Inflation's Impact on Healthcare Must Be Understood and Put Into Context.
Inflation is the general rise in prices for goods and services.
Inflation so far has peaked at 9.1% in June of 2022.
Inflation has been caused by an inward shift in aggregate supply from COVID lockdowns and an outward shift in aggregate demand because of 1) direct government payments ($900+B to 165M people) and 2) an expansion in the money supply by the Federal Reserve Bank (0% interest rates).
Inflation is the highest it has been in over 40 years!
In response, the Federal Reserve is raising interest rates to lower aggregate demand and slow or even shrink the economy (i.e. recession).
Healthcare--and more specifically the hospital sector--has seen high inflation because of a decrease in the supply of labor (100K nurses leaving, 117K doctors leaving) and an increase in demand for services (COVID and sicker patients who did not seek care during COVID).
Hospitals will pass on their rising costs to employers.
Employers in turn will layoff employees because of the recession and decrease the number of members on their plan.
These people will then sign up for ACA plans, enroll in Medicaid or go uninsured... all of these forms of coverage pay hospitals less than commercially insured plans.
As a result, hospitals will see decreased revenue. Hospitals will likely need to close facilities, layoff administrative staff and stop building projects.
Perhaps this pruning of the hospital sector is a painful, but necessary process to allow for the rebirth of primary care in America.
Sources:
www.gao.gov/bl....
www.washington...
www.cnbc.com/2...
www.statista.c...
www.nytimes.co...
www.aacnnursin...
www.healthcare...
www.beckershos...
www.dallasnews...
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