January 26, 2022

As curious beings, we humans have an affinity for the future. We wonder how it will unfold and what we will find once we get there. This natural desire to know what will be becomes even more acute as we contemplate our own individual outcomes. How will I fare in 2022? What’s going to happen to my income? Will I even have a job as the year comes to an end? Hospital planners are likewise curious about what may lay in store for their facility’s fiscal standing, as well as their overall capacity to carry out the caring mission. Because our curiosity over what may come is particularly piqued with the start of a new year, we want to provide herein a few items hospital executives may want to watch for in this new year.

Higher Labor Costs

According to an article in HealthcareDive (HD), hospitals will face “continued pressure on profit margins as expenses climb due to a host of issues.” Among the issues mentioned in the article were higher labor costs. Now, this will come as no surprise to most of our readers. We have mentioned on more than one occasion in recent months that the American healthcare industry was already in the middle of a staffing shortage even before the COVID pandemic hit. Over the last two years, that shortage has become more glaring as more and more clinicians are moving on or taking early retirement. Facilities in some sections of the country are hitting the panic button as they are seeing nurses walk off the job due to their refusal to get the COVID vaccination, and that trend will only get worse now that the U.S. Supreme Court has upheld the Biden Administration’s vaccination mandate for hospital workers.

All this means that clinical workers, such as doctors and nurses, are going to be in even shorter supply, beginning in the next few weeks. This, in turn, means that hospitals will have to start paying a premium to find and bring in clinicians from other areas to come and work in their facility. That means a further drag on the bottom line, eating into increasingly tenuous profit margins. For some hospitals, whole departments will have to close, as we have already seen in isolated examples around the country. In the worst cases, entire facilities may be forced to shut their doors.

A Sicker Population

Analysts are in agreement that the pandemic caused many people suffering from serious symptoms to put off care. This, coupled with the ongoing COVID variants rampaging through the country, along with the general aging of the population, means that Americans are getting sicker, frailer and more prone to poorer outcomes. When these individuals do decide to enter back into the healthcare marketplace in order to get their hip pain evaluated or address their chronic cough or get that growing skin lesion checked out, chances are the prognosis will be worse than had they come in a year ago when the symptoms first appeared. Now, instead of relatively inexpensive preventative care, the patient is looking at major surgery and huge medical bills.

Obviously, a sicker population means more case volumes—and presumably greater financial stability—for the nation’s hospitals. However, where staffing shortages are more acute, the strain on the facility to have the capacity to schedule a potential flood of needed procedures may near a breaking point. This potential influx of high acuity cases, in tandem with the serious staffing shortages cited above, make it imperative that hospitals (a) place a priority on securing and maintaining adequate clinical staff, and (b) determine how best to relieve the financial pressure that is sure to come by paying more for this staffing. This includes looking to insurance companies for reasonable reimbursement rates.

The Payer Piece

So, what role will payers play in 2022 to help or hurt hospital bottom lines, especially in light of the two potentialities described above? The HD article mentioned above points out that the public health emergency (PHE) “is expected to end sometime this year and insurers are bracing for states to restart determining who is eligible for Medicaid coverage.” Author Samantha Liss states:

The redeterminations could result in another fluctuation to coverage in 2022, exposing Medicaid managed care organizations such as Centene and Molina to a decline in enrollment and a loss of revenue after recording membership gains in 2021. It’s unclear how many Medicaid members will be booted from the program due to ineligibility. On the flip side, some may be able to catch those customers through an ACA exchange plan.

Healthcare analyst, Kevin Thilborger, stated:

It will also be difficult to renegotiate contracts with payers. Before the pandemic, hospitals may have been operating at a five percent annual increase in costs, but the typical payer-negotiated contract allowed only for two to three percent in annual rate increases. Now, that gap is even wider. That’s why the negotiations are even tougher, because they have to ask for more.

Thilborger thinks payers are not likely to go along with such requests. Indeed, payers “are already requesting decreases in negotiated rates from hospitals,” he said. Premiums rose this year, and Thilborger expects that trend to continue into the next. These hikes may end up being even more substantial, given how many employers in recent years have moved to offering self-funded health plans, according to some analysts.

Final Thoughts

There are many other issues facing hospitals in 2022, such as supply chain shortages and general inflation that will affect the costs of those supplies that the facility is fortunate enough to secure. The bottom line seems to be that this will be another year of adjusting to an array of challenges bombarding hospitals from all sides. Those with the strongest resources will do just fine. Those on the margins will face another year of struggling to survive.

If we at MiraMed Global Services can be of assistance to you and your facility in this year of challenge, please contact us at info@miramedgs.com.