Top Industry Challenges for Healthcare (2024)

Healthcare was a $4.3 trillion industry in 2021 for the United States alone, accounting for18.3% of the country’s gross domestic product. From primary care to life-savingemergency treatment, healthcare provides essential services to people in need — andjobs that require a wide range of skills and expertise. As such a large and impactfulindustry, healthcare faces a host of challenges, from delivering high-quality and equitablecare to managing and securing data and supporting its workforce. Beyond that are challengesstemming from government agencies seeking to increase their influence over how thosetrillions could be better spent and a growing number of disruptors from outside the industrythat all want a piece of the pie.

What Are Healthcare’s Top Industry Challenges?

Hospitals and health systems are challenged by maintaining continuous operations, keepingpatients safe and ensuring their data is secure. Those challenges come at a significant costin terms of hiring the right personnel, deploying strong technology and making clinical andbusiness processes efficient without compromising care quality. What’s more,healthcare institutions must do their work while responding to an ever-changing regulatoryenvironment and facing new kinds of competitors that promise patients more convenience orless costly care. So healthcare providers must find a balance between provisioning care thatmeets the needs of patients and expectations of regulators and maintaining financialstrength.

Key Takeaways

• Many healthcare industry challenges stem from a need to respond to external forces, bethey from regulators, competitors or cybercriminals.
• Inefficient workflows for documenting patient appointments, submitting insurance claimsand normalizing unstructured data add to organizations’ expenses.
• From telehealth to electronic health records, hospitals and health systems face loomingquestions about how to deploy technology to improve patient experience without furtherburdening clinical staff.
• Healthcare providers stand to benefit from adopting enterprise resource planning (ERP)systems that can offer systemwide insight into operational performance.

Healthcare Industry Challenges Explained

Healthcare comes with the highest stakes: people’s lives. The dozen healthcare industrychallenges outlined below cover a wide range of areas. Some are the result of externalforces, such as cybersecurity, competition and government regulation. Others stem frominternal processes that need improvement, such as inefficient workflows for documentingclinical care or submitting claims. Others, still, may be influenced by internal andexternal forces, such as the adoption of telehealth or the movement to provide moreequitable care. But woven through them all is the common thread of uncertainty: uncertaintyabout disruptive competitors, the next cyberattack, the future of telehealth services and awhole host of other technology innovations that hold great promise. There’s alsouncertainty about how providers can move to value-based care without creating aback-breaking administrative burden — and that’s only one of healthcare’smany regulatory-induced challenges.

Each of these challenges is significant on its own but, together, they create a toughenvironment. Not meeting these challenges could harm patient care, financialstability and the reputation of a health or hospital system’s reputation.Successfully meeting the challenges requires a proactive approach. Providers must embracetechnology that supports their ability to make decisions based on data. They need to fostera culture of continuous learning and improvement and prioritize patient-centered care.Collaboration — both within healthcare organizations and with external partners— is vital. As the landscape continues to change, flexibility and adaptability will bekey for successful healthcare providers.

12 Healthcare Industry Challenges

A wide range of challenges impact healthcare organizations and will impact how they providecare, use technology and otherwise do business in 2024.

1. Cybersecurity: The healthcare industry is especially susceptible tocyberattacks due to the volume of personally identifiable information (PII) and protectedhealth information (PHI) that hospitals and health systems store. Research has shown that60% of healthcare organizations have been hit with ransomware attacks in the past 12 months,while the number of successful attacks targeting the healthcare industry has more thandoubled in the same time frame.

It has become crucial for healthcare companies to address their cybersecurity issues becausemore than financial consequences are at stake: Patient outcomes are affected and, sometimes,it’s literally a matter of life and death. Roughly 80% of ransomware attacks that hithospitals disrupt patient care, with disruptions typically lasting two weeks. Thesedisruptions often force organizations to divert care to other facilities, which has beenlinked to increased complications with medical procedures and higher mortality rates.

Meanwhile, the cost of mitigating a data breach in the healthcare industry is more than $10million, and the potential loss of annual operating income from a single ransomware attackis as much as 30%. With hospital and health system operating margins at less than 2% andstill recovering from largely negative margins in 2022, that is a cost few organizationsfind themselves able to pay.

2. Telehealth: The healthcare industry was quick to embrace telehealth inthe early days of COVID-19; in April 2020, its use was 78 times greater than it was twomonths prior. That said, the gradual return to in-person care coupled with the expiration ofthe public health emergency, which relaxed many restrictions on when and how telehealthcould be used, has led to increased doubt about telehealth’s future.

Currently, telehealth use represents about 5% of all medical claims. However, nearly 70% ofall telehealth claims represent mental or behavioral health appointments, which suggeststhat other medical specialties haven’t fully embraced telehealth use. It’s alsopossible that utilization will drop in 2024 and beyond given uncertainty about what servicesMedicare will cover, how much physicians will be paid for telehealth visits and whetherproviders will be able to prescribe controlled substances in telehealth visits.

Further complicating telehealth’s future matters is the potential for vendor churn.Many hospitals and health systems are nearing the end of the contracts they signed withtelehealth vendors early in the pandemic. As these organizations reevaluate the technologythey have and whether it meets their needs, the healthcare industry may need to prepare forsignificant disruption in telehealth.

3. Competition: Brick-and-mortar health systems increasingly facecompetition and disruption. Standalone urgent care clinics are growing at a 7% annual rate,and today 80% of the U.S. population lives within a 10-minute drive of an urgent carecenter. (Notably, that total excludes clinics inside retail stores, which number more than2,500.) The popularity of these clinics comes from convenience, as they tend to be openlonger than the typical doctor’s office.

In addition, retail companies that have not traditionally provided care delivery services aregetting into the game. Amazon acquired primary care provider One Medical in 2022, both CVSHealth and Walgreens have acquired primary care and home health companies, and Best Buy hasfocused on supporting in-home remote patient monitoring. To top it off, venture capital firmGeneral Catalyst has recently hinted that it may purchase a hospital.

All these moves are poised to have a significant impact on the healthcare industry in 2024and beyond. Hospitals and doctor’s offices with long wait times to schedule anappointment or to see a doctor may have trouble competing with clinics that have longerhours or are even willing to send a care provider into someone’s home.

4. Invoicing and payment processing: The healthcare industry is especiallysusceptible to revenue leakage, with asmuch as 15 cents on every dollar earned going uncollected. The primary challengeorganizations face is an inefficient revenue cycle management (RCM) process. Manualworkflows are common for tasks such as verifying a patient’s insurance information,obtaining prior authorization, checking the status of a claim and appealing denials. Thesemanual processes are time-consuming and subject to human error, so they lead to addedexpenses — most notably, in the form of employee time. This contributes to paymentdelays, which means it takes healthcare organizations longer to get paid for the servicesthey provide. Unfortunately, about 75% of providers use manual processes for collectionsand, as a result, about 70% need more than 30 days to collect payments from patients.

It is possible to streamline these processes using electronic invoicingand invoice processing,which automatically tracks invoices from the time they are received. This can reduce errors,shorten time to payment and improve a healthcare provider’s cash flow. It’sworth noting, however, that certain claims or prior authorization denials will still requiremanual intervention.

5. Price transparency: Two U.S. regulations aim to help patients understandthe cost of healthcare services and avoid unanticipated bills. First, the Hospital PriceTransparency rule requires hospitals to provide both machine-readable and consumer-friendlylists of prices for common services and procedures. Second, the No Surprises Act requireshospitals to provide good-faith estimates of what services will cost and bans out-of-networkcharges for services provided at an in-network facility.

While organizations such as the American Medical Association and the American HospitalAssociation support these regulations, they have also noted the strains they can put onhealthcare providers. For example, it’s difficult to determine a single, fixed ratefor a medical service, as organizations often negotiate different rates with differentinsurance companies. In addition, creating price transparency tools takes time and requiresfinancial and staff resources that are in short supply in healthcare organizations. Finally,the arbitration process for insurers and providers to negotiate a “surprisebill” issued to a patient is likely to result in lower payments, which could adverselyimpact the hospitals and health systems that provide the services.

6. Big data: The average hospital system produces 137 terabytes of dataevery day. This data is valuable for many reasons: It documents the care that has beendelivered, it offers insight into a patient’s overall health and wellness, and itprovides an audit trail for compliance and legal purposes. The healthcare industry strugglesto manage big data because as much as 80% of its data is unstructured, such as free-textphysicians’ notes or medical images, and cannot easily be captured in the rows of adatabase. Normalizing unstructured data to look like structured data makes it more usefulfor clinical and business decision-making, but the normalization process is expensive andtime-consuming when done manually.

Here, data crunching is necessary to convert raw datainto a machine-readable format. Key to successful data crunching is knowing the use case,understanding the data sources and documenting the process to help make it more efficient inthe future. Data crunching will be an important consideration for the healthcare industry in2024 as organizations seek to study their data to better understand clinical and financialoutcomes.

7. Health equity: The negative impact that economic and socialmarginalization have on health outcomes was well documented prior to the 2020 pandemic.However, higher rates of hospitalization and death from COVID-19 among non-white Americans— coupled with lower vaccination rates — further highlight the healthcareindustry’s ongoing struggle to provide equitable care. Other examples include higherrates of death from cancer and higher maternal mortality rates.

In response, the Centers for Medicare & Medicaid Services (CMS) has set five prioritiesfor improving health equity in the United States over the next decade. These prioritiesinclude collecting more accurate data about patients’ barriers to receiving care,building the capacity to address disparities in care and making healthcare services moreaccessible.

The Centers for Disease Control and Prevention (CDC) has indicated that addressing healthequity “requires ongoing societal efforts” to remove barriers to care andaddress long-standing injustices that patients face based on their race, gender, sexualorientation, disability status or other factors. The healthcare industry has an importantrole to play, but institutions in education, government, public safety and the privatesector also need to be involved.

8. Slow clinical workflows: Nearly 80% of office-based physicians and 96% ofhospitals in the United States use electronic health record (EHR) systems. This is asignificant increase from less than 20% of physicians in 2001, influenced largely by federalreimbursem*nts allocated in the Health Information Technology for Economic and ClinicalHealth (HITECH) Act of 2009. In terms of clinical workflow, EHR systems appear to come withboth yin and yang. They have improved care delivery by streamlining note-taking, improvingdecision-making and providing reminders and alerts to clinical staff. However, multiplefeatures of EHR systems have been linked to an adverse impact on clinical workflows, rangingfrom long load times to information overload. Clinical staff also spend more time looking attheir computer screens and less time with patients, and more time completing their clinicalnotes or documenting visits to submit bills.

A range of technology innovations have the potential to improve the clinical workflow withinEHR systems, including the use of generative AI to automate documentation and make it easierto search for information. The challenge for the healthcare industry in 2024 is to determinethe appropriate use cases for such innovations — and ensure that using them does notfurther distract clinical staff during patient visits.

9. Provider shortages: The healthcare industry faces a significant shortageof qualified professionals to deliver care. The Association of American Medical Colleges hasprojected a total shortage of between 37,800 and 124,000 physicians by 2034. Meanwhile, a2023 analysis of data from the 2022 National Nursing Workforce Survey showed that more than610,000 experienced registered nurses — nearly one-third of nurses in the U.S. —are considering leaving their jobs in the next five years due to stress directly linked tothe pandemic.

Several factors contribute to these expected shortages. Chief among them is burnout, fueledby a combination of increased workloads during the pandemic and the growing number ofadministrative tasks that clinical staff are forced to complete. Additionally, nearly 45% ofphysicians are over the age of 55; as these physicians reach retirement age, there are notenough medical school and residency program graduates to replace them.

The shortage of physicians and nurses is hitting rural areas of the United States especiallyhard. Nearly 200 rural hospitals have closed since 2005 and another 600 are at risk ofclosing, in part because they struggle to compete with the higher salaries and betterworking conditions of suburban and urban hospitals. This will have a significant impact onthe healthcare industry in 2024 and beyond. Patients in rural areas will have to travelfarther to get the care they need, which contributes to poorer health outcomes.

10. Patient experience: Slow clinical workflows and provider shortages havecontributed to declining satisfaction with the patient experience. Also bringing downpatient experience are long wait times — nearly a month (26 days), on average, betweenscheduling a new-patient appointment and the appointment date — and persistent manualprocesses for managing appointments, renewing medications and discussing test results. Theseincrease the likelihood that a patient will switch doctors, which leads to lost revenue andhurts the reputation of a hospital or health system.

The healthcare industry will continue to respond to these challenges in 2024 through physicalchanges, such as state-of-the-art facilities, and a range of technology offerings.Self-scheduling capabilities, automated reminders, digital check-in and real-time paymentsare some examples of technologies that can improve the patient experience. Increasing thelevel of care provided in the home, whether through home visits or telehealth appointments,can also help.

For many organizations, these are large-scale changes. Leaders must ensure that newtechnologies or workflows to improve the patient experience do not adversely impact theexperience of clinical staff, who are already feeling overwhelmed.

11. Move to value-based care: CMS has set ambitious goals for transitioningthe healthcare industry to value-based care, which reimburses providers based on theclinical outcomes they achieve and not simply on the volume of services they perform. Forexample, the agency hopes all Medicare beneficiaries and most Medicaid beneficiaries will beenrolled in value-based programs by 2030.

Healthcare providers face two core challenges in achieving this goal. One is the volume ofvalue-based care models that CMS has created. The accountable care organization (ACO) is themost notable, but there are also separate models for certain chronic conditions,prescription drugs and medical procedures, as well as models for specific types of Medicareand Medicaid health plans. A patient seen by a hospital or health system could conceivablybe part of multiple value-based care models, which makes it difficult to document where,when and from whom they receive care.

The second challenge is the amount of documentation required to demonstrate value. There areseveral components of quality care, including safety, equity, timeliness and cost.Organizations must report their performance on these metrics, and many others, to show bothCMS and commercial insurers that they are delivering high-value care. This is creating asignificant administrative burden likely to leave hospitals and health systems with fewerresources to devote to patient care.

12. Regulatory changes: Healthcare, of course, is heavily regulated, aspatients’ lives are at stake. The pace of regulatory change has picked up since thepandemic, partly to give healthcare organizations greater flexibility to provide necessarycare and partly to give patients improved access to their own health records — whilekeeping that information secure. But regulations covering the use of telehealth, transparentpricing, health equity and value-based care continue to evolve. In addition, the healthcareindustry must contend with recently passed regulations, such as the information blockingrule (which requires organizations to share patients’ records with them), and newrequirements for documenting evaluation and management (E&M) care encounters moreaccurately.

The healthcare industry is struggling to keep up with this pace of change. Staff need to beeducated about the new rules, particularly if their day-to-day roles are directly affected.Legal and compliance teams, meanwhile, need to review and update policies on everything fromreleasing information to documenting care — and often must sort through multipleregulations that apply to the same process.

How ERP Can Help Solve Healthcare Challenges

While healthcare’s challenges have disparate origins and require different mitigationstrategies, a common thread is the pitfall of inefficiency. Manual workflows for submittingclaims, departmental data silos, time-consuming processes for normalizing data and outdatedpractices for engaging with patients all result in healthcare providers operating lessefficiently than they could. Furthermore, that inefficiency makes it difficult to providehigh-quality care, meet compliance requirements and adapt to competitive pressures.

But unifying data and automating manual processes is where enterprise resource planning (ERP)systems shine. An ERP system can bring together previously siloed data from across thehealthcare organization. Through this unified view of data, executives have greateroversight into administrative and clinical operations, while hospital leaders have greateraccess to the information they need to make informed decisions quickly. Oversight andinformed decision-making improve efficiency, which enables high-quality care, reduces costsand sets the stage for growth.

ERP systemssupport growing healthcare organizations in at least three important ways. First istheir easy scalability. Cloud-based ERP systems help organizations deploy a single systemacross multiple locations without the need for additional infrastructure or resources.Second is unification. With ERP, reporting, purchasing, accounting and many otherdepartments are served from a single platform, removing the inefficiencies and redundanciesof managing dozens of different applications. And third is integration with externalsystems. ERP systems are designed to facilitate that integration, so they can automaticallyextract data from business and clinical systems, eliminating the need to pull manual reportsand getting data into decision-makers’ hands faster.

Adapt to the Ever-Changing Healthcare Landscape With NetSuite

Healthcare organizations must do business in a complex and dynamic environment whereit’s imperative to respond to changing market conditions, industry regulations andcompetitive pressures, all while providing quality care to patients in need and supportingthe staff that do this meaningful work. NetSuite cloud-based ERP software for healthcare and life sciences is well-suited to helpproviders adapt to change through workflow reconfiguration, process automation, real-timereporting and better visibility into data across the enterprise. Leveraging NetSuiteEnterprise Resource Planning (ERP) empowers the data-driven decision-making thathealth and hospital systems need to maintain operations at a time of great uncertainty.

For example, using NetSuite, Ohio-based Crossroads Health, aprovider of behavioral health and mental health services, was able to submit strongerapplications for grant funding, refresh its annual budgeting cycle and prepare budgetreports that are individually tailored to the interests of board members. This has supportedCrossroads Health as it doubled in size, expanded into primary care and added pharmacyservices even as it managed increases in wages and expenses that outpaced Medicare andMedicaid reimbursem*nts.

The healthcare industry faces no shortage of challenges to how it documents, delivers andpays for patient care. Health organizations must prepare to expect the unexpected —whether in the form of new regulations, new competitors or new cyber threats — whilemaintaining the level of service their patients expect and improving access for those whohave been underserved. While there is no single solution for addressing all thesechallenges, greater visibility into clinical, operational and performance data enableshealthcare providers to take proactive steps to meet the heady challenges they face.

Healthcare Industry Challenges FAQs

What is the biggest challenge in the healthcare industry?

Healthcare organizations’ greatest challenge is adapting to pressure from a wide rangeof external stakeholders that they cannot control, from government regulators, tocompetitors in adjacent vertical markets, to cyberattackers seeking valuable financial andpersonal information. This is a difficult and expensive challenge for organizations thatmust maintain 24/7 operations while providing high-quality patient care.

What are the biggest issues in healthcare 2024?

The healthcare industry maintains many inefficient workflows. Some, such as processes forsubmitting claims to insurance companies or sending bills to patients, are largely manual.Others have been automated but remain challenging due to requirements for clinical andadministrative documentation. In some cases, such as leveraging big data, the inefficiencyis a by-product of the nature of healthcare. Because the bulk of the industry’s datais in unstructured formats, it can be difficult and time-consuming to normalize it forinterpretation and analysis.

What are three common barriers to growth in the healthcareindustry?

Healthcare organizations struggle to grow due to inefficient workflows that make it difficultto see more patients or pay bills on time. In addition, new documentation required as partof the transition to value-based care and other regulatory requirements has pushed thehealthcare industry to add administrative personnel, which means fewer resources areavailable to hire physicians and nurses. Finally, the healthcare industry must continue toaddress inequity in access to care, which contributes to poorer outcomes in marginalized andunderrepresented communities.

What is a major disruptor facing healthcare currently?

Traditional providers of healthcare services, such as hospitals, health systems andphysicians’ offices, face increased competition from retailers, urgent-care providersand direct-to-consumer telehealth providers. These competitors aim to provide moreconvenient care at a lower cost than a trip to the doctor’s office or emergency room.At the same time, these entities often lack the brand awareness and market presence ofhealth systems that have been part of their communities for decades, if not centuries.