Health industry finance leaders brace for rising costs, report finds

No, you’re not the only one worrying about how rising costs could affect your budget and financial future.

Increased spending—due to rising insurance premiums, out-of-pocket costs, and provider rates, among other things—also keeps health system and health plan leaders up at night, according to a Deloitte Center for Health Solutions survey released Thursday.

The report, which is based on responses from 60+ CFOs, finance VPs and directors, and other leaders with large US healthcare organizations polled earlier this year, highlights the challenges that C-suite executives face when it comes to improving bottom lines. The findings come as the health sector faces high inflation, workforce challenges, a shifting payer mix, supply chain issues, and inconsistent volume recovery.

Finance leaders told Deloitte that they expect all major forms of health spending to increase in 2023 compared to 2022. Almost three-quarters of respondents (72%) said they expect insurance premiums to rise, while 56% anticipate increases in out-of-pocket costs, and about half (51%) think they will see higher provider rates.

A majority of respondents further expressed “greater concern” about how the economic situation (70%), new regulatory requirements (57%), and operating model and cost structure could affect their organizations. And about three-quarters of executives surveyed said reducing costs is more of a concern now than in previous years.

Tina Wheeler, the US healthcare leader at Deloitte, told Healthcare Brew that the findings offer “a grim outlook.”

“Whether it’s providers or payers—or even consumers and patients—the spending for out-of-pocket costs, insurance premiums, and even provider rates are predicted to increase year over year. I also think that consumers and employers will also be hit pretty hard,” she said. “Overall, it’s a tough, tough row to hoe right now.”

About four in 10 health system finance leaders further said their organizations could need 2+ years to see the same profit levels they did prior to the Covid-19 pandemic. That, Wheeler said, is “a long time compared to the past.”

New opportunities

Although health plan and system leaders have traditionally leaned on solutions that cut costs and improve profitability to offset spending increases—like better offerings and medical cost management—the report found that focusing on digital transformation efforts and service model optimization could prove more effective.

That’s easier said than done, Wheeler noted, for most healthcare organizations.

“Health system executives are realizing that it’s a business imperative—that they need to streamline these systems and they need to drive out costs,” she said. “It’s almost like a conundrum that they’re in because they have such financial pressures. It’s, like, how do [they] invest in these very large projects? But [they’ve] got limited resources. It’s that whole constant prioritization.”