Healthcare Finance in 2024: Make or Break Year? AI Holds the Key

As healthcare continues to evolve at breakneck speed, staying ahead of the curve is crucial for leaders. HealthStream's annual white paper, authored by industry expert Robin Rose, MHA, identifies the top ten trends poised to reshape the landscape in the coming year. This blog series delves into each trend.

Healthcare Finance in 2024: Make or Break Year? AI Holds the Key

The healthcare industry has faced significant financial challenges in recent years, with 2022 being one of the worst for hospitals in decades. While some organizations have seen modest improvements in 2023, the future remains uncertain. Both Fitch Ratings and Moody's Investor Service have released their outlooks for the nonprofit hospital sector in 2024, painting two different pictures (Condon, 2023; Muoio, 2023).

Financial Uncertainty for 2024: Fitch Ratings

• Financial challenges persist: Fitch predicts that a significant portion of the healthcare sector will face continued financial difficulties in 2024.
• Labor shortages remain a major concern: The "labordemic" will continue to be a major challenge, with hospitals struggling to recruit and retain staff.
• Increased reliance on contract labor: Hospitals will continue to rely heavily on expensive contract labor to fill staffing gaps.

More Optimistic Outlook from Moody's

• Cautiously optimistic: Moody's is more optimistic than Fitch, forecasting stronger financials for the nonprofit hospital sector in 2024.
• Reimbursement rate increases: Upticks in reimbursement rates and volumes are expected to outpace labor cost increases.
• Financial recovery: Moody's predicts a financial recovery for the sector, with median operating cash flow increasing by 10% to 20%.

The Role of AI in Healthcare Finance

Despite the challenges facing the industry, finance leaders have an opportunity to revolutionize their work using Artificial Intelligence (AI). A recent survey by Pigment (Vashee, 2023) found that:

• Finance leaders are overworked and lack the tools they need: Only 7% of finance leaders are confident in their ability to make strategic decisions, and 89% are making monthly decisions based on inaccurate data.
• AI offers a promising solution: 67% of finance leaders believe AI will revolutionize the world of finance.

Benefits of AI in Healthcare Finance

AI can provide finance leaders with advantages, including:

• Reduced administrative workload: AI can automate many routine tasks, freeing up finance leaders to focus on more strategic work.
• Improved scenario planning: AI can help finance leaders model different scenarios and make better decisions about the future.
• Increased collaboration: AI can facilitate collaboration between finance and other departments.
• Democratization of information: AI can make financial information more accessible to everyone in the organization.
• Enhanced strategic thinking: AI can help finance leaders think more creatively and strategically.

2024 is a critical year for healthcare finance. While the industry faces challenges, AI offers a promising solution to many of them. By embracing AI, finance leaders can transform their work and help their organizations thrive in the years to come.

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References

Condon, A. “2024 will 'make or break' many hospitals: Fitch,” Becker’s Hospital Review, December 5, 2023, https://www.beckershospitalreview.com/finance/2024-will-make-or-break-many-hospitals-fitch.html#:~:text=Despite%20a%20modest%20positive%20turning,in%20its%20annual%20outlook%20report.

Muoio, D. “Moody's predicts,” Fierce Healthcare, November 8, 2023, https://www.fiercehealthcare.com/providers/nonprofit-hospital-sector-stabilize-2024-amid-rising-reimbursement-volumes-moodys.

Vashee, A. “Office of the CFO 2024: Expectations vs. reality for the modern finance professional,” Pigment, accessed December 5, 2023, https://resources.gopigment.com/hubfs/Marketing%20Resources/CFO%20Report%202024/2536_Pigment_FinanceManagersReport_AW.pdf.