ITIC Global 2023 | Hospital pricing and cost containment solutions
In our final session of ITIC 2023, Mark Smith, Jason C Davis, and Helen Calderini discussed the economic and financial pressures facing healthcare providers and payers
The ITIJ team have been reporting live from ITIC Global in Barcelona this week (November 2023) sharing the discussions that took place at the conference. Read all reports
Helen Calderini, Head of Global Medical Network, APRIL International Care France
Calderini began by noting the effects of inflation on healthcare provision around the world are putting payers under stress, and argued that as an industry, ‘we need to come together to ensure that everyone has access to healthcare’.
She added: “On the member side, when it comes to individual insurance, they’re having to make decisions as to whether it’s healthcare or food on their table.”
Calderini argued that a key aspect of reducing costs was to ensure an early diagnosis: “Capturing the cases early on is important, because if the members do not tell us, there is a penalty on their policies,” she said.
She explained that this ‘also gives our team more time to look at the case, discuss with the member, then discuss with the doctor and facility’ to ensure that patients receive the best care for the best price. This is especially true if patients have to be transferred to another country or facility.
Calderini said that APRIL aims to have ‘90 per cent’ of the work done before an admission is needed – using simplified digital solutions, such as online portals, as well as the company’s Easy Claim payment solution, which allows for easy payments for healthcare around the world.
APRIL also aims to negotiate in advance with providers to ensure that they offer the best possible prices and services for members. The company also ranks its provider network in tiers according to price and quality of service – rationalising how the network is organised and giving members a clear understanding of the services they can access.
This relates to APRIL’s policy of guiding members as much as possible, giving them an understanding of the healthcare ‘industry … and industry actors’ throughout the life of their policy so that ‘by the time they actually need a doctor, they’ve already got a good inkling of where they should be going’.
Jason C Davis, Chief Revenue Officer, The Phia Group and Phia International
Davis focused on the US healthcare system. He noted that in that country, approximately a third ($1,323.9 billion) of the $4,255.1 billion spent on healthcare in 2021 went towards hospital care, with a further 14.9 per cent ($633.4 billion) going towards physician services. This dwarfs other factors such as the cost of prescription drugs (8.9 per cent), clinical services (5.4 per cent), and nursing care facilities (4.3 per cent).
Despite making up a third of health costs, hospitals in the US continue to struggle, with 2022 seeing the end of pandemic-era financial relief, and 19 hospitals filing for bankruptcy that year.
This situation has continued into 2023, with growing labour costs and general inflation – he said that healthcare inflation in the US is ‘always roughly double medical inflation’.
“2022 was one of the worst years on record – and 2023 started off even worse, although it has started to balance out and become more stable,” he said.
Davis noted that most US hospitals sit on ‘impressive’ cash holdings, but they may have to sell investments at a loss to keep the cash flow going.
He also recognised that payer contracts may not cover the additional costs incurred by inflation, particularly with less revenue coming from out-of-network emergencies due to the No Surprises Act – which prevented healthcare providers from charging surprise bills in excess of what insurers will pay.
Payers should expect increased costs, as healthcare providers attempt to shift costs. However, Davis argued that this is not just a recent development: “There’s always been cost shifting,” he said. Part of this is due to an ageing population, but also ‘part of it is because the system always wants to make more money’.
Mark Smith, Associate Director for Marketing, International and PMI Relationships, The London Clinic
Smith spoke primarily from a UK perspective on the issue. He began by noting that hospitals in the country have faced a number of serious financial strains since 2019.
This included the rising cost of attracting and retaining staff, which has resulted in increased costs of approximately £15 million. He credited this issue to the arrival of new competitors in the healthcare sector in London, as well as the combined impact of Brexit and the Covid-19 pandemic.
Energy costs have also more than doubled since 2019 – bad news for ‘energy hungry’ institutions such as hospitals. This was particularly felt in 2022, due to the knock-on effects of Russia’s invasion of Ukraine on the energy market. This resulted in a further £3 million in increased costs.
Medical and surgical supplies, including blood and prosthesis, have also experienced above-inflation price rises, adding a further £1.5 million in costs.
Smith said that to mitigate these cost increases, healthcare providers were working to modify their hiring practices, save energy and improve the efficiency of their organisations. This includes embracing new technologies such as telemedicine and artificial intelligence, using data and benchmarking to identify and prioritise areas of opportunity, and finding like-minded partners to work with where possible to reduce costs.
Smith also argued that there were a number of issues that payers can do to assist healthcare providers. He acknowledged that in the UK, insurers ‘rarely’ link pay reviews to ‘relevant inflationary indices’, resulting in shrinking margins over the past three years. He recommended that insurers should be willing to ‘pay more’, as well as being ready to pay more quickly – Smith said that a ‘lot of cost and profit is held up by poor adherence to payment terms’.
Insurers should also be willing to work with providers to reward them when improvements in care outcomes and cost are demonstrated, and should review and share data with providers to encourage further collaboration, he said.