Healthcare Industry Under Pressure From Its Own Product

On the day that the House of Representatives‘ Democratic majority unveiled their unified healthcare reform bill, Grant Thornton LLP released results of a survey of healthcare financial executives that suggests that many hospitals and other provider organizations are preparing for increased business. But because most provisions of the House and the Senate bills won’t become effective until 2013, the healthcare executives apparently don’t expect that business to come from an immediate expansion of insurance coverage.

In the survey of 846 CFOs and comptrollers conducted by Grant Thornton LLP, the U.S. subsidiary of a global accounting and consulting firm, 38 percent of the healthcare respondents said that they expected their organizations’ hiring to increase within the next six months, compared to 24 percent of financial managers from all industries. The same percentage of healthcare respondents said their headcounts would remain the same, compared to 54 percent of the national respondents. And 24 percent-slightly more than the national sample-said they would cut staff.

While 51 percent of the healthcare respondents thought the economy would improve in the next six months, 44 percent said it would remain the same, and 6 percent said it would get worse. These responses are all in the same range as the national numbers. But 39 percent of the healthcare managers, vs. 27 percent of the national sample, thought the economy would come out of its slump in the first half of 2010. That is probably the most important reason to anticipate an increase in hiring in that time frame.

Other responses indicate that the healthcare leaders are more concerned about economic pressures than the average across other industries. Thirty-one percent of the healthcare executives, for example, expected their organization to raise prices within the next six months, compared to 22 percent of the national sample. Fifty-nine percent of the healthcare managers thought prices would stay the same, versus 67 percent of the national sample.

Ironically, the biggest source of pressure on prices, according to the healthcare leaders, is healthcare benefits and pensions. Eighty-three percent (vs. 77 percent for the national sample) named employee benefits as the most significant factor in price increases, followed at a great distance by energy, insurance, and raw materials.

Not surprisingly, 41 percent of healthcare respondents said they were reducing healthcare benefits, compared to 33 percent in the national sample. Twenty-one percent of the healthcare organizations are cutting their 401k retirement fund matches, while 26 percent of respondents across all industries said their companies were doing that.

In some ways, healthcare organizations aren’t that different from companies in other industries. But it is interesting that their biggest problem-the relentlessly rising cost of healthcare-is partly of their own making.