Navigating financial sustainability: three key insights for healthcare CFOs
Managing the rising cost of healthcare; managing talent challenges, rising turnover and competition; and prioritising investment in AI and digital infrastructure are three considerations for healthcare CFOs.
Healthcare CFOs are grappling with financial sustainability, with rising costs putting vulnerable Australians at risk of losing access to affordable, high-quality care.
Deloitte’s latest annual healthcare CFO survey reveals the impact of Australia’s ageing population, the increasing prevalence of chronic diseases, inequitable access to services, workforce shortages and outdated technology infrastructure, among other issues facing providers.
Although the sector’s finance leaders expect a modest increase in revenue, they also expect a decline in operating profit over the financial year. Labour costs are a major factor, driven in part by workforce shortages and rising wages, along with inflationary impacts on the cost of drugs, equipment and other supplies.
Surveyed CFOs are looking to balance growth with sustainable resource management, with a focus on improving operational efficiency and maximising revenue from existing models. Artificial intelligence (AI) is poised to play a critical role, though most providers are still underinvesting in the technology.
These challenges have profound implications for patients. As providers pass on costs, the financial burden disproportionately affects vulnerable Australians and worsens health inequities.
Patients from lower socioeconomic backgrounds may delay or forgo essential care when faced with higher out-of-pocket expenses, leading to poorer health outcomes and higher healthcare costs in the long term.
These risks highlight the need for providers to adopt strategies that balance financial sustainability with equitable access to care. Here are three considerations healthcare CFOs should take on board.
The first is to manage the rising cost of healthcare. Providers are under immense pressure to remain financially sustainable amid persistent inflation and operational challenges.
Around two in three public healthcare CFOs (65 per cent) expect operating margins to fall due to the rising cost of medication, equipment and other supplies — a sentiment shared by 40 per cent of CFOs in the private sector.
In response, they are going back to the basics with a focus on containing costs, improving workforce productivity and optimising capacity to manage these financial pressures.
Providers are adapting their strategies for optimising revenue, with more than half of surveyed CFOs (59 per cent) managing cash flow on a monthly basis to maintain liquidity and respond quickly to financial challenges. A further 93 per cent are focusing on collecting cash efficiently from existing sources through efficient billing and other relevant processes.
However, financial strategies should always be aligned with health equity objectives to improve access to care while ensuring financial sustainability.
The second consideration is to manage talent challenges, including high workloads, rising turnover and fierce competition.
CFOs are concerned about the pressure of high workloads in the fast-paced healthcare sector, worsened by talent shortages, operational inefficiency and the need to contain costs amid economic instability and inflation.
This is leading to higher stress and burnout among staff, which ultimately detracts from quality of care and threatens financial sustainability.
Fierce competition for skilled professionals and limited new talent are making it harder for leaders to attract qualified candidates, further hindered by outdated technology and ineffective recruitment practices.
In response, finance leaders are looking to innovate workforce models and streamline tasks to redirect time to higher value activities, improve efficiency and attract potential recruits.
The last consideration is to prioritise investment in AI and other digital infrastructure. In terms of capital expenditure over the next three years, the majority of surveyed CFOs (76 per cent) are prioritising data and interoperability tools, core business technologies and digital technologies like virtual health.
Venture investments and mergers and acquisitions aren’t seen as high priorities during this period of economic uncertainty, with operational improvements and financial stability considered more pressing than expansion or high-risk investments.
While CFOs believe it’s important to invest in AI, only 10 per cent believe their organisation is ready to implement AI and just 3 per cent say their organisation is AI fluent. This contrasts starkly with their global counterparts, more than 80 per cent of whom expect generative AI to have either a moderate (26 per cent) or significant (55 per cent) impact on their organisation in 2025.
AI, deployed in the right ways, is critical to solving the long-term cost pressures facing healthcare providers. While reducing costs in the short term may offer immediate relief, strategic investments in technology could significantly boost efficiency and foster growth.
The healthcare sector stands at a critical juncture where financial sustainability hinges on strategically managing costs, investing in technology and empowering the workforce.
As CFOs navigate these challenges, they will need to balance immediate financial pressures with long-term goals to foster resilience and growth.
Indrani Pal and Peter Reynolds are Partners in Audit & Assurance at Deloitte Australia.
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