The Current State of Healthcare Costs
The cost of healthcare in the United States has become a significant challenge for both patients and providers as it continues to increase. According to the Centers for Medicare & Medicaid Services (CMS), the national healthcare expenditure in the U.S. reached approximately $4.5 trillion in 2022, accounting for approximately 17.3% of the nation’s Gross Domestic Product (GDP). With the U.S. spending more on healthcare compared to any other developed country, the healthcare system is struggling to improve the health outcomes and quality of life of the public. This raises serious concerns for the future of healthcare as it can impact practices’ financial growth with operational costs exceeding revenue earnings. The costs of healthcare can reduce the financial opportunities for providers due to fewer patients attending their appointments. Understanding the drivers that are affecting these costs and exploring strategies to mitigate them is essential for providers to achieve healthcare success for their practices.
Key Factors Contributing to the Rising Healthcare Costs
Healthcare costs are driven by a combination of factors, including high prices for medical services, administrative inefficiencies, and the increasing prevalence of chronic diseases. A key contributor to these rising expenses is the pricing of healthcare services. This disparity is evident across a wide range of services, where prices are often inflated without a corresponding improvement in care quality. Offering services like emergency care can become challenging for providers because it can be costly and requires a significant amount of resources. Additionally, administrative processes account for a substantial portion of healthcare spending, with studies showing that they are responsible for approximately 15 to 30% of costs. The complexity of billing and insurance-related activities adds a significant financial burden and creates inefficiencies that are costly to manage.
For example, the need for extensive documentation, prior authorizations, and coding for insurance claims not only increases the administrative workload but also diverts resources away from direct patient care. Many of these tasks require providers and their care team to manually carry out this process, leading to delays in their practices and inefficient use of their resources. Other factors, including labor costs and workforce shortages, can also place a financial burden on many practices and affect their performance in healthcare. With a reduced workforce, many clinics are struggling with these costs while trying to meet the demands of their patients. This has led many providers to implement strategies and adopt technologies in their clinics to automate specific processes and improve their operational efficiency.
As the population ages, providers need tools that are cost-effective and efficient to address their patients’ needs without compromising their clinics’ growth. Physicians can miss opportunities for reimbursements because they may not have reported to payers on services they performed or care gaps they have already closed, losing revenue. With cases of chronic conditions increasing, this highlights the need for effective management strategies to control costs while simplifying process for practices to assist providers in spending less time on tedious/repetitive paperwork.
Consequences Resulting from The Healthcare Cost Crisis
A prominent barrier in healthcare is accessibility to medical services and treatments. Patients who are unable to afford the costs for their treatments are more likely to avoid receiving healthcare. This prevents physicians from seeing their patients because of this obstacle, losing potential revenue and being unable to improve their health. It can negatively impact individuals living with chronic conditions as they require immediate attention/treatments to address their issues, which may need services that are costly for both providers and patients. Equipping physicians with tools that can identify gaps in their patients’ care and automatically notify payers ensures that they receive the appropriate credits while actively reducing their health risks.
Having limited amounts of resources and time for their patients prevents physicians from treating them effectively and lowers their operational efficiency as they see less patients within a day. There are some practices that still rely on paper forms, which may drive costs for practices to acquire these resources. By using electronic systems, providers can automate key workflow processes, such as the request process for prescriptions or sending appointment scheduling links in advance to patients. This can empower patients to be more involved in their care while saving the care team time spent on making phone calls. Ultimately, the consequences that can arise from the high healthcare costs require strategies to help overcome these challenges in medical practices.
Addressing the Healthcare Cost Crisis
As many providers and researchers have recognized this issue, developing solutions to mitigate this crisis is needed. To tackle the rising costs of healthcare, a multifaceted approach is necessary:
- Value-Based Care Models: Transitioning to value-based care (VBC) models can align incentives with patient outcomes rather than service volume. In addition, VBC empowers providers to prioritize delivering preventive care to their patients as it can foster numerous benefits and receive payments for their services. By focusing on prevention, early intervention, and coordinated care, VBC can reduce unnecessary spending and improve overall health outcomes.
- Reducing the Administrative Burden: Streamlining administrative processes and reducing clinical inefficiencies can lower costs and improve the delivery of care. Simplifying billing and insurance processes, as well as adopting standardized electronic health records (EHRs), can cut down on administrative overhead and allow healthcare professionals to focus more on patient care. Efforts to streamline administrative tasks should also include reducing the burden of regulatory compliance. While regulations are necessary to ensure quality and safety, they often come with significant paperwork and reporting requirements. Simplifying these requirements while maintaining high standards of care can reduce administrative costs.
- Innovation in Care Delivery: Technological innovation has the potential to revolutionize healthcare delivery and reduce costs. Telehealth, remote patient monitoring (RPM), and artificial intelligence (AI) are just a few examples of technologies that can enhance care accessibility, improve efficiency, and reduce the need for in-person visits. For instance, telehealth allows patients to receive care from the comfort of their homes. This reduces the need for costly hospital visits and increases appointment show rates, enabling physicians to receive reimbursements for their care. Remote patient monitoring enables healthcare providers to track patients’ health in real-time, catching potential issues before they require more intensive intervention. Providing care to patients remotely also saves physicians their clinic’s resources and effectively manages their conditions. AI can act as a valuable asset to providers by increasing the practice’s operational efficiency and automating note-taking processes. Documenting clinical notes for patients can be a time-consuming task that increases their administrative workload. Leveraging AI to create notes for physicians can save them time and achieve new revenue opportunities for their practices by seeing more patients each day. As a result, these technologies enable more efficient management of chronic conditions and lower overall healthcare expenditures.
Reforming the Future of Healthcare
Through value-based care, simplifying administrative processes, taking on public health initiatives, and leveraging technological innovation, the healthcare industry can better manage costs while improving patient outcomes. Using technology to help address labor and administrative costs by streamlining manual work for physicians can help them deliver high-quality care while driving cost savings for their practices.
MDLand supports physician practices by equipping them with tools that reduce their administrative workload. iClinic® EHR allows physicians to effectively manage their patients by simplifying billing processes and reducing documentation to prioritize delivering excellent quality care. To learn more about how MDLand’s solutions can help physicians thrive in a VBC landscape, schedule a demo.