Where is your healthcare organisation on the spectrum of recession sensitivity? It’s time to find out.
With economic uncertainty ahead, you may have already asked yourself, “Is healthcare immune from a recession?” A better question for healthcare finance teams might be, “Where is my healthcare organisation spectrum of recession sensitivity, and what can I do about it?”
To answer the first question, we looked at several studies on the topic of healthcare being immune to a recession, and the answer so far is maybe, it depends, and no. As most economists will tell you, it’s an art, not a science.
The data shows that healthcare overall has been mostly recession proof. Molly Gamble writes in Becker’s Hospital CFO Report, “The healthcare industry has been described for generations as “recession-proof.” Patients are less price sensitive when health insurance pays for a large proportion of healthcare costs.” And, according to the University of Illinois Chicago School of Public Health, “A new study examining the relationship between local economic conditions and healthcare employment during past recessions found the healthcare sector is particularly stable with respect to economic turmoil.”
So far, so good. But that’s for healthcare organisations overall. And that’s based on the past. Things have changed. As we saw during the pandemic, some healthcare organisations did well, while others were hit hard, and it all hinged on several factors, not the least of which was the pause on elective procedures. Can we apply what we learned then to help predict which organisations will struggle, and which will remain relatively unscathed?
In that same article, Eric Jordahl, Managing Director with Kaufman Hall points out:
So, based on Jordahl’s suggestion, the likely biggest driver and top spot on the spectrum list is how much the patient is responsible for the cost of the care you provide, because consumers are more responsible for the cost and the direction of their care than ever before. High Deductible Health Plans (HDHPs) are one example of this.
There are other factors added to the spectrum list as well, including:
These above, are just some of the ways to measure your recession sensitivity, and here is how to respond:
Now that you’ve determined your recession sensitivity, the next thing to consider is what to do in response. Here are some steps you can take, regardless of your level of sensitivity:
Understanding your recession sensitivity, and what you can do about it, could affect how successfully your healthcare organisation emerges from a downturn.
The Akuna Solutions Team