The financial ecosystem of healthcare in the U.S. is on an alarming trajectory leading to increasing concerns among finance leaders. National health expenditures are predicted to soar to a staggering $8.6 trillion by 2033, engulfing more than 20% of the country’s GDP. Administrative leaders within health systems underline that discussions on cost containment, payment reform, and long-term financial viability cannot be held off any longer.
Recent forecasts from Centers for Medicare and Medicaid Services (CMS) amplify the enormity of the task at hand, as health spending growth consistently supersedes economic growth. This pattern prompts profound doubts about healthcare operation norms, distribution of risk throughout the healthcare ecosystem, and the necessity for protective measures to ensure enduring stability.
Byron Glasgow, Vice President of Finance for the Philadelphia-based Temple University Health System, marked the impending challenge during a Becker’s CFO and Revenue Cycle Podcast episode, stating, ‘We’re nearing 18% of GDP, and we’ve seen some reaction from the federal government, such as H.R. 1, that could heavily impact a health system like Temple Health.’
He highlighted that despite the introduction of H.R. 1, the escalating healthcare expenses are cause for concern. With hospitals at the forefront of care provision, they often find themselves under intense scrutiny when the dialogue steers towards cost containment. This pressure placed on hospitals differs significantly from other sectors. Whether it’s rising food or gas prices, the query is typically, ‘What will the government do?’ However, in healthcare, the predominant question is, ‘What measures will hospitals take?’
A recent CMS report presents a disconcerting scenario. National health spending saw an 8.2% rise in 2024, with a prediction of 7.1% growth for 2025. This growth rate far surpasses the GDP growth rate, causing finance executives to deem it unsustainable. Hospitals, often operating with fragile margins, are burdened to address these rising costs in a manner that factors in what they can realistically manage and control.
A broader examination of healthcare cost drivers is needed to make substantial change. While Temple Health is focused on improving efficiency in areas under their control, such as streamlining claims processing and reducing administrative waste, Glasgow stressed that healthcare needs to evolve as a system for hospitals to sustainably align with value-based care models.
His sentiments are echoed by Dennis Laraway, the Cleveland Clinic Executive Vice President and CFO. He believes the sector is entering a novel era of industrialization, propelled by three interlocking forces: payment reform, cost transformation, and technology innovation. This includes federal funding reductions, and hospitals are responding by improving labor productivity, consolidating back-office services, and driving systemwide efficiency.
Healthcare has been slow in embracing transformative technologies such as robotic process automation or AI systems. However, these technologies are now gaining notable momentum within the sector, contributing to scalability, improved coverage, faster and more accurate transactions, thereby bolstering cost transformation.
In conclusion, the sustainability of U.S. health systems hinges on a major overhaul, focusing on cost containment, payment reform, healthcare legislation, and technological innovation.