From soaring expenses to labor shortages, healthcare faces an arduous road ahead. Addressing high costs and worker burnout will likely top the list of healthcare priorities in 2023. As the new year approaches, expect a continued focus on addressing unmet mental health needs and the toll of chronic disease as well as the lingering burden of the pandemic's acute care delays.
Health leaders should also anticipate a continued emphasis on reducing health inequities and broadening access to care. As the US government demonstrates a heightened commitment to addressing social determinants of health, we recommend keeping an eye out for changes in risk adjustments that better reflect the needs of a diverse patient population.
Despite the challenges ahead, there is room for optimism with technology innovations such as artificial intelligence that improve clinical decision-making and patient outcomes.
Addressing costs a top healthcare priority in 2023
Over the past year, health leaders identified managing soaring costs and improving efficiency as twin key challenges facing healthcare organizations, according to a recent survey of more than 300 health plan leaders conducted by HealthEdge. Addressing these mounting costs while seeking innovative ways to do more with less resources will top the priority list in the upcoming year.
In 2023, the healthcare industry must confront the dual threat of inflation coupled with “skyrocketing expenses," concerns described in a recent report from the American Hospital Association. Nationwide, hospitals are facing billions in loses with 33% operating on negative margins.
Addressing declining healthcare labor and staffing levels
Labor is also a key driver of these expense increases, even as hospital employment dips. Since staffing costs make up such a significant portion of overall hospital expenses, even small increases in expenditures can have an outsized impact.
Hospital labor expenses per patient are climbing year over year, the AHA report found. That's because hospitals are increasingly relying on costlier contract staff such as traveling nurses to fill in for the labor shortage. In 2019, hospitals spent a median of 4.7% of their total nurse labor expense on travel nurses, a figure that soared to 38.6% by January 2022.
Drug costs and medical supplies are rising, too
Higher costs for drugs as well as overall medical supplies, especially those related to pandemic precautions, are also contributing to the increased costs. Medical supply expenses grew nearly 21% through the end of 2021, compared to the pre-pandemic amounts. Hospital departments that most directly worked with COVID-19 such as the intensive care unit experienced even higher expense growth.
Similarly, drug expenses have risen nearly 37% on a per patient bases compared to pre-pandemic levels. This growth in prescription drug prices far outpaced inflation, according to a Health & Human Services report. That analysis points to 1200 drugs that experienced year-over-year list price increases of nearly 32%, far outpacing the 8.5% inflation rate during that same period.
All of these healthcare-specific developments are set amid surging overall inflation, leading to what McKinsey & Company called "a gathering storm" in a late 2022 report on mounting healthcare expenses. That analysis predicted inflation will continue to drive this upward cost trend into the new year and beyond.
Some hope on the horizon
At the same time, there are some bright spots for prescription drug costs, such as a new rebate requirement outlined in the Inflation Reduction Act. Under that provision, which began in October 2022, drug manufacturers must pay rebates to Medicare for certain drugs that have price increases exceeding inflation.
A focus on healthcare employee retention and training
Amid the mass departures and staff shortages, hospitals and health systems are looking to bolster staff retention efforts, an effort that will likely take stage center stage in 2023.
Healthcare work places are focusing on work flexibility, team dynamics and benefits as well as educational development opportunities and training, according to a McKinsey & Company report examining why so many nurses are leaving. The report also referenced steps to improve workflow and processes to ensure staff works at the top of their licenses, instead of tasks that could be completed by someone else.
Emphasizing inclusion, growing the healthcare talent pipeline
Taking tangible steps to create a healthy working environment for nurses is a key strategy that arose from the Nurse Staffing Task Force and Think Tank, which was launched earlier this year to address nursing stress and burnout. Among the group's recommendations were improved schedule flexibility, innovative care delivery models, and an emphasis on diversity and inclusion efforts.
Those coincide with efforts from the American Association of Colleges of Nursing to bolster inclusion in the academic setting, too. This year, the association launched an 18-month national initiative that highlighted the importance of inclusive learning environments and building "a culture of belonging" at nursing schools.
On the hiring side, there will likely be greater emphasis on growing “the talent pipeline." Improvements could be made to streamline the hiring process, create new partnerships, and focus on new and more diverse talent pools. For example, the U.S. Department of Labor recently announced $80 million in grant funding to bolster nursing training programs for historically marginalized people along with other equity efforts.
Addressing overall healthcare worker burnout
Nursing isn't the only area experiencing mass personnel departures. From therapists to pharmacists and physicians, the pandemic only exacerbated longstanding burnout and wellbeing concerns. In 2022, the National Academy of Medicine addressed the high rates of burnout and mental health strains with its National Plan for Health Workforce Well-Being.
“As a nation, we must redesign how health is delivered so that human connection is strengthened, health equity is achieved, and trust is restored," contributors wrote.
The report focused on reducing mental health stigma among health care workers and making care more accessible while also exploring system-level changes that could address mental health shortages in rural and undeserved areas.
Improving mental health access
On a broader societal level, too, expanding mental health access will be a continued priority in the upcoming year. Even as the country struggles with increased mental health needs, the shortage is growing. The lack of mental health resources is also impacting hospitals as mental health patients with nowhere to go fill up emergency room beds, a concern that has intensified in recent years.
Integrating physical and behavioral healthcare needs is an approach that can not only improve access but also reduce stigma, says mental health advocacy groups such as NAMI.
Exploring the role of integrated physical and behavioral health and technology
Integration needs to be about more than just connecting physical spaces. To be successful, this effort requires payers to be on board with reimbursements that reflect the integration, points out Brett Hart, chief behavioral health officer at Centene, in an article in HealthPayer Intelligence. Addressing substance use disorders – and their connection to other mental health needs – is a key component in addressing whole person health.
A more prominent role for artificial intelligence in healthcare
Another technology that will see increased attention in 2023 is artificial intelligence. Health leaders will be looking at the potential of AI to improve health care effectiveness and efficiency. This progress is most evident in radiology, a specialty in which AI tools are becoming more mainstream and integral to clinical diagnosis.
There is promising research in other areas of medicine, too. For example, AI tools can help gauge a patient's risk for developing certain outcomes such as a rare disease or experiencing complications from chronic conditions. Researchers at the University of Houston recently developed an AI-based tool that predicts which patients are at higher risk for diabetes complications including those that arise from care delays.
At RTI Health Advance, we are also leveraging the potential of AI tools to improve healthcare predictions. The RTI Rarity tool merges artificial intelligence (AI), advanced data science methods, and geospatial analytics in a risk adjustment framework. Featuring a supervised machine learning method known as random forests (RFs) and other state-of-the-art predictive analytics methods, it provides high-resolution social determinants of health (SDoH) composite scores constructed with a health equity focus.
Consumers feel the impact of high healthcare costs, inflation
Delayed care is just one symptom of the growing consumer costs burden, effects of which will stretch into 2023 and influence the way people approach their health needs. Across the country, families are feeling the impact of high inflation on everything from their medical needs to food, clothing and housing. In fact, improving food access and affordability is a primary goal of the Biden-Harris Administration's National Strategy on Hunger, Nutrition and Health.
These needs can be even more pronounced for people with chronic disease who face rising costs to treat conditions such as diabetes. Too often, people must pick between paying for life-saving medication and putting meals on the table, advocates say.
People with chronic disease struggle to pay medical bills
As costs rise, people with multiple chronic diseases are struggling to pay their medical bills. Researchers have previously linked multiple chronic conditions with more “adverse financial outcomes," such as medical debt, per results published in 2022 in JAMA Internal Medicine. These findings underscore the need to design better policies to improve financial outcomes for these patients, researchers wrote.
These financial strains extend beyond the individual to the health system overall, which is increasingly facing the burden of high costs related to chronic disease. By some counts, 86% of the county's health care costs can be attributed to chronic diseases.
Understanding patients' needs beyond the doctors' office
Hospitals, health systems and insurance companies are increasingly looking at their role in addressing what happens beyond the doctor's office and how a patient's lived experience impacts their health. In recent years, the social determinants of health ranging from food insecurity to transportation and housing needs, has shifted from an emerging concept to a topic that's at the forefront of health leaders' minds.
That trend will only grow in the upcoming year. In recognition of these connections, more hospitals and health systems will turn their attention to better connecting patients with resources in the community as well actively partnering with organizations to align their offerings with patient needs.
Addressing social determinants of health matters financially, too
System-wide inequities that lead to food insecurity also impact healthcare. A 2022 study of New York residents found that 21% of people who say they are food insecure also delay or skip medical care. About 13% say they delay or don't buy prescription medication, according to the findings from The New York Health Foundation. Similarly, another study found that social determinants of health such as food insecurity and transportation posed barriers to seniors accessing healthcare services.
These delays in care have a huge impact on healthcare spending overall as care delays often result in much more acute and costlier treatments down the road.
Estimating the high costs of health inequities
Deloitte actuaries recently found that US healthcare inequities account for about $230 billion in annual spending. That figure could soar to $1 trillion or more by 2040 if these inequities aren't addressed.
As Andy Davis, an author of the Deloitte report said in Forbes: “Health inequity is not trending towards a crisis, we are in crisis mode now. By being able to quantify the impact that these inequities [have] on healthcare costs, understand the magnitude of it, and the implications of those costs for everyone in society, we can spotlight how prevalent this crisis is today, and how important it is to solve."
Better understanding health and social factors
As costs climb, participation in value-based healthcare models (such as ones that bundle care in exchange for a fixed fee) will continue to grow as will better ways to gauge a patient's health risks. To reduce provider incentives for cherry picking healthier patients, these models incorporate financial incentives for higher-risk patients that may require higher healthcare needs.
Expect to see improvements in reliable data collection that reflects the complex relationship between health and social factors such as race, socioeconomic status and language, as Deloitte notes in its health equity dashboard. These will be instrumental in providing a more accurate and complete assessment of an individual's health.
Improvements in risk adjustments necessary
As more and more health systems embrace these alternative models, risk adjustments face limitations that call for improvement, as described in an issues brief from Duke's Margolis Center for Health policy. While there is increased interest in incorporating social factors into risk adjustments, more evidence and research is necessary to ensure the goals of health equity.
RTI Health Advance can guide you through 2023 and beyond
As your organization navigates the dynamic healthcare landscape ahead, you can rely on our team of clinicians, data scientists, healthcare consultants, and digital health experts. At RTI Health Advance, we support innovative programs and services to make care more equitable, cost-effective, and high-quality. From improving health equity to better understanding payment reform, RTI Health Advance can help guide your organization into the new year and beyond.