Progress amid uncertainty: A mid-year update on 2025 healthcare finance trends.

At the close of 2024, CommerceHealthcare^® issued Healthcare Finance Trends for 2025 — Accelerating Change (Trends Report hereafter). The report examined industry directions for 2025 and beyond. Eight themes were identified across four overarching categories:

• Finance and growth
• Patient financial experience
• Technology and automation
• New care and business models

CommerceHealthcare^® offers this update to the Trends Report to help inform current planning.

Highlights.

The year to date can be characterized by the following:

• Fresh uncertainties and persistent “structural” issues clouding the industry’s generally improving financial health.
• Ongoing commitment to automation and technology investment. The headline priorities of artificial intelligence (AI) and cybersecurity show the twin needs to drive growth and erect strong defenses.
• Patient affordability pressures that are fueling more need for financial assistance programs.
• Growing agreement about the urgency of migrating from status quo operational models to substantially new ones.

Financial update.

Our Trends Report’s opening theme was Financial Conditions Improving But Structural Issues Cloud Outlook. The anticipated improvement has materialized, though some gains appear tenuous and many organizations are still struggling. The structural issues remain in force, encapsulated in a recent report’s conclusion — “hospitals face a perfect storm of financial pressures: persistent cost growth, inadequate reimbursement, shifting care patterns driven by both policy changes and an older, sicker population with more complex, chronic conditions.”^{footnote [1]}

A brief scan of leading metrics reveals both the progress and the prevailing challenges:

• Profitability. Through April, hospital margins have been running near or above 3% versus the mid-1% range throughout 2024.^{footnote [2]} Median operating margins for health systems are thin (Figure 1).^{footnote [3]} Press reports reveal significant divergence among the larger health systems. Smaller hospitals continue to struggle in 2025, as do physician groups. The median investment (loss) per physician full-time equivalent stands at an annualized $347,240 — a 4.8% increase compared to 2024, and a 16.3% jump from 2023.”^{footnote [4]}

Figure 1

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• Revenue/volume. Hospitals experienced 24 consecutive months of year-over-year (YOY) growth through April in gross operating, inpatient and outpatient revenues. A key driver is volume growth that now sits at 2% for inpatient admissions and almost 5% for outpatient visits.^{footnote [5]}

• Cash. Days cash on hand varies widely across health systems, ranging from 464 days down to 42 in one analysis.^{footnote [6]}

Several ongoing structural impediments to financial health loom particularly large for the second half of the year.

Government funding cuts.

The much-publicized proposed Medicaid changes being debated in Congress are a major concern. While not in the purview of this report to predict outcomes, it’s helpful to review the potential magnitude and risks involved:

• $880 billion in reduced spending over 10 years is currently proposed. This figure represents 29% of state-financed Medicaid spending per resident.^{footnote [7]}
• 15.9 million people could become uninsured and uncompensated care could rise by $278 billion by 2034.^{footnote [8]}
• 63% of those in nursing facilities have Medicaid as a primary payer, and many would be at risk (Figure 2).^{footnote [9]}

Figure 2

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Any substantial Medicaid funding cuts “would be a material credit negative for healthcare providers.”^{footnote [10]} These Medicaid proposals come on top of two additional funding cuts. One is expiring Affordable Care Act subsidies starting in 2026 that could trigger a significant population to drop insurance. The second is reduced research grants. Sixty percent of the over 2,500 scientific institutions supported by the National Institutes of Health are academic medical center campuses.^{footnote [11]}

Unfavorable cost trends.

Increases in several cost categories are proving hard to tame. A notable one is drugs. Clinic spending is projected to grow 11% to 13% in 2025, while hospitals will increase 2% to 4%.^{footnote [12]} Several high-profile initiatives are taking direct aim at reducing pharmaceutical costs. One is major online pharmacy “disruptors” such as Amazon and Mark Cuban Cost Plus Drug Company. These firms seek to offer patients substantially discounted medications at scale and with high convenience. Another effort is newly-intensified government pressure on pharmaceutical manufacturers to lower prescription drug prices significantly through directly negotiated prices, proposed mandated price levels and changes to various programs. Whether the cumulative effect of these pressure points can meaningfully reduce drug costs for providers remains to be seen.

Labor shortages and disruptions.

Labor represents another structural problem. Turnover fell in 2024, but the overall hospital rate is still 18.3%.^{footnote [13]} Physician groups are seeing significant turnover in key roles such as medical assistants.^{footnote [14]}

Critical shortages are projected for the next decade or more. The RN shortfall will be almost 208,000 FTEs by 2037. ^{footnote [15]} The long-term services workforce will need 950,000 additional people by 2037.^{footnote [16]} Shortages also plague revenue cycle management (RCM). Finance leaders report heavy competition for candidates and are turning to alternative pay structures and increased incentives for hard-to-fill roles.^{footnote [17]}

Facilities projects.

Hospital facility construction is taking a larger share of 2025 capital budgets (Figure 3).^{footnote [18]} Physical plants are aging, and forecasters see a looming bed shortage that will need to be addressed.

Figure 3

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The search for growth.

The urgency to pair rigorous cost control with pursuit of growth was also explored in our Trends Report. Nearly two-thirds of healthcare executives entered this year with a leading priority of developing revenue growth strategies.^{footnote [19]} A recent survey found that 85% of responding medical organizations anticipate at least a 5% revenue increase and one-quarter are targeting 15% or more.^{footnote [20]}

Our Trends Report highlighted several attractive growth avenues:

• Telehealth. Forecasts remain solid for telehealth. Polled about the five top solutions to which new or additional funding will be directed in 2025, 22% of leaders cited virtual care.^{footnote [21]} Artificial intelligence (AI) should enhance telehealth use through patient-facing chatbots and intelligent triage tools.^{footnote [22]}

• Hospital at Home (HaH) and home services. Leaders perceive numerous care modes that can be viably delivered in the home, suggesting growth potential (Figure 4). Barriers to overcome include supply of physicians, insurance reimbursement and patient acceptance.^{footnote [23]} Many see HaH as the “keystone of a future home-based care ecosystem.”^{footnote [24]}

Figure 4

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• M&A. Non-organic growth continues to be a prime strategy for many, and it merited a separate theme in our Trends Report. The first quarter of 2025 produced only five announced transactions and most involved financially distressed acquirees.^{footnote [25]} According to healthcare M&A law firms, acquirers are showing greatest interest in the mental health sector (45%), telehealth (41%) and long-term care (41%).^{footnote [26]} Concerns continue to be raised regarding the effects of consolidation. A recently published review of both horizontal and vertical transactions found that neither type “resulted in consistent and significant improvements in price, cost or spending or quality associated with healthcare delivery.”^{footnote [27]}

Given the myriad opportunities, some believe that today’s CEOs must adopt the mindset of a portfolio manager and seek to “optimize the mix of service lines, care delivery methods, facilities and geographical regions.”^{footnote [28]}

Patient financial experience update.

The patient financial experience and the role played by expanded financial assistance is a topic we address annually. As a 2025 CommerceHealthcare^® article discussed, this assistance is a strategic necessity in light of significant affordability challenges for many Americans:

• 64% expect to pay more for healthcare in 2025.^{footnote [29]}
• 31 million Americans borrowed an estimated $74 billion in the past 12 months to pay for healthcare, and 58% of them assumed debt of $500 or more.^{footnote [30]}
• 3.5% is the projected average annual growth rate of per capita out-of-pocket spending from 2025 to 2032.^{footnote [31]}

The financial fallout ranges from revenue loss when patients defer care to cash collection difficulties to elevated bad debt. Affordability also complicates the task of achieving broad access to healthcare. CommerceHealthcare^® recently published a report on this subject. One of many statistics offered was that 34% of adults in 2024 said they lack access to quality care due to cost.^{footnote [32]}

Meeting the need with patient financing.

It’s clear that demand for patient financial assistance will stay elevated. Nearly nine in ten hospital websites show available payment plans.^{footnote [33]} CommerceHealthcare^® market assessments suggest that these programs are frequently limited in ability to help a broad population. As our Trends Report noted, the gold standard is a no-interest line of credit for significant amounts and longer terms to accommodate a range of patient scenarios. Credit lines make flexibility the watchword with their ability to cover subsequent additional care charges without a new loan process.

Making the financial journey better.

As 2025 unfolds, overall patient financial engagement is improving, but considerable work remains. Surveyed patients still experience care delays due to insurance verification issues (22%) and struggle with medical record or billing information errors (20%).^{footnote [34]} Positively, more are receiving upfront price estimates of service (41%). Almost nine in ten providers registered urgency to improve estimating accuracy.

Fresh impetus for those efforts may come from stepped-up government oversight and pressure for price transparency. CMS has issued new requirements for hospitals and has levied ten noncompliance penalties in 2025 at the time of this report’s release, compared to three for all of 2024.^{footnote [35]}

Technology and automation update.

The intensity of commitment to financial technology was another significant CommerceHealthcare^® Trends Report theme. That commitment isn’t waning:

• 63% of organizations are increasing budgets for digital investment; one-third by over 25%.^{footnote [36]}
• 50% of digital health companies are bullish on 2025, and 79% anticipate raising capital.^{footnote [37]}

Our Trends Report also stressed that this year would emphasize realizing returns on this substantial investment. Many finance leaders say they look for a technology product or service to generate revenue that exceeds project launch costs by three times.^{footnote [38]} CFOs currently “lean toward platforms that reduce FTE burden or directly impact revenue cycle KPIs.”^{footnote [39]} Calculation is complicated by the multiple hard-to-measure objectives being pursued (Figure 5).^{footnote [40]}

Figure 5

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Our Trends Report spotlighted the following technologies gathering momentum in financial functions.

Process automation.

The latest CAQH Index identified an $18 billion savings opportunity from fully automating selected major administrative processes.^{footnote [41]} Only 53% of 2024 survey respondents reported adequately automating payments workflows, for example.^{footnote [42]} The drive to capture these savings is fueling healthy North American RCM process automation market growth of 10.61% annually from 2025 to 2033.^{footnote [43]}

One technology seeing investment is Robotic Process Automation (RPA), which involves software bots that perform human tasks in many financial processes. A recent poll of nearly 500 healthcare RCM executives established that 21% of organizations have implemented RPA in at least one revenue cycle function, and nearly 70% report achieving full ROI within 12 to 18 months of deployment.^{footnote [44]}

Artificial intelligence.

AI, especially generative AI, is clearly top of mind for healthcare leaders. One senior health system executive summarized the intense focus, stating “Over the next two years, how teams adopt and champion generative AI will be critical in achieving future success.”^{footnote [45]} Productivity is a prominent AI goal. One survey of 300 provider C-suite leaders showed that 83% place top priority on employee efficiency, while 77% want productivity gains to unleash revenue growth as well as cost savings.^{footnote [46]}

AI activity in healthcare is increasing. Sixty percent of respondents from provider, payer and pharmaceutical organizations say their AI budgets are growing faster than overall IT spend, and 64% are willing to partner with early-stage companies to co-develop AI applications.^{footnote [47]} A focused study among leading health systems found 23% reporting “high degree of success” with AI use in the revenue cycle.^{footnote [48]} Nine in ten RCM leaders will require AI and RPA capabilities in any new or renewed outsourcing agreement.^{footnote [49]}

Many are touting potential from fast-emerging intelligent agents. Gartner defines them as programs that can execute instructions, create plans, drive tooling and produce dynamic outputs. Furthermore, “a fully mature intelligent agent will have agency to learn from its environment … and perform tasks autonomously.”^{footnote [50]} A recent study mapped how this unfolding progression might look in healthcare (Figure 6).^{footnote [51]}

Figure 6

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Hurdles to expansion include immature AI tools (77%), financial concerns (47%) and regulatory uncertainty (40%).^{footnote [52]} Additional gating issues are data security and healthcare’s omnipresent challenges, integrating new technologies with existing central systems.

Some say healthcare isn’t pursuing AI aggressively enough. Others call for caution in the face of unproven ROI. “Despite all the excitement, even the most widely adopted use case — ambient documentation — hasn't delivered consistent financial returns across provider groups,” according to one subject matter expert.^{footnote [53]}

Digital payments.

CommerceHealthcare^® conducts ongoing surveillance of digital payment rails used in both business (B2B) and consumer (B2C) transactions. Sixty percent of American consumers purchased goods or services using a digital payment mode within an application in 2024, and 69% did the same on websites.^{footnote [54]} However, paper checks have hardly disappeared. Across industries, they’re the second-most-common form of payments over $500.^{footnote [55]}

Healthcare is poised for 21% compound annual growth in credit card and digital payments through 2034 (Figure 7).^{footnote [56]}

Figure 7

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Growth drivers include the shift to outpatient and virtual care and emphasis on obtaining upfront payments from patients. Interest in digital rails is on the upswing:

• 40% of patients want providers to support contactless payments and online portal payments.^{footnote [57]}
• 33% of consumers experience frustration when options such as digital wallets and mobile payments aren’t offered.^{footnote [58]}
• 75% of patients across 6,000 physician practices feel it’s somewhat or very important to use digital tools to simplify their transactions, including financial ones.^{footnote [59]}

The following sections offer some recent analysis on digital payment modes.

• ACH. Healthcare’s steady upward march in volume and dollars of electronic funds transferred continued in 2024 with 4.6% growth (Figure 8).^{footnote [60]} In the first quarter of 2025, healthcare saw 125 million ACH transactions, an 8% rise over the prior year.^{footnote [61]} Commerce Bank ranks among the top 50 nationwide institutions for volume of ACH origination and receipt.

Figure 8

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• Account to Account (A2A). ACH is one vehicle to accomplish so-called Account to Account (A2A) payments in which money is exchanged electronically between sender and recipient bank accounts. Consumer-to-Business A2A will experience a compound annual volume growth rate of 19% to exceed $200 billion by 2027.^{footnote [62]} That level would represent approximately 5% share of U.S. digital commerce spend.
• Digital wallets. Consumer adoption of digital wallets in stores has grown from 19% in 2019 to 28% in 2024, and one in five users say they frequently leave home without their physical wallet.^{footnote [63]} Upfront payments at appointments and recurring/automatic payments are logical uses for patients. Private physician practices are slowly adopting. According to a recent survey, 11% of respondents plan to add digital wallet payment options.^{footnote [64]}
• Treasury services. Various same day treasury solutions are being enabled by the move to cloud computing, better data sharing among systems and use of instant payment rails. This powerful combination is helping treasurers “move away from slow, end-of-day processes and instead monitor and control their finances continuously.”^{footnote [65]} Overall digitization of treasury continues apace. In 2024, the treasury management software market reached $5.5 billion and is forecasted to climb to $10.2 billion by 2033.^{footnote [66]}
• AI-influenced payments. In a December multi-industry poll, 46% of financial professionals agreed that AI will have a transformational impact on payments processing over the next two years, though 62% feel businesses aren’t yet prepared to integrate the technology with existing payment systems.^{footnote [67]} Expected AI benefits are enhanced fraud detection and much greater personalization of financial transactions.
• Virtual cards. In healthcare, virtual cards are used in accounts payable to execute electronic supplier payments, whether one-time or regularly scheduled, by concealing the actual account information. The program generates many benefits for vendors and providers alike. Virtual cards share revenue between card supplier and provider. Some organizations also deploy these cards in tandem with digital wallets. The global virtual cards market is projected to grow at a 21.2% rate from 2025 to 2030.^{footnote [68]}
• Blockchain as a support tool. Blockchain technology carries the potential to elevate privacy and higher security levels in payments processing and foster growth of “smart contracts.” The latter are digital programs on a blockchain platform and represent a global healthcare market said to be growing at 21% annually through 2033.^{footnote [69]} Anticipated yearly growth in all healthcare blockchain use is over 52% through 2030.^{footnote [70]}

The cybersecurity overhang continues.

Cybersecurity earned a separate theme in our Trends Report. This technology and governance issue reigns mightily as surveys released over the past half-year corroborate. To cite a pair:

• In a small poll of influential healthcare IT executives, 30% ranked cybersecurity their top 2025 IT priority, outpacing major initiatives such as EHR and AI by a healthy margin.^{footnote [71]}
• Just over half of respondents placed cybersecurity atop the list of healthcare’s business sectors most in need of a digital strategy.^{footnote [72]}

New vulnerabilities.

AI-based physical threats have seen growing incidence in 2025. Study respondents describe generative AI being deployed to “impersonate clinicians, defeat voice authentication, bypass smart locks and manipulate surveillance systems.” Only 18% of those respondents have a strategy to mitigate such threats, and 71% aren’t prepared for tactics such as deepfake badge credentials or sensor spoofing.^{footnote [73]}

Response.

Many are calling for healthcare to take a more strategic, enterprise-level approach to cybersecurity. Some of the key response elements are listed below:

• Tightly coordinating and auditing physical and cyber defense.^{footnote [74]}
• Implementing strong emerging software defenses. For example, Gartner predicts that by 2028, 25% of business entities will adopt more secure enterprise browsers with specialized controls.^{footnote [75]}
• Integrating cybersecurity efforts with those of risk management, compliance and internal audit departments. One senior executive asserts that data silos and limited communication are common among risk management teams, causing duplication and gaps in risk coverage.^{footnote [76]}

New care and business models update.

The final theme in our Trends Report spotlighted the Growing Impetus for New Care and Business Models. A health system senior executive believes the industry “must radically rethink partnerships, risk-based models and the role of technology.”^{footnote [77]}

Leadership requirements.

Considerable discussion centers on how leadership must adapt to drive change and growth. One talent firm believes today’s environment demands “a scientific engineering” mindset from CEOs, who will need “a deeper understanding of healthcare delivery mechanics and technology applications.”^{footnote [78]}

Retail health partnership potential.

This year is witnessing new meaningful partnerships between retail health companies and traditional organizations. Amazon’s One Medical has recently forged new alliances with health systems, and CVS announced a $20 billion, 10-year investment to build an integrated care platform that could include traditional providers.

Success in these endeavors is uncertain, of course. However, this partnership path offers health systems, hospitals and practices access to retailers’ funding, technological prowess and market reach that could accelerate the shift to comprehensive, holistic care.

Conclusion.

Recent data largely confirms the direction and intensity of our Trends Report’s eight themes. The progress is encouraging on the financial, patient finance, technology and new business model fronts. But as this report’s title underscores, new uncertainties have clouded the 2025 horizon and added risk. Leaders will again be performing a difficult balancing act among many priorities and will be looking to harness exciting technologies to address structural issues and bring about the substantial change everyone seeks.

CommerceHealthcare^® solutions are provided by Commerce Bank.

Disclosures: