Heard Around the C-Suite: The AI Arms Race and Other Insights from the Spring CFO & COO Forums

CFOs and COOs are navigating one of the most turbulent years in recent memory since 2020. From historic Medicaid cuts to escalating battles with payers, health system leaders are bracing for financial, political, and reputational pressures that demand new strategies.

In this episode of The Dispatch, we unpack the key themes from The Health Management Academy's 2025 CFO and COO forums:

• The fallout of the “One Big Beautiful Bill” and what comes next on site neutrality, 340B, and nonprofit status.
• Why payer relations have become an outright arms race and how AI is reshaping denials management.
• Workforce challenges: rising labor costs, unionization, and the push to build new pipelines.
• Where AI and automation are showing real ROI, from ambient listening to autonomous coding.

Transcript

Anika: 0:05

Welcome to the Dispatch, a podcast from the Strategy Catalyst team at the Health Management Academy. I'm your host, Anika Rashid, senior Analyst at Strategy Catalyst. Each episode we'll dive into the trends and insights shaping healthcare strategy today. Let's dive in. In today's episode, we're getting into the major takeaways from the Health Management Academy's 2025 CFO, and COO forums. These conversations in the spring captured the turbulence of the current policy environment with leaders bracing for historic Medicaid cuts and other looming reforms. Now these conversations happened in the spring, so we'll also provide an update on how health systems are responding. Since then, We'll also cover payer relations and the escalating AI arms, race and denials management What was top of mind when it came to workforce and unionization and the continued push for AI driven efficiencies? We'll start with policy. So this spring when CFOs and COOs gathered at their respective forums, policy turbulence came up in basically every session was definitely top of mind. Leaders were rattled by signals of Medicaid cuts uncertainty around site neutrality. The prospect of https://healthmanagementacademyin.sharepoint.com/:p:/s/AcademyCatalystCareTransformation/EbJzzeChmO1NhcA63NVNiGABWAHKOwRSfnnE8RdzDjU4Sg?e=6hH2hzthree 40 B reform, elimination of NFP status. So everyone knew that the changes were coming, Medicaid cuts were seen as inevitable and site neutrality as particularly impactful, and also led to conversations about ambulatory strategies for CFOs and what we're seeing in health systems as betting on their A SC strategies. So quick plug for more on this, including case studies and physician alignment. Check out our website. There was a sense that we were in a maelstrom with reimbursement, uncertainty, clinician shortages, economic retraction, bad debt denials, and pre-auth issues. NIH cuts, and all of these would only get worse with anticipated policy upheaval. CO COOs. We're also thinking about the impacts of grant funding being pulled back on a MC systems. Changes to Medicaid for rural and safety net hospitals, and grappling with the need to keep essential services open and making potential cuts while navigating what they felt like they needed to do while still serving their communities. So service line rationalization, conversations were definitely happening. they were talking about what can we shudder and what can we partner on? What is non-negotiable? And the feeling was that if any of the proposed policy changes hit that would have significant and ugly impact. They were also flagging other pain points like restrictions on D-E-I-S-D-O-H, gender affirming care, plus the growing misalignment between state and federal policy. So in short, there was a sense of waiting for the other shoe to drop, and systems already felt squeezed between financial, political, and reputational pressures. So since then the shoe has dropped. The one big beautiful Bill Act brought historic Medicaid cuts hospitals are finding themselves having to reappraise their value to policy makers and the public. this leaves health systems bracing for the next rounds with site neutrality three 40 B nonprofit status. The bill didn't touch those areas, but they're still very much on the table. so what's health system response looked like now? I have Ross Arrington, managing Director of Health Policy and Strategy over at the Academy Advisors to speak more on that,

Ross Airington: 3:28

the reforms are forcing states and health systems to retool quickly, but in many cases, they're still waiting on CMS and other agencies to issue the detailed rules that will determine both the scope and the timing of the changes. what the bill did not touch was site neutral payment 40 B reform or nonprofit status. Those are still very much on the table and we expect follow-up legislation regulatory action in those areas down the line. as we speak, comments are still open on a CMS rule that would expand site neutral payment for drug administration services. So a lot is going on right now hospitals are having to adapt quick, but there's also a lot of hurry up and wait going on.

Anika: 4:14

for health system executives. The prudent move is to identify places where cuts can potentially be made and maybe not make those cuts right now, but to be ready to make changes if things continue the way that they are. So this is a moment of real inflection for health systems.

Ross Airington: 4:31

What the one big beautiful Bill did was something that we never thought we would see, which was historic cuts. To Medicaid the largest cuts in the history of the program and the arguments that are usually used avoid. Cuts to healthcare financing fell flat on their face. What we are hearing and what we are seeing in the industry is fundamental reappraisal of what our value is to both the public, to the government, in between. Why did the arguments that have worked historically not work this time? what do we need to change those arguments? What is the message we need to be delivering both to Congress, to the executive branch and to the American people to demonstrate the value that health systems, hospitals, and providers, provide. I'm not sure that we figured that out yet. And so this is very much a time of soul searching.

Anika: 5:31

So how did we get here? On top of that, the financing mechanisms that states have long leaned on provider taxes, state directed payments are being restricted. The federal government is saying that states need to step up, But states can't run on a deficit. They have to balance their budget every year. So states that lose access to these financing tools will face hard trade-offs. They'll have to make healthcare spending cuts or reduce other critical services, and the outcome is gonna differ state by state. But across the board, policy makers are gonna be forced into tough decisions about what to fund and what to sacrifice. At the same time, systems receiving federal funds have been forced to scale back D-E-I-S-D-O-H, and gender affirming care programs. Here's Ross again to speak more on that.

Ross Airington: 6:09

They're already stripping away health equity frameworks, guidance on diversifying clinical trials, you name it. and health systems, especially those that are receiving federal funding, we're forced to review and often dismantle their DEI and SDOH initiatives. That includes revising, hiring practices, staff training, and even language and mission statements, and other public facing materials to avoid references that could be perceived as potential violations. the cumulative effect of this is Heightened legal uncertainty, and health systems having to find a way that they can continue pursuing these missions, without running afoul of the current administration. and that is not an easy thing to do. compliance, is more important now than ever because things that were okay just a couple of months ago are the type of thing that are gonna lose you federal funding today.

Anika: 7:09

So for strategy leaders, looking forward, what does all this mean? Spring forums mentioned the feeling that boards were not adequately equipped to navigate this kind of turbulence. Ross from the Academy Advisors told us how TAA has seen a little bit of a shift in how government relations is positioned inside systems. with government relations officers being given a direct line to the CEO rather than reporting through multiple layers. So in this kind of fast moving policy environment, delays in information can be costly and leaders need to be able to pivot quickly. And so that requires government relations being integrated at the highest strategic level. not just as an advocacy function, but as a core part of strategy. What matters the most now is legal and regulatory interpretation. Boards can't just get briefed on laws that have already passed. They also need to understand pending federal and state proposals so that they're not caught off guard. Some boards are even bringing on directors with health policy expertise, and treating policy risk as seriously as financial risk. Finally, CSOs need to help reframe the value narrative. Policymakers and the public are no longer swayed by the same arguments that worked even a few years ago. Systems need to be able to articulate their role in a way that resonates today. Not only do they need to be aware of what's coming, but they also need to engage early. Here's Ross one more time.

Ross Airington: 8:25

it's safe to say that the next 12 months be defined by heightened scrutiny of hospital financing, especially through three 40 B and site neutral payment, on three 40 B HH S's, piloting a rebate model tied to the 10 drugs up for Medicare negotiation. Which raises real cash flow concerns for hospitals that will pay higher upfront costs and then have to wait for rebates. in Congress, proposals for point of sale discounts, international reference pricing, and even a possible shift in oversight from HRSA to CMS, all of which could fundamentally reshape the program. On site neutrality. CMSs, as I mentioned before, has already proposed equalizing payment for drug administration and off-campus HODs and physician offices as part of the rule. However, CMS is soliciting comments on, whether this model should be expanded to imaging and other outpatient services. Even requesting information on the feasibility of site neutral payment for clinic visits performed on campus. So even if the drug administration policy isn't finalized, the proposed rule, and RFIs are sending a clear signal that CMS intends to continue its efforts to expand site neutral payment policies. If not this year, then certainly the next couple of years, engaging early with policymakers and coalitions is gonna be key, because the rules are still in flux. And believe it or not, there is a real opportunity to shape the outcome, that be through, public comment or working directly with, state legislatures.

10:05

so we just covered policy turbulence and how strategy leaders need to help change the narrative with policymakers in the public, but another arena where the narrative is playing out intention as highs with payers. CFOs, in our sessions were clear that payer relations are not in a good place right now. Leaders are also increasingly worried that scrutiny over rates, margins, and nonprofit status is eroding trust, and CFOs in particular said that it feels like they're constantly on the defensive with local media, employers, and policy makers. Quick to question whether hospitals are delivering enough community benefit to justify the rise in costs. That's also why we've heard examples of systems hiring PR teams, leaning on chambers of commerce and making transparency with boards, physicians and employees, a cornerstone of their approach to rehabbing their image. executives describe negotiations with payers as more adversarial than ever. We've heard it described as a battle of the bots, payers deploying AI to retroactively deny claims. With organizations reporting insurers clawing back four to$6 million every month just from AI driven takebacks by United and Blue Cross. When we asked CFOs if this felt like a period of peace with payers or on the brink of war, nobody described it as a period of peace. It's a tense environment and the operational pressure is immediate. Every denial or denied claim adds to the strain on frontline teams.

Anika: 11:25

Here's Thomas Sea executive director on the AI catalyst team here at THMA with more on this.

Thomas Seay: 11:30

There truly is an AI arms race between payers and providers. Providers have seen significant increases in denials over the last few years, and health insurers are using AI algorithms to make those denials. There is a lawsuit alleging that one payer deployed an AI model known to have. A 90% error rate in the claims that it chose to deny. Now, that's an allegation hasn't been proven, but it speaks to the ways that payers are using AI really aggressively to try to reduce their costs and in response we see. Providers implementing AI throughout the revenue cycle. We've seen providers significantly increase their CDI query rate without increasing staff by using AI tools and using AI to draft appeals letters. But it truly is. An arms race, this is a zero sum game. Every dollar you win is one your payer loses. So if you upgrade your ai, your payer's gonna upgrade their ai. We have one organization that implemented an AI tool that within the first year saw a$15 million revenue boost, but by the second year. Had fallen to$7 million as payers adapted. That's indicative I think, of the arms race dynamic. I don't think you can opt outta that arms race. you do have to maintain a level of investment here. Uh, but I also think that long-term AI wins require you to invest outside of the revenue cycle if you save some of your short-term rev cycle gains for long-term investments. In clinical AI that can help you stay, on top of all the opportunities available.

Anika: 13:08

What also stood out in the forums is how denials management is being elevated to the C-suite as a strategic priority. Executives are weighing how to balance short-term financial wins with long-term resilience. AI may not eliminate the conflict, but it can redefine the terms of engagement, even if we're committing to a constant back and forth. Here's Alex Pollac, director on the AI Catalyst team here at THMA. With more on this.

Alex Polyak: 13:30

while it is an arms race, and while it means that the burden placed on health systems of having to fight payers will never necessarily go away. There is an element of you can kill two birds with one stone with AI in that a lot of the work that is being done now, both in terms of rev cycle tools, but in general with clinician documentation means that the amount of time that clinicians spend having to respond to prior authorization requests have to respond to, denials. Is dramatically decreasing. one of the things I like so much from Emory, was that they were saying that with their use of Doximity GPT, you can now have a draft in seconds instead of in half an hour for an appeal that a clinician previously just would've looked at and said, I don't have the time for this, And that's an appeal letter that's been written and sent out. Otherwise it wouldn't have previously been sent out. And so what I'm trying to get at here is that so much of the battle for revenue capture is actually fought. Between clinicians and RevCycle teams in order to get them on the same page in a timely fashion, and AI is offering a very unique. Almost unprecedented way to bridge what at times has been a really big chasm between the two groups. Their motives or incentives are not typically aligned. AI is dramatically decreasing the administrative burden and dramatically enhancing the collaboration and that. In and of itself, I think is driving a lot of the ability of revenue capture that not only do you see, but also that you're gonna need to continue to see in terms of health systems pushing back against payers.

Anika: 15:22

We also heard some CFOs describe the tactic of pushing legislators to consider new rules, like requiring the losing party to pay appeal costs. Another major thread was contract dynamics themselves. We heard of shorter contract terms one to two years in many markets, as both payers and providers hedge against future volatility. strategies here vary. Some systems favor evergreen contracts with termination clauses, while others are doubling down on shorter deals to preserve their leverage. Finally, CFOs flagged the payer mix shift from traditional plans to IRAs. CFOs describe this as a slow but growing pressure point. Adoption is rising, especially among small and mid-size employers. But the early signs that we're seeing aren't really favorable. Reports from the forum said that patients on Icra seem less likely to pay their bills than those in high deductible plans. And steerage toward lower cost providers is even more pronounced than with narrow networks. So while the impact isn't big yet, their trajectory is clear. Let's pivot now to workforce, which remains top of mind for both COOs and CFOs. Even as turnover and burnout have receded from their pandemic highs, labor costs continue to climb. CFO forum reported that physician compensation is rising five to 6% annually while nursing salaries are growing seven to 10% year over year and rural hospitals face an especially precarious situation having to pay wage premiums just to attract staff while operating with already raise within margins CFOs were also worried about unionization and considered it something to monitor. Interestingly, the research that THMA has conducted has pointed out that compensation isn't actually the top driver of unionization Instead, what conversations at CFO Forum highlighted was that what's fueling organizing momentum are issues of autonomy, culture, decision making power, and work life balance. COOs were equally preoccupied with strengthening the pipeline. and as one COO put it, it's hard to get young people engaged in healthcare when they can do just as well financially at a Starbucks. Health systems are experimenting with community partnerships and building relationships, even with high schools, to spark interest in entry level roles. Some are also creating structured academies for advanced practice providers. and aiming to rebalance care models towards a PP LED delivery. Retention was also a major topic. Executives pointed to the first six months as a critical window with many staff leaving before they truly get to settle in One COO at forum said, there's a difference between getting someone to join you and getting someone to stay with you. culture transformation, mentorship, stronger preceptor training have all emerged as levers of choice. Naturally technology also comes into that conversation. There are tools that can help support staff and get them out of doing some of that less satisfactory work. Whether those tools are ambient listening or load balancing nursing staffing with virtual opportunities. We also heard about automated discharge systems. But we continue to see AI and automation considered more and more as critical tools to offload routine tasks and buy back time for clinicians. Ambient listening in particular continues to stand out as one of the most physician satisfying technologies in play today. for CFOs. Automation of back office functions remains just as important, especially across the revenue cycle. Here's Alex of AI Catalyst again, to talk more about that.

Alex Polyak: 18:53

The more advanced AI use that we're hearing about is predominantly in administrative work, especially on rev cycle side, and that makes sense. In today's financial climate, you want to be focusing on writing the ship and helping your margins. And then the big one that's particularly new and we're only beginning to see some. True solutions here, are AI powered autonomous coding solutions, which, if you can imagine, are gonna be particularly transformative for one of the most, Work strapped people in the entire healthcare workforce

Anika: 19:30

When it comes to ai, leaders are continuously asking, how do we choose what to prioritize? Which tools deliver measurable ROI now and which ones are worth investing in for long-term transformation? here's Thomas of AI Catalyst once again to talk more about that.

Thomas Seay: 19:45

I would offer a couple of thoughts there. Nebraska Medicine has a big partnership with Palantir and they've come up with a three question scorecard to prioritize their AI projects. The first question is about strategic alignment. The second is about speed to execution, and the third is about return on investment. And they basically assign a one to five score on each of those dimensions, add them up, and that's your score for prioritizing your AI investments. Another approach I'd consider is identifying whether, you're looking for short term returns or longer term transformation. If you're focused on the short term revenue cycles where it's at, you're gonna see a very fast return from your AI investments there. The risk is that if you're always chasing the short term. You're never gonna get around to investing in the long term. And moreover, any short-term gains might erode if your payer then upgrades their own ai. So one thing we've heard about, health systems doing is allocating half of the dollar saved from short-term AI investments into longer term AI investments. I also think we're seeing a shift from incredibly conservative low risk AI implementations into. Ones that are either more risk tolerant or at least pose more hypothetical risks that you have to mitigate. You have WellSpan, for instance, using an agent called Anna that calls patients who need a colonoscopy and walks them through prep. That is a real time interaction between an AI agent and a patient, so that requires a pretty sophisticated and reliable AI tool. It also requires more sophisticated governance to ensure safety.

Anika: 21:22

Another discussion that emerged at COO Forum was health systems debating whether to lean into their EHR vendors roadmap or invest in best in class point solutions. Epic in particular, has built out an ambitious AI pipeline, but leaders are weighing whether good enough from the EHR is preferable to deeper standalone tools.

Thomas Seay: 21:42

The good news is Epic has, quite a robust AI roadmap and has largely been meeting, the deadlines that they've stated for the features they plan to roll out. So you can get from Epic a pretty clear timeline of what they're planning. A rule of thumb, we've heard some health systems use. Is that if Epic's tools are 80% as good as what's available from another vendor in the market, stick with Epic. That's gonna be much easier from an integration perspective. on the other hand, you look at Epic's roadmap and you decide X capability is super important, super urgent, or if Epic's implementation is not quite right for your health system, that might be a moment where you wanna look at other vendors in the marketplace.

Anika: 22:22

That was Thomas of AI Catalyst. And here's Alex with more on this topic.

Alex Polyak: 22:27

epic understands that they are not the only player in these spaces, and that's at their heart. They are an EMR provider, and so they have not only partnered with a lot of leading organizations who have decades of experience in rev cycle, decades of experience in ambient and so on, but they also are actively working. To enable other vendors to basically be able to plug into Epic as the baseline, which means that from the sense that you're going to be potentially duplicating something that Epic will have down the line, a fair concern. But the idea that you are going to have a point solution that can't plug into Epic, that is rapidly becoming less of a concern. But the second thing that I would really encourage any CSO, but frankly any CXO. Talk to Epic about what their timeline actually entails. They're very transparent about the fact that if they say a certain feature is opening in Q3 of 2026, they'll tell you if that means that six plus organizations have been piloting it already for three months, six months, one year. In general, I think that you want to be thinking about. How ready for market this solution will be. Epic has a lot of experience with integrating at your organizations, but it also doesn't mean that you're going to necessarily be having something that is as tried and tested at some other organization vendors have. So I would just encourage you to think about if this is something that has a pilot already of. Organizations that look like you, that are of your size and they already have results and they can share stories with you, epic will help you with that connection and that's a good reason to go with Epic.

Anika: 24:24

Lastly, I wanna turn to Northwell, which had two sessions at COO Forum. So the first session discussed Northwell Health Integration Playbook. What stood out wasn't necessarily the size of their deals, but the way that they approach them. Northwell takes what they described as a culture first strategy. That means prioritizing cultural alignment and community influence over pure financial calculations. Their integration strategy is long-term. Guided by a cross-functional executive team built through trust, collaborative projects and selective partnerships. Northwell builds credibility by empowering frontline providers, showing measurable outcomes and proving to the board that growth strengthens not dilutes the mission. Over time that track record translates into long-term trust, and that trust is what allows them to keep pursuing ambitious growth without pushback. Sustainable growth isn't just about what you buy, but how well those moves. Reinforce culture and community. Trust m and a is a lever, but culture is the foundation. In their second session, Northwell discussed their supply chain and operations, resiliency and sustainability initiatives, and this session was a big hit at COO. With tariff risks being a huge concern this year, supply chain leaders at Northwell shared how they reframed supply chain, not as a cost center, but as a strategic investment. at the session, they pointed to their supply chain leaders as an investment who more than pay for themselves. Through smarter sourcing, waste reduction, and stronger vendor partnerships. Northwell's approach emphasized not only cost efficiency, but also environmental stewardship. There are inevitably a lot of savings to be identified with your supply chain leader. COOs. Found this session in particular inspiring with the context of sustainability being better for the community as well as better for the environment. For more on for the tariff discussion, Our July 16th episode covered the tariff agenda and strategic implications as well as how health systems can respond. The conversations at CFO and COO forums underscored a common reality. Health systems are continuously being asked to do more with less, while having to defend their value to policymakers, payers, and the public. As the policy and economic landscape continues to shift, the executives we spoke with see this as an inflection point. to reshape their organizations looking towards resilience, credibility, and growth. That wraps up this episode of the dispatch. If you have thoughts or comments, we'd love to hear them. Please email us at Strategy catalyst@hmacademy.com to share. And don't forget to check out other resources from the Health Management Academy on our website, HM academy.com. That's it for this dispatch. Thanks for listening.