Four Factors Likely to Impact Healthcare in 2023

Healthcare leaders are in for a tumultuous 2023, according to a Deloitte report. Staffing, inflation, shrinking margins and supply chain issues are among the major issues that will continue to challenge hospitals and health systems and have a huge effect on overall strategy.

Here are the four factors identified by Deloitte as most likely to impact healthcare in the coming year.

Inflation and affordability

Healthcare is no longer immune to inflation, with 76% of healthcare leaders indicating they believe it will have a significant impact on their strategy. Only 7% said it was unlikely to have an effect.

Rising costs of living may cause some patients to delay routine care and check-ups, much like the pandemic, leading to poorer health outcomes.

While most health system executives surveyed by Deloitte indicated that inflation would have a major impact on their strategy, less than half of health plan executives believe it will impact their short-term strategy. But the trickle-down effect of health care pricing will likely mean that health plans could feel the effects after 2023, when health systems have borne the brunt of the financial problems, according to the report.

Digital transformation

As interest rates rise, healthcare organizations may struggle to modernize their technology and embrace digital transformations, according to Deloitte.

Only 29% of healthcare system respondents said accelerated digital transformation is likely to have a major impact on their organization’s strategy in 2023, while 63% believe it will have a moderate effect. However, among health plan executives, accelerated digital transformation is expected to have a “high impact” (43%) or “moderate impact” (50%) in 2023.

Deloitte notes that the difference in responses may be that health system leaders want digital transformation but may not know how to pay for it, or are eager to get long-delayed projects off the ground. Health plans also tend to outpace health systems on the technology front.

Shrinking margins

Many health systems saw lower patient numbers and revenue during the pandemic and have yet to recover to pre-pandemic levels. With rising costs for supplies and labor, 2022 could turn out to be one of the worst financial years hospitals have had in decades.

Revenues continue to be squeezed by patients who delay care, and increasing numbers of patients are diverted to outpatient centers instead of hospitals for non-urgent procedures.

Average operating margins among hospitals and health systems fell 46 percent in September compared to the same month a year earlier, according to the report. This margin compression may not be sustainable for many hospitals—especially small and locally controlled organizations. As a result, some hospitals may be acquired, while others may be forced to close their doors.

New payment models and alternative places of care

Shifting to new payment models, such as value-based care (VBC), is seen as a top priority among health plan executives surveyed by Deloitte for 2023. Many health plans are likely to enter the new year in a strong financial position due to -fewer health claims for care in 2022. Hospitals and health systems, on the other hand, will be more focused on slowing losses in 2023. This could make it difficult for health plans to move their network providers into new payment models.

The report notes that consumers are looking for more convenience, which can lead to alternative care sites that can offer a better customer experience. Alternative care venues (defined as care outside the traditional doctor’s office) are not new, but they are gaining prominence as the retail and digital worlds converge and the public sector recognizes the need to promote health equity and improve user experience. At the same time, consumers are changing the way they want to access care and are demanding that the traditional healthcare visit and experience be more in line with other encounters they have in their daily lives.

Most health plans are expected to be profitable in 2023, but hospitals and health systems likely face another challenging year as they try to balance financial pressures with the need to invest in the future while ensuring high-quality care.

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