Providers to target efficiency, supply chain resilience in 2025

Providers to target efficiency, supply chain resilience in 2025


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Healthcare providers are set to have another year where maximizing efficiency, above all, is paramount. 

Although both for-profit and nonprofit providers reported improved operating margins last year compared to 2023, experts say systems will be prone to backsliding this year if they do not carefully contain costs and explore strategic growth opportunities.

Health systems will seek to expand gains from 2024, including improved utilization metrics, and apply lessons learned from major supply chain crises. New challenges are on the horizon too, as a new administration comes to Washington with its own healthcare policies.

“Healthcare is still a very fragile sector. It operates on extremely thin margins, and this year is a year that we will have an administration change in Washington — that interjects some level of uncertainty in the whole healthcare mix,” said Kevin Holloran, senior director and sector leader of the not-for-profit healthcare group at Fitch Ratings. “Uncertainty in general … is likely not a good thing.”

This year, experts say successful health systems can get ahead of cost pressures by seeking out novel partnerships that allow them to do more while spending less, including more joint ventures, direct deals with manufacturers and spin-off ventures like Kaiser Permanante’s Risant Health.

Here are the top predictions for healthcare providers in 2025.

Providers eye reductions to pharmacy, labor costs

Although operating margins improved across the board in 2024, not all health systems recovered equally, and experts stress that providers will need to keep an eye on costs in 2025.

In response to cost pressures, 53% of healthcare executives recently surveyed by Deloitte said improving efficiencies and enhancing productivity was a top priority for this year. 

Managing rising pharmaceutical costs, particularly those related to specialty drugs, is an immediate priority, healthcare executives say. Although the drugs are utilized by a small number of patients, they now account for 54% of health systems’ total drug spend, according to consultancy Vizient’s 2025 outlook. Spending is expected to further climb as drug development continues.

Increased demand for diabetes medications approved for weight loss, called GLP-1s, has driven a large portion of specialty pharmaceutical spending, according to Steven Lucio, senior principal of pharmacy solutions at Vizient

Demand for GLP-1s could rise further this year if the incoming Trump administration approves a Biden-era rule that allows Medicare to foot the bill for GLP-1s when prescribed for weight loss.

Providers are investigating a number of approaches to lower their specialty pharmacy spend. Because of the drugs’ high price tags, “you want to be very judicious at how you use them,” Lucio said.

However, because the drugs are often developed to serve specific use cases, health systems can have limited data to guide decisions about how to prescribe the drugs effectively, Lucio said.

In response, some health systems are forming high cost drug committees to better understand the medications and to oversee prescribing practices. Physicians and pharmacists on the committees review operational, clinical and economic data to evaluate the efficacy of prescribing the drugs.

Academic health systems, like Cleveland Clinic and Vanderbilt University Medical Center, were early adopters of the strategy. More health systems are predicted to start up their own committees as managing pharmacy costs grows in importance this year, Vizient predicts. 

Other providers are teaming up with nontraditional partners like Mark Cuban Cost Plus Drugs or Civica Rx, a nonprofit generic pharmaceutical company, to directly purchase generic medications at lower costs. Community Health Systems is one of the most vocal advocates for working directly with manufacturers. All 71 of its hospitals began working with the Cost Plus Drugs Marketplace in June.

“You’re seeing more and more disruption of [the pharmaceutical] industry,” said Fitch’s Holloran. Providers are asking themselves, “Isn’t there a better way, cheaper way, to produce some of these drugs?” 

Health systems will also continue to prioritize cutting labor costs next year. Although health systems spent less on labor in 2024 relative to highs recorded during the pandemic, healthcare wages remain elevated above pre-pandemic levels, according to Mark Pascaris, senior director at Fitch Ratings. 

Some systems will leverage automation, such as virtual nursing, in order to be “more creative about who exactly is at the bedside,” said Pascaris. “Health systems are trying to use more entry level people at a lower cost point for certain functions.”



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