By Steven Shill
It’s no secret that the U.S. healthcare industry is in deep distress. According to BDO’s 2023 Healthcare CFO Outlook Survey, the forces that made last year so tough for healthcare — including higher labor and supply costs — aren’t going away in 2023. In fact, they could get worse. This begs the question: What are healthcare CFOs going to do to improve their organizations’ finances this year?
- They’re shifting their investments.
This year, healthcare CFOs are significantly increasing investments in primary care, elder care and home care. Organizations that ramp up their elder care and home care capabilities will be better positioned to cater to the aging U.S. population and accommodate higher numbers of Medicare patients. At the same time, demand for primary care is increasing, meaning the right investments in this space could yield high returns for healthcare organizations.
And CFOs aren’t just investing in service lines: this year, healthcare CFOs are doubling down on telehealth, with 47% planning to increase investment in telehealth platforms. But with patients increasingly returning to in-person care over virtual or even hybrid offerings, CFOs planning significant investments in telehealth may want to ask themselves whether it’s really the best place to direct their capital this year.
- They’re eyeing add-on deals.
It looks like big deals are going out of style in healthcare, with more CFOs turning their attention to smaller add-on deals rather than mega-mergers. This trend is likely to solidify as the FTC continues to block large healthcare mergers with antitrust lawsuits.
At the same time, deals are slowing down as companies spend more time in the due diligence phase. Navigating the due diligence process is the top-cited deal challenge this year among healthcare CFOs planning a transaction. We expect to see greater scrutiny during this part of the process, leading to longer deal timelines. Ultimately, we may see a focus on quality over quantity as healthcare companies pursue fewer, higher-ROI opportunities.
- They’re pulling back on digital.
In this year’s survey, just 34% of healthcare CFOs say they’re pursuing digital transformation, down from 53% who said the same in last year’s survey. CFOs seem to be replacing direct investment with dealmaking: enhancing digital capabilities is one of the top-cited deal drivers in healthcare this year.
In terms of specific technology solutions, healthcare CFOs seem to be underinvesting in digital front doors/patient portals and EHR optimization. In BDO’s 2022 Patient Experience Survey, 87% of patients who had used patient portals report finding them helpful. Neglecting to invest in digital front doors/patient portals could be a missed opportunity for healthcare CFOs. At the same time, a properly optimized EHR system can improve workflows and the patient experience, whereas an unoptimized system can actually create more work for clinicians.
What healthcare CFOs should do this year:
So, what should you be doing to strengthen your organization’s financial position in the year ahead? Here are some ways you can prepare for the economic challenges on the horizon this year:
Re-evaluate your budget and financial obligations. This year, just 24% of healthcare CFOs are concerned about violating their bond and loan covenants. As we saw last year, however, the actual number of violations could be much higher. That means that some CFOs are likely overestimating their financial positioning. Take a close look at your finances and identify any potential risk areas, even if you feel the risk is relatively low. Make sure you have a detailed plan of action should you discover you are heading for a violation.
Make sure you don’t fall behind on digital. In times of hardship, it’s tempting to reduce your investment in digital. At the same time, healthcare as an industry has traditionally been slow to adopt technology. Now that patients are driving a shift toward consumerism in healthcare, staying in the analog age is no longer an option. If you want to earn patient loyalty, you need to deliver digital experiences that align with patients’ expectations. One way you can do this is to implement online or self-scheduling through your patient portal.
Consider making a transaction in tech or retail. Another way you can capitalize on the shift toward consumerism is exploring a transaction in the tech and retail spaces. Tech add-ons can be a great way to enhance your digital maturity. Many patients are turning to retailers for quick and convenient care — working through a retailer to offer care allows you to reach patients where they are instead of waiting for them to come to you.
Steven Shill, Partner and National Leader, The BDO Center for Healthcare Excellence & Innovation, can be reached at firstname.lastname@example.org or (714) 668-7370.
Alfredo Cepero, Managing Partner
305-420-8006 / email@example.com
Angelo Pirozzi, Partner
646-520-2870 / firstname.lastname@example.org