Endemic COVID-19, labor shortages and inflation could drive the national health expenditure up $600 billion through 2027 — but confronting shortcomings through infrastructural innovation could generate $1.5 trillion in that same time period, according to research from McKinsey & Company.
In a Sept. 8 article published on its website, the management consulting firm analyzes studies to explore the cost of healthcare's current challenges, then weighs the profitability of acting on improvements. McKinsey argues that healthcare leaders, particularly in the private sector, can build on collaborative momentum from the pandemic's start to "not only weather the storm but also emerge stronger."
McKinsey identified the following challenges:
- Labor shortage: Forty percent of a given healthcare provider's total expenditure is on its workforce, a number that is increasing as demand skyrockets and hiring trends struggle to keep pace. By 2025, McKinsey predicts the U.S. will be short 200,000 to 450,000 nurses and 50,000 to 80,000 physicians.
- Inflation: By 2027, inflation could account for a healthcare spend of $370 billion beyond the baseline increase, McKinsey says. In the past three years, costs for supply inputs have grown from 15 percent to 25 percent.
- Endemic COVID-19: If the pandemic stretches to an endemic, as McKinsey projects, its 100 million annual cases could cost healthcare providers an extra $222 billion by 2027.
McKinsey's proposed measures:
- Transform care delivery: Increasing the population in total cost of care value-based arrangements from 6 percent to 40 percent, and shifting 20 percent to 25 percent of hospital volume to alternate locations, could yield $420 billion to $550 billion by 2027.
- Improve clinical productivity: Increasing the physician fill rate from 80 percent to 95 percent could yield $160 billion to $310 billion by 2027.
- Simplify administration: Administrative activity accounts for 25 percent of national healthcare expenditures. Reducing spend by seven percent could yield $270 billion to $320 billion by 2027.
- Utilize technology: $250 billion of U.S. healthcare spending could be shifted to a virtual sphere, while tech improvements could decrease waste and fraud. Proper adaptations could yield $300 billion by 2027.
Read the full McKinsey & Company article here.