In a dynamic healthcare landscape, effective cost containment can help health systems Manage their expenses and improve the bottom line.
Health systems have been navigating rising costs for some time now, and CFOs are at the forefront of this challenge. Healthcare costs have steadily been increasing since 2021, making cost containment a crucial strategy going forward.
From high labor costs, to the advent of artificial intelligence (AI) and shifting reimbursement models like value-based care, CFOs are finding they must be agile in their approach. What’s more, external factors such as tariffs and supply chain disruptions add further pressure on health system budgets.
In this week’s episode of The Winning Edge, sponsored by HealthTrust, we’re diving into the nuances of cost containment for CFOs in 2025. Tune in to hear Lynn Ansley, Vice President of Revenue Cycle Management at Moffitt Cancer Center, James Dregney, Chief Financial Officer and Vice President of Finance and Operations at Sauk Prairie Healthcare, and Rich Philbrick, SVP, Strategic Accounts and Performance Solutions, HealthTrust, discuss what cost containment means for health systems and how they are strategizing in 2025.
Value-Based Care Models
The transition from fee-for-service to value-based care (VBC) is reshaping how providers deliver services and get reimbursed. But often, this model can be a double-edged sword for CFOs. While value-based care aims to reduce unnecessary spending by prioritizing preventive care, it also requires significant investment in infrastructure, data analytics, and care coordination.
To get serious about VBC, CFOs must prioritize investments in electronic health records (EHR) and other technologies that allow for better tracking of patient outcomes. A shift to value-based care may involve financial risk, but it can also result in more sustainable and predictable revenue streams when implemented strategically and effectively.
Factoring AI into the strategy
AI offers a promising avenue for providers to streamline operations and reduce unnecessary expenditures, but with so many AI solutions on the market, CFOs must be careful in choosing the right technology.
Despite the industry hype, health systems should not invest in AI simply for the act of hopping aboard the new technology train. CFOs must consider factors like costs of implementation, training, and continued governance. There’s also the question of how new technology could disrupt workflows and affect staff.
While initial investments in AI technology can be substantial, the long-term savings and efficiency gains often outweigh these costs.
Tariffs
Tariffs pose yet another challenge for providers. The fluctuating costs of medical devices, pharmaceuticals, and personal protective equipment (PPE) due to international trade policies can quickly disrupt budgets. CFOs will need to work with supply chain managers to develop contingency plans, such as diversifying suppliers, leveraging group purchasing organizations (GPOs), and investing in local or domestic suppliers where possible.
Additionally, negotiating long-term contracts with vendors and suppliers can also help to give a little price stability in a volatile market. Leveraging data analytics to track supply usage and optimize inventory management is also a crucial strategy. Budgeting for tariffs may certainly play into cost containment efforts for 2025.
High Labor Costs
In the previous finance episode of The Winning Edge, panelists discussed the best strategies for lowering labor costs as this challenge grows for health systems everywhere.
Labor expenses remain one of the largest healthcare budget items, and with increasing demand for healthcare services due to factors like an aging population, these costs are expected to rise. CFOs will have to consider innovative approaches to workforce management, such as enhancing the use of nurse practitioners and physician assistants to handle routine care, which can free up specialists to focus on higher-acuity cases.
Additionally, technology can also play a role here; implementing flexible staffing models, such as telemedicine, can help alleviate the strain on in-person resources and reduce costs without sacrificing quality.
Join us on Tuesday for a deep dive into the most effective cost containment strategies for healthcare finance executives in 2025.
This episode of our WInning Edge series is sponsored by HealthTrust.
Marie DeFreitas is the CFO editor for HealthLeaders.
KEY TAKEAWAYS
Cost containment is a growing concern for finance executives as healthcare costs, as well as demand, continue to increase.
Components such as technology implementation, value-based care models, labor costs and tariffs all play a role in strategizing for future financial challenges.
Tune in to the upcoming episode of The Winning Edge, where executives will discuss what cost containment looks like for health systems in 2025.