Innovative groups like the Blue Zones Project are reinventing how we think about health care.
Key takeaways
Providers will face lagging reimbursement, expensive labor, increasing cost of capital and inflation.
Supply chain disruptions, high demand for employees and the need to introduce new solutions like automation and technology persist.
Nearly 1,900 leaders from around the globe registered for our second annual Virtual Health Care Day to learn about key trends and the economic outlook for the health care ecosystem.
The day kicked off with a dynamic presentation from Dr. Allen Weiss, chief medical officer of the Blue Zones Project, who discussed the need to shift how we think about health care. The day continued with RSM economists summarizing the impact of the pandemic on the U.S. economy and what the implications are for the health care sector.
Leveraging data to inform and change how we approach our health and wellbeing
The Blue Zones Project researched the healthiest communities around the world and identified specific ways to help communities transform the way they live and improve their long-term health outcomes. The Blue Zones Project has taken real-world data and worked with more than 70 communities and affected more than 4.5 million lives with proactive changes to peoples’ lifestyles, their communities and the policies driving their choices. The project has driven down health care costs while tracking long-term health outcomes to identify what we should be focused on for future generations.
The Blue Zone Project identified nine strategies to living life longer and better:
- Move naturally
- Exercise however your lifestyle allows
- Adopt the right outlook:
- Downshift – eliminate things that aren’t positive in your life
- Find a sense of purpose – identify something to focus on and pour your energy into
- Eat wisely:
- Consider a glass of wine every night at 5 – have a social break and be good to yourself
- Work toward a more plant-based diet
- Apply the 80% rule – eat slowly and consider cutting down your meals by 20%
- Connect with the right people:
- Focus on your loved ones first
- Find people and places where you have a sense of belonging
- Identify the correct tribe to be a part of
The economy is not in a recession, but likely it will be by next year. Inflation has peaked and it is going to take about three years to get it down to three percent. The policy rate will rise in the near term and then will pause. At some point next year equity values will rise, and at a certain point risk appetite will return. I anticipate a six–to-12-month recession, with limited impact on unemployment and continued increases in wages.
Joe Brusuelas, RSM chief economist
Middle market health care providers continue to face economic challenges
Health care organizations continue to be under significant pressure. While middle market health care providers report being ready and able to adjust to the post-pandemic world, many of the challenges that have emerged over the past few years will persist for some time. Additionally, many of the strategies and solutions that the health care industry has used for the last 30 years will no longer be enough to keep the industry afloat.
The most significant challenges facing health care providers currently are:
- Lagging reimbursement – Reimbursement isn’t keeping up with inflation and reimbursement rates affect the entire health care ecosystem
- Volume shifts – Volumes are coming back, but are shifting in acuity; off-site services are having a long-term impact
- Expensive labor – The cost of labor in health care continues to increase; health care consumption continues to outpace employment, leading to both opportunity and uncertainty
- Cost of capital – The cost of capital is increasing and will continue to rise as the Fed focuses on price stability
- Rapid inflation – Medical expenses were rising before the pandemic and continue to do so, straining patients’ ability to pay for quality care
Health care organizations have a growing list of uncertainties and challenges that we need to prepare for, all while the cost of making new investments will be increasing. We are almost back to pre-pandemic health care employment and continuing to add employees at this rate is not going to be enough to deal with the increased demand in the health care sector. This will require all health care organizations to make new investments in technology and rethink strategies for operating in this new environment.
Matt Wolf, RSM director and senior health care analyst
Struggles affiliated with the pandemic will continue after the public health crisis is over
The pandemic and recent geopolitical events have had many downstream effects. For middle market health care companies, the most relevant of these are supply chain disruptions, price increases and staffing shortages.
In the U.S., households and businesses were able to absorb price increases for a period of time, but at some point, price hikes will result in demand destruction, increased borrowing in the corporate sector and ultimately a recession. RSM economists predict a recession beginning in early 2023, which will significantly affect the U.S. health care ecosystem.
Even in a recession the unemployment rate may not rise. It is anticipated that the labor market will remain tight and health care workers will continue to demand higher wages. Adding more employees won’t entirely bridge the gap, so new and different technologies and strategies will need to continue to be explored.
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