Quick look: McKinsey has released its 2023 report with estimates of what to expect regarding U.S. healthcare in the foreseeable future. Though the data shows temporary complications, it’s a call for business leaders and brokers to work collaboratively to accelerate problem solving and pave a more positive outlook for the future.
As much as we’d like to avoid it, inflation has infiltrated the economy and affected how businesses are making decisions in 2023. As predicted, McKinsey’s recent study – What to expect in U.S. healthcare in 2023 and beyond – reveals inflation, in combination with the shortage of healthcare workers and the after-effects of the pandemic, has created its fair share of challenges.
However, small- and medium-sized businesses (SMBs) have always been scrappy and proven their resilience time and time again, most notably in the past few years. So, though the current healthcare forecast may not be as sunny as one would like, it doesn’t mean there aren’t brighter days ahead.
Brokers and SMBs are collectively tapping into their arsenal of resources and experience. And by adding the competitive advantage of a PEO solution, they can uncover creative solutions to keep healthcare plans affordable and accessible.
Key points from the study
The overall sentiment of the study shows growth. While this may also equal increased costs in certain areas, limitations seem temporary. By 2026, with enough time to recalibrate post-pandemic, predictions show recouped savings and streamlined healthcare services.
Increase in costs may temporarily limit provider growth
In 2022, McKinsey estimated provider profit pools would grow at a 7% compound annual growth rate (CAGR) between 2021 and 2025, though now the forecast is cut more than half to 3% CAGR from 2021 extending through 2026.
The projection decline is based primarily on the increased costs caused by high inflation and healthcare labor shortages. However, despite the downturn, insights show a rebound between 2023 and 2026 with a jump of 15% in annual growth for a total earnings before interest, taxes, depreciation, and amortization (EBITDA) of $358 billion.
Healthcare growth in certain areas may spearhead EBITDA recovery
Labor shortages, particularly with nurses, are affecting post-acute care profit pools, though virtual care and value-based care will continue to grow. With a broader provider and payer network, the goal is to improve utilization and alternative measures, such as the use of non-hospital sites to promote effective care and cost management.
Additionally, due to the increase in technology application and labor productivity efforts, it’s expected in a best-case scenario for hospitals and post-acute providers to collectively recoup cost savings of 600 basis points.
Pharmacy services continue advancement
Projections from last year showed pharmacy services profit pools growing at 3% CAGR from 2021 to 2025. These remain intact in the 2023 reporting but with an additional year added on to reach $65 billion by 2026. The steady growth is attributed to the recurrent use of pharmaceutical services and increased prices for specialty drugs.
Although the pharmacy sector also faced worker shortages all of last year, it spurred retail and provider-based pharmacies to increase their retention efforts. Many offered higher wages and benefits, limited operating hours, and invested in technology like micro-fulfillment to optimize the process and cut costs. Furthering these efforts will continue to streamline pharmacy services and optimize the interaction between pharmacists and patients.
What brokers should know
For SMBs, it can feel like things are getting worse before they get better. To ease the stress and promote more favorable solutions, there are several actions brokers can take now.
Healthcare costs are changing and so are healthcare demands. Yet, not every SMB requires the same healthcare plan nor would their employees consider it valuable. They want customization. By partnering with a PEO solution, brokers immediately expand their network and ensure their clients have access to a greater selection of premium benefits which larger companies typically have a hold on.
Technology has played an impactful role, allowing SMB employers to offer modern health benefits at more cost-effective pricing. The adoption of telehealth, automation, and mobile applications have improved the experience for SMB leaders and their employees. Without it, brokers put themselves at a disadvantage when curating options for clients.
Improve employee education
Many times employees aren’t aware of the full scope of what their benefits provide. Therefore, they go largely unused and unappreciated to the detriment of all. Enhancing the experience with ongoing health plan education can help everyone get the benefits most impactful for them.
Championing a PEO solution
A PEO solution provides brokers support with all of the above, and more. When working with a PEO like ExtensisHR, brokers can offer their clients premium-level benefits at affordable costs to create manageable estimates as they grow. In addition to a full suite of HR services, additional built-in advantages include:
Remote HR technology
ExtensisHR’s Work Anywhere® platform allows SMB leaders to handle all HR tasks from wherever they are, at their convenience. The technology improves cost management, streamlines workflows, and syncs up company goals and performance, among other time-saving tools. In today’s increasingly mobile working environment, remote access is a must have.
Familiarization with your clients’ evolving needs is essential to manage costs and expectations. Unlike big-box PEOs which operate mostly on support ticket systems, ExtensisHR offers person-to-person service with a dedicated HR manager and team who are equipped to handle all HR questions. They work with your clients to provide solutions based on each company’s specific requirements.
Risk management and compliance services
Implementing healthcare plans also requires adhering to the guidelines set forth on a federal, state, and local level. With so many changes taking effect on an ongoing basis, it’s important to have a professional HR partner who is well-versed in the language and updates of regulations affecting SMB employers.
At ExtensisHR, we have a history of superior customer satisfaction and success working with brokers and SMBs. Our goal is to be the go-to support in all areas of HR so business leaders can focus on their company growth.
Are you looking for new ways to strengthen your portfolio and deliver more for your clients? Contact our HR experts to learn how a PEO partnership may benefit you.