Healthcare was a $4.3 trillion industry in 2021 for the United States alone, accounting for 18.3% of the country’s gross domestic product. From primary care to life-saving emergency treatment, healthcare provides essential services to people in need — and jobs that require a wide range of skills and expertise. As such a large and impactful industry, healthcare faces a host of challenges, from delivering high-quality and equitable care to managing and securing data and supporting its workforce. Beyond that are challenges stemming from government agencies seeking to increase their influence over how those trillions could be better spent and a growing number of disruptors from outside the industry that all want a piece of the pie.

What Are Healthcare’s Top Industry Challenges?

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

Key Takeaways

  • Many healthcare industry challenges stem from a need to respond to external forces, be they from regulators, competitors or cybercriminals.
  • Inefficient workflows for documenting patient appointments, submitting insurance claims and normalizing unstructured data add to organizations’ expenses.
  • From telehealth to electronic health records, hospitals and health systems face looming questions about how to deploy technology to improve patient experience without further burdening 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 industry challenges outlined below cover a wide range of areas. Some are the result of external forces, such as cybersecurity, competition and government regulation. Others stem from internal processes that need improvement, such as inefficient workflows for documenting clinical care or submitting claims. Others, still, may be influenced by internal and external forces, such as the adoption of telehealth or the movement to provide more equitable care. But woven through them all is the common thread of uncertainty: uncertainty about disruptive competitors, the next cyberattack, the future of telehealth services and a whole host of other technology innovations that hold great promise. There’s also uncertainty about how providers can move to value-based care without creating a back-breaking administrative burden — and that’s only one of healthcare’s many regulatory-induced challenges.

Each of these challenges is significant on its own but, together, they create a tough environment. Not meeting these challenges could harm patient care, financial stability and the reputation of a health or hospital system’s reputation. Successfully meeting the challenges requires a proactive approach. Providers must embrace technology that supports their ability to make decisions based on data. They need to foster a 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 be key for successful healthcare providers.

12 Healthcare Industry Challenges

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

1. Cybersecurity: The healthcare industry is especially susceptible to cyberattacks due to the volume of personally identifiable information (PII) and protected health information (PHI) that hospitals and health systems store. Research has shown that 60% 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 than doubled in the same time frame.

It has become crucial for healthcare companies to address their cybersecurity issues because more 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 hit hospitals disrupt patient care, with disruptions typically lasting two weeks. These disruptions often force organizations to divert care to other facilities, which has been linked 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 $10 million, and the potential loss of annual operating income from a single ransomware attack is as much as 30%. With hospital and health system operating margins at less than 2% and still recovering from largely negative margins in 2022, that is a cost few organizations find themselves able to pay.

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

Currently, telehealth use represents about 5% of all medical claims. However, nearly 70% of all telehealth claims represent mental or behavioral health appointments, which suggests that other medical specialties haven’t fully embraced telehealth use. It’s also possible that utilization will drop in 2024 and beyond given uncertainty about what services Medicare will cover, how much physicians will be paid for telehealth visits and whether providers 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 with telehealth vendors early in the pandemic. As these organizations reevaluate the technology they have and whether it meets their needs, the healthcare industry may need to prepare for significant disruption in telehealth.

3. Competition: Brick-and-mortar health systems increasingly face competition 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 care center. (Notably, that total excludes clinics inside retail stores, which number more than 2,500.) The popularity of these clinics comes from convenience, as they tend to be open longer than the typical doctor’s office.

In addition, retail companies that have not traditionally provided care delivery services are getting into the game. Amazon acquired primary care provider One Medical in 2022, both CVS Health and Walgreens have acquired primary care and home health companies, and Best Buy has focused on supporting in-home remote patient monitoring. To top it off, venture capital firm General 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 2024 and beyond. Hospitals and doctor’s offices with long wait times to schedule an appointment or to see a doctor may have trouble competing with clinics that have longer hours or are even willing to send a care provider into someone’s home.

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

It is possible to streamline these processes using electronic invoicing and 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’s worth noting, however, that certain claims or prior authorization denials will still require manual intervention.

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

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

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

Here, data crunching is necessary to convert raw data into 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 in the future. Data crunching will be an important consideration for the healthcare industry in 2024 as organizations seek to study their data to better understand clinical and financial outcomes.

7. Health equity: The negative impact that economic and social marginalization 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 healthcare industry’s ongoing struggle to provide equitable care. Other examples include higher rates of death from cancer and higher maternal mortality rates.

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

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

8. Slow clinical workflows: Nearly 80% of office-based physicians and 96% of hospitals in the United States use electronic health record (EHR) systems. This is a significant increase from less than 20% of physicians in 2001, influenced largely by federal reimbursements allocated in the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009. In terms of clinical workflow, EHR systems appear to come with both yin and yang. They have improved care delivery by streamlining note-taking, improving decision-making and providing reminders and alerts to clinical staff. However, multiple features of EHR systems have been linked to an adverse impact on clinical workflows, ranging from long load times to information overload. Clinical staff also spend more time looking at their computer screens and less time with patients, and more time completing their clinical notes or documenting visits to submit bills.

A range of technology innovations have the potential to improve the clinical workflow within EHR systems, including the use of generative AI to automate documentation and make it easier to search for information. The challenge for the healthcare industry in 2024 is to determine the appropriate use cases for such innovations — and ensure that using them does not further distract clinical staff during patient visits.

9. Provider shortages: The healthcare industry faces a significant shortage of qualified professionals to deliver care. The Association of American Medical Colleges has projected a total shortage of between 37,800 and 124,000 physicians by 2034. Meanwhile, a 2023 analysis of data from the 2022 National Nursing Workforce Survey showed that more than 610,000 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 to the pandemic.

Several factors contribute to these expected shortages. Chief among them is burnout, fueled by a combination of increased workloads during the pandemic and the growing number of administrative tasks that clinical staff are forced to complete. Additionally, nearly 45% of physicians are over the age of 55; as these physicians reach retirement age, there are not enough medical school and residency program graduates to replace them.

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

10. Patient experience: Slow clinical workflows and provider shortages have contributed to declining satisfaction with the patient experience. Also bringing down patient experience are long wait times — nearly a month (26 days), on average, between scheduling a new-patient appointment and the appointment date — and persistent manual processes for managing appointments, renewing medications and discussing test results. These increase the likelihood that a patient will switch doctors, which leads to lost revenue and hurts the reputation of a hospital or health system.

The healthcare industry will continue to respond to these challenges in 2024 through physical changes, such as state-of-the-art facilities, and a range of technology offerings. Self-scheduling capabilities, automated reminders, digital check-in and real-time payments are some examples of technologies that can improve the patient experience. Increasing the level 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 new technologies or workflows to improve the patient experience do not adversely impact the experience of clinical staff, who are already feeling overwhelmed.

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

Healthcare providers face two core challenges in achieving this goal. One is the volume of value-based care models that CMS has created. The accountable care organization (ACO) is the most notable, but there are also separate models for certain chronic conditions, prescription drugs and medical procedures, as well as models for specific types of Medicare and Medicaid health plans. A patient seen by a hospital or health system could conceivably be 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 are several components of quality care, including safety, equity, timeliness and cost. Organizations must report their performance on these metrics, and many others, to show both CMS and commercial insurers that they are delivering high-value care. This is creating a significant administrative burden likely to leave hospitals and health systems with fewer resources to devote to patient care.

12. Regulatory changes: Healthcare, of course, is heavily regulated, as patients’ lives are at stake. The pace of regulatory change has picked up since the pandemic, partly to give healthcare organizations greater flexibility to provide necessary care and partly to give patients improved access to their own health records — while keeping that information secure. But regulations covering the use of telehealth, transparent pricing, health equity and value-based care continue to evolve. In addition, the healthcare industry must contend with recently passed regulations, such as the information blocking rule (which requires organizations to share patients’ records with them), and new requirements for documenting evaluation and management (E&M) care encounters more accurately.

The healthcare industry is struggling to keep up with this pace of change. Staff need to be educated 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 from releasing information to documenting care — and often must sort through multiple regulations that apply to the same process.

How ERP Can Help Solve Healthcare Challenges

While healthcare’s challenges have disparate origins and require different mitigation strategies, a common thread is the pitfall of inefficiency. Manual workflows for submitting claims, departmental data silos, time-consuming processes for normalizing data and outdated practices for engaging with patients all result in healthcare providers operating less efficiently than they could. Furthermore, that inefficiency makes it difficult to provide high-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 the healthcare organization. Through this unified view of data, executives have greater oversight into administrative and clinical operations, while hospital leaders have greater access to the information they need to make informed decisions quickly. Oversight and informed decision-making improve efficiency, which enables high-quality care, reduces costs and sets the stage for growth.

ERP systems support growing healthcare organizations in at least three important ways. First is their easy scalability. Cloud-based ERP systems help organizations deploy a single system across multiple locations without the need for additional infrastructure or resources. Second is unification. With ERP, reporting, purchasing, accounting and many other departments are served from a single platform, removing the inefficiencies and redundancies of managing dozens of different applications. And third is integration with external systems. ERP systems are designed to facilitate that integration, so they can automatically extract data from business and clinical systems, eliminating the need to pull manual reports and 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 where it’s imperative to respond to changing market conditions, industry regulations and competitive pressures, all while providing quality care to patients in need and supporting the staff that do this meaningful work. NetSuite cloud-based ERP software for healthcare and life sciences is well-suited to help providers adapt to change through workflow reconfiguration, process automation, real-time reporting and better visibility into data across the enterprise. Leveraging NetSuite Enterprise Resource Planning (ERP) empowers the data-driven decision-making that health and hospital systems need to maintain operations at a time of great uncertainty.

For example, using NetSuite, Ohio-based Crossroads Health, a provider of behavioral health and mental health services, was able to submit stronger applications for grant funding, refresh its annual budgeting cycle and prepare budget reports that are individually tailored to the interests of board members. This has supported Crossroads Health as it doubled in size, expanded into primary care and added pharmacy services even as it managed increases in wages and expenses that outpaced Medicare and Medicaid reimbursements.

The healthcare industry faces no shortage of challenges to how it documents, delivers and pays for patient care. Health organizations must prepare to expect the unexpected — whether in the form of new regulations, new competitors or new cyber threats — while maintaining the level of service their patients expect and improving access for those who have been underserved. While there is no single solution for addressing all these challenges, greater visibility into clinical, operational and performance data enables healthcare 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 range of external stakeholders that they cannot control, from government regulators, to competitors in adjacent vertical markets, to cyberattackers seeking valuable financial and personal information. This is a difficult and expensive challenge for organizations that must 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 for submitting claims to insurance companies or sending bills to patients, are largely manual. Others have been automated but remain challenging due to requirements for clinical and administrative documentation. In some cases, such as leveraging big data, the inefficiency is a by-product of the nature of healthcare. Because the bulk of the industry’s data is in unstructured formats, it can be difficult and time-consuming to normalize it for interpretation and analysis.

What are three common barriers to growth in the healthcare industry?

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

What is a major disruptor facing healthcare currently?

Traditional providers of healthcare services, such as hospitals, health systems and physicians’ offices, face increased competition from retailers, urgent-care providers and direct-to-consumer telehealth providers. These competitors aim to provide more convenient 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 of health systems that have been part of their communities for decades, if not centuries.