April 5, 2022  | Updated: January 8, 2023

Category: Healthcare Industry, Healthcare Technology


  • Same factors driving inflation in traditional market exist in healthcare
  • Effects of inflation in healthcare are delayed due to fixed reimbursement negotiations
  • Streamlined administrative operations and employee empowerment essential to combat healthcare inflation

Consumers are feeling the effects of inflation from grocery stores to gas stations and restaurants to retail shopping. While healthcare remains relatively untouched, the clock is ticking before the economic impact will be felt by patients and providers alike.

Companies have the freedom to increase prices of their relative goods and services at any point in time based on market supply and demand—this is the essence of a free market economy. Healthcare is an exception. Labor contracts as well as reimbursement rates are negotiated with private insurance plans or set by government programs such as Medicare two to three years in advance.

The proof is in the putting. Consumer prices for retail goods and services are increasing faster than at any other point throughout the past four decades. At the same time, inflation in healthcare remains between 2% and 3% since the beginning of the COVID-19 pandemic.

How healthcare inflation will catch-up with the economy:

Healthcare facilities, providers, large hospital networks, and especially patients need to keep a close eye on the pricing of medical goods and services. The same factors which are driving inflation in the traditional marketspace—such as supply chain issues and labor shortages—also exist in healthcare.

In fact, healthcare ranked among the top three industries hardest hit by the “great resignation,” according to the U.S. Department of Labor. Healthcare staffing shortages are forcing hospitals and other medical facilities to pay higher wages for temporary staff and travel nurses.

The nursing shortage caused by the pandemic is likely to get worse. In addition to higher labor costs, hospitals must also account for an increase in spending for personal protective equipment (PPE) and other medical supplies related to COVID-19.

What is next?

Hospitals are indicating they will include higher staffing costs during their next round of negotiations with health insurance plans. This will likely result in a two-part scenario. First, providers will demand higher reimbursement rates due to the expense increase for wages along with anticipation that patients will continue to receive healthcare delayed during the pandemic. Next, health insurance plans will likely pass along these higher costs down to employers and consumers by raising premiums for 2023.

How Healthcare Facilities & Providers Can Prepare

Many healthcare facilities took small steps throughout the course of the pandemic by taking advantage of federal aid through stimulus packages and tightening capital expenditures. While these measures worked in the interim, long-term strategies are necessary in order to avoid drastic price increases for patients and a tremendous impact on revenue.

It may prove to be a blessing in disguise for the healthcare industry to implement a fundamental reset. It is time for healthcare facilities and providers to adopt advanced administrative workflows, modern digital health technologies, and effective communication strategies.

This three-part process starts with preparing a groundwork for successful operations, followed by creating a framework to ensure success, and most importantly helping providers easily adopt and adapt the changes.

  1. Software to Streamline Healthcare Administration:

More than $4 trillion is spent on healthcare annually in the United States and approximately 25% is used for administrative tasks. This equates to approximately $3,000 per person spent solely on healthcare administration annually. This unnecessary spending could be greatly reduced through digitizing administrative processes such as medical credentialing, provider roster management, payer enrollment, and any task which traditionally involves paper forms and wet signatures.  These are only a few of the many ways healthcare providers and their facilities can save time, save money, and reduce risk with healthcare administration software.

  1. Acquire and Retain Quality Employees

It won’t be long before healthcare organizations will need to move away from reliance on temporary positions and concentrate on rebuilding a permanent workforce. These efforts will necessitate acquiring qualified healthcare providers and more importantly incentivizing them to stay. In the wake of the Great Resignation, employee expectations for a workplace are more complex than ever before. It will be important for healthcare facilities of all sizes to increase workforce flexibility, focus on strengthening talent pipelines, prioritize workplace health and wellness, and provide continuing medical education opportunities for employees to strengthen their skillset.

Furthermore, healthcare facilities providers must adapt digital health solutions which streamline clinical communication. A proper clinical communication tool ensures HIPAA compliance, improves patient care delivery, and reduces the likelihood of medical errors. At the same time, nurses, physicians, radiologists, and other clinical staff will reap the benefits of improved communication and less frustration throughout the workday. The end result is increased job satisfaction, boosted productivity, and ultimately enhanced patient care.

  1. Empower Clinical Staff to Embrace the Change

Medical facilities may experience pushback at first from their providers. It is crucial for healthcare administrators to empower their care teams to embrace a transformation of the traditional healthcare delivery model. Change is not always easy for everyone. The key is to highlight the benefits for an individual on a personal level.

In this case, proper digital health technology can enable healthcare professionals to focus their time and energy on caring for patients rather than secondary tasks which ultimately contribute to workplace burnout. Healthcare providers can spend less time on administrative tasks and more time caring for their patients or furthering their career with continuing medical education courses.

If clinical staff at all levels can focus on work which they spent years of education and professional training to do, the likelihood of career abandonment is greatly diminished.

What Lies Ahead:

The next few years will without a doubt be difficult for medical facilities and their providers as they cope with inflation that is working its way through the system and healthcare not far behind.

It is crucial for healthcare providers, medical facilities, and insurance networks to confront the fallout of inflation and its impending effects on the healthcare industry. All parties involved in multiple sectors of the industry must work cohesively in order to construct an establishment that accentuates optimal operational execution and flexibility with a focus on maintaining workplace satisfaction.

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