Explore how IT managed services can help health systems navigate Medicaid cuts, stabilize costs, and maximize ROI in 2026.
The proposed Medicaid reimbursement cuts are creating real financial pressure for health systems. Recent KLAS data shows Medicaid cuts are the most widely cited federal policy change expected to have a “devastating” or “catastrophic” impact on provider finances. Combined with rising costs, narrow margins, and staffing challenges, these cuts force health systems to make hard choices in their 2026 budget planning.
As health systems move quickly to understand how these changes will impact operations, likely outcomes include reduced operating margins, increased uncompensated care, delayed or cancelled capital IT projects, and pressure to reduce IT spending. However, 75% of health systems say they are redrawing budgets to prioritize IT investments that provide fast, measurable ROI. Healthcare IT managed services should be considered a critical part of that strategy.
Here’s how managed services can benefit your organization:
1. Free up staff for high-impact work
When budgets are constrained, every hour of internal staff time must drive measurable value. Yet many IT teams remain tied up in routine operational support, from service desk triage to application maintenance. These functions are necessary but rarely move the needle on strategic goals.
By transitioning operational tasks to a managed services partner, health systems can reassign internal staff to more impactful initiatives such as EHR optimization, revenue cycle improvements, or automation projects. These initiatives are crucial for improving patient care, streamlining operations, and enhancing financial performance.
2. Stabilize costs
KLAS found that 86% of health delivery organizations already have multiple contingency plans, including workforce restructuring, service line adjustments, and capital spending cuts. Managed services provide a predictable, contracted expenditure for operational IT, stabilizing costs while ensuring essential systems remain supported.
This stability is crucial as many systems brace for reduced reimbursement with no margin for unplanned cost spikes. Fixed managed services contracts also simplify budget planning and reduce the need for emergency staffing measures to cover critical operations, which can often be the most expensive option.
3. Maximize existing technology investments
New capital investments are facing more scrutiny, making it essential to extract full value from current systems. Whether it’s your EHR, cloud infrastructure, or digital tools, performance and reliability depend on consistent, effective operational management.
Managed services partners bring defined processes, mature operational frameworks, and specialized expertise that can reduce incident resolution times, improve system availability, and enhance user satisfaction. The KLAS report notes that while nearly 40% of health systems are betting on AI and automation to ease administrative loads, many remain in pilot mode due to resource constraints. Managed services can free up internal capacity to advance these transformative initiatives.
4. Maintain strategic control over Epic while enhancing operational support
One common concern among health systems considering managed services is the potential loss of control over critical platforms like Epic. This is a valid consideration as Epic is central to clinical workflows, revenue cycle operations, and patient engagement. However, managed services don’t mean giving up control; they’re about enhancing operational execution while preserving strategic oversight. You can maintain control over your most critical systems.
A well-structured managed services partnership ensures:
- Governance remains internal: Your organization retains decision-making authority over Epic configurations, workflows, and strategic direction.
- Transparency is built in: Partners provide detailed reporting, performance metrics, and collaborative planning to ensure alignment with your goals.
- Flexibility is preserved: Contracts can be tailored to support specific modules or functions, allowing you to scale support without compromising control.
By offloading routine maintenance, updates, and issue resolution, internal teams can focus on areas that truly require internal insight and leadership, such as Epic optimization, clinical alignment, and innovation initiatives.
What to consider
Before including managed services in your 2026 budget, ask these questions:
- Where is internal staff time currently spent, and what isn’t getting done as a result?
- Which operational areas consistently require unplanned spend or premium contractors?
- How could budget predictability improve financial planning under reimbursement cuts?
- Are IT performance metrics aligned to your business goals, and are staff delivering to those metrics?
The bottom line
Medicaid cuts leave little room for inefficiency. Including IT managed services in your 2026 budget will help you ensure core systems remain stable, internal teams focus where they're needed most, and limited dollars go further. As health systems face uncertainty, clarity and resilience will define those who thrive.