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Healthcare Finance Trends for 2023: A Mid-Year Update

In late 2022, CommerceHealthcare® published its annual look ahead and assessment of leading issues and opportunities influencing providers. Healthcare Finance Trends for 2023 — Multiple Intersecting Challenges (Trends Report) offered themes in four overarching categories:

  • Financial
  • Patient financial experience
  • Digital transformation
  • Building trust

As a leading bank, Commerce Bank maintains active industry and economic surveillance to help clients stay current. Consistent with this effort, this report updates selected Trends Report analysis within the four categories.

Overall Observations on the First Half

Charting the 2023 arc of progress in healthcare finance provides a helpful backdrop to the discussion of specific themes. Such a perspective yields five top-level observations:

  • The balancing act between tight cost control and growth investment noted in Trends Report continues to dominate leadership attention.
  • The current environment rewards emphasis on pragmatic, achievable initiatives and favors projects with measurable short-term returns.
  • The rationale for driving proactive organizational and care delivery change has only become stronger during 2023.
  • Competition from non-traditional providers is steadily mounting.
  • Leadership focus is vital. External advisors and technology help, and there is a distinct predilection to outsource functions not considered core competencies.

Finance Update

Trends Report detailed the looming financial challenges facing health systems, hospitals, and practices for 2023. Despite some recent improvement, many organizations continue to struggle. All are wrestling with cost increases heightened by inflation. Four financial themes have been prominent in the year’s first half:

Chasing elusive profitability

The median hospital operating margin turned positive in May following two break-even months, and labor costs appear to be headed in the right direction, though they still exceed pre-pandemic levels.1 Increased patient lengths of stay represent profit headwinds. Many hospitals and health systems are dipping into their financial reserves to weather the storm.2 Nimble reserve management is important to maintaining good credit ratings and borrowing capacity. This management is a compelling issue since 30% of hospitals/health systems defaulted on bond or loan covenants in 2022.3 The total for impaired hospital bonds stands at $12 billion.4

Regaining profitability requires “unrelenting cost discipline” and concentration on “recurring savings” through moves like “implementing technology to automate tasks.”5 One analysis suggests urgency, asserting that powerful trends could shave ten percentage points from industry operating margins by 2027.6

Staying on revenue growth track

Pursuing top line growth remains a high priority alongside cost control. The initiatives chronicled in Trends Report have seen solid 2023 support. For example, commitment to telehealth remains steadfast. Half of CFOs expect to increase investment throughout the year.7 A positive stimulus arrived when most telehealth reimbursement waivers were extended through 2024. The current emphasis is on making the telehealth experience more convenient for patients, including financial interactions. The effort includes creating:

  • Attractive hybrid virtual/on-site combinations of care
  • Asynchronous care opportunities
  • Virtual care subscription services8

Another prominent revenue concern is the Medicaid disenrollment issue. Over one million people had exited the rolls as of mid-June.9

Managing reimbursement disputes

The first half has seen disputes over prior authorization, payment denials and clawbacks of payments made. Payers have been aggressively pursuing prior authorization of procedures, and there is near-universal agreement that this process and compliance overall are consuming considerable provider staff time (Figure 1).10 Over three-fourths of hospitals and health systems say their experience with commercial insurers is worsening.11

Tired healthcare worker sitting on the floor. Contributing to Workforce Burden.

View PDF of Figure 1

Commercial insurance initial prior authorization/precertification denial rates for inpatient claims rose to 2.8% in 2022 and reached over 3% in 2023’s first quarter. Medicare Advantage generated an initial denial rate of 5.8% through most of 2022.12

Many CFOs are also reporting that the Independent Dispute Resolution (IDR) process, established to resolve out-of-network provider payment issues arising from No Surprises Act requirements, has become burdensome. There were 334,828 disputes initiated through the federal IDR portal in the first year ending March 31, 2023. That volume was “nearly fourteen times greater” than initial government estimates, and “required certified IDR entities to expend considerable time and resources.”13

The cash flow impact from these delays and denials is not trivial. As one measure, 50% of hospitals indicated that they are carrying over $100 million in receivables for claims older than six months.14

Addressing ongoing workforce challenges

Workforce disengagement and shortages that surfaced in the past few years continue to be top of mind for leaders and may have long-term consequences. The first half of the year has seen some easing from pandemic crisis levels, but staffing is a substantial challenge across clinical and administrative functions.

Nursing remains a flashpoint. Over 142,000 RNs returned to the workforce in 2022, a 4% uptick, while the turnover rate declined nearly 5% to a still-high 22.5%.15 These positive developments are tempered by prognoses for a meaningful nurse exodus. A survey in late 2022 found nearly one-third are likely to leave direct care within a year.16 Particularly worrisome is potential pipeline shrinkage due to younger nurses leaving the profession at a significantly higher rate than their older peers (Figure 2).17

Percentage Reduction in RN Workforce from 2019-2021, by Age

View PDF of Figure 2

One emerging response is “virtual nursing.” This approach uses telehealth technology to help experienced nurses deliver care remotely. Retired and other non-practicing nurses might find this model attractive, boosting the nursing pool and enhancing scheduling flexibility.

Many administrative roles are likewise challenged. One recent focused survey indicated that 63% of provider organizations were experiencing staff shortages in their revenue cycle departments.18 The talent problem spans inpatient and outpatient settings. An April poll revealed that 56% of medical group leaders consider lack of clinical and administrative employees as the chief roadblock to improved productivity.19 Another study noted only 39.5% of medical groups have administrative staffing at 90% or better of optimal target levels.20

These workforce disruptions are producing:

  • Increased cost. Health systems and medical groups reported a median staff cost increase of 10% from 2022 to 2023.21 Fitch pegs average hourly wage growth at 4.7% through April.22 Nursing turnover is especially costly as the average outlay to replace a bedside RN rose 13.5% to $52,350.23
  • Constrained growth. Revenue optimization is difficult when caregiver shortages exist. Physician hiring and onboarding can take up to a year, impeding growth.24
  • Knowledge loss. The spike in early retirements of seasoned executives during the pandemic is expected to continue over the next several years, prompting an “experience brain drain.”25
  • Stepped-up retention efforts. Beyond pay increases, health systems, hospitals, and practices are working on several fronts to retain employees. Some are continuing options for hybrid work. Across industries over three-fourths of those with a “teleworkable” job are working from home to varying degrees (Figure 3).26 Trends Report cited another benefit seeing 2023 growth in healthcare: Earned Wage Access (EWA). Using technology such as CommerceHealthcare® refund management automation tools, providers can offer on-demand pay that has been earned. A global survey revealed that 28% of respondents want help paying for commuting, energy and other daily expenses.27

Growing Share of U.S. Workers are Working a Hybrid Schedule

View PDF of Figure 3

Patient Financial Experience

Even as they contend with financial limitations, providers realize that substantial improvements in patient experience are vital and cannot be deferred. The impetus for hospitals and health systems to deliver personalized, convenient and transparent financial encounters is strong and emanates from two leading directions — patient demand and competitive pressure:

Patient demand

Affordability frames the financial experience for many patients. The struggle to meet healthcare cost obligations is ongoing, and inflation is only exacerbating the problem. Consider recent evidence:

  • In a Harris poll, 61% of Americans cited affordability as their highest barrier to care access, while 26% said healthcare costs strain their finances and 23% stated insurance fails to cover their care.28
  • In a March 2023 survey, middle income respondents ($30,000–$100,000) placed healthcare costs at the head of their list of financial worries (35%), topping inflation (32%) and household expenses (27%).29
  • The Milliman index of total annual cost for a “typical” family of four is estimated at $31,000 in 2023, up 5.6% from the previous year. The out of pocket and employee insurance contribution portions represent 42% of the total.30

The need is fueling expansion of patient financing programs. Low- and no-interest credit lines covering significant dollar amounts and extended durations remain the industry gold standard for generating patient-friendly experiences. Providers are increasingly turning to outside help to offer such programs more broadly. One survey recently determined that 61% of hospital and medical group leaders anticipate greater reliance on third parties to offer patient financing over the next two years.31 This move is consistent with the trend to outsourcing many financial functions. The Trends Report also observed that many health systems are gravitating to a model in which only short-term payment plans remain in-house.

Patient experience can be significantly enhanced through better communications about financing, including prior to service. “Patients want to understand their financial responsibility upfront,” notes a report.32 Financing based on pre-service estimates is an opportunity.

Competitive pressure

Early 2023 witnessed little diminution in activity by payers, “retail health” providers, and other competitors to expand further into ambulatory care services. Amazon and CVS closed major acquisitions of physician and home care groups, while Walgreen’s, Walmart, Optum, and others made aggressive growth moves. Bain & Company projects non-traditional players will own 30% of the primary care market by 2030.33

Beyond taking market share, these competitors are leveraging technology to offer highly convenient care and financial experiences. Traditional providers are pressed to “up their game.” One example on the financial side was highlighted in a recently published article by CommerceHealthcare® on a patient refund management solution designed to deliver payment speed and convenience.

Several strategic responses to this competition are available. Figure 4 shows consensus on several recommendations by leading industry sources.34, 35

Recommended Strategies to Address Competition

View PDF of Figure 4

Collaborating with retail health firms is certainly gaining momentum, as evidenced by recent news that 16 health systems have allied with Amazon’s One Medical clinics.36 Some providers are actively considering acquiring retail clinics. In the financial arena, providers are ramping up use of online billing, electronic payment modes, upfront cost communications and other convenient options for patients.

Digital Transformation

Digital transformation has been a significant goal in healthcare for several years, and various aspects of its progress were charted in the CommerceHealthcare® Trends Report. The term has acquired a range of meanings, but McKinsey recently offered a useful definition: “Digital transformation is the fundamental rewiring of how an organization operates” in order to “build a competitive advantage by continuously deploying technology at scale to improve customer experience and lower costs.”37 A mid-year status check reveals several points of technology emphasis.

Technology as enabler

Facing heavy financial challenges, providers are focusing pragmatically on digital enablement of key near-term goals and are rigorously screening technology projects for rapid ROI. Current priorities support two goals:

  • Growth. Funds are flowing to technologies that foster diversification of revenue streams. Telehealth, remote patient monitoring and other tools are critical to fast-growing ambulatory services and Hospital-at-Home programs. Interest in the latter is high, boosted by extension of eligibility for the federal Acute Hospital Care at Home initiative through 2024. Nearly all segments of the home services suite are projected to grow substantially over the next decade (Figure 5).38

Home Procedures 10-Year Forecast

View PDF of Figure 5

  • Cost reduction/process improvement. Too many administrative and payment processes are still heavily manual, and many organizational data systems have limited capability to track patient financial obligations fully. The first half of the year has seen expanded implementation of financial process automation to cut costs, to manage remittances effectively and to address continuing supply chain management/payables changes. These solutions aim to embed exception-based processing that optimizes workforce productivity.

Requirements for value realization

Unlocking transformative value from technology deployment is increasingly understood as carrying several critical success factors, most notably:

  • Becoming a core part of operations. The right automation goes beyond one-off cost savings to become foundational to operations.
  • Wide deployment and use throughout the organization. An important empowerment for broad adoption is reliance on Application Programming Interfaces (API) to facilitate integration of various information systems. This necessity has guided CommerceHealthcare® to adopt an API-first mindset throughout its technology offerings.
  • Interdisciplinary teams to drive projects. Gupta describes the approach as “fusion teams” that are populated by developers, users and representatives drawn from IT, operations and others.39 The goal is faster product development that more closely maps to desired business outcomes.

Artificial intelligence

An article on current trends would be remiss in not mentioning Artificial Intelligence (AI). Recent publicized advances in machine learning (ML) and accessible large language models to power so-called “generative AI” have given prominent attention to the technology in 2023. The chief challenge in healthcare is defining attainable use cases. A recent survey suggested that clinical applications have been the primary focus so far, though 25% have incorporated some AI/ML into financial operations (Figure 6).40

In What Areas Have You Begun to Adopt and Implement Artificial Intelligence (AI) and Machine Learning Tools in Your Operations?

View PDF of Figure 6

Several fundamental requirements to promote successful generative AI applications (research, decision support, document creation) have already begun to emerge. One is the availability of high-quality internal data to train the AI engine appropriately. Another is skill in crafting query prompts to the engine to elicit good AI output.

CommerceHealthcare® believes that leaders also must evaluate the effects on existing jobs and work. Accenture urges executives to begin assessing roles: “Organizations that take steps now to decompose jobs into tasks, and invest in training people to work differently, alongside machines, will define new performance frontiers and have a big leg up on less imaginative competitors.”41

Building Trust

The Trends Report noted the challenges and benefits of building trusted relationships with patients, employees and other vital constituencies. Trust yields a very practical set of returns. Consumers “crave a trusted partnership” with healthcare providers.42 Analysts believe that their reservoir of community trust enhances most providers’ partnership attractiveness to retail health corporations. Yet, that level of trust needs improvement. Some surveys show health systems and traditional independent providers lagging behind their retail competitors in likelihood to win trust patients' trust in 2023.43

One key component of organizational trust is cybersecurity. Cyberattacks have not diminished in 2023. A federal report noted that “ransomware attacks, data breaches — and often both together — continued to be prevalent in attacks against the health sector” in the first quarter of the year, with threats particularly targeting managed services providers and the supply chain.44 This year’s attack volume is on track to exceed last year’s, and concerns are rising that ransomware may force some struggling hospitals to close.45 Investment continues to flow to cyber-defense, growing at a 15% annual clip, while rising insurance premiums are adding financial burden.46

As implied in the federal report mention of service provider vulnerability, external vendors play a key role in the security matrix. Robust long-term defenses can emerge from strategic relationships rather than purely transactional ones. That is one reason why a survey of healthcare finance executives indicated that 28% prioritize finding a strategic revenue cycle management pprovider.47 As a bank, Commerce is highly attuned to cybersecurity, and it aims to protect its clients through steps such as hosting its patient refund management portal behind its own firewall rather than on the public cloud as well as by diligent oversight of processes that it manages for customers.


The Trends Report themes are not only still in force at mid-year, many are also intensifying. Multiple pressures and crosscurrents span financial management, patient financial experience, digital transformation, and trust-building. Creative solutions are being pursued in all areas, but face headwinds from financial constraints, workforce disruption and aggressive competition. Staying the course on change is imperative to meet today’s demands and usher in new levels of success for healthcare.

CommerceHealthcare® solutions are provided by Commerce Bank.


  1. Kaufman Hall, National Hospital Flash Report, June 2023.
  2. Kaufman Hall, The Essential Role of Financial Reserves in Not-for-Profit Healthcare, April 2023.
  3. BDO, Healthcare’s Challenging Road Ahead: 2023 BDO Healthcare CFO Outlook Survey, February 2023.
  4. H. Gillers and M. Evans, “Some Hospitals That Spent Big on Nurses During Pandemic are Now Short on Cash,” Wall Street Journal, July 5, 2023.
  5. Advisory Board, “10 Takeaways from our Cost Management Intensive,” March 17, 2023.
  6. Boston Consulting Group, “The Existential Threat to U.S. Hospitals,” February 9, 2023.
  7. BDO, Healthcare’s Challenging Road Ahead: 2023 BDO Healthcare CFO Outlook Survey, February 2023.
  8. Penn State Health News, “Penn State Health Enhancing Access to Primary Care Through Subscription-based Virtual Service,” June 13, 2023.
  9. Kaiser Family Foundation, Medicaid Enrollment and Unwinding Tracker, June 12, 2023.
  10. American Hospital Association, “Infographic: Commercial Health Insurance Practices that Delay Care, Increase Costs,” November 2022.
  11. Ibid.
  12. Crowe, Time for a Commercial Break: Crowe RCA Benchmarking Analysis, May 2023.
  13. U.S. Departments of Health and Human Services, Labor and Treasury, “The Federal Independent Dispute Resolution Process – Status Update,” April 27, 2023.
  14. American Hospital Association, “Infographic: Commercial Health Insurance Practices that Delay Care, Increase Costs,” November 2022.
  15. Nursing Solutions Inc., 2023 National Health Care Retention and RN Staffing Report, March 2023.
  16. McKinsey & Company, Nursing in 2023: How Hospitals are Confronting Shortages, May 2023.
  17. Gist Healthcare, “Younger Hospital Nurses Leaving the Profession Altogether,” June 24, 2022.
  18. J. Asser, “Majority of Providers Expect to Outsource Patient Financing,” HealthLeaders, April 14, 2023.
  19. C. Harrup, “As Healthcare Staffing Woes Linger, Reduced Capacity Remains the Biggest Roadblock to Productivity,” MGMA STAT, April 20, 2023.
  20. M. Hagland, “AMGA Survey: Clinics Struggling with Chronic Staffing Shortages, Costs,” Healthcare Innovation, May 30, 2023.
  21. Ibid.
  22. Fitch Ratings, “Hospitals and Healthcare Systems Labor Dashboard: June 2023,” June 12, 2023.
  23. Nursing Solutions Inc., 2023 National Health Care Retention and RN Staffing Report, March 2023.
  24. Association for Advancing Physician and Provider Recruitment, “Report Finds Physician Shortage on the Rise as Burnout Continues to Drive Turnover,” October 18, 2022.
  25. Kaufman Hall, 2022 State of Healthcare Performance Improvement, October 2022.
  26. K. Parker, “About a Third of U.S. Workers Who Can Work From Home Now Do So All the Time,” Pew Research Center, March 30, 2023.
  27. Randstad, Workmonitor 2023.
  28. The Harris Poll and American Academy of Physician Associates, The Patient Experience: Perspectives on Today’s Healthcare, May 20, 2023.
  29. Primerica and Change Research, Q1 U.S. Financial Security Monitor, April 2023.
  30. Milliman, 2023 Milliman Medical Index, May 30, 2023.
  31. J. Asser, “Majority of Providers Expect to Outsource Patient Financing,” HealthLeaders, April 14, 2023.
  32. Definitive Healthcare, Retailers in Healthcare: A Catalyst for Provider Evolution, May 2023.
  33. American Hospital Association Center for Health Innovation, Health Care Disruption: 2023 Outlook, February 2023.
  34. Ibid.
  35. Definitive Healthcare, Retailers in Healthcare: A Catalyst for Provider Evolution, May 2023.
  36. G. Bruce, “16 Health Systems that Partner with One Medical,” Becker’s Hospital Review, February 24, 2023.
  37. McKinsey & Company, “What is Digital Transformation,” June 14, 2023.
  38. Sg2, 2023 Impact of Change Forecast Highlights, June 21, 2023.
  39. A. Gupta, “Why Fusion Teams Matter,” Gartner Insights, February 14, 2022.
  40. Healthcare Innovation, 2023 State of the Industry Survey, January/February 2023.
  41. Accenture, A New Era of Generative AI for Everyone, March 22, 2023.
  42. The Harris Poll and American Academy of Physician Associates, The Patient Experience: Perspectives on Today’s Healthcare, May 20, 2023.
  43. Health Tech Nerds, HTN 2023 Healthcare Predictions, 2022.
  44. U.S. Department of Health and Human Services Health Sector Cybersecurity Coordination Center, “HC3 Cybersecurity Bulletin,” 2023.
  45. A. Condon, “Some Hospitals are One Ransomware Attack Away from Closing,” Becker’s Hospital Review, June 23, 2023.
  46. A. Condon, “Hospitals Must Boost Cybersecurity Investment Despite Other Costs Weighing on Margins,” Becker’s Hospital CFO Report, April 17, 2023.
  47. M. Hagland, “Survey: CFOs, RCM VPs Facing Severe Cost, Staffing-Shortage Challenges.” Healthcare Innovation, June 30, 2022.