While the next 12 months are most likely going to bring some changes in the healthcare environment, according to a report from PwC Health Research Institute, 2017 is expected to be “a year of equilibrium for medical costs,” with projections that they will show the same 6.5% growth rate as 2016.
That may sound like good news, but a Fortune magazine article pointed out that 6.5% still outpaces general price inflation. Even with some realignment, the article noted that employers could nonetheless be looking at a 4% increase.
What’s driving the costs? Despite the recent media focus on price increases for prescription drugs, that only represents about 17% of total medical costs, according to PwC. It should be noted that a Time Magazine article did point out that “On average, the cost of drugs is increasing at 10% a year”—significantly higher than the 1% inflation rate.
Another 19% is attributed to hospital outpatient, with the remaining almost evenly split between hospital inpatient and physicians.
And with the retail clinics and urgent care centers seemingly popping up on every street corner and in retail environments, consumers who may have previously opted to “wait it out” are now more likely to have their sore throat checked while they’re buying bread and milk. More availability leads to higher utilization and greater costs, noted the PwC report.
Impacts and Strategies
How will this impact healthcare providers and businesses?
According to the PwC report, healthcare organizations will have to deal with several challenges:
increasing access to consumer friendly services,
decreasing the cost of those services and
meeting consumer and employer demand for better performance and more value for the healthcare buck.
The last can be especially worrisome for some under-performing facilities, since a Kaiser Health News article pointed out that employers will be countering the impact of the growth rate by not only encouraging employees to use technology (video or telephone) versus in-person visits, but also by “steering patients to hospitals with records of lower costs and better results.”
For their part, while the number of employers adopting high deductible health plans (HDHPs) is expected to increase, they are getting some pushback from employees unable to pay those steep deductibles.
With that in mind, employers are also exploring other options:
reduce the coverage for workers’ spouses while increasing the cost for that benefit
The good part is that when high performance networks are part of the mix, the costs for employers and patients may be reduced without a concomitant reduction in quality. According to a healthcare guide by the American Academy of Actuaries, HPNs are “designed to deliver high-quality and efficient care; promote stronger relationships between the insurer, provider, and member; and provide a potentially lower-cost health care option.”
The bad part, at least from the employee standpoint, is that the network itself is narrower, referrals may be required, and out-of-network (OON) coverage may be reduced or eliminated.
There may be more changes and challenges ahead in 2017, especially in light of the recent election. Businesses need to stay in tune with what’s occurring in the healthcare environment and how those landscape shifts will affect their bottom line.