What You Should Know
– A new McKinsey & Company report reveals that Health Services Technology (HST) has become the fastest-growing segment in U.S. healthcare, with EBITDA projected to exceed $110B by 2029.
– As traditional payers and providers face a “prolonged strain” on margins, they are decisively shifting investment toward AI-enabled automation and outsourcing to solve structural labor shortages and administrative complexity.
Uneven Recovery Period in Healthcare
The U.S. healthcare industry is entering a period of “uneven recovery,” where the traditional powerhouses—hospitals and insurers—are seeing their share of the profit pool shrink relative to the technology companies that serve them. According to McKinsey’s 2026 Healthcare Profit Pools report, industry EBITDA as a share of National Health Expenditure fell from 11.2% in 2019 to 8.9% in 2024.
While the macro outlook is somber, HST is the outlier, projected to grow at 9% annually through 2029. This isn’t just a trend; it’s a structural migration of value from labor-intensive services to software and analytics.
The Gen AI “Tipping Point”: From Pilot to Production
We have officially moved past the “vaporware” phase of Generative AI. The data shows a massive acceleration in adoption:
- 85% of healthcare organizations are currently implementing Gen AI solutions.
- Over 10% of U.S. physicians are already using AI-powered ambient documentation tools (e.g., medical scribing).
- Workflow Automation: The shift is most pronounced in “workflow-heavy” areas like automated claims management and real-time data connectivity, where the ROI is immediately measurable.
Segment Breakdown: Winners and Losers through 2029
The report illustrates a decisive shift in where money is made in the ecosystem.
- Providers: Facing a “fragile recovery” until 2027. Hospitals are battling a spike in uncompensated care risk as Medicaid disenrollment continues. The bright spot? Non-acute care (Ambulatory Surgery Centers, Home Health, and Hospice) continues to outperform traditional inpatient settings.
- Payers: Group commercial insurance is emerging as the “critical stabilizer,” expected to account for 36% of total payer profits by 2029 as disenrolled Medicaid members move to employer-sponsored plans.
- Pharmacy: Reshaped by the “GLP-1 Effect.” These drugs accounted for half of the 11% growth in drug spending in 2024. Total drug spend is on a path to reach $1 trillion by 2029.
The Efficiency Trap
For decades, I’ve heard that “tech will save us” from rising costs. McKinsey’s data suggests that for the first time, the pressure is high enough—and the tech (AI) is mature enough—that the shift is actually happening. However, a word of caution to the C-Suite: as you move from “labor-intensive” to “software-intensive” models, the competitive advantage lies not in owning the AI, but in the integration. The vendors who can connect fragmented data silos will win; those selling isolated “point solutions” will likely be consolidated into larger platforms.
3 Key Takeaways for Healthcare Leaders
For a CEO or CFO, this report confirms that HST is no longer a back-office expense; it is a core growth strategy.
1. Prioritize Outsourcing: Scale efficiencies are becoming impossible to achieve in-house for mid-sized players.
2. Double Down on ASCs and Home Health: The “site-of-care” shift is permanent and accelerating.
3. Audit your AI Roadmap: If you aren’t among the 85% implementing Gen AI, you are already behind the competitive curve.
