Health system CEOs are being pulled in many directions at once, from integrating new facilities in meeting community need to preparing for federal Medicaid reimbursement and other policy changes. For Todd LaPorte, CEO of Scottsdale, Ariz.-based HonorHealth, one of the biggest challenges is deciding how quickly to grow while managing limited financial and staffing resources.
“Somebody asked me what the greatest challenge of being a CEO is. It is clearly how to pace growth and allocate resources. Part of that is how you manage with finite assets like cash, and part of it is how you manage the human resources that are going to be necessary to execute well,” Mr. LaPorte told Becker’s.
Those decisions have been especially relevant over the past two years as HonorHealth has expanded its Deer Valley Medical Center, upgraded its Scottsdale Shea campus and acquired 11 Evernorth Care Group locations from Cigna. Furthermore, the system also assumed the operations for several Arizona facilities affected by Steward Health Care’s bankruptcy, a move Mr. LaPorte said helped preserve access to care in parts of the Phoenix metropolitan area.
The Steward integration began with installing Epic at the facilities in three months, followed by the introduction of HonorHealth’s daily management system. Mr. LaPorte said the changes have helped build confidence among current staff and attract more medical staff, while occupancy has more than doubled since the acquisition.
“With some of our recent acquisition and expansion activity, we need to see it through and see it stabilized. So you could say 2026 has been a year of sticking to the knitting and execution,” he said.
That work remains a priority, but HonorHealth is also preparing for what Mr. LaPorte expects to be a significant financial challenge coming with government program changes beginning in 2027. The system anticipates more than $150 million in annual margin deterioration by 2032 because of federal legislative and CMS policy changes, and has developed a detailed improvement plan with milestones targeted over the next five to six years.
The projection is substantial for a system with approximately $4.5 billion in annual revenue and an operating margin Mr. LaPorte estimated at 1% to 2%, or about $45 million to $90 million in current operating income. HonorHealth reported a -0.2% operating margin in 2025 as part of its stepped investment in community need in crisis.
“With something of that magnitude, we have to prepare now, and that journey starts in 2027,” Mr. LaPorte said.
Among the federal changes hospitals are preparing for are provisions of the 2025 reconciliation law, known as HR 1, that establish Medicaid work requirements for certain beneficiaries beginning in 2027, increase the frequency of eligibility checks and restrict some state Medicaid financing arrangements.
HonorHealth is already seeing patients move from Medicaid coverage into self-pay status, a trend Mr. LaPorte expects to continue into 2027 and become a lasting part of the system’s operating environment. Arizona’s population growth has provided some relief, as higher patient volumes have helped offset the deterioration in payer mix.
“With that population growth and a rising acuity of health needs, we’re seeing higher volumes that are using our facilities. In some ways, that’s mitigating the effect of the payer mix erosion, but that only lasts so long,” he said.
As part of its effort to improve margins, HonorHealth is looking to AI and automation to increase efficiency. The system recently selected Qventus to co-develop AI tools, building on an existing partnership focused on care operations.
“I don’t think we’re looking at that as the silver bullet, but as part of the solution,” Mr. LaPorte said.
The margin improvement plan will continue as HonorHealth undergoes a leadership transition. John Neil, MD, who became HonorHealth’s president in June, will succeed Mr. LaPorte as CEO on March 1, 2027. Mr. LaPorte will remain with HonorHealth as a strategic adviser to the CEO.
Meanwhile, he has been urging local business and community leaders to consider what role they can play in maintaining healthcare access as federal funding policies change. He said states and communities will increasingly face decisions about how much of the difference they are willing to cover.
“If we don’t step up as a community with funding at the local and state level, we can put the breadth of and access to our healthcare services in our community at risk, because the federal government is backing off,” he said. “I also remind people, particularly my business community, that healthcare is basic infrastructure for a vibrant business economy.”
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