Capacity constraints, rising costs and consolidation shape outlook for providers in 2026, says Bank of Ireland’s head of Health Sector Gráinne Mahon Henson.
Underlying activity across Ireland’s healthcare sector remains strong, supported by demographic trends and the essential nature of care delivery, according to the latest Bank of Ireland Sectors Team report.
Ireland’s population aged over 65 has now exceeded 800,000, with the cohort aged over 85 expected to more than double by 2040, a shift that is already feeding through to demand for services ranging from nursing homes to community pharmacy.
“The growing proportion of individuals requiring higher levels of support is driving increases in staffing requirements and associated cost pressures”
“Demand conditions continue to be resilient, with capacity constraints, workforce availability and funding structures remaining the key factors shaping performance rather than demand itself,” said Bank of Ireland’s head of Health Sector Gráinne Mahon Henson.
High occupancy highlights pressure on capacity
Residential care continues to operate near full utilisation, with nursing home occupancy levels in the mid-90% range into early 2026. There are approximately 32,200 registered nursing home beds across 544 facilities nationwide, with private and voluntary operators accounting for about 80% of homes and 84% of total bed capacity.
The structure of the sector is also evolving. Group ownership now accounts for around 58% of private nursing home beds, a notable increase in recent years that points to continuing consolidation and merger activity.
Despite sustained demand, capacity growth has remained limited. This has put operational performance under pressure, with outcomes varying depending on staffing stability, regulatory standing and the condition of facilities.
Cost pressures intensify across care settings
Cost inflation remains a dominant issue for providers, particularly in residential care where staffing represents the largest expense.
Wage pressures have increased materially since 2019, reflecting statutory changes and broader inflation. Minimum wage increases of around 6% in 2025 and a further 4.8% in 2026 have added to the burden, alongside wider cost inflation of about 2.5%.
Additional factors, including higher thresholds for employment permits and staffing mix requirements, have compounded challenges, particularly for operators reliant on international recruitment.
At the same time, the complexity of care needs is rising. Data shows that 69% of nursing homes are reporting higher resident dependency levels, while 85% have seen an increase in care hours required.
“The growing proportion of individuals requiring higher levels of support is driving increases in staffing requirements and associated cost pressures,” Henson said.
Pharmacy expands role as demand grows
Outside of residential care, community pharmacy continues to perform strongly, supported by rising prescription volumes and an increase in chronic disease prevalence.
The Community Pharmacy Agreement 2025 has delivered improved remuneration, including higher dispensing fees and expanded service payments backed by an estimated €50m in 2026 funding.
A further development is the rollout of the Common Conditions Service, which allows pharmacists to assess and treat certain conditions directly, easing pressure on GP services and signalling a broader shift in care delivery.
Technology and AI begin to reshape delivery
Healthcare providers are increasingly investing in technology to improve efficiency and compliance, with early adoption of artificial intelligence beginning to influence care delivery.
The Department of Health’s AI strategy is already showing potential benefits, including faster diagnostics, improved patient flow and reductions in clinical documentation time of up to 40%.
This reflects a wider move toward technology-enabled care, particularly in high-volume settings where operational efficiencies are becoming increasingly important.
External risks feed into cost base
The report also highlights the indirect impact of global events, including the Middle East conflict, which is expected to feed into higher energy, transport and supply chain costs across the sector.
Healthcare provision is particularly exposed to energy price volatility, especially in residential and hospital settings where utilities are a significant component of operating costs. Rising shipping costs may also affect the price of pharmaceuticals and equipment.
A structural challenge for the sector is its limited ability to pass on rising costs, with much of healthcare revenue determined through public funding mechanisms such as Fair Deal and HSE contracts.
“Where funding adjustments lag underlying cost movements, margin pressure emerges, particularly for smaller and independent providers,” Henson surmised.
Investment shifts towards scale and efficiency
Investment activity remains ongoing, particularly among larger operators. Consolidation in nursing homes continues, while similar trends are emerging in home care and disability services.
About 80% of total health spending is publicly funded, yet a significant share of service delivery is provided by private operators, especially where public capacity is constrained.
Public capital investment is also playing a key role, with approximately €9.25bn committed under the National Development Plan for health infrastructure between 2026 and 2030.
Across the sector, capital is being directed primarily towards upgrading existing facilities, improving energy efficiency and investing in digital systems rather than new developments.
Outlook underpinned by demand, shaped by execution
Looking ahead, demand across the healthcare sector is expected to remain strong, driven by demographic trends and continued pressure on public capacity.
The State is likely to rely further on private providers, reinforcing steady activity levels, while investment is expected to favour operators with scale, governance strength and the ability to manage regulatory and staffing challenges.
Key risks remain centred on workforce availability, funding adequacy and regulatory complexity, with smaller or less well-capitalised providers more exposed.
“Healthcare continues to stand out as a resilient and defensive sector, albeit one where operational capability will increasingly determine sustainability,” Henson concluded.
Preparing for a more complex operating environment
In her foreword to the report, Bank of Ireland’s head of sectors Paula Feehan said Irish businesses are navigating a shifting economic landscape shaped by global events and rising costs.
“Irish businesses are facing an ever-changing economic and trading environment, particularly in the wake of enduring global events, supply chain disruptions, increased costs and changing consumer behaviours,” she said.
Feehan added that close engagement with industry is central to understanding how these pressures are being felt on the ground.
“Our sector specialists work closely with key industry stakeholders and have a deep understanding of the challenges and opportunities that you face,” she said, pointing to the importance of tailored support as organisations plan for the remainder of 2026.
Read the full report on the various sectors including Retail, Agriculture, Manufacturing, Healthcare, Technology & Telecoms and Food & Drink:
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