Healthcare CFOs Look 2024 with Hope but Caution

Healthcare CFOs Look 2024 with Hope but Caution

CEOs in the healthcare industry are facing exciting new prospects, but they may also face difficult obstacles in the future.

Based on a survey of 100 healthcare CFOs conducted by BDO Healthcare CFO Outlook, it can be inferred that almost 80 percent of them anticipate higher profitability in 2024 after a comparable upturn in 2023. Nonetheless, as the report’s authors point out, regulatory constraints, financial clawbacks from the COVID era, and difficult loan and covenant agreements should not be overlooked because they may lead to mistaken optimism.

However, other factors that are adding to this general sense of fair optimism include the potential of AI, emerging care prospects, and the expectation of a return to dealmaking.

“The healthcare industry is still in recovery mode in many ways, and CFOs are revisiting strategy and investment in a proactive approach to support resiliency in their operations,” said Brad Boyd, national co-leader of the BDO Center for Healthcare Excellence & Innovation.“Their clear focus on cash flow, cost optimization, and risk management will be critical to prevent disruption of care to their patient communities.”

In light of the ongoing uncertainty in the market, which may cause CFOs to postpone transaction plans, dealmaking is on the agenda for 72% of respondents to BDO’s poll. The research emphasizes how transaction execution will continue to be impacted by variables like consumer uncertainty, inflation rates, geopolitical events, and the next US presidential election.

The ambulatory care, home care, specialty services, and telehealth sectors are all promising for dealmaking. On the other hand, over 40% of CFOs stated that businesses are thinking about reducing their spending on behavioral health and primary care.

The authors of the research advise healthcare CFOs to ensure they have a clear grasp of the value opportunity, be well-prepared for possible transactions, and be ready for a smooth integration if a deal is completed.

This year, healthcare CFOs will continue to place a high priority on strategic cost reductions and enhanced revenue cycle management in order to get their own financial house in order.

Over one-third of firms intend to carry out strategic cost reductions, which may include personnel cutbacks, notwithstanding the ongoing labor shortages. However, 48% of businesses say they will spend more on hiring, and the same percentage say they will spend more on training. Comparably, 46% of respondents said they will boost employee pay and benefits in 2024.

The authors of the paper state that although artificial intelligence (AI) is currently all the rage, healthcare executives must continue to identify the areas in which AI may have the biggest positive effects, such as improving physician efficiency, supply chain optimization, or consumer satisfaction.

While AI can be helpful, healthcare executives must ensure that appropriate data is collected and that humans are kept informed in order to guarantee that AI and other technologies are operating as intended.

“Healthcare leaders must keep in mind that AI doesn’t have a medical degree,” said Kirstie Tiernan, principal, data and AI at BDO Digital. “It requires clinical oversight to make sure it’s working as intended.”

Fundamentals like cash flow and liquidity should always come first, and in the face of ongoing uncertainty, CFOs will need to be very adaptable.

“Healthcare CFOs have sound strategies for the future—they will simply need to be vigilant and resilient in how they navigate risks to fully realize their potential,” the report concluded.