Weekly Business Insights 07/29/2025

Optimizing healthcare supply costs—from the physician’s perspective

External spend for supplies, pharmacy, and purchased services makes up 30 to 40 percent of a typical health system’s total cost base, and optimizing clinical supplies spend is a critical method to consider reducing total costs.  Identifying and implementing spend optimization opportunities can result in 5 to 15 percent cost savings from health systems’ external spend baseline.

Supply chain leaders often focus on managing spending on clinical supplies such as medical devices. Yet clinical stakeholders have the valuable perspective of knowing which devices can provide the highest-quality care at the lowest price point. Physicians can also be valuable partners when negotiating with vendors. Given this, physician agency and autonomy in the pursuit of health system–level goals for managing supply costs could go a long way in not only reducing costs but also engaging and retaining physicians.

Health system executives should find ways to effectively engage physicians in decision-making to responsibly reduce costs and improve standardization while maintaining or improving quality. This article discusses how these leaders can build a culture that fosters physician engagement, tailor health systems’ analytics platforms to physicians’ needs, and consider creative ways to encourage physician involvement in supply chain decisions.

Optimizing healthcare supply costs—from the physician’s perspective | McKinsey

‍

Medical cost trend: Behind the numbers 2025

The same inflationary pressure the healthcare industry has felt since 2022 is expected to persist into 2025, as providers look for margin growth and work to recoup rising operating expenses through health plan contracts. The costs of GLP-1 drugs are on a rising trajectory that impacts overall medical costs. Innovation in prescription drugs for chronic conditions and increasing use of behavioural health services are reaching a tipping point that will likely drive further cost inflation.

Meanwhile, cost deflators are not enough to offset cost inflators. The growing adoption of biosimilar medications may provide some relief, while many health plans are looking inward to find opportunities across business operations to generate additional cost savings. Today’s medical cost trend is an urgent call to action for healthcare organizations to rethink their strategies to manage the total cost of care more effectively.  

As we predicted in our Next in health services 2024 report, the sector is in a state of sustained economic compression. For healthcare organizations already in a fragile financial position, these factors are relentless. This reality requires a new response. Organizations should reshape strategies; reengineer financial, workforce and business models and capitalize on each transformational opportunity — from investments in innovation and technology to deals — to overcome the inflationary chokehold and forge a path to a drastically different cost and business model.

Medical cost trend: Behind the numbers: PwC‍

U.S. healthcare spending rises to $4.8 trillion in 2023, outpacing GDP

National health spending is expected to grow by 5.2% in 2024, though Medicaid enrolment is set to decline by 11.2% when over 10 million people lose coverage now that pandemic response measures guaranteeing continuous enrolment have expired. An estimated further 2 million will lose coverage in 2025.

Spending is set to grow an average of 5.6% a year between 2023 and 2032, outpacing the projected annual gross domestic product growth rate of 4.3% during the same period. The rise will lead to an increase in the health spending share of growth domestic product to 19.7% by 2032 from 17.3% in 2022, the data showed.

It will gradually fall over the following years when the effects of other provisions kick in, such as drug prices negotiated by Medicare with pharmaceutical companies that are set to apply starting 2026, and the tying of drug price increases to inflation which already started in 2023.

U.S. healthcare spending rises to $4.8 trillion in 2023, outpacing GDP | Reuters