Part 2: Inflation’s Ongoing Impact on Healthcare

by | 30 January 2023

This time last year, the U.S. was experiencing historic inflation. Consumers were balking at the price of everyday essentials, hoping it would be a blip that would soon even-out. However one year later, egg prices have soared – up 60% in the last 12 months.

The healthcare industry, in particular, has been plagued by volatility over the past three years. On the heels of the COVID-19 pandemic, the U.S. economic environment is now challenging operating conditions for health systems, independent providers, investors and most importantly, patients.

After a full year of staggering inflation and rising costs, here’s how the sector has been impacted.

Margins are Being Squeezed

At the end of 2022, Mass General Brigham reported a $432 million operation loss and -2.6% operating margin for the year, and Cleveland Clinic expects a $200 million+ operating loss, as reported by Healthcare Dive. These are just two instances of health systems struggling under the pressures of the current economic landscape and staffing shortages.

Deloitte’s latest healthcare report lays out the fact that “many health systems are still recovering from low patient volume and revenue shortfalls tied to the pandemic. At the same time, costs for supplies and labor are rising. 2022 might wind up being one of the worst financial years hospitals have experienced in decades.”

The same report notes that median operating margins among hospitals were down 46% in September, compared to the same period in 2021.

Leaders Feel the Pressure
These tightening margins, rising costs and ongoing labor shortages have put pressure on hospital and health system leaders.

In a survey conducted by the Deloitte Center for Health Solutions, staffing challenges and inflation will be the two largest factors impacting their strategy for 2023. These leaders are up against a staggering talent crisis – between burnout, a wave of retiring baby boomers and turnover, the Bureau of Labor Statistics estimates 1.1 million new nurses will be needed by 2030.

The possibility of a recession has also led many to press the pause button on their expansion plans, as evidenced by the 10% drop in hospital M&A activity in Q4 2022.

Patients are Dissatisfied

Gallup’s annual healthcare survey revealed a downward change in American healthcare sentiment. The researcher reported the results are “a new low”, and that for the first time in Gallup’s two-decade trend, less than half of Americans would rate U.S. healthcare as “good” or “excellent”.

Ongoing inflation has also impacted Americans’ views on healthcare costs. In the survey, only 56% of Americans reported being satisfied with the total cost they pay for healthcare, the lowest since 2016.

At the same time, Deloitte reports many patients continue to push off non-urgent medical procedures three years after the pandemic began – impacting Provider bottom lines. There’s also a potential longer-term impact, as “delaying care could exacerbate health issues and lead to more high-cost medical procedures in the future.”

Click here to read Part 1: How Inflation is Impacting the Healthcare Industry.

Read more in: