Hospital Costs Can Prompt Business Layoffs — What’s the Solution?

If healthcare system prices are driving employers to reduce their staff, how can we make data-driven decisions and educate our workforce to potentially level the impact?

During the year following hospital price hikes, companies shed workers, according to a study by the National Bureau of Economic Research reported in the Wall Street Journal. Cutting payroll is one way companies manage higher premiums and the rising cost of benefits.

What does this mean for population health?

If fewer people are receiving preventive care and services to manage common chronic conditions, how will that gradually erode the health of a community, then triggering exorbitant expenses later? By the time a person gets the necessary care, a health situation has exacerbated and a costly E.R. visit is the crutch.

The study also determined after tracking about 200 mergers that hospital system consolidation to combine resources certainly creates efficiencies and improves operations. But prices increase anyway. The good news is mergers can expand services for patients and help hospitals that are struggling to stay open to serve community members.

The caveat: If community members are not supported by employer-sponsored health benefits because of hospital price hikes, resulting in staff layoffs particularly in the $20,000 to $100,000 salary range, those E.R.s and urgent care centers will be packed. Access will exist, but only access to the costliest out-of-pocket care. This fuels a cycle of jacking up premiums and employer costs while reducing employees’ available health resources.

What’s the answer to this complex and arguably toxic cycle of paying more, losing staff, getting less care and more costly care, and back to square one?

That’s a good question and a discussion that is important for employers to have with each other as peers, with their third-party administrators and benefits providers in a solution-focused manner, and with community leaders.

What should be our next steps?

We know that more than 156 million Americans have employer-sponsored health insurance and employers are largely invested in health and wellness benefits. You play an integral role in ensuring the care and vitality of your people and the community at large.

We also know that medical price increases have far outpaced inflation and the consumer price index (CPI). The trend continues.

We believe there are strategic ways to use data to reduce cost, increase access to care, and cultivate healthier workplaces and communities. In our Insights to Effectively Manage Your Healthcare Spend, we share four guidestones for developing a road map that hopefully will allow you to maintain and even expand staff without undue financial pressure.

Those include focusing on leading indicators such as common chronic conditions within your population and understanding that healthcare and pharmacy benefit quality matters more than discounts.

A study by the healthcare research firm, 3 Axis Advisors, found generic prescriptions dispensed by mail were marked up on average more than three times than those filled by brick-and-mortar pharmacies. Because prescription drug spending is a growing expense for employers, and an important benefit for their people, cost comparison is important, but also beware of discounts that might not actually cost you less or deliver more value.

Next: location, location, location. Where people live and access healthcare services has a major impact on how much they and you spend. For instance, some communities have higher E.R. utilization rates for non-emergent care. If your population resides in areas where this is the case, how can you educate employees on appropriate alternate care locations?

This leads to health literacy and the importance of connecting the dots between the benefits you offer and how to understand and use them. People are 32% less likely to be hospitalized and 14% less likely to visit the E.R. when they understand patient education material and communicate this understanding back to doctors, according to a study published in the Journal of Medical Internet Research.

During a time when benefits costs continue to rise and hospital prices are such that employers across the country are reacting by reducing staff, it’s critical to look closely at how we can help our employees stay healthier and utilize resources on hand to take the edge off these financial increases. Could we level out potential losses with more data-driven decision making and education? Can we keep valuable staff on board while delivering vital healthcare benefits to them and their families by making sure they make the most of the benefits offering?

There’s no indication that hospital prices will decrease. Like checking out at the grocery store, the sticker shock is now an everyday reality. But businesses depend on recruiting and retaining talent to succeed, and any steps taken internally or through advocacy such as serving on the board of a hospital or healthcare organization can make a difference.

Let’s continue the conversation.

About Health Action Council 
Health Action Council is a not-for-profit 501(c)(6) organization representing mid-and large-size employers that enhance human and economic health through thought leadership, innovative services, and collaboration. It provides value to its members by facilitating projects that improve the quality and moderate the cost of healthcare purchased by its members for their employees, dependents, and retirees. Health Action Council also collaborates with key stakeholders – health plans, physicians, hospitals, and the pharmaceutical industry – to improve the quality and efficiency of healthcare in the community.