While the threat of recession inches closer and closer with each inflation report or stock market slip, HCA Healthcare Chief Financial Officer Bill Rutherford said health systems such as his likely have less to fear this time around than during economic downturns of the past.
Healthcare is generally more shielded from recession threats than most industries, thanks to the public’s steady demand for care services and long-term contracts that delay the immediate impacts of price increases, Rutherford explained Tuesday morning during a fireside chat at Morgan Stanley’s 20th Annual Global Healthcare Conference.
Still, health systems across the country are already feeling the added weight of wage increases as supply costs enter the early stages of their own upward climb.
Rutherford said his organization is investigating how changes in the economic climate could affect its business. Alongside inflation, he said HCA is keeping a close eye on nationwide employment numbers, which could impact individuals’ health coverage and, subsequently, demand.
Should those unemployment numbers begin to plummet, however, HCA still expects at least some of those patients will be able to retain coverage where they might not have in recessions past.
“Fortunately, today, we have something we've never had in past recessionary environments, and that's the subsidies in the Health Insurance Marketplace,” he said. “And now that the enhanced subsidies are going to continue we believe that can be a buffer from maybe some of those historical trends that have gone forward.”
Enhanced Affordable Care Act subsidies included in 2021’s American Rescue Plan Act helped spark a record 14.5 million sign-ups for the 2022 coverage year by relieving premiums for some low-income exchange customers. The subsidies sparked a record 14.5 million sign-ups for the 2022 coverage year and, under August’s Inflation Reduction Act, were extended through 2025.
Rutherford noted that the enhanced subsidies will also help mitigate the uncertainty of Medicaid redetermination, when states will disenroll as many as 14 million Medicaid recipients who received coverage during the public health emergency.
“We’re going to have to wait to see when [redetermination] starts, how states will choose to implement that,” he said. “But we think because now the enhanced subsidies in the health insurance exchange are going forward, that … there’s a fair number of those [disenrolled] that could likely receive coverage in the Health Insurance Marketplace. So we’ll continue our assessment of that, but right now we’re not inventorying that, if you will, as a major hit.”
The executive said HCA is also keeping an eye on potential post-midterm policy changes as well as states' Medicaid expansions—although he acknowledged that the system does not "have any belief in the near term" that Texas and Florida (its largest markets) will opt to expand.
As HCA plans for future economic curveballs, Rutherford said the system’s labor expenses and volumes remain on the road to recovery following the delta and omicron wave disruptions.
HCA’s overall volumes are nearing levels seen in 2019 as the continued shift to outpatient care compensates for middling inpatient numbers, he said. Medicare patients, “a population that tended to stay away during COVID,” are also expected to return to healthcare settings in the near future, he said.
Echoing comments from the company’s most recent earnings, Rutherford said HCA has seen premium labor prices and demand begin to cool from the winter and early spring spike, Rutherford said. The company expects that trend to continue through the end of the year barring any additional variant spikes, he said.