Is Healthcare Recession-Proof?

While healthcare is generally considered to be more resilient than many other industries during economic downturns, it is not completely recession-proof. During times of economic uncertainty, hospitals and health systems struggle to maintain cash flow. At the end of 2022, 50% of US hospitals had a negative operating margin, and 30% of rural hospitals faced the risk of closing in the near or immediate future. The added strain of rising costs of labor, supplies, and services also have a negative impact on the healthcare industry.

The demand for healthcare services tends to remain relatively stable, as people continue to require medical care regardless of the economic situation. However, during periods of economic turmoil, consumers tend to avoid costly, non-essential care in order to afford other expenses. Below are four main factors that impact the healthcare industry during periods of economic hardship.

1.  Deprioritized Healthcare Spending 

During economic downturns, individuals may delay or forgo receiving care. Non-essential treatments and elective procedures are more likely to be skipped or delayed to reduce unnecessary spending. Consumers hit especially hard during a recession may skip essential care entirely due to cost. Furthermore, consumers that have outstanding medical bills are less likely to pay and/or return to the provider for treatment. Studies have shown that 38% of Americans report delaying care due to cost, and 28% of Americans will skip required medical care entirely due to costs. In terms of patient payments, 68% of patients do not pay their medical bills in full, and 56% of consumers would not be able to pay a medical bill over $1000. These issues are only compounded during times of economic turmoil. Missed patient payments lead to growing sums of bad debt, while a decline in patient volume hurts revenue generation for hospitals and health systems.

2.  Financial Strain on Consumers 

Recessions can lead to higher unemployment rates and financial hardships for individuals. This may result in loss of employee-sponsored health coverage as well as uninsured patients not being unable to afford healthcare services. Over 50% of Americans are enrolled in high-deductible healthcare plans, resulting in high patient responsibility cost associated with most procedures. With added economic uncertainty, consumers become more conservative with non-essential healthcare spending–regardless of what level of health coverage one may have. Because of this, hospitals suffer to generate cash flow on patient receivables from both patients and insurance payers.

3. Reduction in Government Funding

During recessions, governments may face budgetary constraints and look for areas to cut spending. Healthcare programs and public health initiatives may experience reduced funding, impacting healthcare organizations and providers that rely on government support. According to a recent poll, 63% of Americans say the government should be responsible for ensuring health care coverage for all Americans. For the underinsured and uninsured population, government and charity programs are crucial in order to be able to afford care. Without these programs, hospitals and health systems that do treat the uninsured and underinsured population are less likely to receive reimbursement in any form, leading revenue losses and increased bad debt. 

4. Lack of Resources

Healthcare providers that have not implemented digital, patient-centric solutions are more likely to suffer financial strain during a recession. Hospitals that still rely on outdated, manual methods of patient billing and communication will spend more money and manpower attempting to collect receivables. A recent study by the Association of Credit and Collection Professionals found it costs four times more to collect from patients than it does from an insurance company. New technology platforms that automate the payment process lead to better patient engagement, improved patient understanding of their responsibility, and increased patient payment. Healthcare financing programs and online payment portals meet patients where they are while reducing staff burden and billing expense for providers.

While healthcare may not be entirely recession-proof, it has historically demonstrated more resilience compared to industries such as retail or hospitality. The essential nature of healthcare services and the ongoing need for medical care generally contribute to its relative stability during economic downturns. However, the specific impact of a recession on the healthcare industry can vary depending on factors such as the severity and duration of the economic downturn, government policies, and the overall standing healthcare system.

Health systems looking to become more resilient during times of economic turmoil are encouraged to consider providing digital, patient-centric solutions. Programs such as BridgeMed benefit both consumers and providers by offering flexible financing programs, online patient payment access, and reduced staff involvement in the payment process. By implementing BridgeMed, providers can experience increased speed to cash, reduced bad debt, and improved patient access to healthcare.


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