Pennsylvania: A Healthcare Overview

Background

Pennsylvania, like other markets across the country, has experienced major consolidation in the healthcare industry. Physicians have become employed by health systems, and independent practices are a minority. These factors continued through 2025 and into 2026.

Key Developments and Trends

Pennsylvania has faced the closure of several hospitals, including Crozer-Chester Medical Center, Heritage Valley Kennedy Hospital and Taylor Hospital, each closing in 2025. From 2018 to January 2026, multiple general acute care hospitals licensed in Pennsylvania have closed, while many others have merged with other licensed general acute care hospitals. Although some hospitals have also opened in that timeframe, the trend evidences the financial pressure that hospitals and health systems have faced in recent years.

Rural healthcare in Pennsylvania has especially faced challenges in this environment. In the wake of reduced federal investments in rural health following passage of the One Big Beautiful Bill, as well as other financial pressures, rural hospitals have had to cut services or face closure. As of this writing, the state budget remains in limbo, but could potentially alleviate some of those pressures with state financial investment in rural healthcare seeking to offset the loss of federal funding.

Federal spending changes, particularly with the loss of certain subsidies for Affordable Care Act health plans, have led to a rise in insurance premiums for Pennsylvanians, which itself has led to many individuals dropping coverage. The largest number of terminations of coverage have been among older rural Pennsylvanians and those whose incomes place them just outside qualification for Medicaid. These factors will likely place additional pressure on hospitals and health systems in the foreseeable future.

Health systems are further challenged in terms of how to incentivize physicians in their compensation and what results they seek from their employed doctors. Other forms of physician alignment have also emerged with some frequency, including leasing the practice to the hospital without selling the practice’s assets. This, in turn, means that the contracts with insurers to pay for physician services run through the hospital or its affiliated physician practice, challenging those payment models and the contracts that create them as well. 

Private equity continues to influence the healthcare industry in Pennsylvania, producing various results in terms of cost savings and quality of care. In the last year, Prospect Medical Holdings, the entity which owned Crozer-Chester Medical Center, declared bankruptcy. Chariot Equities purchased the facility the same year, and has yet to reopen the site. Some legislators have suggested laws that seek to prevent events such as the shuttering of Crozer-Chester Medical Center, but thus far these have not been passed into law. Pennsylvania does not permit physicians to be employed by non-professional entities, so the structuring of relationships between private equity and licensed healthcare practitioners is another challenge adding to the complexity of these arrangements.

Fraud and abuse enforcement and the dynamics of whistle-blower lawsuits also remain a significant threat. Every year Medicare fine-tunes the Physician Fee Schedule, and in recent years has taken that publishing opportunity to regulate in other ways. For example, it has used the fee schedule publication to clarify substantive aspects of the rules regarding “incident to” billing as well as Stark law interpretations. In addition, Pennsylvania has an Insurance Fraud Code (and a Workers’ Compensation version of that statute), which restricts in different ways the potential relationships among providers, physicians, lawyers, payers and claims submission for insurance payments. Pennsylvania’s Workers’ Compensation laws remain linked to Medicare payment rates, but the Pennsylvania Commonwealth Court’s 2024 opinion extending portions of the federal physician self-referral restrictions into Pennsylvania’s Workers’ Compensation rules has raised questions as to the legality of certain business structures, as well as the ability for providers, such as durable medical equipment suppliers, to provide services to Pennsylvania Workers’ Compensation patients. The Pennsylvania Supreme Court granted an appeal in December 2024, but has yet to issue an opinion in the case. Issues of physicians under Workers’ Compensation-owning pharmacies when the law prevents them from dispensing drugs have also raised controversy.

Taking effect on 1 January 2025, the Pennsylvania law prohibiting post-termination restrictive covenants of longer than one year in employment agreements for certain healthcare practitioners has been in effect for a year, but has yet to produce any case law pertaining to the new statutory language.

Outlook

The Pennsylvania healthcare market may face significant shifts in the coming years, depending on the results of the 2026 elections. As of this writing, control of the legislature is split, with Democrats holding a thin majority in the General Assembly, and Republicans holding a two-seat majority in the state Senate. If control of the state Senate shifts, and Democrats are able to retain control of the General Assembly, it may result in a significant shift in the landscape for the healthcare industry. Several proposed laws may be revived, if Pennsylvania finds itself under unified Democratic control, including laws pertaining to the regulation of artificial intelligence both in the provision of healthcare and in health insurance, as well as proposed changes to medical marijuana laws and possible legalization of recreational use. The state budget could also significantly change, with more funding being provided toward rural health and Medicaid. Depending on the outcome of the above-mentioned Workers’ Compensation case, the legislature might revise portions of the Workers’ Compensation laws to clarify the applicability of Medicare to Pennsylvania’s Workers’ Compensation system, especially with respect to federal fraud and abuse laws such as the Stark law.