During 2023, healthcare systems, hospitals, and practices made progress rebounding from the pandemic’s many disruptions. While momentum remains positive, significant headwinds persist.
Overall Observations
- Provider finances are healthier, but there is considerable variability among organizations and the gulf between stronger and weaker performers may be widening.
- Many trends and forces intersect and often conflict, rendering decision-making more complex, with high-stakes.
- Affordability, patient financing and competitive factors are a key triad influencing the patient financial experience in 2024.
- Technology investment is still a priority, especially in revenue cycle automation, artificial intelligence and cybersecurity, but many providers are constrained by their financial challenges.
Financial Update
The financial picture for many health systems, hospitals and practices has brightened somewhat in 2024. An emerging consensus views the industry as increasingly bifurcated into financially healthy and unhealthy organizations. A poll of CFOs earlier in the year indicated that only 54% were achieving positive margins while 39% were negative.1
Just over half of surveyed CFOs said they’re optimistic about their organization’s financial future.2 Fitch’s mid-year assessment of not-for-profit hospitals reaffirmed a “deteriorating” outlook and unfavorable cost trends.3 S&P Ratings questions the “sustainability of positive cash flows” and holds a negative outlook on 25% of hospitals.4 For health insurers, Moody’s expects lower profitability from reduced Medicare Advantage reimbursement rates throughout 2025 and 2026.5
Generating growth and expansion
This year, 57% of C-suite executives consider revenue growth their top strategic initiative.6 The most active expansion paths include:
- Outpatient Services
- Telehealth
- M&A
Managing prior authorization (PA) and payment denials
The American Medical Association (AMA) surveyed 1,000 primary and specialty physicians at the end of 2023 and came away with a clear message: “The PA process continues to have a devastating effect on patient outcomes, physician burnout and employee productivity.”7
Finding solutions to workforce shortages
Labor challenges have abated somewhat in 2024, but shortages appear to be “structural” and are a “long-term challenge.”8 The latest report on physicians forecasts a shortfall of 13,500 to 86,000 by 2036, assuming increased investment in graduate medical education.9
Turnover among skilled administrative and clinical professionals is a critical concern for 83% of surveyed financial managers who now maintain a “primary focus” on attracting and retaining talent.10
Patient Financial Experience Update
Despite improvements, the patient financial experience is a source of frustration for many individuals. A confluence of three forces is exerting pressure on the patient financial experience today: affordability, patient financing demand, and competition.
Affordability
- 46% of adults have little to no confidence that their resources will sufficiently cover their care as they age.
- The average cost of healthcare for a typical individual covered by an employer health plan is $7,151 in 2024, up 6.7% from the previous year.11
- 56% of adults aged 50 and over are “very concerned” about the cost of medical care.12
Patient financing demand
Given that 50% of all patients owe between $1,001 and $5,000 for their care, financing programs are crucial.13 Zero interest rate lines of credit that can be extended for longer terms have been well received by patients and generate benefits for all.
Competition
The proliferation of new retail health competitors offering affordable care has fueled the “rising consumerism” of patients by prioritizing convenience and low-friction processes.
Technology and Automation Update
Automation
Organizations see automation as a source of cost reduction, streamlined payments processing and effective management of suppliers. Most health system finance executives (87%) say they face intensified demand to upgrade their RCM systems.14
Digital Transformation (DT)
A host of technologies aim to “digitally transform” healthcare in ways that unleash major cost clinical and operational benefits necessary to twenty-first century success.
- 89% of healthcare executives call digital transformation a leading priority, but 3 in 4 consider it incompletely planned or resourced.15
- 96% of surveyed finance leaders report that DT is a major emphasis for 2025–26, but under 11% have fully implemented comprehensive solutions.16
- 50% of hospitals and health systems have formulated a comprehensive digital plan that is actively monitored by the financial team.
Cybersecurity and artificial intelligence (AI) have been prominent throughout 2024. AI is one of the most potentially transformative technologies, and 2024 has witnessed little diminution of provider enthusiasm for identifying and implementing tangible applications such as decision support, radiology interpretation, clinical documentation, analytics, and many others.
Digital Payments
- ACH continues to be popular, registering 126 million healthcare transactions in the second quarter of 2024, a gain of 2.8% over the same period in 2023.17 Same day transfers are growing rapidly, with volume up 47% year over year across industries.
- Real-Time Payments. E-Money payments, including mobile wallets, will reach 28% of $2.3 trillion in global non-cash transactions by 2027.18 Advanced technologies are powering banks’ ability to provide “real-time treasury services” facilitating swift transactions to improve “cash management, risk mitigation, and liquidity enhancement.”19
- Buy Now, Pay Later (BNPL). Paying for purchases digitally via interest-free installments has shown appeal, and 29% of consumers have used BNPL over the past twelve months.20
- Earned Wage Access (EWA). There is noted growth in rapid payments to employees and the market anticipates new oversight will underpin its expansion.
- AI-influenced Payments. AI will embed digital payments into broader financial apps and enable “voice-activated conversational front ends.”
- Blockchain as a Support Tool. Proponents say blockchain can bring privacy/security support to the payments infrastructure.
Collaboration and Trust
Research has underscored the contribution these connected values make to several healthcare initiatives:
Value-Based Care (VBC) and care coordination
VBC embodies the objective of delivering high quality, cost-effective care over time and across sites. Robust growth forecasts see 90 million lives covered by VBC models by 2027, up from 43 million in 2022.21
Responding to competition and disruption
The AHA advises hospitals to “emphasize the value your providers deliver consistently as a trusted health partner for the community.”22
Technology adoption
AI and cybersecurity are particularly dependent on user trust to attain full potential. A study on AI adoption identifies one principal challenge as lack of patient confidence in data privacy, unbiased output, and algorithm methodology.23
Health equity
Pinpointing disparities in health access and outcomes for different socioeconomic populations hinges on self-reported data, observes a recent study, but “systemic mistrust of the health delivery system” leads population segments to avoid sharing their information.24
Conclusion
The various factors at play are often intertwined and sometimes conflicting, complicating decision-making. Success still depends on balancing cost control with growth investments in solutions spanning financial management, patient financial experience, automation technology, and trusted collaboration. With healthcare poised to undergo substantial change in coming years, understanding industry dynamics and trends is essential.
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1. Healthcare Financial Management Association, Health System CFO Pain Points 2024 Summary, March
2024.
2. L. Dyrda, “Hospital CFOs Choose Optimism,” Becker’s Hospital Review, March 15, 2024.
3. Fitch Ratings, “2024 Mid-Year Outlook: U.S. Public Finance Compendium,” June 25, 2024.
4. S&P Global Ratings, “S&P Healthcare Credit Beat: Ratings Outlook 2024,” February 27, 2024.
5. J. Lagasse, “Medicare Advantage Profitability on Decline, Moody’s Finds,” Healthcare Finance, February 2, 2024.
6. Sage Growth Partners, The New Healthcare C-Suite Agenda 2024–2025, January 22, 2024.
7. American Medical Association, “Infographic: 2023 AMA Prior Authorization Physician Survey” June 18, 2024.
8. S&P Global Ratings, “S&P Healthcare Credit Beat: Ratings Outlook 2024,” February 27, 2024.
9. Association of American Medical Colleges, The Complexities of Physician Supply and Demand: Projections From 2021 to 2036, March 2024.
10. Black Book Market Research, “Black Book Unveils 2024’s Top Client-Rated Financial and RCM Solutions Leading Digital Transformation and Liquidity Management,” June 24, 2024.
11. Milliman, 2024 Milliman Medical Index, May 2024.
12. University of Michigan Institute for Healthcare Policy and Innovation, “On Their Minds: Older Adults’ Top Health-Related Concerns,” May/June 2024.
13. Kodiak, “Drawing The Line on Patient Responsibility Collection Rates,” February 2024.
14. Black Book Market Research, “Black Book Unveils 2024’s Top Client-Rated Financial and RCM Solutions Leading Digital Transformation and Liquidity Management,” June 24, 2024.
15. McKinsey & Company, “Digital Transformation: Health Systems’ Investment Priorities,” June 7, 2024.
16. Black Book Market Research, “Black Book Unveils 2024’s Top Client-Rated Financial and RCM Solutions Leading Digital Transformation and Liquidity Management,” June 24, 2024.
17. Nacha, “2Q 2024 ACH Network Infographic.”
18. Capgemini, Payments Top Trends 2024, January 2024.
19. Ibid.
20. McKinsey & Company, “Consumer Digital Payments: Already Mainstream, Increasingly Embedded, Still Evolving,” October 20, 2023.
21. McKinsey & Company, “What to Expect in U.S. Healthcare in 2024 and Beyond,” January 5, 2024.
22. American Hospital Association, 2024 Health Care Disruption Outlook, February 2024.
23. N. Sahni, G. Stein, R. Zemmel, and D. Cutler, “The Potential Impact of Artificial Intelligence on Healthcare Spending,” National Bureau of Economic Research Working Paper, October 2023.
24. Optum, 2024 Annual Health Care Trends Report, May 2024.