Home » Blog Articles » Healthcare Trends » How does a Recession Impact Healthcare Providers?

Recently, there has been substantial talk of an approaching economic recession in the United States. Economic downturns are disruptive to people’s livelihood, with nearly everyone in the economy financially, economically and physically impacted. Yet, the consequences of a recession are not initially visible in the healthcare industry. Many healthcare providers are not always clear as to how an economic slowdown would impact them directly.

Here is a concise summary of how a recession would impact healthcare providers.

Impact of a Recession on Healthcare Providers?

The economic downturn of 2008-2009 provides some of the best examples of what some of the specific impacts would look like in the field of Healthcare. Even though this list is far from perfect, it does provide healthcare providers a general guideline for what to expect during a recession. The list is far from complete, but it does provide some general guidelines.

Reduces the shortage of Healthcare Workers:

For many healthcare and medical specialties, there is a shortage of qualified staff. Organization and industry observers are predicting severe shortages of healthcare practitioners and support staff in the approaching years. The use of temporary providers has been one solution to this problem. However, during an economic downturn, the use of locum tenens (temporary) health professionals will likely no be in as high demand. This is due to the fact that demand for some medical treatments would drop.

Currently, for example, there is a shortage of addiction treatment professionals, behavioral health practitioners, primary care physicians as well as emergency room clinicians. Similar workforce shortages exist in the direct care industry. There simply are not enough DSPs to go around and meet the demand for their services.

But, during the last recession, there were reports from regions of the country that there were more nurses available to work in healthcare settings. Part of this was because some retired nurses rejoined the workforce. Other nurses delayed retirement and some part-time nurses sought full-time work. All of these factors would work to alleviate the nursing shortage.

Reduced Demand for Some Healthcare Services:

There are likely some supply-side factors that likely also reduced the demand for nurses and healthcare workers. During economic periods when financial margins are constrained, some consumers will defer healthcare in order to save money. A survey by the AAFP (American Academy of Family Physicians) found that some families are forced to prioritize spending on other necessities and reduce spending on health care services.

People will still have to seek treatment for more serious diseases, but they will attempt to skip treatments for more minor, non-life-threatening conditions. I similar trend is visible when examining data on hospital admissions and elective surgeries.

Research from 2013 indicated that during severe recessions, people will delay elective-surgical procedures. In turn, these actions create substantial financial headwinds for surgical centers, hospitals and health systems. From 2009 to 2011, the average 300-bed hospital lost about $3.7 million dollars due to a decline in commercially-insured patients who were unemployment or underemployment.

In fact, this change in spending patterns by healthcare consumers helped to permanently change the overall industry. As healthcare spending decreased, there was an increase in the movement to expand outpatient care options. Most outpatient settings are usually more consumer-friendly and affordable. Particularly, when compared to more traditional inpatient settings.

Previously mentioned research by the American Academy of Family Physicians listed the following trends during the Great Recession:

  • Increase in patients with major stress symptoms.
  • Concerns over the ability to pay for their healthcare needs.
  • Increase in appointment cancellations by patients.
  • A decrease in the number of employer-sponsored and privately-insured patients.
  • New health problems developing due to the fact that patients were skipping preventive healthcare measures.

A Complex Connection – Healthcare and the Economy:

In the United States, the economy shapes the complex interactions between overall employment, health coverage, medical costs and access to quality care. A variety of details, both seen and unseen, can change the outcome and cost of healthcare.

Factors such as the demand or access to healthcare may coincide or conflict with a healthcare organization or medical practitioner’s financial incentives. When a recession occurs in the United States, the healthcare industry can experience reduced demand for non-urgent or elective care which decreases overall revenue.

Healthcare providers experience additional problems from a greater number of patients who are unable to pay their medical expenses. Hospitals and health systems may also suffer from reductions in charitable giving and less funding from local, state and/or federal government.

Most industry observers agree that the financial impact of a recession prevents some patients from seeking inpatient treatments and elective services. Offices and institutions may both experience an increase in the number of patients who are unable to pay for the services they have received.

An occurrence that could greatly increase the number of write-offs that a healthcare provider’s back office is forced to take on their accounts receivable.

Due to this fact, many physicians and other healthcare professionals are establishing new financial arrangements with hospitals and other provider groups in order to help stabilize their income.

Whether a recession occurs in the near future, is unlikely to change the present trajectory of healthcare in America. Growth and consolidation are likely to continue to reshape health care delivery while technology influences the speed as well as the direction of change.

For more information on this topic or other revenue cycle related healthcare trends, contact Advanced Billing & Consulting Services (ABCS).

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