State of Healthcare Software Development 2026: What CIOs and CTOs Are Budgeting For, Buying, Building, and Expecting From Vendors

Executive summary: what is different about 2026

Healthcare software development in 2026 is defined by a tension that does not resolve neatly. Investment is growing, AI is everywhere, and the pressure on technology leaders has never been higher. But execution is struggling to keep pace. The research compiled from Forrester, Qventus, KLAS, Guidehouse, HIMSS, and PHTI for this article tells a consistent story across very different research populations and methodologies.

Three structural shifts define the year.

AI has crossed from experiment to expectation, but almost nobody has landed it at scale. Guidehouse's analysis of a HIMSS survey found 78% of health systems engaged in AI projects, yet only 52% feel operationally ready to deploy AI at scale. Qventus's research with 60+ health system technology leaders found that only 4% have achieved enterprise-scale AI with measurable outcomes. The gap between engagement and execution is the defining healthcare technology story of 2026.

EHR dependency has become a strategic constraint, not just a technical one. Willingness to wait for an EHR vendor to build a needed feature dropped from 52% to 22% in a single year among health system technology leaders, according to the Qventus 2026 CIO report. This shift is opening significant new demand for third-party integration and development work, while also reshaping how organizations evaluate software vendors.

Buyers have tightened the ROI standard applied to every technology investment. PHTI's 2025 State of Digital Health Purchasing found anticipated ROI is the top purchasing factor for 77% of digital health decision-makers, up from 50% in the previous survey. Organizations that do not show measurable clinical or financial returns are losing ground regardless of technical quality.

Section 1: Healthcare technology budgets in 2026 are growing, but not uniformly

At the market level, healthcare technology investment in 2026 is clearly expanding. Forrester projects U.S. healthcare provider technology budgets reaching $69 billion in 2026, up 7.6% year over year from $64 billion in 2025. Software accounts for $25 billion of that total, representing 36% of provider tech budgets. Tech consulting and systems integration adds another $7 billion, and tech outsourcing a further $6 billion. The combined external-development ecosystem for U.S. healthcare providers represents a significant and growing market.

Healthcare and financial services were among the sectors Forrester identified as expecting double-digit budget increases, driven primarily by investment in generative AI, analytics, and threat intelligence. A separate SmartSense/Coleman Parkes survey of 150 U.S. hospital CFOs conducted in January 2026 found 73% expect their organization's technology budget to increase in 2026, with AI topping clinical and operational investment priorities.

But aggregate projections and individual organization decisions tell different stories. Qualitative reporting from named CIOs in Becker's Hospital Review documented significant variation: Sharp HealthCare projected a "fairly significant" IT budget decrease; Atlantic Health System implemented a 5% IT reduction; North Country Healthcare planned a modest increase. The consistent pattern across these divergent decisions is a shared directive: spend smarter, not just more. AI and cybersecurity are gaining budget share inside flat or shrinking IT envelopes, which means other categories are compressing to fund those priorities.

Note: Forrester aggregate and SmartSense CFO survey data reflect different populations and methodologies. KLAS data covers non-U.S. healthcare organizations; the insourcing signal may not transfer directly to the U.S. market.

Section 2: Building, buying, or partnering the decision has gotten more complex

The build-versus-buy question in healthcare has never been simple, but 2026 has added a third dimension: which layer requires custom engineering regardless of what platform you start with.

The EHR market consolidation visible in KLAS data illustrates this shift. KLAS's 2026 U.S. Acute Care EHR Market Share report found that EHR purchase decisions dropped 40% compared to 2024 and nearly 50% compared to 2023. Epic was the only vendor selected by large health systems in 2025, adding 77 hospitals and now commanding 43.7% of the acute care market and 56.9% of beds. Oracle Health posted a net loss for the third consecutive year, with 65% of its customers classified as leaving or considered vulnerable by KLAS. The market is consolidating around fewer dominant platforms, but that consolidation is not reducing development complexity. It is shifting it. Organizations locked into a single EHR ecosystem still need custom integrations, custom workflows, and custom analytics layers built on top of or alongside their platform.

The Qventus 2026 CIO report makes this dynamic explicit. Willingness to wait for EHR vendors to build needed features dropped from 52% in 2025 to 22% in 2026. Organizations that previously expected their EHR to eventually deliver a capability are now routing that need to third-party development or integration. This is not a rejection of EHR platforms; it is a recognition that the EHR roadmap cannot move at the speed healthcare technology strategy now requires.

The KLAS Global HIT Trends 2026 report (182 non-U.S. healthcare organizations across 43 countries) adds a further signal: 42% of surveyed global organizations report no plans to leverage external advisory support, choosing to protect margins by maximizing internal engineering talent. At the same time, EHR modernization and AI implementation are the areas where organizations most frequently still turn to external expertise, reflecting the limits of internal capability in highly specialized domains. The hybrid reality is not build or buy but: buy the platform, build the integration layer, and bring in specialists for the parts that require domain expertise you do not have.

Section 3: AI adoption in 2026 wide engagement, narrow delivery

No topic in healthcare technology receives more attention in 2026 than artificial intelligence. And no topic has a larger gap between how it is discussed and what is actually happening in production.

The pattern across research sources is consistent: AI engagement is near-universal; AI execution at scale is uncommon. Guidehouse's analysis of a HIMSS survey of 50 qualified healthcare leaders found 78% engaged in AI projects while only 52% felt operationally ready to deploy at scale. Qventus's survey and interviews with 60+ health system technology leaders found 42% deploying AI across multiple use cases but only 4% at enterprise scale with documented outcomes. The Guidehouse team named this pattern "execution paralysis": the barriers are not access to AI technology but organizational readiness, internal alignment, data governance, and staff adoption.

The pressure to close this gap is intense. Qventus found that 65% of health system technology leaders rate AI operationalization pressure at 7 or higher on a 10-point scale, 94% say delays in operationalizing AI would put their organization at a competitive disadvantage, and 77% say even a one-to-two-year delay would mean meaningful lost savings and efficiency gains.

Globally, the direction is equally clear. KLAS's Global HIT Trends 2026 report, covering 182 healthcare organizations across 43 non-U.S. countries, found that AI has become the number-one healthcare IT investment priority for the first time, with 57% naming it as a top priority. EHR/digitalization ranked second at 44%, infrastructure at 26%, and cybersecurity at 25%. Cloud adoption accelerated to 73% of organizations actively using cloud environments, up from 59% in 2025, with AI increasingly shaping cloud strategy.

Where AI investment is concentrating

Among U.S. health systems, administrative and ambient AI use cases are advancing fastest. PHTI's 2025 State of Digital Health Purchasing survey found more than 4 in 5 health plans and health systems have adopted AI solutions, primarily for administrative tasks and clinical decision support. KLAS Global HIT Trends 2026 found clinical documentation as the leading AI sub-priority at 19%, followed by imaging AI at 13%, and AI platforms and integration at 11%. Clinical decision support at 4% is advancing more slowly than administrative automation, despite receiving more public attention.

What is blocking broader AI deployment

Guidehouse's analysis of the HIMSS survey identified 48% of health system leaders citing cybersecurity and data privacy concerns as top barriers to broader AI adoption. Fifty-eight percent plan to implement AI-driven workflow automation or productivity tools within two years. The Qventus report adds an EHR-specific dimension: with 74% of technology leaders naming EHR vendor dependency as a top execution barrier, AI deployment is often constrained by integration complexity rather than by AI capability itself.

These figures come from different surveys with different populations and question wording; they are not additive. Qventus covers medium and large U.S. health systems; Guidehouse/HIMSS covers 50 qualified healthcare leaders. Both findings point in the same direction: engagement is widespread, scaled delivery with outcomes is rare.

Section 4: EHR integration is still the hardest software engineering problem in healthcare

One of the most consistent findings across every major 2026 healthcare technology research property is the centrality of EHR complexity as a barrier to everything else organizations want to accomplish.

The KLAS 2026 U.S. Acute Care EHR Market Share report describes a market in a purchase freeze: EHR buying decisions dropped 40% compared to 2024 and nearly 50% compared to 2023. Most organizations are locked into their current EHR and focused on optimizing it rather than replacing it. For Epic, which holds 43.7% market share in acute care and 56.9% of beds, the near-term question is not which EHR to use but how to extract more value from the platform already in place.

For organizations on Oracle Health, the picture is more complicated. KLAS data finds 65% of Oracle customers leaving or considered vulnerable, with the third consecutive year of the largest net market share loss among tracked vendors. Customer satisfaction with the Millennium platform has declined through repeated post-acquisition restructuring following Oracle's 2022 acquisition of Cerner. KLAS characterizes 2026 as a pivotal year for Oracle, hinging on its new AI-enabled EHR and whether it restores customer confidence.

The Qventus 2026 CIO report's EHR finding is the clearest market signal of the year for development strategy: willingness to wait for an EHR vendor to build a needed feature dropped from 52% in 2025 to 22% in 2026. This creates structural, growing demand for FHIR-based integration, SMART on FHIR development, third-party API work, and middleware capable of bridging clinical data to the AI and analytics layers organizations are building outside the EHR.

What vendor partnership quality means in the EHR context

KLAS's consistent finding is instructive: the primary driver of Epic's market share growth is not just technology capability. KLAS identifies a vendor's reputation for listening to customers, taking feedback, and implementing requested changes as a major factor in satisfaction and market movement. The same principle applies to third-party development partners working in the EHR integration layer. Healthcare organizations do not simply want integration capability; they want partners who understand that EHR environments are complex, that integration specifications differ by EHR, and that maintaining an integration over time requires ongoing attention as EHR APIs evolve.

Section 5: What buyers want from development partners the accountability shift

The buyer expectations research available in 2026 points consistently toward a single shift: accountability has replaced enthusiasm as the primary vendor evaluation criterion.

PHTI's 2025 State of Digital Health Purchasing found that anticipated ROI is the top purchasing factor for 77% of digital health decision-makers, up from 50% in the previous survey. The survey of 309 decision-makers at U.S. health plans, employers, and health systems found that nearly half are now using performance-based contracts tying payment to specific clinical outcomes, member engagement, or financial savings.

The KLAS framing on vendor partnership reinforces this. KLAS's 2026 ERP Implementation Services report identifies three consistent drivers of high client satisfaction: healthcare-specific module expertise, proactive pushback against poor decisions, and strict alignment on change management. These are not generic software-development competencies. They are healthcare-specific partnership behaviors that require organizational investment in domain knowledge, not just technical delivery capacity.

The Qventus 2026 CIO report names vendor consolidation as an emerging strategic priority. More than half of respondents reported spending 11% to 25% of IT bandwidth on vendor management, integrations, and implementations alone. Organizations are asking: which vendors can we hold accountable across a long relationship, not just a single engagement?

Section 6: Cybersecurity is non-negotiable across every budget scenario

Across every research source reviewed for this article, cybersecurity appears consistently as both a top investment priority and a primary barrier to AI adoption. As organizations connect AI tools to clinical data, EHR systems, and patient engagement platforms, the security perimeter expands significantly. Third-party AI vendors, API integrations, and new communication channels all represent potential attack vectors in an industry that has historically been among the most targeted by ransomware and data breaches.

Guidehouse's HIMSS survey found 48% of health system leaders citing cybersecurity and data privacy concerns as a top barrier to broader AI adoption. Multiple Becker's Hospital Review CIO interviews identified cybersecurity as a "non-negotiable" investment area even in organizations implementing budget reductions. KLAS's Global HIT Trends 2026 report ranks cybersecurity as the fourth priority globally at 25%, behind AI (57%), EHR/digitalization (44%), and infrastructure (26%), but describes it as foundational to everything above it.

Section 7: What this means for buyers and development vendors

For healthcare software buyers

Budget software development separately from overall IT spending. The aggregate market figures do not reflect individual organization realities. Track software development as a distinct line from infrastructure, licensing, and staff costs. The allocation to external development partners deserves its own visibility because this spend behaves differently from internal headcount and is more directly tied to project delivery capacity.

Define EHR integration scope before accepting any development estimate. EHR integration complexity is the most consistent source of scope and budget variance in healthcare software projects. Every integration project needs clearly defined EHR environment, FHIR resources, authorization approach, and write-back requirements documented before estimates are generated. Estimates built on undefined integration assumptions will change substantially during delivery.

Apply the ROI standard to development partners as well as software products. A development proposal should articulate what outcomes the engagement is expected to produce, how those outcomes will be measured, and what assumptions behind the estimate could change the result. Partners who cannot answer these questions before development starts are likely to disappoint against them after delivery.

Treat vendor consolidation as a deliberate strategy. Spending more than 10% of IT bandwidth on vendor management is a sign that the partner portfolio has grown beyond manageable scope. A deliberate consolidation strategy, favoring fewer partners with deeper capability, reduces integration overhead and increases accountability. It also makes each remaining relationship more strategically important and worth evaluating more carefully before beginning.

For healthcare software development vendors

Healthcare domain expertise is the primary differentiator. KLAS's finding that healthcare-specific expertise drives the highest client satisfaction applies equally to development partners as to platform vendors. The ability to explain how a specific EHR integration was implemented in production, why a particular FHIR resource was chosen, and what the clinical workflow implications of an architecture decision are is what separates healthcare software engineers from general software engineers.

The willingness to challenge poor decisions is a valued partnership behavior. KLAS's identification of proactive pushback against poor decisions as a top satisfaction driver runs against the instinct to accommodate client requests. In healthcare software development, where the cost of incorrect architecture decisions is high and the regulatory environment is unforgiving, the partner who identifies a scope risk or flags a compliance gap before it becomes a problem is more valuable than the one who accepts all decisions without comment.

EHR integration expertise is moving from differentiator to table stakes. As willingness to wait for EHR features has collapsed and demand for third-party integration grows, FHIR implementation experience, SMART on FHIR capability, and cross-EHR integration knowledge are increasingly expected rather than exceptional. Development partners who cannot demonstrate these capabilities in production environments will be progressively filtered out of healthcare RFPs.

Post-launch accountability is becoming part of the contract expectation. The shift to performance-based contracting in digital health purchasing suggests growing discomfort with the traditional handoff model. Development partners who build post-launch accountability into their engagement model, with defined maintenance, monitoring, integration update handling, and incident response obligations, are better positioned for the long-term vendor relationships that health systems are explicitly seeking.