The healthcare sector continues to be deeply turbulent. Inflationary pressures, political uncertainty, and technological advances—like those presented by Artificial Intelligence (AI)—are causing a great deal of disruption. At the same time, provider issues caused by staff shortages and the remnants of the COVID-19 pandemic remain deeply problematic.
But what are the common pressures faced by hospitals, clinics, and private practices? And how can your facility address the rising healthcare costs.
Rising Operational Costs
Inflation has hit the healthcare sector hard. The latest data shows that healthcare inflation has historically been higher than inflation in other sectors—with some exceptions on a year-to-year basis. Supply chain issues that first emerged during the COVID-19 pandemic have never completely disappeared. This reality has increased drug costs and slowed drug shipments.
An ongoing physician and nursing shortage has increased wages and higher recruitment costs. These days, recruitment costs cannot even be considered one-time expenditures, as there is a near-constant need to replace staff and hire more people to meet expanding demand.
Finally, healthcare facilities need to invest in more technology than ever. This includes AI, information technology improvements, tele-health equipment, and regular investments in cybersecurity. All of these costs have ongoing components.
Declining Reimbursement Rates
At the same time, costs are going up, and numerous revenue streams are decreasing. Reimbursement rates from Medicare, Medicaid, and private insurers have decreased from their COVID highs. This has left many healthcare practitioners needing additional dollars to balance their books. Shifting payment models are also increasing strain on the healthcare industry. Many providers are now focusing more on value-based reimbursements. While value-based care can lead to revenue enhancements, it can also lead to revenue disruptions or force hospitals to engage in more risk-sharing financial arrangements.
Finally, health insurance deductibles and costs are also increasing. This means that patients are having more trouble managing their costs, which can lead to higher levels of uncompensated care.
Financial Strain on Rural and Small Providers
Perhaps no specific healthcare sector has seen a greater strain on revenue than smaller, rural providers. According to a Becker Hospital Review article from April 2024, more than 700 rural hospitals faced the risk of closure.
As healthcare continues to thrive on patient volume, these areas struggle because of a lack of patients, technological innovation, or investments. The health of rural populations compounds these vulnerabilities. Rural America tends to be older and sicker and has less access to preventative care. As a result, by the time a patient makes it into a rural hospital, they need more expensive care.
These realities lead to increased consolidation pressures on these hospitals, forcing them to find larger partners to bring more resources. In the face of these pressures, many rural hospitals face a simple, painful choice: Merge or close.
Investment in Digital Transformation
Gone are the days when a medical office or hospital could get by with technology that would have worked a few years ago. These days, hospitals must invest in digital products to survive.
These digital products come from multiple directions. First, healthcare offices must invest in telemedicine products that will allow them to maintain access to healthcare products and expand virtual care services. Indeed, these services—and the technology that serves as their foundation—are expanding regularly. To remain up-to-date with patient demand and adequately meet patient needs, offices must invest in the latest technology and constantly upgrade their technological platforms.
Furthermore, the area of Health Information Technology has become larger, more important, and more expensive. Data analytics that can analyze population health are now required. This technology allows practitioners to better grasp what drives community healthcare trends. Electronic Health Records and diagnostic tools can also provide better medical care. They can also ensure every appropriate practitioner can access a patient’s healthcare record.
Solutions and Strategies
Fortunately, despite these challenges, practitioners can still find ways to control healthcare costs, reduce provider issues, and deliver higher-quality care. You can deploy multiple different strategies to achieve better results.
First, your healthcare system needs to concentrate on efficiency improvements. Operational costs remain a massive financial burden. However, process improvements, automation, and appropriate technology can reduce these costs.
You must also diversify your services and provide patients with more healthcare options. Specialized care, urgent care, and outpatient services have all grown in popularity over the past few decades. These areas have proven to be solid revenue generators for healthcare facilities.
Finally, your hospital will likely need to engage more with government leaders. Doing so can allow you to advocate for changes that will benefit your healthcare system. You can also partner with local healthcare organizations to ensure you can access taxpayer funding for special projects or increase reimbursement rates.
Takeaway: What You Need To Know
Hospitals, healthcare offices, and private practitioners continue to need to develop sustainable financial strategies to ensure quality patient care. These strategies require deploying outside experts, investing in technology, and deepening staff recruitment and retention.
It also means that hospitals and other medical offices need to engage in deeper collaborative efforts than ever before. Healthcare practitioners need to work with other providers, payers, and policymakers to address financial challenges and find long-term solutions. Practitioners also need to seek outside efforts to help them develop the sustainable solutions they need.
Do you need help with your healthcare recruiting or want additional insight into the healthcare world? MRINetwork is here to help. Contact us today for more information.