Med Industry Blog

Healthcare Costs in 2022 and Beyond

August 5, 2022

Healthcare is becoming more expensive and less available. We can look at what's going on but we can't quite figure out how to solve the problem. Are there less healthcare facilities in the US? Yes and no. There are less hospital beds than 50 years ago, but the remaining hospitals have expanded significantly and there are many more clinics and urgent care facilities than ever before. Are there more doctors and medical professionals? Yes and no. There are more doctors but there are many more physicians assistants and nurse practitioners. Does health insurance provide adequate reimbursements for healthcare procedures? Yes and no. Much depends on the coverage purchased and the procedures facilities use to do billing. Is the actual increased cost of healthcare equipment and facilities making the cost of care unreasonable high? Yes and no.
Let's look at these and try and figure out where the problem may be hiding.

Are there less healthcare facilities in the US? Yes and no. There are less hospitals than 50 years ago, but the remaining hospitals have expanded significantly and there are many more clinics and urgent care facilities than ever before.

There were about 7150 US hospitals in 1970 compared to 7300 US hospitals in 2022 however the number of hospital beds in the US has dropped from 1.5 million in 1970 to 920 thousand in 2022. Of the current 7300 US hospitals, only about 6000 are designated as short term acute care or critical access hospitals. The remaining 1300 are dedicated to rehabilitation, psychiatric, children, long term care and similar none acute care facilities. Even with the reduction of facilities and beds, healthcare costs have increased. Reasons for rising healthcare cost include government policy, mainly Medicare and Medicaid has enabled medical providers to increase prices and benefit due to having more insurance reimbursements being available. Currently there are about 9200 urgent care facilities and 2700 retail clinic in the US. The conclusion might be, even thought the number of hospital beds have decreased significantly, the total number of facilities offering care has increased which doesn't do much to make healthcare less expensive.

Are there more doctors and medical professionals? Yes and no. There are more doctors but there are many more physicians assistants and nurse practitioners.

There were roughly 334,000 thousand doctors practicing in the US in 1970 compared with 1 million practicing in 2022. The US population growth from 1970 (200,000) to 2022 (332,000) has increased by about 60% while the number of physicians has tripled. Add to this number about 117,000 physician assistants (PA) and 355,000 nurse practitioners (NP) and we basically now have more than 1.5 million medical professionals representing five times more than we had in 1970. Pretty much the same conclusion as hospital costs, the number of medical professionals have increased significantly while the population has grown at a much slower rate. Once again, this doesn't do much to reduce costs - it does however provide the best healthcare services in the world. The real question is with more medical professionals, why is it more difficult to see one - the numbers don't support it - population has reduced and the number of medical professionals has increased?

Does health insurance provide adequate reimbursements for healthcare facilities? Yes and no. Much depends on the coverage purchased and the procedures facilities use to do billing.

Government programs such has Medicare and Medicaid have contributed greatly to increased cost of healthcare. The industry is able to establish prices knowing that their billings will be reimbursed, being guaranteed by the government. Commercial insurance carriers primarily follow government operated insurance programs and billings, again insuring facilities will be reimbursed at comfortable levels. Billings are designed so that healthcare facilities that treat those that are unable to pay and do not have insurance, are covered by the higher prices of those whom pay or have insurance. More than 82 million are enrolled in the Medicaid program and 64 million in Medicare, 31 million have no insurance coverage leaving about 155 million with retail health insurance including about 35 million under the Affordable Care Act. Difficult to bring prices down in this $4.1 trillion industry when billings are pretty much unrestricted for half the population covered under government programs. Insurance premiums continue to climb, and other than some competition among insurance providers, there is little motivation for medical organizations or the government to agressively reduce costs and prices.

Is the actual increased cost of healthcare equipment and facilities making the cost of healthcare unreasonable high? Yes and no.

There is no question that the cost of new systems continues to rise especially in light of newer technologies being introduced. Construction costs are also escalating at an amazing pace. Supply chain issues are driving prices up and deliveries delayed - increasing costs even more. The other side of he coin is more expensive technologies also reduce costs. Analog x-ray procedures using film were time consuming, new digital technology has reduced this time to a fraction of what it was. CT and MRI technologies produce higher quality images enabling radiologist to offer diagnosis quicker and more accurately. Patient throughput is several times greater than previously, enabling billing to easily increase and cover the cost of newer technology. The construction dilemma doesn't offer many answers, however in light of the number of facilities we now have and the continued reduction of beds, maybe it would be wise to slow down expansion.

So as we look back at these issues we may want to consider the continued expansion of facilities, as not entirely necessary. We could also look at a more efficient use of the increased number of medical professionals. Regulating insurance reimbursements and medical facility costs could be based upon actual costs and not as much on what the market will bare . Although this already may be being done to a certain extent by CMS (Centers for Medicare and Medical Services), it probably could use more aggressive attention.

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