Health Trends to Track in 2023

As a potential recession looms on the heels of the pandemic, it is challenging to predict where the US health care system is headed in 2023. Still, we asked our experts to analyze emerging trends, read the tea leaves, and explain how events are likely to play out. 

Is the US health care system recession-proof? Or perhaps more accurately, is the US health care system recession-resistant? Unfortunately, this question is extremely relevant in 2023, as a potential recession looms. While the health care sector has fared relatively well in previous economic downturns, all bets may be off this time around as uncertainty continues to plague many facets of the industry.

The after-effects of a once in a hundred-year pandemic, record inflation, labor shortages, and a deeply divided government are major factors. Against this backdrop, we turned to four managed care experts to analyze emerging trends, read the tea leaves, and discuss what likely lies ahead. Our experts were asked to hone in on 3 areas and assess how various stakeholders might be impacted: the financial outlook for health systems and providers, payer-provider issues, and increased consolidation. 

Health systems are expected to face financial challenges postpandemic, in large part due to lower patient volumes and increased costs. While it is true volume has increased from the pandemic lows, inflation, the specter of a recession, and a shift in where revenue is generated means volume has not yet returned to pre-pandemic levels. It is difficult to determine when and if it will ever return to those levels. Adding to the pain, health systems and providers can no longer rely on COVID relief funding. 

What will the impact be on ___?

Health systems and providers: “Health systems and providers have been losing income due to the shift away from inpatient to outpatient care,” said Larry Hsu, MD, medical director of Hawaii Medical Service Association in Honolulu, HI. “I expect this to continue in 2023.” 

Arthur Shinn, PharmD, president of Managed Pharmacy Consultants in Lake Worth, FL, agreed. “How could the increased focus on use of walk-in clinics and telemedicine services not take away utilization from traditional health system settings?” 

Dr Hsu noted systems that figure out how to operate more cost-effective centers of care and overcome fragmentation will be able to recoup losses incurred on the inpatient side. Dr Shinn said urgent care centers that communicate seamlessly with patients’ providers via the electronic medical record is an example of meaningful efficiency.  

David Marcus, managing director of employee benefits at the National Railway Labor Conference in Washington, DC, noted the impact on health systems and providers will likely be mixed. “For some providers—especially those that are more fiscally stable—acquisition targets will be more plentiful. For providers that are on the fringe, this may be an existential crisis. For hospital systems, the pressure to shift to non-inpatient settings will continue to build as plan sponsors and insurers are looking to decrease costs by shifting to more efficient sites of care. Additional decreases in revenue are likely and substantial increases in wages and cost of capital will continue. For hospital systems and providers, the wildcard is demand; it’s difficult to imagine other scenarios like the pandemic where quantity decreases.”

F. Randy Vogenberg, PhD, RPh, principal at the Institute for Integrated Healthcare in Greenville, SC, thinks the pandemic will have lingering effects. “Health systems and providers  will continue to struggle for survival, particularly those in rural or underserved areas of the country. Systems large or small are looking to improve efficiencies and more effectively deal with operational cost impacts that are continuing postpandemic.”

Payers: “Payers will continue to encourage the shift of care to outpatient areas, such as infusion centers, same day surgery, and the like,” said Dr Hsu. Even so, Mr Marcus expects insurers to be adversely affected. “Costs will most likely increase as consolidations will allow remaining hospital systems to increase prices. In addition, there is an emerging body of evidence that demonstrates decreases in quality of care in markets that have experienced consolidation.”

Dr Vogenberg concurred. Payers face a changing competitive landscape, he noted. Scale helps, but only to a point, since health systems, particularly larger ones “present a financial counterweight strain to insurers.” Such growth among payers and providers is leading to more oversight at the state and federal level. “State legislators have been increasing the number of pro-consumer bills that push back on all key  health care stakeholders, including payers.” Dr Vogenberg added that with Sen Bernie Sanders (I-VT) at the helm of the Senate’s Health, Education, Labor, and Pensions Committee, “reform that favors consumers is his major theme,” which will increase focus on payer practices. 

Covered individuals: The overall impact will be negative, said Mr Marcus. “It stands to reason that both premiums and cost sharing will increase because of the price pressures.” This does not bode well for consumers and likely their health outcomes over time. A recent Gallup poll found that nearly 40% of respondents said they or a family member delayed treatment in 2022, an increase of 12 percentage points over 2021. “Covered individuals have had record health care debt and bankruptcies,” said Dr Vogenberg. On the one hand, this is getting attention of legislators who are likely to conduct hearings and try to bring about change. On the other hand, Washington tends to move at a glacial pace, which will leave many patients with steep hills to climb. “With ever increasing bio-pharmaceutical product entries at ever higher price points, plan members will continue to struggle with traditional cost sharing amounts,” explained Dr Vogenberg. “Many will minimize their use of medications and medical care when they can and increase their use of emergency rooms that may be more cost effective than their coverage.”

While the shift to telemedicine and walk-in clinics can be advantageous for the insured, due to increased and easier access, inefficiencies and fragmentation can result in frustrating experiences. Dr Shinn said he knows an individual who had a sudden onset of severe abdominal pain that would not abate. He went to a busy hospital emergency department and waited while the pain worsened. Frustrated, he drove himself to the nearest urgent care center and as seen at once. He was diagnosed with a severe GI bleed, and transported by ambulance to the same emergency department he had left. He was seen right away because he was taken by ambulance. 

The uninsured: While Dr Vogenberg thinks the uninsured will not be impacted anymore than they already are by rising health system costs and access, Mr Marcus said he believes fewer providers could mean even less access for the uninsured.

Increased costs due to inflation may prompt health systems to request higher reimbursement from payers, who in turn are likely to increase out of pocket costs for their covered members—if payers even agree to such increases. After all, the ground is shifting beneath the feet of insurers. Layoffs appear to be impacting most sectors of the US economy. Microsoft and Google’s Alphabet parent are the most recent notable examples. Fewer workers mean fewer commercial insurance enrollees, who are likely to shift to less profitable ACA exchange plans or Medicaid. 

Meanwhile, stakeholders are waiting to see what the 118th Congress will do in 2023. Final rules are expected for enforcement of the No Surprises Act, which aims to curtail surprise medical billing. 

What will the impact be on ___?

Health systems and providers: “The shift from employer sponsored insurance to exchange, Medicaid, or uninsured status will result in lower premiums and reimbursements,” offered Mr Marcus. “Bad debt is likely to increase as well.”

Dr Vogenberg said that despite expected enforcement of the No Surprises Act he does not see it having a major impact. “Akin to efforts on posting drug costs that failed, this is likely to have the same fate.” 

Payers: Mr Marcus sees reasons for concern. “Health systems and providers will push for higher reimbursements that will ultimately increase premiums. Additionally, payers and plan sponsors will likely have to deal with adverse selection. As insurance prices increase, it becomes more likely that insureds who view themselves as healthy will drop coverage.  Inflation and job concerns will likely cause persons to re-evaluate spending.”

Look for payers to expand their reach via Medicare Advantage as the commercial side becomes less profitable, noted Dr Hsu. Dr Vogenberg said he expects payers to focus on site of care cost reduction efforts. “Direct member messaging, engagement, and care management counseling or outreach by insurers and plans are increasingly common.”

Covered individuals: Unless individuals qualify for Medicaid or become eligible for Medicare, “they will face limited choices in the commercial market,” said Dr Hsu. The limited choices will be more costly, added Mr Marcus. One way to stand out in such an environment is by providing covered individuals information, noted Dr Vogenberg. “Patients will be looking to maximize their health care benefit and understand their best choices. The information needs to be actionable—whether it [pertains to] clinician or hospital shopping, pharmacy shopping, and the like. People want to find services that are the most affordable and easiest to access.” 

The uninsured: Once again, Dr Vogenberg believes that uninsured will not be impacted anymore then they are already by information, costs, or access , while Mr Marcus said declining access could be even more of a problem. 

It stands to reason that some health systems will look to spread costs by acquiring, whereas others will seek access to more resources by being acquired. This alignment of need signals the likely increase in merger activity. 

What will the impact be on ___?

Health systems and providers: “Hospitals that can acquire other hospitals and/or additional physician practices are going to be in a better position going forward.,” said Mr Marcus. He emphasized that systems will have to be smart about it. “Purchasers will need to be prudent and not overpay.” Mr Marcus added that while sellers should not expect a windfall, “it is a less risky path than going it alone.” Buyers will gain increased leverage and seek higher reimbursement, said Dr Hsu. This could be a way to offset losses as care shifts to lower-cost centers of care. 

Payers: Both Mr Marcus and Dr Hsu said they believe payers will be negatively impacted as consolidation leads to higher prices and lower quality care.

Covered individuals: “Premiums and cost sharing will increase, while access and quality care decrease,” said Mr Marcus. 

The uninsured: Mr Marcus noted that the uninsured will find it more and more difficult to access care—other than the high-cost emergency department.