5 Things to Know About the Economics of Healthcare in 2025
Healthcare industry changes in the United States continue to challenge businesses and individuals. Policy and regulatory shifts, along with insurance companies’ financial strength or weakness and individual health plan availability, roil the industry. Early into 2025, the pace of change is accelerating. Prospective students looking for the best healthcare MBA programs will find what they need to succeed in the industry at Baylor University’s Hankamer School of Business.
Forest Kim, PhD, executive director and clinical associate professor at the Robbins Institute for Health Policy and Leadership at the Business School, sees five healthcare industry changes that will affect healthcare economics in 2025:
- Regulatory and policy uncertainty
- Increased pressures for cost-cutting
- The roles of technology and Artificial Intelligence in cost efficiency
- Continued movement toward lower-cost treatment settings
- Continued Private Equity (PE) investment in the industry
Each of the five is a challenge individually. The combination of all five demands the kind of preparation Baylor’s Executive MBA (EMBA) provides for current and future healthcare industry leaders. The Healthcare Administration concentration combines rigor and relevance to instill knowledge specific to the healthcare industry. It also equips graduates for the challenges ahead and enables them to find even more success in their careers. Learning outcomes from this program include:
- How policy and law impact the American Healthcare System
- Financial factors impacting healthcare organizations
- Economic models and considerations in a variety of healthcare settings
- Technology and innovation’s application in healthcare curriculum
Regulatory and Policy Uncertainty
“The speed at which the new presidential administration is issuing new policies is staggering,” Kim said. “Recently, I spoke with a senior leader in the Military Health System who says that he spends a significant portion of his day monitoring cable news to keep up with new guidance.”
Policy changes announced via leaks or social media blasts, rather than a press release or White House announcement, make it difficult for federal workers and healthcare professionals to assess and implement changes. Traditional forms of communication have been upended as employees learn about policy changes from their news feeds before or at the same time as senior leaders, Kim said.
Modes of communication are not the only issue. Policy changes, especially haphazard ones, lead to uncertainty.
“It’s been said that a health system’s financing can change with the stroke of a legislator’s pen,” Kim said. “This is true now more than ever.”
Cancellations of major federal research grants and other programs impact organizations across the healthcare sector, including academic medical centers, community clinics and universities.
Increased Pressures for Cost-Cutting
Spurred by federal funding cuts, hospitals and health systems face increasing pressures to cut costs. A 2025 BDO report found, “While many organizations were already struggling during the COVID-19 pandemic, many of the challenges of that era remain unsolved. Now, healthcare organizations are facing mounting pressure from labor shortages, margin erosion and cyber threats.”
Healthcare executives are having more conversations about relying less on commercial payers, known in the industry as “living off of Medicare.” Changing this pattern requires bringing spending in line with Medicare and Medicaid reimbursement levels.
“Any cuts to Medicaid will only amplify these cost-cutting pressures,” Kim said.
Medicaid cuts will also lead to more hospital closures, particularly in underserved and rural areas where Medicaid patients are the highest clientele.
The Roles of Technology and Artificial Intelligence in Cost Efficiency
Faced with continued workforce shortages and declining reimbursements, the healthcare sector is looking towards Artificial and Augmented Intelligence for solutions. The National Institutes of Health said, “AI could significantly reduce inefficiency in healthcare, improve patient flow and experience, and enhance caregiver experience and patient safety through the care pathway.”
Kim predicts that 2025 should see an acceleration of the incorporation of AI and large language models (LLMs) into healthcare, even if the most significant impacts are five or more years down the road.
In addition, leaders in healthcare administration are looking across the healthcare value chain – in both clinical and administrative areas – where AI can either replace or assist healthcare workers in their daily tasks.
Continued Movement Towards Lower-Cost Treatment Settings
In line with pressures to cut costs and due to declining reimbursement rates in inpatient settings, 2025 should see expanded use of treatment settings such as ambulatory surgery centers, urgent care clinics and home health to help lower costs.
“Increased interest in home health should accelerate the rapid consolidation, mergers and acquisition activity occurring among home health companies,” Kim said.
The growth of the ambulatory surgical center (ASC) market from $81.5 billion in 2022 to a projected $141.2 billion in 2032 is evidence of this shift.
Clinical studies and medical industry leaders say positive patient outcomes, shorter stays and patient preference for “easier scheduling, shorter wait times, faster procedures and more personalized care” also contribute to a move to ASCs for cutting costs.
Ongoing Private Equity Investments
Though private equity investments in healthcare dropped slightly from 2023 to 2024, the healthcare sector remains attractive to private equity investors due to consistent demand, an aging population and opportunities for consolidation and improved efficiency.
Looking favorably for an expanded role of PE in healthcare is the difference between the Biden administration, which favored aggressive regulation, and the Trump administration, which currently prioritizes deregulation.
“The new administration’s policies, with its focus on deregulation and market versus government-driven approaches, could enhance private equity investments in the coming year,” Kim said.
However, the lowering of regulatory hurdles for PE healthcare investments provides an opportunity for students seeking an MBA in healthcare leadership to make an immediate professional impact. Efforts by private equity firms to squeeze maximum profit in a minimum timeframe are exemplified in Cerberus Capital Management's purchase of a nonprofit hospital system. This, followed by a series of questionable business decisions, ultimately led to the rebranded system’s bankruptcy in 2024.
How Students Benefit from Baylor’s Healthcare MBA in Today’s Economic Landscape
The challenges above form a rocky terrain for healthcare leaders. An Executive MBA in Healthcare Administration from Baylor prepares students to overcome them.
“First, we help students understand the macro forces at play in our healthcare system,” Kim said. “Additionally, we educate students to grasp the competencies needed to affect change at the micro-level. Last, the Robbins Institute for Health Policy and Leadership works with Baylor’s Robbins Healthcare MBA to help students define their ‘why?’ All of our students enter our program to make a difference in healthcare. We help them more precisely define their personal values and leadership philosophy, so they remain true to their calling even in the midst of uncertain and difficult times.”
Baylor’s Executive MBA Prepares Students for the Challenges of Today’s Healthcare Industry
The EMBA program at Baylor University features a meeting schedule of one weekend a month. The world-class instructors in the Business School will teach you to analyze real-world case studies, develop a servant leadership mindset and learn professional skills like learning to lead, negotiating, decision-making and presenting yourself like an executive.
Click here to download the EMBA Fact Sheet or read more about the Healthcare Administration concentration.
The FTMBA program at Baylor University is geared toward early-career professionals who are ready to break into their desired industry. With a foundation of rigorous coursework, a dynamic classroom setting and engaged faculty to challenge and support you along the way, our ultimate aim is to help you build your business acumen so you can take your career to the next level.
Click here to download the FTMBA Fact Sheet or read more about the Healthcare MBA
What’s Next?
Ready to pursue an EMBA in Healthcare Administration? Fill out this form to learn more and speak to one of our Enrollment Coordinators
Dr. Kim further explains what solutions are necessary to solve the healthcare workforce crisis. Learn more here
Shifting to home-based healthcare is one of the solutions to the economic challenges this industry faces. Learn how Baylor Healthcare MBA Angel Vargas made it possible in his career.
