Healthcare Finance Trends for 2024 by CommerceHealthcare® presents the bank’s annual outlook on major factors commanding leadership attention. Ten themes are identified from analysis of a broad spectrum of industry data.
Integration, Cybersecurity, Artificial Intelligence Headline 2024 Technology Investment
Technology is a top-three priority for 56% of providers, and 75% plan spending growth in the next twelve months1. Three information technologies are at the forefront in 2024:
- Robust system integration. CommerceHealthcare® sees its clients integrating various systems to streamline and improve processes.
- Cybersecurity. A poll revealed that 78% of respondents had at least one security incident over the past year.2 Fifteen percent of them cited impact that “compromised patient health or safety.”
- Artificial Intelligence (AI). Almost one-third of leaders recently named AI as the biggest current topic in healthcare technology.3 Finance and Revenue Cycle Management (RCM) uses are already emerging in prior authorization, analyzing accounts receivable, and remittance management.
Difficult Financial Pressures and Conditions Frame 2024 Actions
Decision-making in 2024 will be framed by financial considerations.
- Profitability/Margins: Improvement will be challenging as “longer-term industry dynamics continue to suggest protracted margin compression.”4
- Volume: Despite some recovery, 44% of healthcare systems remain behind their pre-pandemic inpatient volumes.5 Moody’s sees a “modest rebound” in volumes in 2024.6
- Cash: Moody’s projects that 2024 median operating cash flow margins will increase 100 basis points to 7%.7
- Debt/Credit: Almost one-quarter of hospitals encountered debt covenant challenges during the past 12 months.8
Workforce Shortages Maintain Hold on Leadership Attention
Fitch Ratings describes pervasive 2024 staffing shortages as a “labordemic.”9 National nursing turnover stands at 23%, and the vacancy rate is nearly 16%.10 RCM/finance staffing is problematic as well. In a recent study, 80% of respondents said their turnover in RCM functions is between 11–40%, while 73% cited “finding qualified staff” as a major challenge.11 The fallout from the labor shortages is serious and extensive, impacting care, costs, workforce disengagement, and more.12
Growth Strategies: An Imperative for Near-Term Financial Health and Long-Term Success
Forty-nine percent of surveyed healthcare executives regard growth as their top challenge.13 Four major growth avenues are:
- Outpatient Services. Outpatient volume will grow 16% between 2023 and 2033, compared to just 2% for inpatient, and ambulatory surgeries will rise 18%.14
- Telehealth. Virtual care encounters continue to see solid growth.
- Home Care. Many see promise in the budding Hospital-at-Home (HaH) movement. Of healthcare systems capable of developing a program, 26% have fully implemented one.15
- Mergers and Acquisitions (M&A). In a mid-2023 survey, 75% of respondents expected M&A activity in the coming 12- to 18-months, and 65% will increase activity over the next three years.16
Taking Patient Financial Experience to the Next Level
This year is expected to bring a concerted push by providers to elevate their game in delivering a positive patient financial experience. Comprehensive strategies are called for: “Without a holistic, unified strategy and high-quality services, the patient financial experience will remain fragmented and continue to disappoint consumer expectations.”17
Persistent Affordability Issues Fueling Patient Financing Expansion
Healthcare affordability is a persistent problem. In a Harris poll, 26% of Americans said healthcare costs strain their finances, and 23% have insurance coverage gaps.18 Many seniors who rely on Medicare have turned to Medicare Advantage (MA) plans to address affordability. MA has become a significant point of contention between payers and providers who feel the reimbursement rates are too low and the administrative hassles too high. A critical solution to the affordability issue is expanded no- and low-interest patient financing options.
Momentum Building for Greater Finance/RCM Automation and Outsourcing
Automation helps achieve sustained cost savings, management of workforce shortages, and removal of complexity from administrative processes. Finance/RCM departments represent attractive automation potential.
The opportunity is sizeable. The Council for Affordable Quality Healthcare (CAQH) estimates the industry cost-saving potential from fully electronic administrative financial transactions at $22 billion.19 The cost differential is about $5.00 for manual transactions versus $0.67 for electronic.
Nearly one-third of healthcare systems plan automation of two or more RCM or finance functions in 2024, with a top focus being accounts receivable.20
Multiple Avenues for Expanded Use of Digital Payments in Healthcare
Healthcare is likely to expand adoption of various digital payment rails over the next 24 months:
- Automated Clearing House (ACH). Healthcare electronic bank-to-bank transactions through ACH experienced volume growth of 5.8% through the third quarter of 2023, continuing its multi-year increases.21
- ePayables/Virtual Cards. This alternative to paying suppliers by check or ACH is used by 37% of healthcare organizations, and 59% of non-adopters say they plan to do so.22
- Mobile payments. This category encompasses contactless and tap-to-pay technologies as well as eWallets. Mobile payments should see 17% compound annual volume growth across industries through 2025.23 Over 15% of consumers have used an eWallet to pay for healthcare services.24
- Real Time Payments (RTP). Making payments in real time is attractive to providers as it allows them to hold onto cash longer and pay bills with precision timing. The Federal Reserve’s new “FedNow” platform, facilitating 24-hour instant settling and clearing of payments, may provide fresh impetus to RTP expansion.25
Healthcare APM growth will be propelled by convenience for users, cost savings for providers and payers, and retail health competition.
Need to Adapt to a Fast-Changing Competitive Landscape
Non-traditional healthcare providers grew in 2023, and retail health is garnering both consumer mindshare and growing use.26,27 Bain projects the new providers will capture a 30% primary care market share by 2030.28 Healthcare systems, hospitals, and practices are pursuing competition and partnering simultaneously.
Collaboration and Trust Increasingly Central to Strategic Success
Trust-based relationships among patients, staff, clinicians, suppliers, and other providers — including competitors — are essential. Unfortunately, there is a trust gap. For example, only 45% of frontline clinicians trust their leadership to do what is right for patients.29
Conclusion
Progress continues, but leaders are navigating a 2024 filled with uncertainty, difficult tradeoff decisions, and increasing urgency to effect meaningful organizational change. It is a challenging, dynamic environment replete with higher risks and rewards. The overarching takeaway from this report’s data synthesis is the imperative not only to improve financial health, but also address serious issues in workforce management, patient financial experience, and trust-building. Automation, digital payments, and AI are delivering real benefits and offer an expanding menu of solutions. This report also underscores an equally valuable tool: strong partnerships with outside firms that can tailor the technology, processes and advice that an organization needs to meet healthcare’s rigorous demands today and well into the future.
For a more in-depth analysis of 2024 healthcare financial trends, find our full trends report here.
CommerceHealthcare® solutions are provided by Commerce Bank.
2 J. Lagasse, “Almost 80% of Healthcare Organizations Experienced Cyber Incidents in the Past Year,” Healthcare Finance, August 30, 2023.
3 Stoltenberg Consulting, 11th Annual Health IT Industry Outlook Survey, October 26, 2023.
4 Fitch Ratings, “2023 Median Ratios: Not-for-Profit Hospitals and Healthcare Systems,” July 25, 2023.
5 Kaufman Hall, 2023 State of Healthcare Performance Improvement: Signs of Stabilization Emerge, October 2023.
6 L. Dyrda, “Hospital Cash Flow. Margins to Surge in 2024: Moody’s,” Becker’s Hospital CFO Report, November 8, 2023.
7 Ibid.
9 Fitch Ratings, “Controlling Labor Costs Will be Key to NFP Hospital Margin Improvement,” October 2, 2023.
10 Nursing Solutions, Inc., 2023 NSI National Health Care Retention & RN Staffing Report, March 2023.
11 Experian Health, Short-Staffed for the Long Term, November 2023.
12 Ibid.
13 A. Kayser, “The No. 1 Healthcare Challenge, Per 150 Leaders,” Becker’s Hospital Review, August 15, 2023.
14 Sg2, 2023 Impact of Change Forecast Highlights, 2023.
15 Healthcare Innovation, 2023 State of the Industry Survey, January/February 2023.
16 HealthLeaders, “Intelligence Report: What’s Driving M&A,” July–August 2023.
17 Health Management Academy, First to Last Touch: Investment in Patient Financial Experience Key to Revenue Improvement, April 2023.
19 CAQH, 2022 CAQH Index, 2023.
20 Healthcare Financial Management Association, “New Report Projects Robust Investment in Healthcare Revenue Cycle and Finance Solutions, Despite Economic Headwinds,” August 16, 2023.
21 Nacha, “3Q 2023 ACH Network Infographic.”
22 PYMNTS, Digital Payments: Expanding the Payments Palette, March/April 2023.
23 Deutsche Bank Research, The Future of Payments, Series 4, April 2023.
24 PYMNTS, “More Consumers Use Digital Wallets for Healthcare Expenses,” January 20, 2023.
26 Trilliant Health, Value for Money: Trends Shaping the Health Economy, 2023.
27 R. Leventhal, “Primary Care Practices Lose Patients to Alternative Sites of Care,” Insider Intelligence, December 1, 2022.
28 Bain & Company, “Primary Care 2030: Innovative Models Transform the Landscape,” July 11, 2022.
29 Deloitte Center for Health Solutions, Addressing Health Care’s Talent Emergency, 2022.