structures between full mergers, joint operating agreements between organizations that are somewhat dissimilar and new joint ventures to create value. One example of this would be we're seeing physician groups that are owned by health systems partner with independent physician groups to create value through such levers as getting paid more robustly by payers, offering more services that they don't previously offer, ensuring better share of wallet or cross selling of services amongst their patients, moving to lower cost care models and taking on risk arrangements and creating more efficient combined managed services organizations for the back office. We're also seeing an uptick in health system joint venture activity with PE on non acute care services in order to leverage operating scale, cost and expertise that some of the PE providers bring to the table.

[A]

Really helpful examples Ross. I appreciate those and also how you broke down what you're seeing into five basic categories. So again for our listeners that was expansion to new markets, new services, vertical integration capability, add ons and cost leverage or economies of scale. Really insightful. Karishma, I wanted to move this over to you next. Margin compression remains a defining challenge across health systems. So how can organizations unlock real improvements again beyond cost reduction as we just touched on?

[C]

That's exactly right. Happy to expand on that more. So margin compression continues to be a defining challenge across health systems. What we are seeing is that organizations that are able to move beyond traditional cost reductions are taking a much more integrated service line driven approach to performance improvement. So that means looking at each service line holistically from demand and access to throughput and site of care and really aligning how care is delivered with both patient needs and economic realities in mind. At the same time, most effective organizations are combining both revenue and cost actions together. So a number of our health system clients are working on things like pricing and rate strategy, enhancing their value based contracts performance and capturing the incentives that are tied to quality and access and reducing unwarranted clinical and operational variation. So it's less about isolated initiatives and more about a coordinated approach that drives both growth and efficiency. And we're seeing a number of our health systems clients thinking in integrated service line driven approach to their enterprise, value enhancement and margin expansion.

[A]

I appreciate how you put that Karishma. A coordinated approach is what it's all about. So appreciate you sharing some more of what the operational lens here looks like. And Adam, I'd love to turn it over to you next to get a little more insight on the investor piece you'd mentioned or at least touched on this earlier in your intro remarks that investors and capital partners are increasingly selective in the healthcare market right now. So from your point of view, what signals, whether operational, financial, maybe even strategic, can indicate that an organization is actually ready for sustainable value creation?

[D]

Yeah, absolutely. I think there's, you know, a few things that that all investors are going to be looking at on the revenue and cost side and it's going to vary a lot depending on the subsector that you're in, the type of asset, etc. But ultimately they're looking for defensibility in two areas. The first is defensible revenue. So obviously again it's going to vary, but there's going to be some subset of tailwinds and headwinds for a revenue outlook for any type of asset, whether that's on the reimbursement side, taking a look at how rate changes are affecting or payer mix is affecting what rates or payments are going to be coming through for those types of services. And there's also going to be a volume and utilization play that's going to be impacted by demographics, shifting service utilizations, shifting care models that determine patient care pathways and what patients need, what services, when and at what sites of service, etc. And so really there's not meant to be a silver bullet, but investors are going to be looking for do you have a defensible strategy that is going to address the relevant headwinds and tailwinds that are impacting your market? Do you have kind of a point of view on how you're going to be pursuing growth moving forward? Maybe this is a white space growth or de novo expansion strategy. If you have kind of market opportunity, maybe it's going to be, to Charisma's point, a site of service strategy where you have a point of view where you can materially shift volumes towards a lower cost site of service and drive additional productivity and throughput there. And then on the flip side, they're going to be looking at defensibility in the integration space and scalability space. And what this really means is does the asset have a sustainable and consistent operating model or do they have a path to create one that's across care delivery, technology and systems as well as back office management? I think what we always like to say is, you know, we're going to be wary of success on an island, right? Of a success coming from an asset or an individual practice, individual site location that's, you know, disconnected from kind of a broader network or a broader, broader system. And so we're going to be looking at, you know, what are the aspects of clinical as well as non clinical operations that have been standardized, maybe centralized, what's been technology enabled and for those things that have been standardized, streamlined, integrated, et cetera, how well have they been? And so on the clinical side, this is with their staffing and care models. It might be in how you're pursuing patient journeys and documenting patient journeys. It might be in your overall clinical application side of your tech stack. And on the non clinical side, it's going to be function centralization and standardization for revenue cycle, hr, it, marketing, finance, all those sorts of, you know, big buckets that, that are important there.

[A]

Thanks Adam. So I It's a lot of ground for organizations to cover, but it sounds like overall ensuring that there's a defensible strategy in place that addresses headwinds, tailwinds, shows that the organization is prepared and aware of what's ahead and the opportunities in front of them sounds like a key best practice. Well, wonderful. I know we've talked about a lot today in our short time together, but given everything that we have discussed, from deal strategy to operational performance and investor confidence, if healthcare leaders could focus on just one lever to drive long term value in the next five years, what would each of you recommend and why?

[B]

Sure, Erica, I can start. I'd say that having the right portfolio of assets and the right alignments of physicians to both fulfill the mission and extract as much value creation as possible and fulfill the goals of the organization is an important characteristic to follow.

[A]

Sound advice. Thanks. Ross Karishma, what would you say if

[C]

I had to point to one lever? I would say it's enterprise wide performance improvement as the foundation for long term value creation. What we consistently see is that organizations that invest in building a scalable, repeatable performance engine across service lines, site of care and functions are the ones that can sustain margin adapt to market shifts and actually execute on their strategic ambitions. So when it's in place, it becomes a real multiplier across the entire organization initiatives.

[A]

And Adam, how about you?

[D]

Yeah, I definitely agree with everything Gross and Charisma have both said there. I think maybe I would just reiterate to Charisma's point on the, you know, scalability on the platform. There's, there's got to be kind of that discipline performance as well. So, you know, it's step one, of course is building that platform, building that foundation enterprise wide like Krishna mentioned. And then step two is really, you know, having the operating model, the governance and you know, the data infrastructure as well behind it to kind of track make sure you are maintaining that performance, addressing issues as they arise and kind of continuing to standardize, continuing to innovate where there are opportunities to do so.

[A]

Fantastic. Well, Adam Ross Karishma, it's been incredibly insightful having you on the podcast today. We've heard everything from the enterprise and deal strategy lens to operations and investments. So I just want to thank you all again for making the time to be with Beckers and for sharing your expertise with our audience.

[D]

Thanks so much, Erica. Appreciate it.

[B]

Thank you, Erica.

[C]

Thank you, Erica.

[A]

Thank you. And of course, we'd also like to thank our podcast sponsor for today, KPMG listeners. Be sure to tune into more podcasts from Becker's Healthcare by visiting our podcast [e-mail].