Healthcare CFOs expect minimal financial gains in 2025, as high labor costs and insufficient payer rates continue to be major obstacles, according to survey data released last week by financial software company Strata Decision Technology.
The data is based on survey responses from more than 100 finance professionals working at healthcare provider organizations. The survey found that 44% of respondents expect their organization’s operating margins to remain about the same this year compared to last, while 36% anticipate them to rise and 14% expect them to fall.
High costs associated with labor and recruitment were cited as a key challenge by most respondents.
“The primary driver of this is higher wages, and a challenging recruiting environment post-pandemic. While the industry as a whole has started to move beyond focusing on pandemic-specific impacts, labor is an area where the pandemic tail will remain for some time due to the increases we saw to base salaries and benefits in 2020 to 2022,” explained Alina Henderson, Strata’s vice president of healthcare solutions.
The pandemic took a catastrophic physical and mental toll on frontline staff members, and many provider organizations saw attrition in their permanent staff. Employees who left mainly did so due to a loss of morale, or because they moved to a staffing agency with higher hourly payment rates, Henderson noted. In response, many providers increased their base salaries and benefits to incentivize permanent employment.
Henderson also pointed out that frontline staff members have competitive employment options outside of healthcare. This means they’re now seeking more non-salary benefits, such as wellness stipends and flexible schedules, and they have higher salary expectations due to rising inflation, she said.
Payer rates are another key factor causing financial stress among providers. Henderson noted that there is a long history of providers facing an imbalance in negotiating power between their managed care teams and insurers.
“This was often due to a difference in resources both sides were able to dedicate to the effort — insurance companies often had broader access to market data and larger teams, including actuaries as experts in utilization, to inform their negotiating terms. Alternatively, while providers focus extensively on revenue cycle metrics such as AR timing and denials, until recently, many managed care teams lacked access to accurate and granular cost, market and benchmark data, or the ability to project the impact of contract changes,” she remarked.
Providers are beginning to analyze more of these data sets — but at the same time, payers are also leveling up with new AI capabilities that boost their agility and often help them deny more claims, Henderson pointed out.
She said many providers have entered 2025 ready to take advantage of their data.
“While data is abundant, and analytics solutions are increasingly flexible to accommodate different end user needs, many organizations are coming to realize the power of integrated data across their financial and performance management platforms. For example, while it is a useful activity to routinely review cost of care data to understand utilization trends, additional value comes from using that data to inform growth or consolidation plans and model income statement impacts,” Henderson explained.
Overall, healthcare providers are trying to avoid switching from “data rich, information poor” to “information rich, insights poor,” she declared.
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