How Inflation Is Impacting Healthcare Costs
It’s impossible to avoid discussion of inflation these days. Even just a cursory glance at the news brings stories of rising gas prices, and if you’re like most Americans, many of your conversations with friends and neighbors center on how the cost of everything from groceries to hotels is going up month after month. But what about medical care? Is inflation also impacting the cost of doctor’s visits and hospital stays? And what does this mean for you as a healthcare provider? Here’s what you need to know.
Does healthcare inflation impact costs?
The answer is a resounding yes — and unfortunately, the effects are only expected to become more pronounced in the coming years.
Experts are predicting that increases in healthcare costs are looming. But because payments and rates between insurance companies and large medical systems are negotiated years in advance in the United States, the full impact of today’s inflation will likely be felt later.
This, of course, doesn’t mean there hasn’t been any impact on today’s healthcare costs. Healthcare costs are rising due to current inflationary pressures, but they’re climbing at a slower rate than the overall economy. This past year, medical care costs rose 2.5 percent, compared with 6.7 percent across the entire American economy.
The good news is that because we have this built-in lead time due to the way contracts are negotiated, we have the opportunity to prepare for the impacts of inflation so we can insulate our practices, personnel, and patients.
The ripple effects of healthcare inflation
Inflation doesn’t occur in isolation. Every price increase has an impact somewhere else in the economy, which is why inflation is so destructive. When the cost of healthcare goes up, it doesn’t just affect patients and providers — it has a ripple effect that’s felt throughout the entire system.
Nor is the impact of healthcare inflation all one-way. When patients feel inflationary pressures in their personal lives, it impacts their healthcare providers, too.
Costs are passed along to consumers
As the cost of living goes up — and as the labor crisis gives employees more leverage to demand higher wages — labor costs in healthcare will increase. This is in addition to the costs of everything else needed to provide medical care, from energy costs to equipment, materials, and supplies.
These increased costs will be passed along to patients in the form of higher premiums and copays. Or, in some cases, insurers may elect to reduce coverage or eliminate certain benefits altogether in an effort to keep premiums affordable. (We share more on this possibility below.)
Patients are less likely to get the healthcare they need
We also know that when healthcare expenses rise, consumers are less likely to go to the doctor and more likely to delay care. This is especially true for people with high-deductible health plans who may put off seeking care until their deductible is met.
Delaying necessary healthcare can have serious implications for both a patient’s health and the provider’s bottom line. Of course, the patient is the most important here. Studies show that patients who delay care due to high deductibles face higher future healthcare costs due to catastrophic events, an increased mortality rate, and lower overall quality of life.
Patients have less money available for medical expenses
When patients experience increases in living expenses without commensurate increases in their wages, they have less money available to pay medical bills and medical debt. This can lead to an increase in the number of patients who are unable or unwilling to pay their bills, which will eventually be passed along to providers in the form of bad debt.
This, in turn, falls back on consumers in the form of higher healthcare costs, further exacerbating the problem.
More patients will be underinsured
Rising healthcare costs will also lead to more underinsured patients. When patients are underinsured, it impacts healthcare providers by leading to increased costs associated with uncompensated care. In addition, underinsured patients often put off seeking medical care until their condition becomes more serious, which can result in increased visits to the emergency room or higher rates of hospitalization.
Insurance benefits will decrease
Finally, insurance companies may cope with increased costs by decreasing the sizes of their networks, limiting provider reimbursements, or reducing access to medical care. This has an impact on both healthcare providers and patients.
When reimbursements are reduced, it often means that providers are forced to see more patients in order to make ends meet. This can lead to burnout and a decline in the quality of care. In addition, when networks are smaller, patients may have difficulty finding a provider who accepts their insurance. This can limit their access to care, too.
(Get tips on how to deal with medical billing denials.)
All of these factors — higher premiums, increased bad debt, and more underinsured patients — will eventually lead to provider consolidation and closures. When providers are forced to close their doors, it creates a domino effect that is felt throughout the entire healthcare system.
Expert advice to minimize the impact of inflation
In short, inflation is likely to have a profound impact on the healthcare system in the coming years. As a provider, it’s important to be aware of the potential effects of inflation and to take steps to protect your practice. These include:
Increase workforce efficiency through automation and self-service
Automation is one of the best ways to reduce overall costs and generate more revenue for a practice. By automating administrative tasks like billing, providers can free up staff time to focus on more important tasks. This can lead to increased efficiency and productivity.
In addition, self-service tools like online appointment scheduling, payments, and patient portals can help reduce the number of phone calls and walk-ins a practice receives, which relieves overburdened staff and maximizes their efficiency.
Reduce waste and improve operational efficiency
Operational efficiency is another important way to reduce costs. By streamlining processes and eliminating waste, providers can free up resources that can be used to improve patient care. One way to do this is by investing in technology that can help automate tasks and improve communication between staff members.
Improve billing and collections
Billing and collections are two areas where inefficiencies can lead to increased costs and decreased revenues, both of which can be disastrous in a struggling economy. When your costs are higher and you’re not bringing in as much revenue as you could or should be, it may mean having to make dramatic changes to how you operate or even closing your practice’s doors altogether.
By streamlining billing processes and improving communication with patients, providers can reduce the amount of time and money spent on billing. This will lead to increased revenue if your new system improves upon the old one, making it easier for patients to make payments.
(Learn more about how patient financial engagement solutions provide valuable returns.)
Provide support for patients with financial concerns
We can expect that more and more patients will struggle to pay their medical bills as the country’s financial crisis worsens and the threat of a recession looms. It’s important to provide understanding support to patients who are unable to pay their bills in full. This might include instituting a payment plan process or offering discounts or perks for early payment.
The bottom line
Healthcare inflation is a real problem for providers, and it’s only going to become more pronounced in the coming years. As costs continue to rise, patients will be increasingly unable to pay their medical bills, which could have a serious impact on your bottom line. It’s important to be aware of the potential effects of inflation on your practice.
A service like MailMyStatements can help reduce your labor costs, allow your team to focus on providing higher-level services, and give your patients the flexibility to set up payment plans and make automatic payments on their balances. Learn more about our solutions and get started today.