3 Quick CFO Takeaways on Healthcare Spending

This year’s CMS data underscores the need for CFOs to pivot toward utilization management, care delivery redesign, and long-range financial planning.

The latest CMS National Health Expenditure (NHE) data reveals that U.S. healthcare spending climbed to $5.3 trillion in 2024, rising 7.2 % year-over-year and accounting for 18 % of the GDP.

This pace, although slightly lower than 2023’s 7.4 % surge, continues to outpace economic growth and general inflation, which signals persistent structural cost pressures across the healthcare system landscape.

For CFOs, this is more than just a statistic. It encapsulates evolving demand patterns, utilization shifts, and underlying financial risks that affect provider margins, payer liabilities, and consumer affordability.
 

1. Spending Growth is About Utilization and Intensity, Not Price Inflation

Perhaps the most striking insight from CMS and subsequent expert analyses is that medical price inflation played a limited role in the overall healthcare spending growth in 2023–2024. Retail drug prices grew below general inflation, and “excess” medical price inflation was negligible. Instead, the principal driver was greater utilization and intensity of care, i.e. more services provided per patient and at higher complexity.

This reframes cost pressures: It’s not simply negotiating better rates or procurement discounts but addressing utilization patterns through clinical optimization, care coordination, and value-based strategies. Investments in population health management and demand-side interventions could also yield stronger financial returns than traditional price levers alone.
 

2. Mix Shifts Toward High-Cost Care and Insurance Coverage Changes

 Hospital care continues to be the largest component of spending, with physician and clinical services holding a significant share. According to CMS data, hospital services grew nearly 8.9 %, while physician services and prescription drugs remained robust.

Moreover, enrollment dynamics —particularly in private coverage—are adding even more layers of complexity. Higher enrollment raises overall utilization, alters payer mixes, and puts pressure on both providers and payers for financial planning. Overall, this signals the need to model volume forecasts more dynamically and integrate payer mix sensitivities into budgeting and capital planning.
 

3. Affordability, Workforce, and Long-Term Fiscal Sustainability

 CFOs should look at the CMS numbers in the context of broader affordability concerns. Wage growth has lagged behind price increases in many parts of the economy, which is tightening  household budgets and elevating out-of-pocket stress. These translate to potential bad debt, uncompensated care, and collection risks for health systems — especially those serving vulnerable populations.

Institutional finances are further stressed by the growing share of GDP allocated to healthcare and projected future increases, which some analyses suggest could approach 20% of GDP by 2033. That trajectory underscores the urgency of scenario planning and long-range forecasting.

The CFO To-Do List:

• Rebalance cost management strategies: Move beyond price negotiations and more into care delivery redesign, utilization management, and chronic care models that lower intensity without compromising quality.
   
• Strengthen financial forecasting: Incorporate high-growth scenarios and payer mix volatility into multi-year financial plans.
   
• Prioritize affordability initiatives: Engage in pricing transparency, patient financial counseling, and innovative payment models to mitigate rising bad debt and support patient access.