Adapting to new realities in health industries

The US health system is under growing strain as long-standing challenges around pricing, access, innovation, and regulation intensify at the same time. Across health industries (HI), companies are being pushed to deliver better outcomes and patient experiences while managing rising costs, accelerating technological change, and an increasingly uncertain policy environment.

These pressures are reshaping business models in different ways:

• Providers are contending with inflation and shifting reimbursement models.
• Payers are facing shrinking group margins as enrollments decline and employers seek cost savings and alternative products.
• Pharmaceutical and life sciences companies are navigating heightened pricing scrutiny alongside rapid scientific advancement.
• Medical technology companies are racing to modernize commercial and operating models as data, AI, and digital care become central to value creation.

For boards, this convergence of forces raises the stakes for oversight. Directors are being asked to guide strategy through volatility, govern emerging technologies, and engage a broader set of stakeholders. Findings from our 2025 Annual Corporate Directors Survey suggest that HI directors are increasingly concerned about whether their boards are equipped to keep pace.

In 2025, 50 directors serving on boards of HI public companies participated in our survey, accounting for 8% of all respondents. HI directors are more likely than their peers in other industries to say:

• Someone on their board should be replaced
• The board is less equipped to oversee AI and technology strategy
• Director education is crucial to boosting board effectiveness

More than six in ten HI directors think someone on their board should be replaced—the highest share of any industry—and more than half of those directors who want refreshment go so far as to say multiple colleagues are not fit for the role. The reasons for thinking the board needs refreshment are mostly in line with directors overall, but HI directors expressed elevated concerns about colleagues arriving unprepared for meetings, hinting at a time-commitment problem.

Business models are changing. As the scramble to adopt and implement smart technologies continues, HI leaders are looking to keep pace, but survey responses from directors at these companies suggest they worry about falling behind peers in other industries.

AI inherently presents new and amplified risks for companies, and a critical factor in directors’ ability to oversee those risks is the quality of information they receive from management. Almost half of HI directors—considerably more than directors overall—say management provides inadequate information on the risks associated with AI use in the company. They also recognize that their collective boardroom skills may no longer be fit for purpose. That perception is likely contributing to increased calls for board refreshment—and underscores the need for upskilling across the HI industry.

With so much discontent from directors about underperformance on their boards voiced over the years, we asked a new question in 2025 about what directors could do themselves to improve their boards’ effectiveness. The top response from all directors was to seek additional training on key topics, but HI directors overwhelmingly say they would see a benefit from more education.

With a change in US political leadership, 2025 brought fresh uncertainty to companies in the HI industry. Shortly before H.R. 1 was signed into law, nearly half of surveyed HI directors said their boards would need to spend more time over the next year dealing with the uncertain regulatory environment.

For some of these companies already navigating AI business transformation, regulatory changes are poised to further reshape their business models. Tighter Medicaid eligibility, more red tape for states without extra funding, rising ACA Marketplace premiums, and growing strain on safety-net providers—not to mention ongoing legal challenges across each of these changes—are already shifting who is covered, who pays, and the stability of revenues. It’s no wonder that 40% of HI directors view regulatory uncertainty as the top external threat to their company’s strategy execution.

Shareholder engagement is another topic being impacted by the volatile US regulatory environment. A new SEC interpretation shifted how large institutional investors can communicate with US public companies, which led many investors to adopt a more cautious approach to shareholder engagement in 2025. This shift could have major implications for HI companies going forward, as their directors were the most likely to report engaging with shareholders over the past year.

And these boards are not just talking to shareholders—they’re taking action based on these discussions. Compared to directors overall, HI directors were much more likely to say they revised an aspect of company strategy or their executive compensation plans.

Directors at HI companies recognize the imperative to adapt to changing technology and regulation, yet they express real concern about their boards’ readiness to oversee AI and navigate emerging regulatory challenges. Many HI directors in our survey say they need more education, creating an opportunity for greater collaboration with management.