Healthcare is not a one-size-fits-all industry. The current and projected U.S. healthcare and other industries labor markets are experiencing labor shortages that are driving up wages for qualified workers.
The healthcare industry is unlike other industries. Healthcare does not operate in a free market where prices for goods and services are self-regulated by buyers and sellers, based on supply and demand in a competitive market.
Healthcare revenue is largely fixed by the government, with Medicare and Medicaid, since approximately 65 percent of the patient payer mix is paid by the government, and the remainder is paid by insurers utilizing the government payment as the bogey. However, on the labor and supply side, healthcare is subjected to free-market forces, and healthcare is not able to pass on the cost of labor and other increases due to the fixed payer payment system.
Therefore, overall healthcare operating margins, which nationally averaged a slim 2 percent pre-pandemic, have deteriorated to negative operating margins without including the impact of supplemental payments from the American Rescue Plan Act.
According to the Center for Healthcare Quality and Payment Reform, 892 rural hospitals are at risk of closing, 35 percent of hospitals and healthcare systems have defaulted on bond or loan covenants in 2021, 73 hospitals have closed since 2011, and an estimated 1,000 hospitals have consolidated or merged over the past decade.
The U.S. spends more on healthcare than any other developed country due to higher prices for goods and services. U.S. healthcare costs consumed 18.8 percent of gross national product in 2021, and the U.S median per capita cost is $9,892 compared to the median per capita cost of $4,033 for other developed countries. An increasing portion of healthcare providers' revenue is now coming directly from patients. More than 75 percent of patients with employer-sponsored coverage are enrolled in a health plan with an annual deductible, and more than 50 percent of covered patients are enrolled in a high-deductible plan. The average family plan has an annual average deductible of at least $8,000.
Several factors contribute to bad debt and charity care, which continues to increase, resulting in a negative healthcare financial impact. There is a growing number of uninsured (11 percent of 65-plus in 2020), and underinsured people who spend more than 10 percent out-of-pocket of their annual income or their deductible is more than 5 percent of their annual income. The average family of four's annual income is $67,521, and most health plans have a family deductible of $8,000 per year. These issues have led many patients to incur bad debt and have exacerbated the situation for healthcare providers by causing significant coverage losses. According to a Commonwealth Fund survey, 6 percent of U.S. citizens insured during the first half of 2020 lost coverage during the pandemic.
Healthcare financial counselors have experienced challenges in acquiring accurate information to identify and verify patient coverage, determining patients' likelihood of payment, evaluating eligibility to enroll qualifying patients for financial assistance, collection, and assisting in developing a payment plan.
Patients need to be prioritized promptly for follow-up by the billing staff as either likely to pay their balance or who may be challenged to meet their financial responsibility and are earmarked for financial assistance and/or payment plans. Staff needs to ensure that they are supportive and communicate the payment process throughout the experience, making it less stressful and fair to all patients.
The way benefits are administered is growing more complex. This shift in financial responsibility, paired with unprecedented economic conditions associated with the pandemic has had a major impact on healthcare organizations' loss of volume and payments.
This situation is unsustainable. If the U.S. does not develop and support new healthcare delivery and payment models that affect quality and cost, we will become even more dependent on government intervention that will lead to socialized medicine (national health insurance). Government intervention will ration services and control providers, payers, medical intervention, technology, access and patient choice.
As the healthcare industry heads into a pivotal inflection point over the next decade, with so much more that can be done to transform and ensure that the products and services provided will continue to play a vital role in the healthcare delivery system. There is a need to actualize the commitment to transform and optimize the industry to accelerate the growth and development of high-quality and lower-cost care delivery with a commitment to clinical excellence and a customized patient experience. The healthcare industry must consider repositioning strategic options and combinations that integrate state-of-the-art technology and clinical methods comprehensively, investing in people, and providing seamless access for the prevention, diagnosis and treatment of the full spectrum of diseases in convenient patient settings.
There is a need to redesign healthcare delivery models and payment systems to ensure they can meet the growing and challenging demands of the marketplace. Payers must also be engaged to design and support insurance plans that maintain a focus on quality and cost. The healthcare industry needs to adapt to technological, environmental, social, governmental and patient/consumer marketplace shifts that impact their day-to-day financial and operational initiatives. Innovative strategies that need to be considered include creating ambulatory care as a strategic business unit within regional health systems, establishing greater "systemness" through shared and coordinated clinical service lines, and the adoption of retail strategies.
Now is the time for ingenuity and innovation. It is a time for trying new approaches and new ways of delivering healthcare services more cost-effectively. Healthcare leaders need to seek decidedly new ways to better position and proactively manage their future.
Healthcare industry leadership must be singularly focused on the broad mission of improving healthcare delivery and patient outcomes by investing in growth strategies and driving continued innovation, while containing costs to survive.
The healthcare industry must work together, along with Congress, to consider legislation and programs that help enhance education and training for healthcare workers; improve access to life-saving prevention, diagnosis and treatment services for patients such as mental health, substance abuse, primary care, telemedicine, in-home services and value-based payment programs in fee-for-service; and promote total cost-of-care arrangements from payers and other legislative proposals impacting the future survival of the healthcare delivery system.