Healthcare Financial Trends for 2022
COVID-19 continues to make headlines, and its enormous impact on healthcare will last well beyond 2022. Simultaneously, long-standing challenges require care. Healthcare Finance Trends for 2022 detail seven effective health systems, hospitals, and physician practices’ economic and operational well-being.
Another Year of Economic Recovery
The COVID-19 crises course predicts a long-term recovery. However, the most recent financial data illustrates the issues that remain.
Margin/Profitability is a term used to describe how profitable a business is. In 2021, more than a third of hospitals had negative operating margins. The total industry net income loss was estimated to be $54 billion, with a median margin 11% lower than pre-pandemic levels. Hospitals spent an additional $24 billion on clinical labor or $17 million per 500-bed hospital during the year. Medical practices have also suffered.
Revenue and Volume.
Only about a third of primary care offices questioned said they were financially healthy. On the demand side, a good but mixed picture emerges. Overall healthcare spending was 7.2 percent higher than the previous year until August 2021, as shown in Figure 1. Spending, on the other hand, has lagged behind GDP growth. Although hospital income increased, the number of total discharges and emergency department (ED) visits remained lower than in 2019, and OR minutes remained unchanged. As a result, inpatient volume is expected to reduce 1% by the end of the decade, while outpatient volume is expected to rise 14%, and ED volume is expected to grow 5% for emergent and fall 15% for urgent.
COVID-19 government subsidies and accelerated insurance reimbursements aided this metric. As these supports are gone, disciplined cash management will be essential. A rising liquidity challenge was described in a recent paper. Significant insurers are late on billions of dollars in payments for various reasons.
Medical Costs in the U.S.
The rise in employer medical costs is another highly observed indicator. The following are forecasts for 2022:
o Willis Towers: 5.2%9
o Aon: 4.8%10
The data has many implications:
When it comes to optimizing elective treatments,
- Effective scheduling and resource management are still critical.
- Many will diversify their revenue streams by looking into new reimbursement mechanisms, leasing office space, and expanding service lines.
- Cost control will always be a priority.
Finally, leaders will seek assistance from outside sources. According to a recent poll, 92 percent of hospitals seriously contemplate outsourcing suppliers to reduce clinical and non-clinical costs.
Financial strains on patients are a growth stumbling block.
Patients’ ability to recover depends largely on their willingness to pursue elective and routine care. In addition, patients, like providers, are facing financial difficulties due to the pandemic’s consequences and accelerated patient payment obligations. The current condition of consumer healthcare finances is depicted through statistics.
Increasing out-of-pocket costs and gaps in insurance coverage.
The trend of inpatient spending responsibility has been continuously increasing for many years. Personal expenditures are expected to expand at a 9.9% yearly rate through 2026. Furthermore, in the first half of 2021, 10% of persons under 65 were uninsured. Many people lack the necessary resources. According to a survey of Americans over 65, 27% have less than $500 set aside for medical expenses.
Consumers are having difficulty managing their healthcare costs.
According to Commonwealth Fund research, almost one-third of insured and uninsured individuals had some billing issue or medical debt. According to another survey, about 18 percent of people have a medical obligation, with an average of $429.
As a result, care providers lose or postpone money. For example, even though 78 percent of households had insurance, 18 percent had a member unable to receive care for a severe condition in the previous year.
As the national moratorium on student debts and rent responsibilities end, many people’s financial situations may become more insecure.
As a result, providers will be expected to offer more financing options and respond to consumers’ increased desire for upfront cost estimations. According to a recent survey, nearly half of patients were given an estimate, and the impact on volume was primarily good.
Bottlenecks in the supply chain are a significant source of stress.
A worldwide supply chain breakdown is another element delaying recovery. Almost all hospitals and health systems have supply chain issues, with 80% suffering shortages and scrambling to locate new vendors.
Several essential pharmaceuticals, including cancer treatments, anesthetics, and inhalers, are in short supply in pharmacies. There have also been reports of pharmaceutical container outages.
Medical technology is a branch of science that deals with the treatment of Semiconductor chip shortages that have been a severe problem for producers of a wide range of devices, including ventilators, glucose, other monitors, imaging machines, and other medical devices.
Supplies are needed. Many high-volume items are still in short supply, and some providers have requested donated crutches and other medical supplies. COVID-19 outbreaks have also resulted in oxygen shortages.
Providers are taking several steps to ease present stresses and strengthen the supply chain in the long run:
Improving efficiency is a must. Finance and procurement departments must be elegantly efficient while maintaining intimate connections with a growing number of vendors. These goals are aided by eliminating paper-based processes and simplifying them through automation.
Providers must stay on top of their supply demands, use, and projections in a severely limited environment. Therefore, data sharing with suppliers can be quite beneficial.
Refine your budget and cash flow forecasting.
Higher cash levels are anticipated to be committed to inventories, and cost pressures will necessitate better investment management of short-term money.
Gartner recently analyzed the best health systems for supply chain management and identified two techniques to deal with the current difficult situation. One focuses on risk and resiliency, with some even establishing leadership positions. Second, a solid commitment to vendor collaboration is maintained. This collaboration might range from placing an effective order to ensuring that made products are visible and transparent. Finance and Revenue Cycle Management (RCM) professionals must be ready to collaborate.
Consolidation, Pricing, and Data Requirements Headline Concerns about politics and regulations
In healthcare planning, legislative and regulatory factors are critical. Three significant issues demand special attention because of their financial and economic implications:
Regulations about pricing.
The two main focus factors are drug prices and provider price transparency. By 2025, drug spending will reach $380–400 billion. According to government estimates, this amounts to $1,500 per individual. Allowing Medicare to negotiate medication pricing is the most significant — and contentious — step being contemplated. This strategy could result in substantial provider cost savings and other administrative efficiencies. However, noncompliance by hospitals with rules requiring transparent disclosure of actual procedure charges has been a significant problem. As a result, the Centers for Medicare & Medicaid Services (CMS) have raised the fines to $5,500 per day.
Integration of information systems.
Interoperability guidelines are intended to make system integration and information exchange more efficient on a national scale. The mandates and standards define key data sets, faster application programming interfaces (APIs) for system integration, and restrictions preventing technology providers from “information blocking.” This massive interoperability drive illustrates that regulators understand the importance of data integration and flexibility in attaining crucial administrative and clinical goals.
Putting the Technology Strategy in Place
The epidemic has given a new lease on life to healthcare’s multi-year commitment to digital transformation. 60% of providers embarked on new digital projects due to the crisis. In 2022, the focus will be on combining the various technological components into a cohesive, comprehensive whole. Many will create a digital roadmap to guide investment and the implementation of several high-profile technologies in the following order:
The front entrance of the future is a digital one. Providers integrate different systems, apps, and workflows into a single-entry pathway that allows patients to manage their care easily. According to IDC, 65 percent of patients will access services through a digital front door by 2023. The growth of online appointment scheduling and bill-paying options demonstrates progress.
Remote/virtual care is a type of care that is provided over the internet. While the surge in telehealth during the crisis has subsided, utilization is expected to rise. Over half of hospital and health-system executives (56 percent) anticipate higher telemedicine spending in the next two years.
According to additional studies, 40% of pandemic-related virtual care will remain.
Two significant 2022 dependencies come with growing telehealth’s integration into the landscape. The first is reimbursement synchronization. According to providers and industry groups, CMS should renew the public health emergency declaration that expanded coverage eligibility during COVID-19. The agency has requested that this be done by 2023. The platform redesign is the second need. Much of the telehealth workflow was implemented quickly, and it now needs to mature for long-term optimization.
The term “connected health” refers to a system in which people’s Remote monitoring equipment, smartphone apps, and artificial intelligence have ushered in a new era of individualized care, allowing for movements such as hospitals at home.
Leadership Attention Will Be Focused on Cybersecurity
Cybersecurity is a significant priority for executives. A few examples demonstrate why:
In 2020, there will be 642 breaches involving 500 or more records, affecting 30 million people. Activity is still high, with 487 breaches reported until September 2021.
Over two-thirds of healthcare businesses have experienced ransomware attacks, with 33% experiencing two or more. The total cost of downtime is about $21 billion.
Payments fraud and theft are also a problem for finance. Business email intrusion is the most common root cause, according to cross-industry research, with attacks primarily targeting Accounts Payable (61 percent) and Treasury (secondarily) (13 percent ).
Phishing, out-of-date software patches, unsupported software, operating systems, and improperly configured internet access ports are the top risks found in a recent federal healthcare assessment. As a result, vendors must bear the burden of duty.
A security expert, for example, recently gained access to over 4 million patient and clinician records via third-party apps and APIs to major EHR systems.
The defenses must be strengthened. According to a poll, 61% of healthcare executives have little to no confidence in their organization’s capacity to combat ransomware threats. Furthermore, only 11% of hospital IT executives consider cybersecurity a significant budget priority.
RCM/Finance Automation Has a Huge Potential for Advancement
Because of the pandemic’s workflow disruptions, it’s more important than ever to automate manual procedures in the revenue cycle and finance departments. The potential is enormous. According to the report, the financial transaction ecosystem accounts for approximately 21% of that amount, making it a sizable target for cost-cutting.
According to CAQH’s most recent yearly report, the sector could save over $13 billion by implementing 100% electronic transactions. Electronic claims transactions, for example, might generate $426 million per year. According to the survey, 82 percent of finance executives say their companies are automating heavily, but only 19 percent say the outcomes have been favorable so far.
In addition, many suppliers are still experiencing implementation issues, preventing them from speeding up their automation initiatives. As a result, selecting outside partners who can effectively manage training and continuing support to decrease risk and generate speed-to-value will become increasingly important.
Several forces are combining to make 2022 a banner year for financial automation:
Staffing difficulties that haven’t been resolved.
Automation frees up a lot of time for RCM employees, allowing them to focus on more difficult scenarios instead of routine tasks.
Inaction is growing more expensive.
The cost difference between increasingly efficient electronic transactions and manual/partially automated processes is expanding, according to CAQH and others. For example, according to one study, average Days Sales Outstanding (DSO) during the pandemic increased by 17 percent (42 to 49 days) for providers whose payment or invoice processes were not automated.
- There’s a need to keep up with the rising analytics initiatives.
Electronic processes ensure that the data flows that are the lifeblood of analytics are consistent, timely, and correct.
A need for convenience fuels the adoption of digital payments.
A wide range of digital payment methods is gaining popularity. Convenience, efficiency, cash management, and health safety are driving growth, which is consistent across a variety of payment rails, including:
Payments are made in real-time (RTP).
This mode represents a $13.5 billion global market expected to grow at a 33 percent annual rate through 2028. In 2022, the number of people using real-time healthcare bill payments and disbursements will exceed 70 million.
Electronic Funds Transfers(EFT).
In the second quarter of 2021, healthcare processed 108 million EFTs, rising nearly 36% from the same period in 2020.
Wallets for mobile phones.
This RTP facilitator is also on the rise. Between 2021 and 2025, the number of new mobile wallet users is expected to grow at a rate of 6.5 million per year, with average annual spending reaching $4,064 per user. Wallets are also becoming a factor in all aspects of e-commerce, as shown in Figure 9.
In 2022, digital payments should become more widely accepted as part of the e-commerce protocols required to support telehealth. Concerns about COVID-19 will also act as a stimulant.
- Biometric authentication is a related technology that should be on your radar. According to studies, consumers prefer voice, fingerprint, and other biometrics over other biometrics in electronic payments.
- APIs for open banking. These tools enable tight interaction between bank and provider systems, resulting in a smooth payment experience for patients.
- Cryptocurrency is a type of digital currency. Although the future of this mode is uncertain, it is already in use for numerous consumer transactions.
It’s vital to remember that proper payment innovation entails more than merely processing digital transactions. A closed-loop system that unifies expenses and data is required to ensure thorough reconciliation and tracking of fund flow.