Hospitals Should Expect Slower Growth and Higher Wages

Can hospitals and nursing homes across the country keep costs and expenses at current levels without increasing rates or reducing the level of care offered?

It’s a problem that many organizations in the health care industry have struggled with this year, and indications show that the increased spending and expenses that have hit the industry this year will persist into 2017 and beyond.

Hospitals Expect Slower Growth and Higher Wages

Modern Healthcare’s Melanie Evans reports that the Centers for Medicaid and Medicare Services (CMS) projected that 2016 spending would increase 4.9% to $3.4 trillion, predicting that “medicare spending will accelerate next year through 2018.”

Although this increase can be attributed to a number of causes,

“Older baby boomers will create more demand and higher spending,” Evans reports.

Baby Boomer Cost Factor

Older baby boomers who require more complex levels of care add a challenging dimension to America’s complex health care system. By 2029, IntelliCentrics anticipates that 71 million Americans will be 65 or older and 20% of Americans will be Medicare eligible, while the number of Americans able to pay into Medicare will drop 57%.

The impact to hospital revenue will be staggering as seniors begin switching from commercial healthcare plans to Medicare. “This switch will affect a hospital’s revenue mix because reimbursement by the government is usually lower than that of commercial plans,” IntelliCentrics reports.

In order to compensate for the anticipated lower revenues and increased costs, hospitals and nursing homes need to be proactive and look for creative solutions. However, the challenges aren’t theirs alone, which is why the government and insurance agencies have stepped in to help ease the pressure felt by the health care industry.

According to Health Services Administration specialist Heath Atchison, “insurance companies are planning ahead and offering long-term care insurance plans,” which will help baby boomers pay for long-term care services.” According to Atchison, “leaders in government and the healthcare industry are working diligently to address what is a predictable issue. Since these are predictable events, they can be planned for as much as possible.”

Staff Shortages Cost Factor

Hospitals, nursing homes and other health care organizations have had to increase wages in an effort to attract and retain nurses, doctors and other health care professionals. “Howard Bedlin of the National Council on Aging (NCOA) stated that the US will need 1.6 million new care providers by 2020 to meet the needs of baby boomers,” IntelliCentrics reports.

According to Evans, “continued economic recovery and low unemployment could begin to force employers to increase wages.” While wage increases are impacting industries across the country, nursing shortages have made wages a critical topic for the health care industry. “Go to any healthcare facility today and look around at the nurses who are working there,” Atchison says. “One thing will become abundantly clear to you; the vast majority of nurses working in healthcare are in fact baby boomers themselves. We have heard for the past few years about nursing shortages and predictions that these nursing shortages will only get worse.”

In response to nursing shortages the health care industry is trying to make the nursing field more attractive to younger graduates, although wage increases alone have shown little success. “Healthcare companies have tried everything from raising salaries to offering outrageous sign on bonuses. Money does not seem to be the key to get people interested in nursing. Survey a group of nurses and most will not complain about their salary. What they will complain about is the day-to-day workloads that they face. Nurses are overworked and carry larger and larger patient loads as a result of shortages,” Atchison points out.

Health care organizations who can solve the workload challenges faced by medical staff will have an easier time finding and retaining qualified health care professionals.

High Drug Prices Cost Factor

Politicians aren’t the only ones talking about high drug prices. The health care industry is struggling to cope as pharmaceutical companies increase costs. “Pharmaceutical manufacturers have focused on the development of specialty drugs. The introduction of new hepatitis C drugs proved that specialty drug spending can soar as pricey, high-demand medications hit the market,” Evans explains.

Steven Ross Johnson, a writer for Modern Healthcare, agrees that the “introduction of many expensive specialty medications to treat chronic conditions threatens to drive up healthcare spending.” John Rother, CEO of the National Coalition on Health Care told Johnson that “with drugs in development for diabetes and hypertension, these are conditions that affect a very large number of people… the fiscal impact could be quite substantial on private health plans, government and individuals.”

High drug prices, staff shortages and an increasing senior population are three very real challenges that are increasing costs for hospitals, nursing homes and other health care organizations. Adaptability and creative solutions will be the key for these organizations as they try to survive increased costs and a greater demand for quality services in the upcoming years ahead.

How do you feel about hospitals and nursing homes having slower growth and higher wages in 2017 and beyond? Share your thoughts with us in the comments below.

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