Healthcare CFOs are increasingly concerned about economic instability, regulatory demands, and rising operational costs, according to a Deloitte survey of over 60 US health plan and system finance leaders. A majority see the economy as a greater concern than last year, largely due to inflation. Staffing challenges, revenue slowdowns post-pandemic, and the need for innovative solutions like automation and upskilling were also highlighted. CFOs are focusing on cost reduction, revenue cycle improvements, and talent management to enhance profitability, while digital transformation and service model optimization are gaining importance in a changing healthcare landscape.
According to a recent survey conducted by the Deloitte Center for Health Solutions, healthcare Chief Financial Officers (CFOs) are grappling with pressing organizational concerns. Topping the list is the current economic landscape, followed closely by new regulatory mandates and the structure of operational costs.
The survey, which involved over 60 financial leaders representing US health plans and health systems, underscores the heightened unease among healthcare CFOs caused by the turbulent economic climate. A staggering 70 percent of respondents believe that the economy now poses a more significant organizational concern than it did in the previous year, with 21 percent perceiving no change in the gravity of the issue.
The survey’s lead author, Tina Wheeler, who serves as the US healthcare leader at Deloitte & Touche LLP, along with her colleagues, highlighted the impact of inflationary pressures on healthcare organizations. Rising costs in care delivery, labor, and supplies are key factors contributing to the increased burden on the operating model of health systems.
In addition to economic concerns, healthcare CFOs also expressed significant apprehension regarding new regulatory requirements, with 57 percent citing them as a major organizational concern this year. Furthermore, 51 percent of CFOs noted concerns about the existing operating model and cost structure.
The survey report highlighted the challenges faced by healthcare organizations, such as slowing revenue growth due to inconsistent volume recovery from the COVID-19 pandemic. Changes in payer mix and care modalities have also affected the operations of health payers and systems, with over 40 percent of health system finance leaders anticipating that it will take more than two years for profit levels to return to pre-pandemic levels.
The report shed light on the workforce-related challenges in healthcare, as personnel expenses account for more than half of all expenditures for healthcare organizations. While there has been some improvement from the previous year, issues like staff burnout and nurse shortages persist. CFOs are allocating additional resources and efforts to retain staff and reduce attrition, resulting in increased workforce costs. To address these challenges, many finance leaders are exploring innovative solutions such as automation, upskilling, and enhanced flexibility.
The majority of healthcare CFOs are focused on cost reduction as a means of recovery. However, Deloitte researchers are challenging organizations to not only reduce costs but also improve profitability.
Health system leaders expressed a preference for improving the revenue cycle, including shortening payment times and redesigning processes, as a strategy to enhance profitability. Fifty-two percent of respondents selected this option, while 48 percent emphasized the need to address talent-related issues, and 42 percent highlighted increased payments as a priority.
Health plan leaders, on the other hand, prioritized improved offerings (60 percent) and medical cost management (57 percent) as key drivers for profitability.
Strengthening the supply chain emerged as a crucial lever for both health system and health plan leaders, with 45 percent of health system leaders and 43 percent of health plan leaders acknowledging its importance.
For health system CFOs, potential high-impact drivers included optimizing service models (42 percent), transforming care delivery (29 percent), and investing in digital transformation (26 percent).
Wheeler and her colleagues noted that traditional methods of increasing efficiency and profitability have yielded diminishing returns in recent years. In light of inflationary pressures and a dynamic macro environment, they suggest exploring alternative levers for profitability, such as digital transformation and service model optimization.
The authors emphasized that enterprise-wide digital transformation initiatives can help healthcare organizations achieve key organizational goals, including enhanced consumer engagement, revenue growth, and cost efficiencies. With evolving consumer preferences and a rapidly changing healthcare ecosystem, it may be an opportune time to reconsider cost-heavy operating models and embrace change.