What healthcare CFOs are expecting in 2024

The survey was conducted by Rabin Roberts Research and included 100 healthcare CFOs from organizations with revenues ranging from $250 million to $3 billion or more. Respondents were equally represented from hospitals/health systems, physician groups, long-term/post-acute home health, academic medical centers, and outpatient/ambulatory surgery centers.

Although fewer CFOs (61%) reported revenue increases in 2023, many are still optimistic about growth in 2024. Overall, 79% of respondents said they expect to see improved revenue, and 78% said they expect to see their profitability increase.

To improve finances in 2024, CFOs are focusing on adjusting revenue cycle management to improve liquidity (39%), engaging in strategic cost reductions (37%), and transforming their operating models (34%).

Generative artificial intelligence (AI) is also growing in popularity among healthcare organizations. Almost all of the CFOs surveyed (98%) said their organizations are currently piloting uses for generative AI, and 47% said they plan to increase their spending on implementing the technology over the next 12 months.

However, some CFOs are also concerned about the potential harms of generative AI, with 36% saying the technology poses an increased risk to their organizations this year. Among these respondents, 25% said they're concerned about AI's potential to generate or act on inaccurate information.

Workforce challenges, including clinician burnout and staffing shortages, continue to be a problem for healthcare organizations, but 47% of CFOs said talent shortage is less of a risk in 2024 than it was in 2023. Many CFOs also plan to increase spending on recruitment, training, and compensation and benefits to address ongoing workforce challenges.

Although dealmaking slowed recently due to high interest rates and economic uncertainty, there may soon be a resurgence in healthcare. In the survey, 72% of CFOs said they plan to pursue some type of deal in 2024. However, respondents also noted several potential challenges in dealmaking, including navigating due diligence (23%), finding the right target or buyer (20%), and valuation gaps (18%).

4 strategies for margin improvement

Although many CFOs expressed optimism about their organizations' finances for 2024, costs continue to be a major challenge for many organizations. Only 35% of respondents said they have more than 60 days of cash on hand, and 44% said they expect to have more strategic conversations about their organization's strategy for economic resilience.

"The healthcare industry is still in recovery mode in many ways, and CFOs are revisiting strategy and investment in a proactive approach to support resiliency in their operations," said Brad Boyd, national co-leader at BDO Center for Healthcare Excellence and Innovation. "Their clear focus on cash flow, cost optimization, and risk management will be critical to prevent disruption of care to their patient communities."

As healthcare organizations continue to face financial challenges, BDO offers four strategies on how to improve margins and reduce costs:

1. Re-evaluate your growth strategy

Organizations should look for different ways to grow patient capture, enterprise revenue, and market share. Increasing access to care and improving the patient experience can both help organizations with their growth strategies in 2024.

2. Optimize revenue cycles

In 2024, many CFOs are focusing on revenue cycle management. Leaders will need to optimize roles and workflows and design processes for denials and post-payment audits. They should also integrate AI and Robotic Process Automation to boost efficiency.

3. Strengthen your risk management plans

As the healthcare risk landscape continues to evolve, leaders should have conversations with board members and key stakeholders about their mitigation and diversification plans, as well as how they plan to address any emerging risks.

4. Look for strategic areas to reduce costs

"Healthcare organizations need to look carefully at cost management strategies that involve staff cuts," BDO wrote. "Focus on lowering your total medical expenses (TME) through tactics like automation, AI, and application rationalization."

For more margin management strategies, check out Advisory Board's expert insight outlining 20 ways health systems can control costs and set themselves up for long-term success. (Cass, Becker's Hospital CFO Report, 2/5; 2024 Healthcare CFO Outlook Survey, accessed 2/6)

Health systems are under increasing pressure to reduce costs. Over years of studying cost-controlling best practices, Advisory Board has identified 20 essential tactics that can help you create near-term savings and set the stage for long-term cost discipline.