Less room to absorb rising costs
The financial case for digital investment starts with the pressures already on the balance sheet.
Health systems are entering 2027 budget planning with limited room for higher costs or delayed payments. The latest National Hospital Flash Report, published in October using August 2026 data, put year-to-date hospital operating margins at 2.5%, including allocations. Roughly 43% of hospitals in the report were operating at a loss. Those hospital benchmarks provide context, rather than a measure of every health system’s financial position.
For CEOs and CFOs, that leaves a difficult investment question: which expenditures can improve financial performance without adding more cost and complexity than the organization can sustain? Digital strategy belongs in that discussion wherever technology can address a specific source of expense, payment friction or constrained capacity.
The pressure extends beyond payroll
Workforce spending remains substantial, while drugs and supplies are adding to the squeeze.
The AHA’s March 2026 Costs of Caring report found workforce spending accounted for about 60% of hospital expenses in 2025 and rose 5.6% year over year. More recent hospital data shows continued pressure from nonlabor costs. Digital priorities should reflect both.
- Workforce: Scheduling and demand forecasting tools can help managers identify coverage gaps and avoidable overtime. Time saved may support patient care or avoid additional hiring without reducing payroll.
- Supplies: Supply expense per adjusted discharge increased 5% year to date through August 2026. Purchasing and inventory analytics can help teams investigate variation and waste.
- Drugs: Drug expense per adjusted discharge rose 6% over the same period, making pharmacy purchasing and utilization another area for closer review. Both expense figures are from the August 2026 hospital data, compared with the same year-to-date period in 2025.
Visibility alone does not lower expenses. Each investment needs an operational owner who can act on the findings and identify whether the result is lower spending, avoided cost or additional capacity.
Revenue cycle deserves direct attention
Preventing payment problems can be more useful than processing them faster.
Revenue cycle is a concrete place to connect digital strategy with financial performance because it affects both the cost of collecting payment and the timing of cash receipts. The AHA estimates hospitals spent $43 billion in 2025 trying to collect payment from insurers for care already delivered, including nearly $18 billion overturning claims denials. These are the association’s estimates of administrative expense, not the value of unpaid claims.
A useful digital response starts by separating the causes of rework. Missing documentation, eligibility errors and unresolved authorization requirements need different remedies. Automating an appeal may reduce handling time, but preventing a recurring submission error could remove the work altogether.
For example, a health system could focus on a service line with frequent authorization-related denials. Connecting scheduling, authorization status and documentation requirements could help staff resolve missing information before care is delivered. The financial question would then be whether avoidable denials and staff rework declined, rather than how many checks the software completed.
There is also a timely infrastructure change. CMS’s Interoperability and Prior Authorization final rule requires impacted payers to meet its API requirements primarily by January 1, 2027. That creates an opportunity for more electronic exchange, but provider organizations still need to connect the available functionality to their own workflows. The deadline does not mean every payer or service will follow one uniform process.
Executives should distinguish improvements in collections from improvements in cash timing. Receiving the same payment sooner can strengthen liquidity. Recovering revenue that would otherwise have been lost can affect earnings. Reducing collection expense is a third benefit. Treating them separately makes the financial contribution clearer and helps prevent double counting.
Name the financial benefit
Lower cost, faster cash and added capacity require different evidence.
Before approving a project, identify what the organization expects to change. Will an expense leave the budget? Will payment arrive sooner? Will existing staff or facilities support more activity? Each can justify investment, but one should not be presented as another.
AI adds costs as well as possibilities
The financial case needs to include the work required to make automation dependable.
AI proposals often begin with an estimate of work that could be automated. Executives also need to account for:
- Implementation: Integration, data preparation and staff training.
- Ongoing operation: Licensing, vendor support, human review and performance monitoring.
- Workflow changes: Retiring duplicate checks, manual handoffs or overlapping software where appropriate.
- Oversight: Assigning responsibility for errors, compliance concerns and escalation.
A tool that drafts an appeal still needs accurate source information and appropriate review. Its financial value depends on the total effort required to complete the task, including corrections and downstream rework. A budget that funds launch but leaves ongoing operation unassigned is incomplete.
Choose investments around the payment model
An operational improvement can have different financial effects under different contracts.
Digital priorities should reflect how the organization is paid. Under fee-for-service reimbursement, reducing a canceled appointment or filling unused capacity may support additional revenue. Under a risk-based arrangement, better coordination may help reduce avoidable utilization and total spending. The same intervention can therefore have different financial implications across a health system’s patient populations.
That matters when evaluating tools for readmission prevention, remote monitoring or care management. An avoided admission may benefit patients while reducing hospital revenue under one arrangement and contributing to shared savings under another. Leaders need to understand the contracts, the timing of settlement and which entity bears the cost of the intervention.
Portfolio decisions also need to account for the resources projects share. Several individually attractive initiatives may compete for the same integration staff or depend on unfinished data work. Sequencing investments around those dependencies can be more practical than approving a collection of projects that cannot be implemented together.
The executive task is to connect each priority to a defined financial pressure. Revenue cycle investment should address identifiable payment problems. Workforce technology should support an explicit staffing or capacity objective. Broader infrastructure spending should have a clear role in enabling those improvements, with the cost of maintaining it included.
Bring the margin conversation to HIMSS27
Use financial priorities to guide technology discussions.
Health system financial pressures in 2027 will require choices about where to invest and what to stop doing. Digital strategy can support those choices when it addresses a known operational problem and produces a financial benefit the organization can identify. Its value depends on implementation, ownership and the ability to change established processes.
Register for HIMSS27 to connect with healthcare peers and explore how technology can support your organization’s financial and operational priorities.