Healthcare Inflation: What Providers Need to Know in 2023

It seems like every headline for the last year and a half has been about one topic: inflation. At this point, we have all felt its impact: groceries, gas, rent, eating out—you name it, everything is going up.

And healthcare is no exception.

In recent years, the healthcare industry has been grappling with the relentless surge of healthcare inflation, a force that has left no stakeholder unscathed in our complex ecosystem of providers, payers, and patients. 

As costs continue to escalate, healthcare providers are facing unprecedented challenges with respect to operations and financial sustainability.

By better understanding the impact of healthcare inflation, providers can uncover strategies that enable them to optimize their financial performance, ensure the viability of their operations, and ultimately, deliver high-quality patient care.

What Is Healthcare Inflation?

Healthcare inflation, or medical inflation, refers to the rapid and disproportionate increase of medical care costs.

It is a multifaceted phenomenon that encompasses various factors, including the rising prices of prescription drugs, medical equipment, and hospital services, as well as the increasing costs of healthcare administration, labor, and insurance premiums.

Healthcare inflation not only affects the affordability and accessibility of healthcare services but also places a significant burden on the budgets of governments, businesses, and individuals alike.

Several elements contribute to healthcare inflation, including an aging population, technological advancements, and the prevalence of chronic diseases:

  • Population: as the population ages, the demand for healthcare services increases, leading to higher utilization and costs. 
  • Technology: advancements in technology, while often improving patient care, can also contribute to rising expenses due to the high costs of research, development, and implementation. 
  • Chronic diseases: the growing prevalence of chronic diseases, such as diabetes and heart disease, also places a strain on healthcare systems, requiring long-term care and management, which in turn drives up costs. 

Additionally, inefficiencies in healthcare delivery, high administrative costs, and market consolidation among healthcare providers can exacerbate healthcare inflation. These factors, combined, impact not only the affordability of care for patients but also the financial sustainability of healthcare providers, insurers, and governments.

Healthcare inflation has outpaced other sectors since 2000, but over the last year, this trend has reversed. The CPI (Consumer Price Index) reports that overall prices went up nearly 6% from February 2022 to February 2023, while healthcare prices only increased 2.3%.  

Impact of Healthcare Inflation: Providers and Patients

To better navigate the complex landscape of healthcare inflation, it is essential for providers to understand its far-reaching implications on both their organization and the patients they serve. 


Healthcare inflation has a significant impact on healthcare providers, affecting various aspects of their operations, financial sustainability, and ability to deliver quality care. Four key consequences to watch include:

  1. Increased operational costs: rising prices of medical equipment, supplies, and prescription drugs, as well as increased labor costs, can strain healthcare providers’ budgets and affect their bottom lines.
  2. Financial sustainability: with the mounting financial pressures due to healthcare inflation, providers may struggle to maintain their profitability, leading to potential cutbacks in services, staff, or investments in new technology and infrastructure.
  3. Revenue cycle management (RCM): as healthcare costs rise, providers must navigate increasingly complex reimbursement processes, leading to higher administrative expenses and potential delays in payments.
  4. Quality of care: inflationary pressures may force providers to focus more on cost containment, potentially compromising the quality of care they deliver to patients, which can affect patient outcomes and satisfaction.

As highlighted above, the financial loss looms big for healthcare providers. 

With multiple payers in the mix—from patients to government entities—prices have been set and can’t be changed for several years, meaning healthcare organizations could suffer from a sharp decline in operating margins. Roughly half of U.S. hospitals ended 2022 with negative margins, and McKinsey expects profit margins for providers to fall as much as 50% in the near future.

Even before inflation set in, providers were dealing with a labor crisis that has only been exacerbated as supply and labor expenses grow. Higher salaries and better benefits are necessary to attract and retain top talent, but providers are struggling to balance demands with pressure to cut costs.

With respect to patient care, sadly, a decline in overall quality of care is the only outcome when there are more patients than the staff can handlestaff strikes are only making things worse.


Healthcare inflation also has several consequences for patients, affecting their access to care, financial responsibility, and overall healthcare experience. Some of the key concerns for patients include:

  1. Increased out-of-pocket expenses: as healthcare costs rise, patients often face higher out-of-pocket expenses for treatments, prescription medications, and medical services, potentially leading to financial strain or even medical debt.
  2. Limited access to care: inflationary pressures may force providers to reduce services, close facilities, or limit patient intake, making it more difficult for patients to access the care they need, particularly for those in underserved communities or rural areas.
  3. Reduced quality of care: as providers focus on cost containment to stay financially sustainable, patients may experience a decline in the quality of care, with potential consequences for their health outcomes and satisfaction.
  4. Difficulties with insurance coverage: rising healthcare costs can also lead to increased insurance premiums and deductibles, making it more challenging for patients to afford adequate coverage. In some cases, patients may choose to forego insurance altogether, leaving them vulnerable to high medical expenses.

With or without inflation, healthcare affordability was already a concern for Americans.

AccessOne’s survey showed that more than half of patients are distressed about their ability to pay a medical bill of $1,000 or less. The added strain of inflation means more patients will delay care or forego it entirely. Delaying preventative care can worsen the healthcare situation, as otherwise preventable needs turn into high-cost emergency situations

In short, the ability to pay profoundly affects the health priorities of individuals. Even the perceived threat of inflation is enough for patients to cancel appointments or not make one at all.

Healthcare inflation disproportionately affects seniors and low-income households, which in turn can increase strain on public assistance programs like Medicaid.

In this context, what can relieve providers and patients?

The Inflation Reduction Act

The U.S. government took action to slow soaring inflation by passing the Inflation Reduction Act (IRA) on August 16, 2022.

Key objectives of the IRA include making healthcare more affordable for millions of Americans, supporting climate stability and clean energy, and taxing large corporations. 

With a goal of reducing total deficit by around $240 billion over 10 years, the IRA addresses two areas of healthcare costs for consumers: 

  1. Affordable Care Act (ACA) subsidies which were set to expire at the end of 2022, have been extended until 2025. This prevents millions of people from losing coverage and helps countless others avoid increases in their healthcare premiums. 
  2. Drug prices for Medicare beneficiaries can be capped by the government—negotiations are projected to reduce government spending by approximately $100 billion over ten years. 

While every incremental step helps, these allowances alone will not be enough to combat rising healthcare inflation. In other words, there is more to be done.

How Providers Can Mitigate Healthcare Inflation

It’s more important than ever to help patients manage healthcare costs.

Nearly 71% of consumers say inflation has affected healthcare purchasing decisions or their ability to pay their medical bills. Without confidence in their ability to pay, consumers may choose not to seek care. 

It’s obvious that providers must work to maintain a healthy revenue cycle management, especially against inflation, and maintain a steady inward cash flow. After all, if the industry isn’t profitable, there can’t be any healthcare services.

But, patients must be taken into account. They must be able to access and pay for the medical services they need and deserve. These are several strategies for providers to consider in this quest.

Promote Cost Transparency 

Patients have a fear of the unknown.

Knowing in advance what their healthcare costs will be can help ensure they get the care they need and pay for it in a timely manner.

Lack of clarity around charges and confusion over the portion of the bill that health insurance will cover are the two biggest consumer frustrations regarding healthcare bills. 

For Gen X specifically, transparency is essential, with 69% saying they want healthcare providers to share costs of care before treatment.

An empathetic, transparent approach, while openly discussing the financial responsibility of patients, can ultimately help bolster revenue. A classic win-win situation.

Leverage Healthcare Payment Technology 

Traditional billing workflows involve multiple manual processes to attempt to collect payment.

Adopting digital healthcare payment technology like AccessOne Direct MobilePay removes barriers to collection, as the solution makes it simple for patients to pay whenever and wherever it works for them.

Providing patients with self-service tools can increase the total number of payments made while enabling organizations to measure AR in days, not months. 

In other words, maximizing efficiency in collections is one way providers can keep costs low, while simultaneously increasing the likelihood and speed of payment. 

Optimize Workforce Management 

The labor shortage has been a massive contributor to healthcare inflation.

There is an ever-increasing demand for medical practitioners, from nurses to administrative staff, made even more severe by a high attrition rate. 

Providers can address staffing shortages and control payroll expenditures by automating routine workflows. Many steps of the patient journey, from booking appointments to enrolling in a flexible payment plan, can be automated with the right technology.

Processes will require less manual effort, relieving pressure from understaffed teams, who will have more time and energy to provide a better patient experience.

Shield Your RCM With AccessOne 

Healthcare inflation is a reality for every provider and patient.

Taking action to address staffing shortages and enhance the patient experience could make the difference as all healthcare stakeholders look to weather the inflation storm.

How? With healthcare payment technology that is built to strengthen every step of the healthcare journey.

Book your AccessOne demo today or reach out to talk with our team. 

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