Health Care Financial Outlook: Costs, Services Demand and Labor Shortages

easing patient financial stress

By Lori Kalic, health care senior analyst and partner with RSM US LLP

Key takeaways:

  • The pandemic’s effects continue to weigh down the health care industry. 
  • Rising health care costs and staff shortages are also having a negative impact on the bottom line of many organizations.
  • Technological solutions may be the key to improving their financial well-being. 

For many hospitals across the country, the first two months of 2022 were a disappointment from an operational perspective. On average, inpatient volumes decreased, and outpatient volumes were slow to recover because of the omicron surge in the winter months. While hospitals did experience some expense relief in the first quarter due to below-budget volumes, expenses remained higher than in prior years due to continued supply chain issues and labor costs.  

The median change in operating margin was down 11.8% from January to February, and the median change in operating EBITDA margin decreased 7.5% month over month, according to the March 2022 Kaufman Hall National Hospital Flash Report. Other key financial results include the following:

Hospital financial results

U.S. health care prices are expected to rise by 3.6% in 2022, up from 2.7% in 2021, 3.1% in 2020 and 1.1% in 2019, according to a recent article by Modern Healthcare. This rate of inflation is expected to boost overall health care spending growth by 4.6%, to $4.5 trillion. 

What does all this mean for the consumer? Higher out-of-pocket costs that are projected to climb 6.1% in 2022 and an average increase of 4.6% from 2021 to 2030.

Population growth is partly driving increased health care expenditures. According to census bureau estimates, the U.S. population is currently 331.9 million, and will grow to 347.3 million by the end of 2025. Given this expected growth, the health care sector will have to hire approximately 745,000 employees during the next four years, or approximately 186,000 employees per year, to maintain current staffing levels. To return to pre-pandemic staffing levels, the sector must hire over 1.3 million employees through 2025, or approximately 333,000 employees per year.  

This data suggests that the demand for health care services will continue to grow in 2022 and beyond, but there will likely be fewer health care workers to deliver those services. It is critical for health care organizations to analyze a mix of digital and human solutions for a given process or function to ensure the best results. Innovative technologies like robotic process automation will soon become a requirement for any organization to stay competitive when it comes to attracting talent, providing high-quality care and staying ahead of the curve.  

Get additional insights in RSM’s Summer 2022 health care industry outlook.