Are Hospitals Prepared for a Recession?
News coverage of a possible economic recession flared late this summer with a yield curve inversion, a bond market phenomenon that is historically associated with a financial downturn. The curve came with a 3% drop in the Dow and S&P. Healthcare-related stocks took an even larger fall. The Federal Reserve’s interest rate cut failed to immediately bolster the market.
While economists can’t precisely pinpoint the start of the next recession, this market volatility should serve as a wake-up call to vulnerable healthcare organizations. As we saw during the Great Recession (Dec. 2007- June 2009), an economic downturn can be particularly harmful to standalone and government hospitals and health systems currently eking out the slimmest of margins. Hospitals should be preparing now to absorb the financial impact of a recession.
The hospital business is highly subject to consumer utilization patterns. Out-of-pocket healthcare costs continue to be burdensome for many Americans with the proliferation of high-deductible health plans. Half of adults surveyed by the Kaiser Family Foundation in March 2019 said they have put off seeking medical care in the past year due to costs. This comes despite the U.S. currently experiencing one of the greatest periods of economic expansion in its history.