October 27, 2022 by Medigroup
From the gas pump to the grocery store, inflation is impacting every industry and every family across the country. And record-high inflation is now blasting through the healthcare sector.
Medical practices and hospitals are scrambling for solutions to help avoid debt and combat rising prices. While consumers already feel squeezed by price increases in most other areas, their healthcare costs haven’t risen, just yet. According to the consumer price index reported in March 2022, costs increased on average by 8.5% but healthcare costs only increased by 2%.
Yet most providers, hospitals, and administrators are finding it difficult to pass increased costs on to their patients, many of whom have canceled or postponed medical procedures during the COVID-19 pandemic to avoid the virus and save money. That’s why consumer costs in the health industry haven’t yet directly reflected inflationary increases.
The pandemic has driven healthcare providers straight into the path of this oncoming tsunami. It has accelerated affordability challenges, exacerbated clinical staff shortages, and limited progress on improving outcomes.
These signs are ominous.
Medical cost inflation could reorder the entire healthcare industry and put nearly half of its profits at risk. As a result, those who hope to survive are redesigning their organizations to improve productivity, innovating new business models to reshape care, reallocating limited resources, and turning to group purchasing organizations or GPOs to cut costs.
Practices that take swift action could set themselves up for success in the coming years.
The likelihood of continued labor shortages in healthcare as demand for services rises means that higher inflation could persist. The worsening clinical labor shortage will be a significant contributor to the projected increase in healthcare costs for the next five years. By 2025, expect a shortage of 200,000 to 450,000 registered nurses and 50,000 to 80,000 doctors. These shortages support estimates that healthcare labor cost growth will outpace inflation.
The combination of increasing demand and decreasing supply will drive shortages.
Many healthcare providers are shifting operating hours, decreasing service offerings, or suspending some services entirely. Some hospitals are suspending services that don’t contribute enough to operate their facilities so they can keep their doors open.
The industry has been forced to find new ways to stay afloat. Many organizations have discovered the benefits of joining GPOs to reduce supply costs, which spiked in late 2020 and 2021 during the height of the COVID-19 crisis. In addition, labor costs rose steadily between 2019 and 2022, closely followed by pharmaceuticals and medical supply costs.
Accelerating supply costs slammed the U.S. healthcare system hard during the early stages of the pandemic, especially in personal protective equipment such as masks, gloves, hand sanitizers, and disposable gowns. Global bottlenecks created supply chain difficulties that further increased costs. Continued supply chain issues could push nonlabor costs even higher.
Many healthcare leaders have resigned themselves to a sharp decline in operating margins. Payer and provider executives expect a drop in margins of between 25 and 75 percent. This could necessitate drastic responses, including layoffs for nonclinical employees.
While rate increases may seem like the easiest solution, payers and providers know they are unsustainable. Healthcare organizations and medical practices need to take other actions because those who finance healthcare, including employers, government, and consumers simply can’t afford more price increases. That’s where a GPO solution comes in.
As the leader in focused group purchasing, MediGroup has orchestrated a portfolio of suppliers that offer savings and healthcare expertise specific to the needs of its members. MediGroup focuses on how members can continue to build toward the future to ensure continuity of care for each customer in the years ahead.
MediGroup, which has served the healthcare industry since 1999, offers a diverse variety of competitive GPO contracts with savings solutions to benefit your healthcare business. The company has helped physician practices, surgery centers, and other non-acute care-oriented medical facilities find the supplies and services necessary to serve their respective patients.
They have refined their GPO supply chain, GPO contract, and GPO pricing to help practices reduce costs. The MediGroup service contract portfolio, which they refer to as value-added services, offers members additional savings beyond medical and pharmaceutical needs. Their value-added services include discounts on everything you need to run an efficient and successful practice. GPO contracts cover everything from office supplies to pest control.
MediGroup has partnered with a wide variety of vendors to bring its members cost-effective solutions to maximize medical office efficiency. Through these services, members can access savings on office equipment and supplies, document shredding, medical waste management, cleaning supplies, laundry services, telehealth, marketing, and much more.
MediGroup provides its members with the most comprehensive portfolio of cost savings and revenue enhancement solutions available in the healthcare market. Their members run the gamut of medical specialties, including cardiology, ENT, internal medicine, pediatrics, rheumatology, oncology, dermatology, orthopedics, radiology, ophthalmology, family practice, and many others.
In addition to private practices, they help surgery centers, urgent care clinics, laser centers, long-term care facilities, and labs. They support their members in choosing what’s best for their patients and their practices.
So, if you are interested in GPO pricing and a GPO agreement for your healthcare organization or practice, contact MediGroup today.
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