The U.S. health care sector is poised to undergo a significant transformation over the next decade with an aging population in need of care, advances in medical technology, evolving care models and increasing labor costs. The continued push for value-based care models is predicted to reshape many of these trends and reimbursement models, putting the focus on patient outcomes and curbing rising costs.
The additional advancement of pharmaceuticals and therapies to manage chronic diseases will trigger continued growth as well. While all these are positives for the industry, regulatory uncertainties, market volatilities, cyberattacks, and costs can pressure this advancement.
We’ll explore what is emerging in the months to come regarding costs and reimbursement, and some ways providers and health care systems can address challenges.
Persistent challenges: Affordability and costs
According to Kaiser Family Fund, about a quarter (24%) of the American people say they or a family member struggled to pay their medical bills just in the past year. The number rises to 33% for those who are in fair or poor health. Worst off are people who are sick and uninsured: 51% of that group report problems paying their medical bills.
Addressing affordability has recently meant spending more to cover more people, enhance coverage and subsidize coverage as the government has been doing through the Affordable Care Act marketplaces and Medicaid expansion. It’s a reality that the government, and taxpayers, spend more to make health care cost less for people. Costs continue to increase, however, and the government continues to increase spending.
Centers for Medicare & Medicaid Services actuaries project that health spending will grow on average 5.4% per year through 2031, outpacing projected average growth in the countries’ gross domestic product (GDP) of 4.6% per year and resulting in health spending consuming almost 20% of GDP (19.6%) by 2031 (equating to $20,425 per capita).
And within this climate of affordability challenges and costs, hospitals and health systems have been at a crossroads of increasing demand for higher acuity care and deepening financial instability. Persistent workforce shortages, severe fractures in the supply chain for drugs and supplies, and high levels of inflation have collectively fueled hospitals’ costs as they care for patients 24/7.
Ongoing reimbursement streamlines were challenged again this year with a massive cyberattack on one the industry’s largest revenue and payment cycle management companies creating a backlog of claims and delayed revenue. Diverting dollars from their reserves to maintain access to care has required tradeoffs that have limited many hospitals and health systems from investing in updated infrastructure, new medical technology and equipment, and other clinical needs.
Opportunities ahead
While the industry has its challenges, sometimes challenges reveal opportunities, too.
As providers improve telehealth coverage, address prescription drug prices, provide alternative payment models with provider incentives, and leverage technology adoption, administrative burdens and patient care delivery will be improved, costs controlled and reimbursements managed.
In addition, offerings like price transparency or accountable care organizations, which include a group of doctors and providers who collaborate to give high-quality care to patients, are also opportunities underway where many organizations are trying to curb costs and address reimbursements to improve patient care.
The use of technology will also provide additional opportunities to improve patient data sharing, interoperability and more, reducing redundancies and duplicative costs. By decreasing manual processes and replacing (or optimizing) with technology, care delivery models can then be offered in virtual settings, reducing care costs through more effective and efficient population health management techniques.
Going forward
The health care sector will continue to be impacted by labor challenges and inflation pressures affecting patients’ physical, emotional and financial well-being in the short term. Organizations and providers can take proactive steps to assist their patients in navigating this complex landscape by leveraging newer, patient-centric financing models and technology, and by advocating for greater affordability with policymakers.
Matt Wolf
Matt Wolf is a financial consulting director in RSM’s health care practice. In 2018, he was selected for the firm’s cutting-edge Industry Eminence Program as a senior analyst covering health care, working alongside the firm’s chief economist and other program participants to analyze trends and themes affecting the industry and shaping middle market businesses.
In addition, Matt leads the firm’s health care valuation team and serves as the practice leader for RSM’s Nashville, Tenn. region health care practice. He is also an active member of the firm’s Family First employee network group.
Michael Haas
Michael Haas is a technology management consulting manager in RSM US LLP’s health care industry practice. In 2022, he was selected for the firm’s Industry Eminence Program as a senior analyst covering the health care industry, working alongside the firm’s chief economist and other program participants to analyze the trends and themes affecting the nonprofit and education industry and shaping middle market businesses. Michael is based out of RSM’s New York City office.
Danny Schmidt
Danny Schmidt is a senior manager in the assurance practice and a health care senior analyst for RSM US LLP. As a member of the Industry Eminence program, Danny works alongside the firm’s chief economist and his fellow senior analysts to understand, forecast and communicate economic, business and technology trends affecting middle market businesses.
