Analysis:

Analysis

24 Mar 2025

10 minute read

Healthcare CFO Survey 2024

Financial sustainability remains elusive for healthcare CFOs

Deloitte surveyed finance leaders across 29 healthcare providers from both private and public health providers in Australia. This study outlook summarises the key themes emerging from the survey, which mostly relate to financial sustainability, talent shortage, capital deployment and digital infrastructure.

Authors:

Justin Scanlan

Peter Reynolds

Indrani Pal

Healthcare providers are continuing to grapple with financial sustainability amid rising costs, due to an aging population and chronic diseases, inequitable access to services, workforce shortages, gaps in infrastructure, and concerns around the balance between Medicare (public) and private health insurance. These challenges are leading to potential issues with affordability and quality of care for some Australians.

Although finance leaders expect a modest increase in revenue, they anticipate a decline in operating profit during the current year. Labour costs remain a major driver behind rising costs, and the increasing workforce expenses is driven, in part, by workforce shortages and rising wages expense. Other factors also contribute to the erosion of profit margins throughout the sector, including inflationary impact on costs of drugs and consumables, along with supply chain difficulties. These issues directly affect the quality of patient care and accessibility of healthcare services.

The efforts of the CFOs to drive growth are centred around improving operational efficiency and maximising revenue from existing models. This dual approach of focusing on modest revenue increases while optimising existing resources, highlights healthcare organisations’ strategy of balancing growth with sustainable resource management.

This is where AI plays a critical role in improving operational efficiency, with its potential to optimise patient care delivery, provide personalised patient interactions and streamline administrative tasks to take pressures off clinicians. Although finance leaders are aware of the transformative potential of AI, investment in AI has been moderate and has generally not been considered an organisational priority. Particularly, outdated technology infrastructure, data management systems and insufficient workforce capabilities have hindered the widespread adoption of digital technologies across organisations.

Over the next three years, majority of CFOs are prioritising capital expenditure in data and interoperability tools, digital technologies including virtual heath and core business technologies, with a relatively smaller investment in AI.

The key themes emerging from Deloitte’s Healthcare CFO Survey have been discussed further, which include the drive to improve the financial sustainability of healthcare organisations and the role of digital technology in improving operational efficiency.

Financial Sustainability in Healthcare

Healthcare providers are under immense pressure to maintain financial sustainability in an environment marked by persistent inflation and operational challenges.

Cost Pressures on Health Service Providers

Healthcare providers face significant cost pressures, primarily driven by persistent inflation. Additionally, operational challenges such as workforce shortages, limited talent pipelines, and staff burnout further strain financial resources.

Change in Operating Margin

CFOs predict varying outcomes: 65% of public healthcare CFOs foresee a decline in operating margin driven by anticipated increase in cost of supplies, medications, and equipment. 40% of private sector CFOs anticipate a decline in operating margin. In response to rising costs, organisations are turning to a back-to-basics approach. Majority of CFOs are focusing on cost containment, workforce productivity, and capacity optimisation to manage the financial pressures.

Workforce

The acute shortage of healthcare professionals and limited new talent pipeline, combined with high stress and burnout among existing staff, is driving increased turnover rates. This results in higher recruitment costs and contributes to significant cost pressures within the healthcare sector.

Q. What is the projected outlook for operating revenue and operating margin for your organisation?

Revenue Optimisation

Healthcare providers face challenges in obtaining funding from government and private health insurers, impacting revenue optimisation strategies. These constraints necessitate rigorous cash flow management, managed monthly by 59% of CFOs, to maintain financial stability, with efficient cash collection practiced by 93% of these CFOs.

Efficient Cash Collection:

CFOs identify driving cash collection from existing sources of revenue as a primary activity for optimising cash flow. Efficient billing and collection processes are essential to ensure timely revenue recognition and reduce outstanding receivables.

Cash Flow Management

Effective cash flow management is a cornerstone of financial sustainability. According to the survey, 59% of CFOs manage cash flow on a monthly basis, emphasising its importance in maintaining liquidity and responding promptly to financial challenges.

Cost Pressures and Equity Impact on Patients

Rising costs have profound implications for patients, particularly in terms of service accessibility and affordability. As healthcare providers pass on increased operational costs, patients face higher out-of-pocket expenses, which can limit access to necessary services.

Service Accessibility and Affordability

The financial burden of rising healthcare costs disproportionately affects vulnerable populations, exacerbating health inequities. Patients from lower socioeconomic backgrounds may delay or forgo essential care due to cost barriers, resulting in poorer health outcomes and increased long-term healthcare costs.

Health Equity

The survey highlights that rising costs can lead to disparities in healthcare access and outcomes, underscoring the need for healthcare providers to adopt strategies that balance financial sustainability with equitable access to care.

Navigating Talent Challenges in Healthcare

Critical issues highlighted for talent management by Healthcare CFOs include workload pressures, impacts on operational efficiency, strategies for talent retention with an emphasis on health equity, and sourcing talent in a competitive market condition.

Workload Pressures and Impacts on Efficiency

In the fast-paced healthcare sector, workload pressures are a significant concern for finance leaders.

Workforce shortages

Structural issues such as workforce shortages and limited talent pipelines contribute to these pressures, exacerbating operational inefficiencies. The ongoing economic instability and inflation further strain resources, compelling CFOs to implement short-term cost containment strategies to manage margins. This environment leads to heightened stress and staff burnout, which ultimately impacts the quality of care and threatens the sustainability of healthcare organisations.

Talent Retention Including Health Equity

Retaining talent within healthcare organisations is an intricate challenge that requires a multifaceted approach.

Talent alignment

Finance leaders recognise the critical importance of aligning investments in talent with broader health equity goals. Strategies include developing rigorous audit, compliance, and management practices to ensure visibility and accountability in health equity performance.

Equity initiatives

Initiatives aimed at improving diversity, equity, and inclusion within the finance workforce are also key. These efforts involve creating measures and dashboards for health equity metrics, fostering a more inclusive workplace. However, these initiatives face challenges such as insufficient sustained investment and the need for cultural shifts within organisations to fully embrace and implement these changes.

Current Challenges in Sourcing Talent

Sourcing new talent in the healthcare sector is fraught with obstacles.

Competition

Market competition for skilled professionals is fierce, and there are inadequate training pipelines to meet demand. The lingering effects of the COVID-19 pandemic have added to these recruitment challenges, making it even harder to attract qualified candidates.

Systems and Infrastructure

Outdated technology infrastructure and ineffective recruitment practices further hinder efforts to bring in new talent. To address these issues, finance leaders are increasingly involved in innovating workforce models and improving systems to streamline tasks. By doing so, they aim to redirect time to higher-value activities, enhancing overall organisational efficiency and making the workplace more attractive to potential recruits.

Q. Level of agreement on organisational talent-related situations

Capital allocation on digital infrastructure

Capital investment and optimising the use of existing assets plays a crucial role in sustaining growth and competitiveness in the healthcare sector. By prioritising strategic expenditures, healthcare providers can improve their operational efficiency, reduce long-term costs, and enhance patient outcomes.

The survey results indicate that majority of CFOs are prioritising capital expenditure in data and interoperability tools, digital technologies including virtual heath and AI, and core business technologies over the next 3 years.

Capital Investment

Planned capital expenditures over the next three years are a key focus for healthcare CFOs. The survey identifies the prioritisation of capital investment as follows:

Data and Interoperability Tools

These are crucial for enhancing systemic efficiencies, enabling seamless data exchange, and improving decision-making processes across healthcare systems.

Digital Technologies

There is a strong emphasis on adopting digital technologies to streamline operations, reduce costs, and enhance patient care delivery. The transformative potential of AI, though under-leveraged, is recognised as vital for future sustainability and efficiency.

New Building Assets for Hospitals

Investment in new building assets is essential to address capacity constraints, improve patient flow, and modernise facilities to meet growing demands.

Alternate Care Sites

Developing alternate care sites is significant to manage patient volumes effectively, alleviate pressure on traditional hospital settings, and offer flexible care options.

Low Priority

Areas such as mergers and acquisitions and venture investments are considered lower priorities due to the immediate need to focus resources on operational improvements and financial stability rather than expansion or high-risk investments during this period of economic uncertainty.

Adoption of AI

AI significantly enhances financial sustainability through predictive analytics, optimises talent management with advanced recruitment tools, promotes health equity by identifying care gaps, and boosts operational efficiency via automation in healthcare organisations.

However, despite the anticipated spending on technology, only 10% of surveyed CFOs expressed that their organisation is ready for implementation of AI technologies and only 3% of participants indicated their organisation is fluent in the use of AI. This is in stark contrast to global counterparts, where more than 80% of surveyed health system executives expect the proliferation of gen AI to have either a “significant impact” (26%) or “moderate impact” (55%) on their organisations in 2025. Although CFOs see investment in AI technologies as important, but is not being met as an organisational priority. This is largely due to organisations lacking the capabilities and digital infrastructure to facilitate wide-spread adoption.

Q. What ranking would you give to the importance of investing in AI in your organisation (where 0 means 'irrelevant' and 10 means 'critical’)?

Overcoming barriers to AI Adoption

Despite its potential, widespread AI adoption in healthcare faces several barriers:

Outdated Technology Infrastructure

Many healthcare organisations operate with legacy systems that are not compatible with advanced AI technologies. Upgrading infrastructure to support AI applications is essential for seamless integration.

Insufficient Data Management Systems

Effective AI implementation requires reliable and comprehensive data. Organisations must invest in robust data management systems to ensure that the data used for AI applications is accurate and secure.

Lack of Specialist Workforce Capabilities

Implementing and maintaining AI technologies require specialized skills that may be lacking within the current workforce. Upskilling existing employees and hiring specialists with the right capabilities is critical.

Financial Constraints

Initial investment in AI technologies can be substantial. However, demonstrating the long-term cost savings and efficiency gains can help justify these investments to stakeholders.

AI's transformative potential in healthcare spans financial sustainability, workforce planning, health equity, and operational efficiency. By harnessing AI technologies, healthcare organisations can achieve more efficient financial management, address workforce challenges, promote equitable healthcare delivery, and enhance overall operational performance. Investing in AI is not just an option but a necessity for healthcare organisations aiming to thrive in a complex and dynamic environment.

Previous report:

Healthcare CFO Survey 2023

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Healthcare CFO Survey 2024