Healthcare Business Trends

Paul Keckley: 4 implications of the post-pandemic U.S. economy for healthcare

August 31, 2022 4:48 pm

In late July, several federal agencies/trade organizations released reports about the state of the U.S. economy after the first six months of 2022. Collectively, they reflect a slowdown in the post-pandemic recovery, as reflected in the following statements:

  • The Bureau of Labor Statistics Employment Situation Summary for June 2022, issued July 8: “Total nonfarm payroll employment rose by 372,000 in June, and the unemployment rate remained at 3.6 percent. …. Notable job gains occurred in professional and business services, leisure and hospitality, and health care.”
  • The Bureau of Labor Statistics Consumer Price Index for June 2022, released July 13: “In June, the Consumer Price Index for All Urban Consumers rose 1.3 percent, seasonally adjusted, and rose 9.1 percent over the last
    12 months, not seasonally adjusted. The index for all items less food and energy increased 0.7 percent in June (SA); up 5.9 percent over the year (NSA).”
  • The Conference Board Consumer Confidence Index for July 2022, released July 26: “The Index now stands at 95.7 (1985=100), down 2.7 points from 98.4 in June.” The Board also noted that this was the third straight month the Index has fallen, which reflects consumers’ weakened view of the present situation.
  • The Bureau of Economic Analysis GDP Report for the 2nd Quarter, 2022, released July 28: “Real gross domestic product (GDP) decreased at an annual rate of 0.9 percent in the second quarter of 2022, following a decrease of 1.6 percent in the first quarter. The smaller decrease in the second quarter primarily reflected an upturn in exports and a smaller decrease in federal government spending.”

These reports confirm a slowdown in the overall economy, with some speculating a recession might be near. For healthcare providers — physicians, hospitals, long-term care providers and outpatient services operators —  already facing higher costs for nurses, support workforce and supplies as well as  higher interest rates for debt, the reports’ findings portend added economic pressures. Meanwhile, health insurers are certain to tighten screws on payment, making positive operating margins rare for providers.

In many ways, it’s financial purgatory for providers.

What to expect

Four factors will shape healthcare’s future.

1 The business of providing healthcare will get more attention. The corporatization of healthcare has increased the focus on operating revenues, executive compensation, ownership models and more.

Healthcare is increasingly associated with Big Business, as evidenced by the high representation of healthcare companies in the Fortune 500 Top 10, which in May included CVS Heath, UnitedHealth Group, McKesson and AmerisourceBergen, as well as companies that have made recent forays into healthcare, including Amazon, Walmart and Berkshire Hathaway.a These rankings reflect the willingness of non-traditional players to disrupt healthcare delivery at a time when it is vulnerable.

2 Private equity (PE) investments will play a bigger role in accelerating innovation and heightening competition. Through the first half of 2022, U.S. PE firms completed 4,337 deals, with a cumulative value of about $529.2 billion, versus 9,171 deals worth $1,232 billion in 2021.b A fifth of deals are in healthcare services. While publicly traded and larger fund sponsors have fared well, smaller funds have struggled to create scalable delivery models, prompting devaluations and consolidation via sponsor-to-sponsor deals. U.S. PE has record-high levels of dry powder, approaching $1 trillion.c Healthcare delivery will be a popular target.

3 The value agenda in healthcare will be temporarily delayed. For most hospitals, medical groups and provider organizations, the concept of transitioning incentives from volume to value is widely accepted as a useful structural change. For many employers, the concept is plausible if savings result. And for regulators in CMS, the Center for Medicare and Medicaid Innovation and the U.S. Department of Health and Human Services, it’s necessary, although efforts to date have produced improvements in care without significant cost savings. The pandemic forced a temporary suspension of the value agenda; the near-term economic environment will heighten anxiety and prompt organizations to rethink their value strategy. For most hospitals, taking on additional financial risk in shared risk arrangements or alternative payment models with Medicare, private insurers or employers will be a secondary pursuit. Revenue growth via fee-for-service productivity coupled with aggressive cost-containment will be primary. 

4 Consumer healthcare spending and affordability will take center stage. With four in 10 households unable to handle a $500 emergency medical bill, and anxiety about financial security mounting, justification for prices will be a universal challenge for insurers, drug companies, hospitals, medical practices and ancillary providers. As the Federal Reserve raises rates, interest on medical debt will increase and, along with it, unpaid medical bills. It will be a vicious cycle, where underserved and middle-income households are directly harmed. In a rare bipartisan consensus, Congress is firmly behind across-the-board transparency and proactive attention to affordability. It’s no longer optional. And the external pressures that will likely result will command attention. So looking again at price transparency, there will be no room for holding out anymore.

Summary prognosis

Healthcare delivery is capital intense, labor intense, highly regulated and complex. As such, it has not historically been adversely affected by economic cycles because entry barriers have been high. For instance, CMS’s historical data on national healthcare expenditures (NHE) show that in the 2008-10 downturn, NHE increased 4.2% in 2008, 3.8% in 2009 and 3.9% in 2010 even as the GDP bounced awkwardly: +2%, –2% and +3.9% in each respective year.d

Although forecasts are premature about the intensity and duration of the approaching downturn, two things appear certain: Healthcare expenditures will be higher than the annual growth rate of the economy, and the landscape of providers will expand as new entrants gain a foothold at the expense of incumbents. 


a. Cision PR Newswire, “Fortune announces 2022 Fortune 500 list,” May 23, 2022.

b. PitchBook, Q2 2022: U.S. PE Breakdown, July 11, 2022.

c. PWC, “Private equity: Deals 2022 midyear outlook,” May 2022.

d., National health expenditure data, Historical, “NHE Summary, including share of GDP, CY 1960-2020,” Table.


googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text1' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text2' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text3' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text4' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text5' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text6' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text7' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-leaderboard' ); } );