Recession and Healthcare Spending

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Recession and Healthcare Spending

Five effects of a recession on healthcare providers and healthcare workers include a decrease in the workforce shortage, a reduced demand for services, more unpaid patient bills, a decrease in charitable giving, and the fact that pediatric healthcare services are generally recession proof. Further details are below.

Lowers the Shortage of Healthcare Workers

  • In positive economic times, there is often a shortage of healthcare workers, but during an economic downturn, this shortage is reduced likely because the use of some services will not be in as much demand.
  • For example, right now there is a "shortage of addiction treatment professionals, behavioral health practitioners, primary care physicians as well as emergency room clinicians," but during the recession of 2008, there were reports of additional nurses available because people are reluctant to pay for these services if they feel they cannot afford them.
  • A U.S. Bureau of Labor and Statistics report found that during the 1990-91 and 2001 recessions, healthcare employment was one of the few sectors that continued to grow.
  • During the 2008 recession, healthcare employment grew 6.6% between 2007 and 2019 compared to a 6.9% decline for employment overall.
  • Physicians office employment grew 5.2%, general medical and surgical hospital employment grew 3.3%, skilled nursing facility employment grew 3.7% and home healthcare services employment grew 18.3%.

Reduced Demand for Services

  • As indicated above, during a recession, consumers will often "defer healthcare in order to save money."
  • An American Academy of Family Physicians survey found that during economic downturns, people often have to prioritize spending on essentials like housing and food. Therefore, healthcare spending is typically reduced.
  • People will still need treatment for major injuries and illnesses, but any service that is elective or minor in nature may be delayed until the economy improves.
  • Elective procedures are the most often type of service that is forgone during recessions, which causes "substantial financial headwinds for surgical centers, hospitals and health systems."
  • Between 2009 and 2011, the "average 300-bed hospital lost about $3.7 million dollars" because of a decrease in commercially-insured patients choosing to undergo elective surgeries.
  • This loss resulted in the expansion of outpatient care facilities that were "more consumer-friendly and affordable" when compared with in-patient facilities.
  • The American Academy of Family Physicians also noted an increase in the number of consumers who were worried about paying their bills, an increase in appointment cancellations, and an increase in new health issues arising because of patients were "skipping preventive healthcare measures."
  • Even as the economy improves, it can take a while before people become comfortable with spending money on healthcare again.

More Unpaid Bills

  • Since most U.S. patients are required to pay at least a portion of their medical bills, during a recession, there is usually an increase in the number of patients who cannot pay their expenses.
  • This is an issue for healthcare providers because they not only lose money, but they also have to increase the number of write-offs they take on their accounts receivable.
  • As such, many providers have to establish "new financial arrangements with hospitals and other provider groups in order to help stabilize their income."

Charitable Giving is Decreased

  • Hospitals often rely on charitable contributions from the public to operate, but in a recession, fewer people are likely to donate and those who do donate may not give as much.
  • This decrease in anticipated funds can strain a hospital's budget or force cutbacks in certain departments.
  • In 2011, 71% of healthcare fundraisers stated that the recession was still negatively affecting contributions.
  • Even during the economic recovery following 2008, 48% of healthcare fundraisers were still cutting their fundraising budgets and 66% were still seeing declines in major gift revenue.

Pediatric Care Appears to be Recession Proof

  • A Health Care Cost Institute study found that spending on pediatric healthcare services by consumers with employer-based health insurance plans grew an average of 5.5% between 2009 and 2012.
  • Per capita spending on children in 2012 was $2,437, which was $363 more than in 2009, but nearly all of the increase was a result of price increases rather than utilization of services.
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