Historically, every decade since the turn of the last century has seen legislative and physician led attempts at healthcare reform. Fortunately, the Kaiser Family Foundation has outlined these many machinations culminating with the pandemic and its focus on access, utilization and widespread acceptance and use of telemedicine/telehealth, significantly affecting both rural and underserved patients. For physicians and hospitals in the here and now, tepidly acknowledge reform with reduction in reimbursement and margin, subsequently illuminating the current state of affairs as it affects all Americans.
The average number of physician providers per 100,000 population nationwide is currently at 225, while Idaho lags significantly behind with only 175 providers. Without stating the obvious, the continued challenge of healthcare administration to the rural population and the under protected remains the same.
According to a recent Gallup poll, most American’s believe that healthcare hasn’t changed much since 1994, and seven in 10 think the current healthcare system is “in a state of crisis” or having “major problems.” Similar sentiments have been expressed for almost the last thirty years. Irrespective of political affiliations or lean, most citizens believe change is foreboding yet mandatorily necessary.
Perusal of recent healthcare economic reports and its systemic lacking’s, recite the pervasive challenges of high cost, accessibility, lack of efficiencies, physician/nursing shortages and medical errors continue as the most worrisome. The decades long redundancy of this nagging list only shifts from time immortal to perpetuity with the most glaring of all statistics being expense.
Cost containment in healthcare delivery has continued its course as a political club for many health systems or changing administrations, with grand descriptors such as ‘dysfunctional and cruel,’ yet age old remedy will again center around diminishment in reimbursements and portability.
The Consumer Price Index has increased by 29.3% from 2013 to 2023 while inflation-adjusted per-visit (Physician Fee Schedule) payments have decreased by 12.2% for outpatient office visits, 19.1% for inpatient visits, and 22.8% for surgical procedures in the same time frame. Adjusted for inflation, national health expenditures increased by 33.9% for physician services from 2013 to 2021. In comparison, Physician Fee Schedule payments over the same period of 2013 to 2021 increased by 1.3% for outpatient office visits but decreased by 10.6% for inpatient visits and 9.8% for surgical procedures. The conventional wisdom, in part, is the two decade and current cuts, restrictions and marginalization of inpatient medicine by physicians and providers is not working.
According to the AMA, recent healthcare spending in the U.S. increased by 7.5% in 2023 to $4.9 trillion or $14,570 per capita. This growth rate is significantly higher than the 4.6% rise in 2022, and apart from the 10.4% rise in 2020 due to the COVID-19 pandemic, it is the highest growth rate observed since 2003 (8.5%). The acceleration in 2023 was driven by higher utilization of health care goods and services as well as a historically high 92.5% insured share. For the first time since the pandemic, the growth in health care spending (7.5%) outpaced GDP growth (6.6%).
Healthcare providers should consider potential policy and regulatory changes that might arise in the coming years from the 2025 change in the federal government administration and recent encompassing bill passage. The proposed Medicaid cuts will definitively affect funding to rural hospitals in all states. (51 in Idaho)
Amid these challenges, industry is also undergoing a shift in growth dynamics. Industry segments such as health services, technology and specialty pharmacy-related services represent an increasing share of profits, rising from 16 percent in 2019 to an estimated 19 percent in 2024. Healthcare Technological revenue pools are expected to grow at an 8 percent annual rate from 2023 to 2028, underpinned by double-digit growth in software platforms such as AI. Pharmacy services could also see continued growth, particularly those with a focus on specialty pharmacy.
The financial landscape of the U.S. health care sector continues to reflect a mix of resilience and transformation. Ratings agencies have issued a stable outlook for the not-for-profit healthcare sector for 2025 while The Fitch Ratings outlook for the sector remained deteriorating for more than two years, but the outlook was revised to neutral for 2025. Significant challenges, including rising costs, workforce shortages, and evolving regulations, continue to pressure providers, payers, and consumers alike. Even with overall improvements in the industry, the gap between stronger and weaker performers continues to widen.
There will most likely be continued economic ascent throughout both hospitals and health systems as revenue growth and demand for outpatient services increases. Operating costs, including labor costs, will continue their strain on budgets. Telehealth growth now accounts for 11% of physician interaction and will continue its cost savings by minimizing overhead. Positive financial projections in Value Based care, AI and automation as well as enrolling more recipients within the Medicare Advantage Plans.
While innovative solutions and strategic shifts offer pathways to sustainable growth in the year ahead, the industry could be set back by major policy shifts in Medicaid Regulations or disruptions to payor programs that could impact patient healthcare coverage. The U.S. health care sector faces a pivotal year in 2025. Long-term financial strategies and technological innovations will shape its trajectory. Stakeholders must navigate ongoing challenges while seizing opportunities to drive efficiencies, improve patient outcomes, and sustain growth.
