Prepare Your Budget: 9 Healthcare Finance Predictions for 2025

From AI to reimbursement, CFOs have a lot to think about for 2025.

After a rough year, financial stability is well underway for healthcare. But that doesn’t mean CFOs can relax.

A report from Moody’s Investor Services clocked in the median operating cash flow margin as nearing 7%, but noted that growth is also slowing down. With so many financial factors (and big talk surrounding each one), coming at CFOs in 2025, it can be hard to know where to focus their attention, and budgets.

 Here’s a breakdown of the top trends we’re seeing for healthcare finance as 2025 commences so CFOs can know what’s coming, and more importantly, prepare their organizations.

1. Workforce woes

Labor costs and inflation hit 2024 hard, and unfortunately 2025 may have a similar outlook. The Moody’s report noted that workforce expense growth will continue to slow but will remain above pre-pandemic levels. Staff retention will be key, but cutting contract labor to cut costs is a trend that may continue. CFOs will need to focus on retaining employees, who are increasingly demanding higher pay, and managing expenses.

2. Primping the portfolio

With the median operating cash flow margin improvement and expected revenue growth, according to the report, the industry may see more systems with newfound wiggle room to make strategic investments. Higher performing health systems may find themselves making more business investments in areas like outpatient services and AI updates.

3. The performance gap

Nonprofit hospitals may still struggle in 2025. Around 60% of nonprofit hospitals next year are expected to have a 6%-plus margin, up from 40% in 2023. But, this is still better than pre-pandemic levels of around 78%. A recent Kaufman Hall report put things in perspective: While the outlook is stable, there's a discrepancy between the highest and lowest performing hospitals, a trend that’s set to grow even more throughout 2025.

4. Commercial cash

Moody's report detailed an expectation of higher reimbursements from commercial insurers next year, possibly moving up to the mid-single-digit percent range. The reimbursement increase, combined with the adoption of state-directed pay programs, will push revenue growth to hit 7% in 2025.

5. More cyber threats, bigger cyber budgets

Cybersecurity threats have obviously grown, and the budgets have followed suit and will continue to do so. Healthcare consistently ranks as the industry with the highest average cost per data breach. Cybersecurity is expected to reach 7% of the total technology budget in 2025, up from 5% in 2019, according to the report.

6. Intentional influence

With a new administration poised to take control, many are saying the next four years could be a whirlwind for healthcare. While some have expressed concern over the potential appointment of RFK Jr. as HHS secretary, (his vaccination stance is certainly a widespread concern), others have speculated that his influence will lead to a greater wellness focus. This could be good for the industry, as it could lead to more preventative health programs, and a focus on value-based care and risk sharing models. However, health systems may need to play a bigger role in managing wellness information than in previous years. With a widespread wellness movement, (which has already begun ─ thank you, TikTok), there comes a wealth of wellness misinformation to combat.

7. MMA: Mixed Medicare Advantage predictions

Some say it's time to pull back on MA, as it's been turbulent for years, but others see a comeback for the program. The industry knows that Dr. Mehmet Oz, Trump’s pick to lead CMS, loves MA, and should he be appointed to lead the agency, we’ll have to wait and see what his plans will be.

Dr. Sachin Jain, CEO of SCAN Health Plan, touched on this in his recent Forbes article:

 “I expect that they will ease up the regulatory environment surrounding Medicare Advantage and make it an even more attractive alternative to traditional Medicare (which bizarrely still lacks dental, vision, and audiology coverage) that is often standard in Medicare Advantage plans) over the next 4 years.”

8. More mergers, anyone?

2024 brought some notable mergers, but many deals fell apart after apprehension about the deals being blocked by the FTC or DOJ. While some mergers broke down in the spotlight, only a fraction of healthcare mergers get challenged by the FTC. However, experts have speculated that the new administration will likely encourage more big transactions and big-name mergers.

9. AI all day

The AI gas pedal will be to the floor in 2025. Health systems that aren’t on top of the AI game may fall behind in efficiency and operations, and incur greater costs over time. At the same time, there are still many questions about the technology, and an over-reliance on AI or investments in bad technology with little ROI could seriously cripple an organization. With more AI tools hitting the market this coming year, potentially cheaper AI prices, and more competition,  CFOs will need to be on top of their game to manage the AI hype and steer the right course.

What CFOs will focus on

CFOs will need to focus on a few key strategies to stay ahead of the game, including:

- retaining employees and managing expenses

- investing in partnerships with revenue cycle and care management companies to help drive down costs

-bolstering a reserve fund for unexpected incidents like data breaches.