Rising healthcare costs and workforce reductions

A vicious cycle

Author

Lauren Curtis
June 25, 2024

Hey Health Techies!

Here’s the thing about healthcare…

Just kidding there’s no one “thing” about healthcare. It’s so very complicated.

And though we didn’t need the reminder that healthcare and economics are inextricably linked, this week a paper came out linking increasing healthcare costs to an increase in layoffs. Because this is a healthcare newsletter and the tech industry has been dealing with workforce cuts for the past couple of years, I wanted to walk you through this vicious cycle.

📈 Rising costs

The paper explored rising costs specifically as a result of hospital mergers. They noted that “the average hospital merger led to price increases of 1.2% within two years after it occurred.”

Despite the analysis looking at a rather small slice of the healthcare landscape, it’s not a stretch to state that healthcare costs are rising more broadly as well. CMS projects that with healthcare costs outpacing the GDP, healthcare spend may reach $7.7 trillion by 2032.

🧑🏻‍💻 Layoffs even outside of the healthcare sector

According to the paper, “a 1% increase in health care prices lowers both payroll and employment at firms outside the health sector by approximately 0.4%.”

Why is this? Well, increasing healthcare costs mean rising employer-sponsored health insurance premiums, and when costs go up in one area, they need to get cut somewhere else.

🤒 No corresponding improvement in outcomes

Sadly, these costs are on the rise “without any apparent improvement in quality”, at least when it comes to the short term impact of these hospital mergers.

Not only that, but it’s probable that the increasing costs actually make outcomes worse if they are leading some into unemployment. It has long been known that employment status is a social determinant of health, specifically correlated to the link between employment and healthcare access in the United States.

In addition, researchers estimate that “a 1% increase in health care prices leads to a 1 per 100,000 population (2.7%) increase in deaths from suicides and overdoses.”

It’s analyses like this that make me more sure than ever that healthcare still has a long way to go to fix the deeply-rooted problems that we are facing.

And while it won’t fix everything, healthcare needs technology in order to help right the ship. Technology to drive efficiencies, improve outcomes, and reduce waste in the system which we can only hope will save both money and lives.

What do you think? What other drivers of change do you see making an impact on healthcare in the next 5-10 years?

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Until next time,

Lauren