Adjusting to the Trump administration funding cuts: A once-in-a-generation opportunity

We’re entering a moment for healthcare as consequential as March 2020. Back then, the pandemic forced rapid transformation across the U.S. health system. Telemedicine went from a fringe tool to a lifeline nearly overnight. Projects that had stagnated for years were implemented in weeks. Unprecedented collaboration led to operational changes once thought impossible. As someone working in a health system during that time, it felt like we squeezed five years of innovation into five weeks.

Today, many health systems are once again being pushed to the brink. But this time, the threat is financial. And the forces behind it may prove even more disruptive and longer-lasting. 

Budget cuts and mounting economic pressures

The Trump administration’s “One Big Beautiful Bill” includes sweeping reductions to healthcare funding, most notably nearly $1 trillion in Medicaid cuts.

Separately, the administration has also proposed significant reductions to the National Institutes of Health (NIH) budget, including cutting targeted research grants, as well as a cap on indirect cost reimbursement from 45-55% down to 15%. Academic centers like UCSF, Hopkins, and Harvard could lose hundreds of millions, threatening research infrastructure and scientific progress.

Individually, these changes are painful. Taken together, they represent a structural shock that could strip hundreds of millions from hospital budgets, especially in systems that serve complex, high-acuity, and underserved populations.

A system already under strain

Healthcare is already stretched thin. Costs are at a record share of GDP. We spend three times more on administrative overhead than peer nations. Hospitals are declaring bankruptcy, and even the best-resourced systems can’t hire fast enough. Non-clinical vacancies, from front desk to medical coding, remain persistently unfilled.

For years, the response to budget pressure was incremental: a few layoffs here, new software there. But the math no longer works. Hospitals simply cannot afford to maintain large teams executing high volumes of manual, repetitive work.

Layoffs and hiring freezes 

The pain is not theoretical. It’s already here. In just the first half of 2025:

• Sharp HealthCare laid off 300+ employees
• Vanderbilt University Medical Center has plans to lay off up to 650
• New York-Presbyterian plans to lay off 1,000 employees
• University of Pennsylvania Health System shared plans to eliminate more than 300 jobs
• Orlando Health announced plans to cut 940 jobs 

These aren’t isolated incidents but rather warning signs of systemic distress. Behind the scenes, many hospitals are preparing for more layoffs, consolidations, and service closures.

A new mandate for change

During COVID, UCSF’s then-CEO Mark Laret said something to the UCSF leadership team that I’ll never forget: “We have a once-in-a-generation opportunity to permanently reshape how we deliver healthcare in this country.”

That opportunity is here again. The difference is that this time, the driving force is economic pressure, not a virus.

Two years ago, AI in healthcare felt to many like something on their five-year roadmap. A year ago, people were content for their AI strategy to consist of helping doctors capture in-visit conversations more easily without a keyboard. The combination of these macroeconomic forces combined with the fact that most people are now using AI in their day-to-day working and personal lives means a significant shift is underway. AI-enabled transformation has rapidly shifted from exploratory to non-negotiable. What used to be “five years out” now needs to be five months in.

Reimagining care with AI-driven automation

For many people, the conversation about AI in healthcare starts with cost-cutting. But that’s only part of the story. The real opportunity is in improving the patient and provider experience, improving quality of care outcomes, and improving staff productivity…while also reducing costs of care.

Take, for example, my work as an endocrinologist: I can prescribe Ozempic, but my patient may never get it due to prior authorization hurdles.

An oncologist can order the right chemotherapy and the right diagnostic imaging studies, but navigating approvals, scheduling, screening, and education can delay or derail treatment.

Too much friction stands between providers and patients — this is where AI efforts need to be focused: identifying frequent, high-friction workflows and using AI to automate them to help remove barriers and friction at scale. 

The goal isn’t just efficiency - it’s ensuring that every patient gets their mammogram, their pre-procedure call to educate them, their follow-up outreach to check-in on them, that prior authorizations don’t delay their chemo infusion. That someone is reaching out before and after every visit, procedure, or hospitalization to ensure patients have what they need. It’s not just about automating the tasks that humans do today. It’s about everything that isn’t getting done because there aren’t enough people to do it. 

And, the path forward will not be found in traditional cycles and methods: hiring a person to patch each gap, and then cutting when finances tighten again. This approach only deepens the spiral of not enough people to do too much work. The only sustainable path forward is one in which reductions in staffing are paired with the adoption of tools that improve productivity. If we thoughtfully offload repetitive manual work to AI, we can reduce roles without increasing the burden on those who remain. We can actually make care more accessible, scalable, humane, and sustainable, for patients and staff. 

How healthcare leaders must respond

To meet this moment, leaders must move beyond reactive cost-cutting and pilot projects. What’s needed now is bold, structural reinvention.

• Drive transformative—not incremental—change. Instead of tweaking broken workflows, reimagine them entirely. Focus on high-friction areas like patient access, prior authorizations, care coordination, and post-discharge follow-up—where AI-powered automation can deliver exponential gains in both quality and efficiency.
• Redesign the workforce around permanent scarcity. With thousands of clinical and non-clinical roles per system unfilled, the old model of human-only labor is no longer viable. Automation isn’t about replacing people—it’s about filling the chronic gaps and relieving an overstretched workforce.
• Lead with clarity and urgency. Acknowledge the pain of layoffs and disruption, but rally teams with a clear vision for how your organization will emerge stronger. Invite every department to contribute ideas—and make transformation a shared mission, not a top-down mandate.

Healthcare systems cannot optimize their way through this storm. They must reinvent - intentionally, urgently, and together.

Seizing the moment

Healthcare transformation is no longer something to plan for. It’s something to execute now. The current pressures are not temporary disruptions; they are signals that the old ways of operating can no longer sustain us.

The good news: we now have the tools to match the moment. AI is no longer theoretical - it's practical, scalable, and already delivering results. It allows us to automate the repetitive, streamline the complex, and humanize every step of the care journey. We can finally offer care that is more accessible, more personalized, and more sustainable - at scale.

Just as the pandemic forced us into rapid innovation, today’s financial crisis demands the same courage. We’re standing at another historic crossroads. Just like in 2020, we are at an inflection point. The pressures are different than they were five years ago, but the stakes are just as high. The decisions made right now will determine whether healthcare continues to operate on an unsustainable path, or whether we finally take the bold steps needed to reimagine how care is delivered.

We have a once-in-a-generation opportunity to build a healthcare system that works better for everyone - patients, providers, and administrators alike.

The moment is here. So is the mandate. 

The only question that remains: will we act boldly enough to meet it?

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*Editor’s note: This blog has been updated to reflect recent policy changes. You can access the original version here.

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