Healthcare Challenges and Triumphs of 2023

As we step into the second half of 2023, the healthcare industry faces a multitude of financial challenges. The healthcare landscape has undergone major shifts in recent years, marked by changing regulations, fluctuations in reimbursement models, and growing demand for affordable, accessible and high-quality care.

June 14, 2023


These obstacles have a significant impact on hospitals and health systems, both small and large, intensifying the need for healthcare organizations to reassess and adapt to the ever-evolving environment.

In this article, we explore the key challenges and triumphs faced by health systems and some of the drivers that health system executives have cited as challenges, as well as positive trends that offer a promising outlook for the future.

Workforce costs and escalating salaries:

The cost of healthcare workers, particularly nurses and physicians, is a significant expense for health systems. Salaries have increased dramatically in some cases, due to a variety of factors, including travel nursing opportunities with high hourly pay rates, competition from other providers and workforce shortages. Many hospitals experienced unprecedented retirements and resignations during the height of Covid. These workforce shortages further exacerbate costs, as health systems may need to pay higher salaries to attract and retain qualified healthcare workers.

Changes to reimbursement models:

Changes to reimbursement models, such as the shift to value-based care, can impact health system profitability. The transition to value-based care can be challenging for health systems, particularly if they are unable to find the talent to effectively manage costs and achieve the desired outcomes. Medicare and Medicaid reimbursement rates continue to be an ongoing issue for many health systems, with continued changes and administrative requirements.

Uncompensated care:

Health systems, particularly those serving low-income populations and uninsured or underinsured, could experience a significant financial burden due to uncompensated care. In addition, many providers are experiencing debt issues from patients who are unable to pay their medical bills due to non-covered services and large deductible or coinsurance shares.

Rising healthcare costs:

As healthcare costs continue to rise drastically, so do complex healthcare needs, the cost of new technology and equipment, staffing challenges, prescription drug prices, and reimbursement models from government and commercial payers. Increasing healthcare costs can impact health system profitability, particularly if they are unable to negotiate favorable contracts with payers or implement cost-containment measures. The aging population of “baby boomers” with significant healthcare needs adds to this burden.

Regulatory compliance:

Health systems must comply with various healthcare delivery regulations, data privacy and security, and financial reporting. Non-compliance with these regulations can result in fines, legal penalties, and reputational damage. Compliance can also require significant resources, which can impact health system profitability.

Positive Trends and a Promising Outlook

Despite a myriad of challenges facing health systems as we enter the second half of 2023, there are many positive trends that offer a promising outlook for the future, including:

Advances in technology:

Telemedicine, electronic health records, and artificial intelligence have the potential to improve patient outcomes, increase efficiency, and reduce costs. These technologies can enable health systems to provide care more effectively and efficiently, while also improving patient access to care.

Focus on population health and equity:

There is a growing focus on population health. Many systems have added a Chief Population Officer to their leadership staff. Successful population health initiatives aim to address large-scale social determinants of health and implement improvements. These include poverty, race, access to care in both rural and urban environments, food and housing conditions, and education. Health systems that prioritize population health can improve patient outcomes, reduce costs, and increase community engagement.

Collaboration and partnerships:

Health systems are increasingly collaborating with organizations inside and outside of their community and service area. These include payers, community-based organizations, faith-based organizations, and public health agencies, to improve population health and reduce costs. Collaboration and partnerships can enable health systems to better address social determinants of health, coordinate care more effectively, and achieve economies of scale.

Emphasis on value-based care and innovative payment models:

Although some health systems have experienced challenges implementing value-based care programs, once implemented, they have the potential to have a positive impact on health outcomes. These programs can improve patient experience, and satisfaction, which ultimately can have a positive impact on costs. Health systems that successfully implement innovative payment models and value-based care can improve their financial performance and achieve long-term sustainability, while actively improving the lives and health of their patients.

Although the next few years will be a challenging time for healthcare providers, hopefully, it will prove an opportunity for significant advancement and transformation in large-scale physical and behavioral health. Additionally, the experiences and lessons learned from the COVID-19 pandemic have highlighted the need for a robust public health infrastructure, preparedness, and crisis management to effectively respond to future challenges.

While the road ahead may be difficult, it is through these challenges that the healthcare industry has the potential to evolve and transform, ultimately improving the quality of care and well-being for individuals and communities worldwide.

Meet the Author

Wendy Brown-Blau

Managing Partner

Wendy is a nationally recognized leader in executive search for managed care, government programs and health systems. She specializes in physician leadership and healthcare financial, compliance, marketing and operational leadership, and has worked with many well-known managed care plans and health systems across the country.

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