Providers to target efficiency, supply chain resilience in 2025
Health systems will work to expand their supply chains and ink nontraditional partnerships in 2025, while trimming excessive AI programs and nonclinical staff.
Article By: Susanna Vogel
Blog Source From : https://www.healthcaredive.com/

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.”
Other health systems are exploring offshoring or outsourcing non-core functions, including their information technology, human resource and finance teams, said Alicia Janisch, vice chair and U.S. healthcare sector leader at Deloitte.
Allina Health, Providence and AdventHealth said they have outsourced departments in pursuit of enhanced expertise and savings. Allina Health, for example, tasked Optum last February with running its IT department.
Allina’s Chief Operations Officer Dominica Tallarico said the partnership with Optum allows the health system to focus on its strengths. The deal also enables Allina to build out its technology suite beyond functions that staff can develop alone, she said.
“Innovation and technology is rapidly changing … the whole point is how do we really advance and not only keep pace, but how do we leapfrog in technology and in AI?” Tallarico said.
Outsourcing revenue cycle management functions is another area to watch, according to Janisch. Health systems expressed growing frustrations with payers’ use of algorithms to deny claims last year. While some may build their own tools to submit prior authorization documents, others will outsource to AI-powered companies, she said.
Supply chain concerns will be front and center
Last year’s temporary closure of a major IV fluid manufacturing facility in North Carolina following Hurricane Helene served as a wake-up call to healthcare providers about the importance of diversifying the supply chain and contingency management planning.
The storm took the Baxter facility offline for several days and disrupted the supply of IV fluids for 60% of hospitals nationwide, according to a letter penned by the American Hospital Association.
“Most health systems that I talked to were kind of caught unprepared, like the pandemic,” said Eric O’Daffer, research vice president of healthcare supply chain at Gartner. “It was a reactive response … almost all of them had to go into a kind of pandemic, command center modality again.”
The most effective health systems, including HCA Healthcare, were able to shift resources around in the wake of the natural disaster to support harder hit regions, O’Daffer said. For example, HCA sent staff and supplies from its Tennessee facilities to its hospitals in Western North Carolina.
However, other systems did not have a centralized list of what resources they had or where they were stored, limiting their ability to respond efficiently to the crisis, the consultant said.
Moving into 2025, supply chain management will take on heightened importance as providers look for real-time visibility into where their products sit and how goods can be mobilized — especially as systems grow.
“Health systems are merging and getting bigger, and the number of $20 billion-plus health systems that are multi-state, non-continuous is growing,” O’Daffer said. “That provides both complexity as well as potential opportunity.”
Some health systems have begun this work already, prompted by supply chain disruptions during the pandemic. AdventHealth, for example, created a central warehouse in 2023 in the middle of Florida to expand its supply chain resiliency.
“The pandemic taught me that you want to be as nimble as possible when you’re caring for others. You want to have your own supply, and you want to diversify where you get your supply well enough to where you’ve got some flexibility when you need it,” said Terry Shaw, CEO of Florida-based AdventHealth.
Health systems will take a sharper look at AI investments
Last year, excitement about AI dominated the healthcare industry, with companies teaming up with technologists to roll out numerous pilots. In 2025, experts say that providers will begin to ask: Does this actually work?
AI offerings for healthcare exploded last year. Amid the hype, health systems have piloted a range of clinical and administrative tools.
However, not all pilot programs have been strategic, said Elizabeth Southerlan, partner at West Monroe.
Some health systems applied the latest AI without pausing to ask if it fit their organization’s needs and without utilizing human-centered design when creating their pilot, Southerlan said. For example, she described one healthcare organization that piloted a scheduling tool without seeking the input of employees who do scheduling.
Other organizations have rushed to implement solutions without assessing whether there is a broad need for the tool, she said.
“I think another area of pushback is you’re solving a problem that takes up 5% of my day. Why are we investing here when there are things that are taking up 20% of my day that are incredibly redundant, that remove me from being top of license?” Southerlan said.
Now, she said there are “so many pockets of pilots at all healthcare organizations, and they haven’t figured out how to take them further — but they also haven’t had the guts to say, ‘This isn’t working: Shut it down.’”
Evaluating what to keep and what to ditch isn’t a matter of looking at straight cost or efficiency gains, according to Andrew Rebhan, senior consulting director at Vizient. He said that some tools billed as cost saving measures — such as notetaking tools — didn’t actually save clinicians much time during pilots.
But that doesn’t mean they’re a failure — Rebhan says providers should measure return on investment in terms of qualitative metrics like user experience.
“Is it alleviating some of the burdens of administrative work? Is it taking away some of the mundane, repetitive tasks that they’re often bogged down with day to day?” Rebhan asked. “I think it’s some of those softer metrics that may be in play here that are actually helping to sustain these tools.”
At AdventHealth, Shaw takes a utilitarian approach to choosing AI investments, telling Healthcare Dive that his system invests in tools that benefit the most patients. AdventHealth is currently pursuing ambient listening tools and “smart” patient rooms, where providers can meet with patients via Microsoft Teams on their TV.
No matter how providers prioritize projects, Southerlan suggests they streamline.
“I think healthcare needs to taper a little bit in terms of just constantly trying to produce more widgets faster, to start to think about the efficiency and effectiveness of the tools that we’re using,” Southerlan said.