The healthcare industry has been in a tough place since the COVID pandemic accelerated all that ailed it: Chronic and worsening labor shortages. Inflated costs of labor, suppliers, equipment and money. The impact of greater competition.
Recovery will remain elusive in 2024, though there are solutions – including sharpened risk management strategies – that stand to blunt some of the ongoing negative forces. Here’s what the industry can expect in the new year.
Struggling economic viability in the face of intense margin pressures
This year, operating margins of the nation’s hospitals continued to fall short of 2021’s median of 3%, even though they have improved from 2022’s 0.22%. No surprise: Higher expenditures were cited as a top concern by 79% of the healthcare respondents to HUB International’s 2024 Outlook Executive Survey.
Those higher expenditures can be seen in higher labor costs, and inflation has been a big contributor across the board. Not only are supplies and equipment more expensive, but so is the cost of money for financing big-ticket items like building projects and medical tech purchases. Many projects are being delayed or curtailed, like the new Chicago cancer hospital that reduced its planned bed capacity by 38% due to a 29% jump in construction costs.
Financial viability is also being pressured by exploding competition. The nation has added 14,500 urgent care clinics since 2019 as patient volume has surged 60%. And extension of the wildly popular telehealth consultations through 2024 also takes a bite out of traditional, in-person provider revenues.
The shortfall of professionals
Every facet of the industry is being strangled by the shortage of professionals that promises to worsen over the next decade: By 2030, there will be a gap of 200,000 nurses; by 2034, a shortfall of 48,000 primary care physicians. Eldercare is the worst affected, with a worker shortage that’s mushroomed to 400,000.
There’s no easy – or short-term – fix. Longer term, some optimists point to the potential of artificial intelligence to supplant some humans, though the technology is still in its formative stages. And more generally, 87% of industry respondents to HUB’s outlook survey said improved training and adding skills in general would have an impact.
But employers should use the new year to take a hard look the role that the industry’s culture plays in recruitment and retention. The top reason 31% professionals cited in one report for exiting is because they didn’t feel valued or that their wellbeing was supported. Violence in the healthcare workplace – five times greater than any other industry – is another concern behind the exodus.
One measure that can help stem the bleeding is for the industry to adjust their benefits and work policies to become more individualized and serve employees’ professional and personal lives. Over 80% of workers, after all, want to be seen as individuals; finding ways to deliver a quality employee experience will alleviate the labor pressures in 2024 and beyond.
Risks and disruptions ahead
Enterprise risk management is increasingly important to healthcare providers and the sharper the strategies in 2024, the better. Some risks may be more manageable than others, and preparedness has never been more important. It will put organizations on more solid ground and make a positive case with insurers. And given the challenges of the insurance market, that’s never been more important.
Healthcare’s increasing reliance on technology, for example, is both a boon and a bane. It reduces costs, eases access, streamlines workflows and improves diagnostics. But the exposures have expanded accordingly, and data breaches suffered by the industry doubled in 2023. Organizations must double down on their training and safety measures in 2024 to slow the pace and make sure they put the right amount of cyber insurance in place. The good news, though, is that premiums will moderate in 2024.
On another front are catastrophic weather events, whether hurricanes, floods or extreme heat. Sufficient insurance, especially for healthcare systems in high catastrophe (CAT) areas, is imperative. It’s driving costs for property coverage and catastrophic perils up by 30%, if not more.
Preparedness is key, but HUB’s survey found a disconnect on this front. Three-fourths of healthcare respondents said they were prepared for climate change and severe weather. Yet fewer than half said they had effective facilities risk management plans. More than just the damage to facilities is a concern. So is the cost of caring for patients injured during these events. Severe heat alone is expected to add $1 billion in additional healthcare costs in 2023 – another pressure on the bottom line and viability in 2024.
Pete Reilly
Pete Reilly is the practice leader and Chief Sales Officer of global insurance brokerage Hub International’s North American healthcare practice.
In this role, he directs and coordinates HUB’s healthcare planning, growth and strategic initiatives. He also works with other leaders and experts within HUB to develop and introduce proprietary products that will help healthcare organizations and providers across the care delivery spectrum.
Pete has been a featured speaker at numerous professional conferences, including ASHRM, the Bermuda Captive Conference as well as having been a guest lecturer on topics of insurance and risk management at The Wharton School, a Metzger-Conway Fellow at his alma mater, Dickinson College and he has been twice recognized as Med Pro Group’s Buffett Award winner. Additionally, Pete has served on numerous insurance carrier Agency Advisory Councils and various ASHRM National Advisory Committees.
