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Flattened Healthcare Spending: Boon or Bust?

According to an April New York Times article, healthcare spending in the United States has slowed significantly over the past few years. Numbers from the Centers for Medicare and Medicaid Services (CMS) show that in 2009 and 2010 total nationwide spending grew less than 4 percent per year, representing the slowest annual growth in more than 50 years. Although this slowdown may not seem unexpected given the current state of the economy, it has been sharper than experts anticipated, pointing to the possibility that factors other than the recent recession also affect spending. This is significant because it may mean the slowdown will continue even as the economy picks up. However, there is good news and bad news with flattened spending.

On the positive side, it could lessen the impact of healthcare costs on household budgets and ultimately strengthen the country’s fiscal health. For example, if Medicare spending grows only 1 percentage point faster than the total economy, the long-term deficit for the United States could fall by more than 33%. On the other hand, reduced spending means less income for hospitals, physician practices and other healthcare organizations. In a time when cost margins are already tight, lessening income could be potentially damaging for many organizations.

Keeping revenue up as income flattens requires improved efficiency and reduced costs. The revenue cycle is a logical place to seek opportunities to achieve these goals. Automating insurance verification, eliminating claim errors, streamlining claim submission and speeding response to rejections and denials, for example, can free up possible dollars to offset any decreases in income.

While no one knows for certain what the next few years will bring and whether the current slowdown in healthcare spending will continue, practices that have strong, efficient revenue cycle processes will be better prepared to navigate the uncertainty and ensure a healthy revenue stream over the long term.