A Deloitte research showed that health care finance leaders are looking beyond cost reduction to stabilise and grow operating margins.
Amid the struggle of the health care industry with profitability for the past decade, which intensified since the start of the COVID-19 pandemic, organisations' efforts have been hindered to achieve their mission of delivering innovative, high-quality, equitable, and affordable care.
Deloitte says traditionally, health care finance leaders have relied on cost reduction as the primary strategy to boost profitability, but in the face of various headwinds such as economic volatility, workforce management issues, and supply chain disruptions, many health care CFOs are now actively exploring innovative tools and methods to enhance their financial performance.
Finance leaders focus on a range of levers to help reach their ambitious operating margin targets, Deloitte says.
Operating margin goals are a key priority
Improving their organisation’s operating margin is among the top three organisational priorities for 78% of the finance leaders surveyed. When asked about their margin improvement goals, finance leaders said they have ambitious plans to improve their margins over the next three years, and nearly one-third aim to improve their margins by three or more percentage points.
Finance leaders are creating a more diverse portfolio of margin improvement levers
Marketing and branding emerged as the greatest strategic growth priorities for both health plan and health system CFOs. In addition, better network management, better member retention, and greater cross-selling opportunities, especially for health plans, came up as high-priority growth levers.
Health system CFOs also identified nontraditional revenue models as a growth priority. In fact, nearly two in three of the executives surveyed are planning venture investments in health or non-health startups within the next two years. Several large health plans have already added newer revenue models in addition to their risk business.
For surveyed finance leaders, while cost reduction is no longer the dominant focus for margin improvement initiatives, it is still an important part of the portfolio for both health system and health plan finance leaders. Emerging technologies, like generative AI, can be useful for workforce management strategies, potentially leading to substantial cost savings.
