The current state of the health care industry is marked by significant challenges and transformative changes. Financial strain, labor shortages, and regulatory changes are among the key issues facing health care providers and organizations.
Financial pressures are a major concern, with nonprofit hospitals expected to continue facing labor supply shortages and pressured margins into 2024[2]. The Centers for Medicare & Medicaid Services (CMS) issued final rules for the 2024 Medicare Physician Fee Schedule, including a 1.25% decrease in payment rates from 2023 to 2024, further impacting providers' financial operations[2].
Labor shortages are another critical issue, with 89% of health care managers struggling to find new talent[2]. The American Hospital Association’s American Organization for Nursing Leadership survey identified “emotional health and well-being of staff” as a top challenge contributing to these shortages. An analysis of EMSI data predicts a shortage of 3.2 million health care workers by 2026, highlighting the scale of the challenge[2].
Regulatory changes are also shaping the industry. CMS is addressing health equity with coding and payment changes, expanding access to mental health, substance use disorder treatment, and dental care for cancer patients[2]. The adoption of value-based care (VBC) models is accelerating, with 90 million lives expected to be in VBC models by 2027, up from 43 million in 2022[4].
In response to these challenges, health care leaders are focusing on digital transformation, workforce adaptation, and cost management. The use of artificial intelligence (AI) is expected to play a pivotal role in streamlining health care processes, from administration to patient care[5]. Health care organizations are also exploring outsourcing and offshoring certain administrative tasks to reduce costs[1].
Consumer behavior is shifting towards personalized care, driven by the rise of consumerism within health care. Patients are now more informed and empowered, seeking health care solutions that cater to their unique needs and preferences[2]. Health care organizations are responding by offering more affordable treatment options, such as virtual health and digital tools, to help ensure patients continue to get necessary care[1].
In terms of market movements, health care profit pools are expected to grow at a 7% CAGR from 2022 to 2027, despite current financial pressures[4]. The industry is also seeing a rebound in merger-and-acquisition (M&A) activity, with more than half of health system executives expecting M&A to impact their organization’s strategy in 2024[1].
Overall, the health care industry is undergoing a period of unprecedented transformation, driven by technological advancements, demographic shifts, and evolving patient needs. Health care leaders must adapt to these changes by focusing on digital innovation, workforce adaptation, and cost management to ensure future success.
