Healthcare
Healthcare providers seek calm in an industry struggling with instability.
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What to Expect in 2024
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What to Expect in 2024
The continuing difficulties of healthcare show little sign of abating: escalating cost pressures, a chronic labor shortage and greater risks to property, reputation and professional status. Healthcare organizations that provide forward-thinking benefits and implement effective risk management are more likely to thrive in the macro healthcare market.
Explore our key takeaways to protect your
profits and drive organizational vitality and resilience...
Healthcare will continue its long and difficult fiscal recovery.
It is well-known that hospitals and healthcare providers struggled financially following the COVID-19 pandemic: The median operating margin for hospitals in 2022 was 0.22%, compared with 3% in 2021; in mid-2023, one-third of hospitals’ operating margins were less than 3%.
Increased expenditures are a top concern for 79% of healthcare respondents to the HUB International 2024 Outlook Executive Survey. Higher labor costs are driving expenditures, as is the cost of routine maintenance due to higher supply and equipment costs.
Elevated interest rates also are squeezing margins, as the cost of borrowing affects capital projects like building new facilities or remodeling existing ones and purchasing advanced medical tech. For instance, a new cancer hospital decreased its bed capacity 38% due to a 29% jump in construction costs.
The pinch is happening to clinicians as well: The Centers for Medicare and Medicaid Services (CMS) has proposed a 3.4% cut in physician reimbursement rates for 2024, following cuts in 2023.
Greater competition is also eroding revenues and profits. The number of nonprofit and for-profit urgent care clinics has exploded to nearly 14,500 since 2019 and patient volume has surged 60%. And as Medicare will extend coverage of telehealth consultations through 2024, the service’s continuing popularity will divert revenues from some providers who would otherwise see patients in person.
Vitality
Resiliency
Preparedness
Preparedness
Resiliency
Economic Viability
Benefits strategy — not AI — will have the biggest potential to help fill staff shortages in 2024.
The healthcare industry is facing a shortfall of nearly 200,000 nurses by 2030 and 48,000 primary care physicians by 2034. This follows an existing shortage of 400,000 caregivers for older adults.
In part, healthcare workers are leaving the field because of respect: The top reason healthcare workers exit their organizations is because they don’t feel valued (31% of employees), and 21% feel their employers don’t support employee wellbeing.
There’s also the matter of safety in employee recruiting and retention. Healthcare professionals’ risk of injury from workplace violence is five times greater than any other industry, and fears of safety have driven healthcare workers into other professions.
Although artificial intelligence has been touted as the long-term benefit for labor shortages and shows potential in healthcare, the technology remains in its infancy. And 87% of healthcare respondents to HUB’s Outlook Executive Survey ranked training and adding skills as having an impact on employee vitality, more than any other factor.
The industry might better heal itself with a more humanistic approach to benefits and work policies. More than eight out of 10 employees want to be seen as individuals, not merely workers, and for their employers to support both their work and personal lives. Delivering personalized benefits that create quality employee experiences (QEX) can be a major factor in boosting recruiting and retention efforts in 2024.
Preparedness
Vitality
Economic Viability
Risk management will be key in a challenging environment.
Given the headwinds working against the industry, it will be difficult for healthcare providers to rebuild resiliency.
Some risks are more easily tackled than others. Technology’s role in healthcare, for example, is vitally important for greater efficiency and enhanced patient care. But cyberattacks have skyrocketed: Healthcare data breaches have doubled in 2023, causing closures.
Guarding against Mother Nature is another matter. As hurricanes, floods, extreme heat and other catastrophic weather events occur with more frequency, business contingency plans are key, but so is sufficient insurance. Property coverage and insurance for catastrophic perils will rise as much as 30% in 2024, and possibly more for properties with high catastrophe (CAT) exposures.
For providers, professional liability coverage is getting more expensive, with rates rising as much as 15% for medical mal insurance. Underwriters are pulling back due to social inflation affecting litigation against healthcare. In fact, excess liability claims have risen 9% in the past year due to rising legal costs and medical cost inflation.
(Two positive notes: Cyber insurance premiums are likely to level off or have minor rate increases after years of double-digit price increases, while workers compensation insurance premiums could decrease as much as 10%.)
Because many carriers are limiting capacity, restricting their appetite in selected markets or increasing premiums to the point of unaffordability, healthcare providers will want to consider alternate risk vehicles like captives or self-insurance for certain insurance needs, such as property coverage, when appropriate.
Organizations should not expect a single underwriter to cover all of their insurance needs in any given coverage line, as healthcare providers often need to access multiple carriers for full coverage.
Resiliency
Vitality
Economic Viability
Disruptions ahead. Are providers ready?
More than half of healthcare respondents to HUB’s Outlook Executive Survey conduct enterprise risk management assessments monthly or quarterly, indicating executives understand that preparedness will be important in 2024.
But there is a difference between knowing that preparedness is important and actually being prepared. For example, 76% of the HUB survey’s healthcare respondents say they are prepared for climate change and severe weather. Yet fewer than half have effective facilities risk management plans.
For hospitals, climate change is a two-pronged risk: They must prepare for weather damage to healthcare facilities and care for patients injured in a severe weather event. No matter if the disaster is a hurricane, wildfire or extreme heat, these events will be costly — the latter alone expected to amount to $1 billion in additional healthcare costs in 2023.
Health systems have responded with dashboards listing patients at risk from extreme weather events and have encouraged investment in tree
canopies and improved cooling and air filtration in the homes of those at risk.
Organizations are also rethinking construction, rebuilding hospitals and adding barriers to withstand hurricanes and floods, for example.
Other potential disruptions are forthcoming. The industry should be prepared for continued government audits for compliance with terms and conditions that accompanied COVID-19 relief funding, as well as lawsuits alleging relief fund fraud.
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HUB healthcare insurance, risk management and employee benefits professionals will work with you to develop a tailored strategy that will protect the bottom line, support the vitality of your workforce and build resiliency for 2024. Here are some initial considerations:
Thoughtfully lean into risk.
Risks in healthcare have increased — and so have premiums. Consider taking a higher deductible, which reduces premiums and improves experience rating, or alternative risk transfer vehicles to lower costs. Ask your broker what kind of insurance strategy meets your risk profile and budget.
Increase engagement through benefits.
Re-emphasize safety.
Understand your loss trends.
Re-emphasize safety.
Understand your loss trends.
Thoughtfully lean into risk.
Employees — especially healthcare workers — expect you to support their health, safety and wellbeing. A benefits strategy based on personalization and fostering quality employee experiences (QEX) will boost engagement, recruiting and retention, and lower risk.
Increase engagement through benefits.
In an era of labor shortages, workplace violence against healthcare workers and increased patient litigation, keeping patients and employees safe is essential. Train and onboard employees to understand expectations and commit to maintaining a safe work environment.
Re-emphasize safety.
Thoughtfully lean into risk.
Increase engagement through benefits.
Understand your loss trends.
Understand the root cause of your large losses and explain to carriers what you’re doing to prevent future losses. Develop a strategy with your insurance broker to determine the best time and frequency to review alternative markets.
Understand your loss trends.
Thoughtfully lean into risk.
Increase engagement through benefits.
Re-emphasize safety.
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When you partner with HUB, you’re at the center of a vast network of experts who will help you improve your profitability, enhance the vitality of your workforce and remain resilient into the future. For more information on how to manage your insurance costs, reduce your risk and take care of your employees, talk to a HUB healthcare advisor. We’re here to help.
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1. HFMA, “The latest on hospital finances; signs of improvement but margins remain tight,” July 27, 2023.
9. Becker’s Hospital Review, “Top 9 reasons healthcare workers quit,” June 16, 2023.
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Be transparent with your broker.
Be transparent with your broker.
Be transparent with your broker.
Be transparent with your broker.
Let your broker know what changes you’ve made to the business, so there are no surprises at renewal. Review exposures and insurance needs at least 90 days prior to policy renewal, so your broker can identify the best options.
Re-emphasize safety.
Increase engagement through benefits.
Thoughtfully lean into risk.
Understand your loss trends.
Be transparent with your broker.
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2. Becker’s Hospital Review, “3 healthcare capital projects affected by inflationary pressures,” February 17, 2023.
3. Medical Economics, “CMS proposes a 3.4% cut to Medicare payments,” July 14, 2023.
4. FPM Journal, “Medicare payment reduction for 2023 smaller than originally announced,” January 10, 2023.
5. CT Insider, “Urgent care expands across Connecticut amid calls for greater oversight,” July 31, 2023.
6. U.S. Bureau of Labor Statistics, “Registered Nurses.”
7. AMA, “Doctor shortages are here – and they’ll get worse if we don’t act fast,” April 13, 2022.
8. McKnight’s Senior Living, “Long-term care workforce shortages worst in all of healthcare, provider groups say as Senate committee explores issue,” February 17, 2023.
10. Forbes, “Violence Against Healthcare Workers Is Rising: Here’s How We Can Protect Them,” August 2, 2023.
11. National Library of Medicine, “Evaluation of artificial intelligence techniques in disease diagnosis and prediction,” January 30, 2023.
12. HR Today, “Rethinking EVP,” June 11, 2021.
13. Medical Economics, “Computer attacks in health care are booming so far in 2023,” August 9, 2023.
14. Yale Climate Connections, “Extreme heat will cost the U.S. $1 billion in health care costs – this summer alone,” July 10, 2023.
15. The Commonwealth Fund, “How Health Care Organizations Are Preparing for Climate Shocks and Protecting Vulnerable Patients,” October 20, 2022.
16. Health Facilities Management, “Building hospitals that can withstand extreme weather events,” August 24, 2022.
17. JDSupra, “HRSA and OIG Begin Recovery and Audits of the COVID-19 Funding Programs, “June 29, 2023.
To improve their financial viability, healthcare providers will need to explore new streams of revenue, understand the implication of emerging payment models like value-based care and explore how to cut insurance costs in the face of rising risks.
The number of nonprofit and for-profit urgent care clinics has exploded to nearly 14,500 since 2019 and patient volume has surged 60%.
Healthcare providers need to consult their insurance broker about filling gaps preparedness, whether it’s for an increasing number of patients, weather-related damage to property, or audit or litigation preparation. If they’re unprepared, they not only risk damage to the bottom line, but their ability to stay operational.
For hospitals, climate change is a two-pronged risk: They must prepare for weather damage to healthcare facilities and care for patients injured in a severe weather event.
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