Finance

Strategic Planning

Health Care Landscape

February 19, 2025

Strategic Outlook for Hospital CFOs

Hospital system chief financial officers (CFOs) face an increasingly complex financial landscape, one shaped by regulatory shifts, technological advancements and evolving patient expectations. Here are 3 top takeaways to effectively navigate in 2025.

Pharmacy Optimization: With systems reporting 25% of revenue tied to pharmacy operations, this area represents a significant revenue opportunity for hospitals. Optimizing formulary management, reducing drug waste and appropriately navigating 340B program benefits can significantly improve financial performance while maintaining high-quality patient care.

Key Action: Collaborate with pharmacy leadership to implement data-driven strategies to optimize pricing and delivery.

Novel Therapies and Downstream Revenue Impacts: There’s growing uptake across patient cohorts of novel therapies, such as GLP-1s for chronic conditions like diabetes and obesity. The trend could significantly impact hospital financials. Costs could mitigate among providers operating in value-based care environments due to reduced complications and utilization of expensive sites of care, like the emergency department. Yet those dependent on fee-for-service reimbursement, particularly in procedural volumes, may face sizable volume declines if eventually it becomes easier and less cost-prohibitive for consumers to leverage GLP-1s and other novel therapies. Scenario planning can help organizations prepare for this eventuality.

Sg2’s medicine experts modeled potential declines in demand should anti-obesity medicines become fully accessible to all patient types. Expect a 7% overall decline in tertiary/quaternary volumes by 2034.

Key Action: Monitor the impact of novel therapeutic adoption on patient volumes and develop strategies to realign service offerings and revenue models to address these trends effectively.

Systemness for Financial Sustainability: Achieving systemness across a health care enterprise enables individual hospitals to operate as unified entities, optimizing resources, reducing redundancies and leveraging economies of scale. As a result, both financial stability and care delivery quality improve. Few provider systems achieve the durable operations that propel excellence year in and year out. Data from the Vizient Clinical Data Base (CDB), however, spotlight a handful of organizations that remain top performers in quality and accountability scores for a decade or more. Those that sustain a track record of success achieve not only financial sustainability but better consumer stickiness, making them indispensable to purchasers. CDB data show that these sustainers continually refine their definition of systemness and iterate processes.

Key Action: Standardize processes and systems across facilities, implement shared services for non-clinical functions, and foster a culture of collaboration to realize the full potential of systemness.

For a deeper dive into these trends, Sg2 members can subscribe to our Strategy Insights for CFOs newsletter. Not a member? Reach out to us at learnmore@sg2.com for information on the expert intelligence, data-driven insights and strategic perspective Sg2 offers to health system C-Suites.

EsserBrianpx.jpg (Original)
Principal
Brian is a national thought leader focused on emerging topics impacting enterprise growth, scale and sustainability. He often speaks at Sg2 events and industry conferences while engaging directly with management teams and boards on the evolving health care landscape and strategy formulation.