Here's How CFOs Can Get Ahead of Rising Healthcare Costs

Where can health systems look to level out rising costs?

A new report from PwC Health Research Institute is renewing a call to action to address affordability in healthcare. According to the report commercial healthcare costs are expected to grow 8% in 2025, and 7.5% for the individual market. The survey looked at actuaries at over 20 employer-sponsored and Affordable Care Act and exchange health plans.

The Outlook

The results are concerning for healthcare, insurers, and consumers.

Insurers, in particular, will likely have to raise premiums, which will be a big hit to consumers already facing rising care costs. A rise in premiums could have aftereffects like an increase in the uninsured population and an increase in medical debt, spelling financial strain for health systems.

Although some health systems have seen improved margins in recent quarters, others are still wading through a sea of increased operational expenses attributed to workforce and current medical supply inflation.

There are some notable trends that could hold off the healthcare cost uptick, such as the increased use of biosimilars, as well as more whole-person care cost management by insurers. But these trends won't be enough to offset expenses, according to the report.

Health systems are also faced with increased regulation surrounding government fee schedules for Medicare and Medicaid, which will lead them to recoup those costs through commercial health plan contracts. Out of the health plans surveyed, over half cited private equity, hospital and physician consolidation among the top three cost inflators. This will feed into contract negotiations and health systems will need to be prepared.

What It Means for CFOs

A tough healthcare climate calls for tougher strategies. CFOs will have to double-down on efforts to contain costs and think outside the box to implement new strategies. CFOs will need to implement hard-ball payer strategies to level the playing field and ensure satisfactory contract negotiations.

CFOs can also look to more strictly manage non-clinical expenses and examine where smaller costs are adding up.

Another possibility is to examine opportunities for non-traditional forms of revenue like filming. Some health systems have added thousands of dollars of revenue a day in fees by allowing film companies to use their facility.

CFOs should also be fully aligned with their revenue cycle team to ensure total financial transparency and goal alignment. Staying aligned with CIOs can also have an impact for CFOs so they can ensure their organization isn't leaking money in the wrong places.