Economic optimism is fueling CFOs this year.
As the new year builds momentum, healthcare organizations are prepped to take full advantage of a seemingly on-the-mend economy. With more cash on hand, better borrowing opportunities, and an abundance of cheaper AI options, 2025 is poised to bring more transformation opportunities for health systems.
Defense to Offense
As many industry experts are expecting the economy to improve, healthcare companies are pressing the gas pedal on investments and partnerships. With stable economic conditions seemingly underway, many health systems are breaking out the cheque book to invest in new technology, namely AI, to improve care access and efficiency. With more AI options than ever coming in at lower prices than ever, these investments are now becoming even more accessible. Partnerships are also on the docket this year as more health systems look to collaborate and invest in partnerships and expansions to improve patient access and service offerings.
Here’s how the healthcare landscape is looking:
-72% of healthcare companies expect a revenue increase in 2025.
-57% of CFOs plan to pursue a transaction or partnership in the next year.
-86% say they’re investing as much or more in AI this year compared to 2024.
Many CFOs saw their health systems put in the work in 2024 to make improvements on key performance metrics such as cost management efforts. The report found that 59% of healthcare organizations have between 61-100 days of cash on hand, up 25% from last year. This coupled with returning patient volumes has set many health systems up well for 2025, and now many leaders are expecting better borrowing conditions in 2025. If this plays out, the industry could see many new expansions, partnerships and innovative projects take shape this year.
All In On AI
Remember when we said more health systems are geared up for savvy investments in 2025? Well, AI is still the top investment consideration, as more health systems look to balance innovative technology with robust cybersecurity measures.
According to the report, 100% of CFOs say they are investing in AI this year. When making these investments, health systems need to possess a strong balance of risk and opportunity. It's never a good idea to throw money at new technology without thoroughly examining how it will improve the organization.
"Our goal is not to replace our workforce with technology, but to help our workforce be more effective and efficient in doing their jobs, while also improving their experience when taking care of patients," says HealthLeaders Exchange member and Finance Director of AdventHealth Kaitlyn Anderson.
CFOs will need to ensure their organizations are implementing a balanced AI adoption by taking a long, hard look at developmental costs, determining market needs, and balancing utilization. This year, more CFOs are expecting to get involved in strategic technology discussions, meaning close collaborations with CTOs and CIOs.
AI dominated the discussions at both the VivE and HIMMS conferences this year, and healthcare executives are starting to realize that AI needs to be customized to each organization to gain the most value and truly make a difference. Specifically, generative AI is taking center stage and drawing the most attention from health systems.
Some findings from the report:
-31% of health systems are restricting access to generative AI chatbots due to data privacy concerns and legal complications.
-30% of health systems say they are partnering with external vendors/third parties to build or access generative AI solutions.
-20% say they are building a proprietary generative AI platform.
Who Doesn't Love a Partnership?
Many leaders have expressed optimism about the 2025 economic outlook and plan to take full advantage by engaging in more partnerships and transactions. From joint-ventures to expansions, according to the report 57% of CFOs say they plan to pursue a partnership or transaction in 2025.
However, CFOs should still exercise caution around borrowing options, as there is still the possibility of fewer federal interest rate cuts than expected, which could dampen some plans. One study even cited some surprising obstacles for hospital borrowing costs, specifically for the West Coast.
The report details that CFOs are leaning toward direct investments in home care, lifestyle centers, and virtual care in 2025. Convenience and patient-centered options will be in the spotlight as more health systems focus on value and wellness for their patients.
Overall, growth is the keyword here. Many health systems are looking to use 2025 to accelerate growth in any way that's feasible, especially through geographical expansions and facility/workforce growth.
The data:
-37% of health systems plan to increase hiring/headcount in 2025 (up 25% since 2024).
-21% are planning a geographical expansion (up 16% from 2024).
-47% have increased investment in U.S. expansion plans following the election.
Marie DeFreitas is the CFO editor for HealthLeaders.
KEY TAKEAWAYS
Healthcare CFOs are gearing up for a financially successful year.
Nearly three-quarters of healthcare companies expect a revenue increase in 2025.
Despite the possibility of fewer interest rate cuts, CFOs are looking to pursue more partnerships, expansions and investments such as AI.