CFOs are feeling optimistic about the financial outlook, but there are three large challenges that will need to be navigated.
A majority (79%) of healthcare CFOs expect a revenue increase this year, yet 78% cited profitability as an area of improvement, according to a healthcare CFO outlook survey conducted by BDO.
While CFOs remain optimistic, BDO warns that healthcare organizations may face challenges in achieving higher revenue and profitability due to three main reasons: regulatory pressures, clawbacks of COVID-19 funding, and challenging bond and loan covenant agreements.
A look at the numbers
The survey, which included responses from 100 CFOs, found that 11% of respondents reported their organizations had violated bond and/or loan covenants in the past year, and 30% expressed concern about violating them in the future.
Furthermore, only 35% of healthcare organizations represented in the survey had more than 60 days cash on hand. This highlights the need for more strategic conversations around economic resilience, as identified by 44% of CFOs.
Whatโs the solution?
In response to these challenges, CFOs are shifting their strategies.
The survey found that 39% of CFOs are adjusting revenue cycle management to improve liquidity, while 37% are engaging in strategic cost reductions, including staff. Another 34% are focusing on transforming operating models. These approaches reflect the need for cash flow optimization, cost optimization, and risk management to ensure the continuity of care for patient communities.
Efforts to optimize revenue cycles through roles and workflows, denials, and post-payment audits, as well as the implementation of AI and robotic process automation, are also expected to increase efficiency and financial performance, the survey noted.
Dealmaking is also a priority for healthcare CFOs this year, with nearly three-quarters of respondents including it on their to-do lists. However, challenges such as navigating due diligence, finding the right target or buyer, and addressing valuation gaps are still top concerns for healthcare finance leaders.
What about investments?
CFOs are starting to recognize the potential of new advancements in AI, particularly generative AI.
Almost half (47%) of surveyed CFOs expect to increase technology implementation spending this year, with 98% piloting generative AI and 46% building a proprietary generative AI platform.
These investments are focused on improving front- and back-office operations, including digital investments in patient-provider communications and remote patient care. Use cases for generative AI include treatment plan generation, clinician-to-patient communications, and diagnostics and medical imaging.
In addition to AI, CFOs are investing in predictive staffing, financial reporting software, and enterprise data analytics to enhance their organizations' performance and financial decision-making capabilities.
What does it all mean?
Overall, the survey highlights the cautious optimism of healthcare CFOs for the financial outlook of their organizations in 2024.
While there are challenges to be addressed, CFOs are taking a proactive approach by revisiting strategies and making investments in revenue cycle management, cost optimization, and technology. By focusing on cash flow, efficiency, and risk management, CFOs aim to ensure the continuity of care and resiliency of their operations.
Amanda Norris is the Director of Content for HealthLeaders.
KEY TAKEAWAYS
CFOs are optimistic about their financial outlook, but they are likely to face challenges in achieving higher revenue and profitability.
In response to these challenges, CFOs are shifting their strategies.
By focusing on cash flow, efficiency, and risk management, CFOs aim to ensure the continuity of care and resiliency of their operations.