How Inflation, Recession, and a Labor Economy have Contributed to Even More Uncertainty
It’s the middle of Q3 2022 and rising inflation, a forecasted recession2, and the added conundrum of a continuing labor shortage have many industries confused about how to plan for the future. Add healthcare to that list of industries. For one of the first times in our U.S. economic history, the healthcare industry is no longer an exception to market volatility. After meeting the challenges of COVID, healthcare leaders now face even more pressure on how to be strategic in 2022 and beyond.
I recently interviewed Optimum’s Managed Services leader, Kristi Lanciotti, MBA, on what she’s hearing from healthcare industry leaders: “A lot of healthcare organizations are taking a much closer look at their financial models,” Lanciotti said. “Volumes are down – preventative care, routine visits, and especially elective surgery. You would think less preventative care would push emergency department visits up, but those volumes are down, too. When those volumes are down across the organization for an extended period of time, leaders have to start adjusting their models.”
While we are not technically in a recession, leaders are starting to treat the economic conditions with recession-like behaviors. But why?
What has contributed to this new health economy and how can leaders best navigate uncertainty? Read on for a dive into contributing factors and how to prepare your organization for the journey ahead.
“Recession-proof” is a bygone era
The U.S. health economy has enjoyed a “recession-proof” resilience for decades. During the 2008 financial collapse and the Great Recession, for example, the health economy was largely protected. Economists have for a long-time referred to healthcare spending as “inelastic”: most consumers are protected from high costs due to comprehensive insurance coverage1.
However, the health insurance industry has changed significantly since 2007. With skyrocketing costs of offering health coverage to employees, more than 30%1 of U.S. firms offer only high-deductible health plans. When consumers must share in a higher burden of health costs, it contributes to a significant decrease in access to care. In other words, healthcare is now competing with household wallet spending in a way it has not historically.
Ben Teasdale, M.Phil., and Kevin A. Schulman, M.D. in the New England Journal of Medicine wrote: “With widespread income loss, an insurance landscape in which patients are increasingly asked to share in the cost of care (even for more traditional types of coverage), and the threat of surprise medical bills from out-of-network providers, it’s not clear whether health care utilization will remain constant.”
The good news—or perhaps contradictory behavior to a recession—is that “household spending, which accounts for 70% of all economic activity, kept pace with inflation.”2 Taking this into consideration, health systems must refocus on a consumer-first mentality to attract that spending. And while patients will always require access to healthcare services, the types of services they select to access may change with these 2022 trends. In the end, healthcare systems should prepare for shifting demands across departments.
Labor Shortages Continue
While increased inflation signals early signs of a recession, one of the key differences in the Q2 2022 economy is a strong labor market. Staffing Industry Analysts (SIA), a global advisor on the staffing industry at large, cites a significantly growing demand for healthcare labor and an increasing labor shortage3. While this spells good news for employees seeking higher wages to meet inflation, it increases budget and resource demands on health systems.
SIA suggests that “The complexities involved in meeting healthcare demand in times of a critical shortage of nurses and providers are considerable, and there is no quick fix.”3 That staffing demand is not limited to just the clinical front-line workers, though. The demand for IT labor across the U.S. was at an all-time high in August 20223.
So, I asked Optimum’s Lanciotti how healthcare organizations should prioritize staffing when the entire industry is experiencing budget concerns and a lack of people. “One way to weather the storm, in times of economic uncertainty,” Lanciotti replied, “is to make staffing adjustments in areas that can reduce overall costs and also free up management time for other important initiatives.”
It’s no doubt that as a managed services leader, Lanciotti recommends an IT managed services partner. “We reduce costs by looking at work holistically,” she said, “and staffing the right level of expertise with the task at hand, which isn’t always possible with a traditional full-time employee.”
The Good News: A Managed Services Solution
Managed Services helps organizations to stabilize costs, gain quality support services, and decrease management burden. How though, I asked Lanciotti, has Optimum retained talent in this competitive labor war when our clients are struggling to find resources? Her answer was simple: "Optimum has been around for 10+ years. We have the best recruiters, and we attract talented people who want remote work." Lanciotti also mentioned how Optimum's new talent line program, Optimum CareerPath, is supporting a continual pipeline of talent that supports widespread healthcare IT needs.
In general though, when considering a Managed Service solution, health systems should expect the following key benefits:
- Flexible and scalable support model
- High-quality, root-cause solutions
- Management oversight plus analyst talent
While a Managed Services partner may not be the "quick fix" to inflation, recession woes, or overall labor shortages, it can significantly reduce costs and free up management burden to focus on other areas in the health organization.
Optimum Healthcare IT offers a variety of managed services, from application management to cybersecurity that can help you save money and improve efficiency.
- New England Journal of Medicine https://www.nejm.org/doi/full/10.1056/NEJMp2018846
- NPR David Gupa, https://www.npr.org/2022/07/28/1113649843/gdp-2q-economy-2022-recession-two-quarters