Hospital CFOs choose optimism

Hospital CFOs are optimistic about the future despite clear challenges and continued high costs, according to a report from Strata Decision Technology.

More than half of CFOs who completed the survey said they were optimistic about their organization's financial future, and 52% expect to see better operating margins this year than last year. Just 14% of respondents expect operating margins to decrease in 2024.

Looking ahead, CFOs are prioritizing reducing costs and managing strategic and performance improvement initiatives as top priorities this year, and they're confident in their teams; 95% said their teams would be able to adjust strategies if there are sudden market and business changes, according to the report.

Hospitals continue to deal with high labor and supply expenses, with total expenses jumping 22% last year over 2019. Despite many hospitals reducing contract labor dependance, 36% of CFOs said contract labor was their largest unforeseen cost last year.

But many hospitals are also seeing patient and surgery volumes increase above pre-pandemic levels, and hospitals reported 2.2% increase in adjusted discharges last year over 2019.

The transition to outpatient care is also significant. Outpatient volumes dipped during 2020 but have increased significantly since then, and were up 14% in 2023 over 2019. Outpatient revenue was up by 14% as well.

"Revenue increase in 2023 – especially outpatient revenue growth – contributed to finance leaders' optimism about how their organizations will fare financially in 2024," the report noted.

Looking ahead to the rest of the year, Strata listed CFO imperatives including:

1. Continuously monitoring margins. "By tracking performance relative to internal and external financial and operational benchmarks, organizations can measure their performance relative to peers, proactively identify opportunities for improvement, and implement strategies to improve margins," according to the report.

2. Focus on service lines. "By establishing crossfunctional teams to interpret service line analytics, organizations are better equipped to identify which service lines are doing well and which are not, and evaluate the potential clinical and financial impacts associated with specific service line initiatives," according to the report.

3. Take data into payer negotiations. "Market-specific claims data can help them better prepare for critical contract negotiations by understanding where they stand relative to peers, including how their negotiated rates compare to other organizations in the same service area, and the broader healthcare market," according to the report.

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