Blog | Cost of Care

PwC report anticipates a 6.5% increase in healthcare costs in 2022, roughly in line with recent years

Blog | Cost of Care

PwC report anticipates a 6.5% increase in healthcare costs in 2022, roughly in line with recent years

Researchers project a small spending acceleration in part because of heightened utilization coming out of the pandemic.

As the healthcare industry emerges from the COVID-19 pandemic, annual costs are expected to increase by slightly more than they did in recent pre-pandemic years.

PwC’s Health Research Institute projects that costs will increase by 6.5% in 2022. That’s below the 2021 projection of 7% but otherwise would be the highest increase since 2015, when costs rose by 6.8%.

Researchers compiled the annual report based on discussions with industry executives and health plan actuaries. In estimating the 2022 increase, as with 2021, the researchers discounted the effects of the pandemic on the prior year’s costs.

Factors that are expected to raise costs

In general, costs in 2022 will “return to pre-pandemic baselines with some adjustments to account for the pandemic’s persistent effects,” the report states.

Some of those effects will be seen in the following trends, according to the projections.

Increased utilization. Some care that was deferred during the pandemic will return, while the ongoing mental health and substance abuse crises and pandemic-related deterioration in population health will be factors. In addition, some COVID-19 costs such as follow-up testing and vaccinations will linger.

“Personalized or targeted outreach could help encourage patients to schedule necessary care, or even their vaccine,” the report states.

Industry preparations for the next pandemic. Health systems will invest in predictive modeling and improved supply chain processes, and prices for PPE, infrastructure and staffing will remain high. Increased spending on technology, connectivity and cybersecurity will be warranted as part of workforce-related changes and to prepare for the next crisis, and providers are investing in infection-control measures.

Stakeholders across the industry also are examining how they can boost health equity. Such investments “likely will dampen healthcare spending in the long run but may drive higher prices in the short term.”

Digital investments that result in higher utilization. “Providers are fine-tuning ‘digital front door’ mobile apps that connect them to their patients, beefing up portals and intensifying use of customer relationship management tools,” the report states. By expanding access to care, such tools likely will increase utilization and thus costs in 2022.

Factors that are expected to lower costs

PwC projects the continuation in 2022 of some patterns that emerged during the pandemic and helped curb costs. A couple of them are described below.

Consumer willingness to use lower-cost sites of care. The most prominent manifestation of this trend is the increased use of telehealth, but other examples are greater utilization of home-based care and a stronger inclination to seek viable alternatives to the emergency department.

“With dwindling ED volumes, providers will need to either address fixed cost structures or increase prices, which employers will surely resist,” the report states.

Provider emphasis on efficiency. “The pressure to provide more healthcare for less has been building,” according to the report, which cites increasing employer interest in high-performance and narrow networks, along with pricing pressures stemming from new federal mandates on transparency.

“The new ways of working forced by the pandemic, including remote workforces, process automation and cloud technology, can help providers lower their cost structure in response to pressure on prices,” the report states. Real estate is one area with ready opportunities for cost reduction.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (nhut@hfma.org).

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