Last week, THMA presented our annual analysis of the healthcare market. Despite financial improvements in 2024, health systems are navigating a precarious moment. Persistent cost inflation coupled with rigid payment models and a volatile macro environment raise concerns about the sustainability of this improvement.
Across the coming weeks, we will unpack key takeaways from the presentation; this issue of Academy360 provides a high-level overview of our analysis. Subsequent issues will go deeper into the research highlighted here.
The Current State of Health System Finance
Health systems have climbed out of immediate post-pandemic margin pressure, only to enter an environment of uncertainty. While the median margin rose to 2.5% as of Q4 in 2024, recovery has been uneven. Our database of 40 LHS ranges from -0.5% to 14%.
Whether organizations can build upon recent successes depends on their ability to manage the “75-75” conundrum: roughly 75% of health system costs are particularly prone to inflation (salaries, benefits, supplies, drugs) while approximately 75% of revenue is largely fixed (federal and state reimbursement, self-pay). This reality means today's cost structure and operations are untenable.
Our research and annual survey of health system executive priorities have revealed two imperatives that connect to important secular trends:
1. Patient access is a gateway to mission and growth. HS must optimize sites and partner for greater impact.
Access is the highest scoring 2025 priority across surveyed health system executives.
Appointment wait times continue to bottleneck patient access, particularly compared to disruptors who focus on speed-to-care and deploy virtual offerings.
The current financial reality restrains HS from simply building and employing their way out of access challenges (even if there were enough clinicians to hire).
Site of care optimization and asset-lite growth strategies (including partnership) are critical for solving access challenges and achieving a lower overall cost base for care delivery.
The next issue of Academy360 will provide a deeper look at the state of access and how health systems are tackling the problem.
2. AI promises long-awaited efficiency and care improvements. Commit to “table stakes” and secure buy-in.
AI continues to rise as a strategic priority, with 74% of C-Suite responders indicating it’s a higher priority in 2025 than in 2024.
We’ve seen widespread adoption in certain areas: AI in revenue cycle is common, while about a quarter of THMA member physicians report using ambient listening in documentation.
However, the C-Suite is not aligned on the level of opportunity for improvement: CIOs rank AI as the biggest opportunity, while other members of the C-Suite (particularly CFOs and CSOs) did not rate it in their top 5.
Several factors contribute to this divergence in perspective, including CIOs proximity to the challenges. While executives are all aware of the progress their organizations have made, informatics executives understand the size of the opportunity that’s still out there and has yet to be harnessed as well as the accelerated rate of change in AI technology.
Health systems face a liminal moment when it comes to AI, too. Slower adopters risk marginalization. Those in a precarious or disadvantaged position could find themselves worse off. Even health systems that have enjoyed relatively strong positions to-date but fail to move quickly to adopt and scale AI could experience a decline. IN this way, AI could a differentiator or commoditizer.
Without the right infrastructure, governance, and frontline buy-in, however, AI initiatives have little chance to succeed and scale.
A forthcoming issue of Academy360 will delve deeper into AI strategy, including how leading edge health systems are incorporating AI into organizational DNA.
For the full presentation, including slide deck and recording, click here.