The year begins with a number of challenges that have only intensified for U.S. healthcare providers.
Below are a dozen trends and issues that commanded our attention throughout 2023 and hold our curiosity in the year ahead. These patterns and shifts directly or indirectly influence how healthcare providers fare in 2024, and ultimately affect how Americans access, afford and receive care. [Becker's Hospital Review]
1. Healthcare has a worsening numbers problem. The estimated 30,000 physicians who join the U.S. workforce will not be enough to meet the growing demand for care and number of doctors retiring, reducing clinical hours, or planning to exit the field each year. Keep in mind that an estimated 71,309 physicians left the workforce from 2021 through 2022 alone. These supply disruptions unfold as the nation as a whole continues to grow and age, intensifying demand for physicians even amid a growing pipeline of advanced practice providers. It's a fairly finite pool of doctors, APPs, nurses and all types therapists and techs to take care of a larger and older population. All in all, the U.S. faces an estimated shortage of between 37,800 and 124,000 primary care and specialist physicians by 2034.
2. The payers have become massive. The largest payers are 10x the size of the largest health systems. The negotiating imbalance continues to grow in favor of the payers. One 2023 analysis found the market-leading insurer in the least competitive insurance markets pays 15 percent less to hospitals than the market-leading insurer in the most competitive markets, for example. Negotiated rates are just one part of the problem hospitals face amid growing payer power, along with denials and reimbursement policies that make a growing portion of payment slow, costly and inconsistent. At the same time, payers are finding the world more difficult in terms of profitability than they were. The most advantageous payers are a mix of payers and providers.
3. The largest employer of physicians is one of the world's largest insurers. UnitedHealthCare with Optum has become the largest employer of doctors in the country. Optum added nearly 20,000 physicians in 2023, meaning it now has nearly 90,000 employed or affiliated physicians and another 40,000 advanced practice clinicians. Everyone else in the disruptor space is playing catch up and facing the same supply problems as legacy providers. There are not enough doctors and providers for each of the disruptors to be successful in providing and staffing clinics on a national level.
4. Governmental healthcare payers, between Medicare and Medicaid, are now combined to be larger than commercial payer sources. This reliance on government-funded programs presents immediate business concerns for hospitals and health systems given that Medicaid fee-for-service payments for physician services are nearly 30% below Medicare payments, which are well below commercial rates. In the year of a presidential election, Medicare has long been seen as the third rail of politics due to the voting power of those 65 and up. Medicaid can now fall in that same category, given that it has even more enrollees than Medicare.
5. Technology is part of a solution, but not the entire solution. Artificial intelligence, automation, EHR optimization, virtual care programs and remote patient monitoring are increasingly important in helping to close some of the care gaps in our country and in making administrative efforts and clinician efforts a little less burdensome. But technology solutions without more doctor and provider solutions will not solve the problem of supply and demand.
6. The movement to value-based care is still very much a work in process. In the fee-for-service reimbursement model, you see some challenges of overuse. Many value-based care models bring in the opposite: increased use of pre-authorization and efforts to avoid providing care. The right solution, as in most cases, is somewhere in between.
7. Medicare Advantage now covers more than half of the Medicare population. Until recently, this has been a huge boon for payers and largely a debacle for providers. Medicare Advantage is one example of the power of political lobbying. Big payers have a lot of influence here, even as CMS overpaid Medicare Advantage organizations an estimated $16.6 billion in fiscal year 2023.
8. Mental and behavioral health in the U.S. has reached a critical stage with a worsening imbalance of needs and demands versus supply. It is estimated that 1 in 5 Americans already lived with a mental illness before the COVID-19 pandemic, which only exacerbated demand for this type of healthcare. Rates of depression among adults hit a high in 2023, suicides hit an all-time high in 2022, and emergency department visits for children's mental health conditions have surged over the past several years. At the same time, nearly half of the U.S. population resides in a mental health workforce shortage area. As it stands, the U.S. faces a shortage of 14,280 to 31,109 psychiatrists, and psychologists and social workers by 2050.
9. Washington, D.C., tends to make noise about the impact of private equity in healthcare. Lawmakers are currently pursuing scrutiny of private equity's involvement in healthcare, but the issue risks serving as a political red herring for an unproductive Congress. Nine percent of private hospitals and 30% of proprietary for-profit hospitals (which make up 36% of all U.S. hospitals) are private equity-owned hospitals. Pricing, competition and quality of care linked to private equity-backed organizations warrant scrutiny, but lawmakers' attention is also needed toward many additional pressing healthcare issues affecting larger pieces of the industry's pie.
10. Aging well/preventive health is seeing a growth in interest. Both aging well and preventive health are difficult to institutionalize but are super important and generally underutilized. In 2020, it was estimated that only 8% of Americans undergo routine preventive screenings. Missed prevention opportunities go toward an estimated 30 cents on every healthcare dollar.
11. The diabetes/obesity drugs can have a large positive long term impact on healthcare. The year begins with steady interest on the long-term effects of GLP-1 agonist drugs, for which demand is high — 9 million prescriptions issued the final months of 2022 alone — and poised to increase. This raises questions for insurers, employers and the government related to spending and questions for healthcare providers' services and surgeries if weight is lost at scale.
12. Hospital margins largely improved in 2023, but hospitals face huge long-term financial challenges. The median hospital operating margin rose to 2% in November, with margins varying among institutions and markets. Greater labor and supply expenses and patient acuity will continue to challenge hospitals in the year ahead, and certain types of hospitals face outsized risks. Hundreds of rural hospitals, for one, are at immediate risk of closure because of the severity of their financial problems.
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