To anyone who follows healthcare hiring and spending trends, 2017 has been quite a curious year. Despite record growth in terms of healthcare jobs since the start of the year, the rate of growth in spending has fallen. While this is not necessarily abnormal in other sectors, it is unusual to see such a trend in healthcare jobs. Increased hiring usually translates into a commensurate level of increased spending.
The latest data from the Altarum Institute indicates the following:
- Healthcare added 314,000 jobs from January through August
- Industry job growth is 3.4% year-on-year for 2017
- Healthcare spending is up 5.6% year-on-year, down from annual growth of 6.8%
- Consumer healthcare costs are up 1.1% year-on-year.
It is clear that both national healthcare spending and consumer costs are still rising. But the rate of growth for both have slowed even as growth in hiring has increased. So what gives? How can spending slow down while hiring increases? There are multiple factors in play, as outlined below.
Mergers and Acquisitions Continue
The merger and acquisition environment is as strong in healthcare as it has ever been. Larger hospitals and medical groups are continuing their strategy of growth through acquisition unencumbered. It is a strategy that leads to more hiring, but one that also means more efficient use of company resources across multiple facilities. The result is one of being able to do more with less.
Forecasts for the remainder of the year suggest there will be no slowdown in mergers and acquisitions. Indeed, the pace may pick up in the months and years ahead as the economy gradually recovers. As a side note, mergers and acquisitions do not affect just hospitals and doctor groups. Pharmaceuticals, life sciences, and information technology are also part of the game.
A Better Technology Environment
Transitioning healthcare into the modern age of technology has been a long time in coming. But now that the transition is here, industry providers are becoming more efficient through the use of technology. This gives more room for cost-cutting initiatives that make for healthy budgets without necessarily reducing the total size of the workforce.
As an example, the average hospital will invest a significant amount of money in building a reliable electronic records management system. But once a system is up and running smoothly, the cost for routine maintenance and management is considerably less. Investments in healthcare IT should gradually go down over time, reducing overall spending without sacrificing electronic record-keeping.
Lastly, value-based medicine is already having an impact on healthcare spending, despite it still being relatively new. One of the major points of the Affordable Care Act is to reduce the overall cost of healthcare by creating a system that guarantees the death of the fee-for-service model in favor of the value-based model.
Value-based medicine ostensibly reduces spending by doing away with unnecessary treatment and working toward an eventual patient outcome that mitigates the need for repeated treatment, repeat hospitalizations, unending testing, and so on. The value-based model relies as much on patient satisfaction as it does the decisions of healthcare providers.
The relationship between healthcare hiring and annual spending has always been a curious one. But the fact that employers are able to increase staffing without a commensurate rise in the budget is a good thing. It shows that the industry is at least on the right track as it endeavors to make healthcare delivery both accessible and affordable for everyone. Let’s just hope the industry can keep moving in the same direction through the end of 2017 and into 2018.