Much of healthcare payment is baked in, given Medicare and Medicaid. How is prolonged high inflation most likely to dent healthcare providers’ bottom lines?
Rick Gundling: It’s really across the board. Certainly as a result of the pandemic, it’s labor costs. But also supplies. That’s easing a little bit, because the supply chains have come back somewhat, but there’s still the price of commodities. The prices of drugs, the cotton and gauze pads, all those things that are part of taking care of someone—they’ve all gone up.
Tom Ryan: Home care is dealing with rates that have been set on an old, failed bid program. When you get a (consumer price index) increase from Medicare, like we did last year, it’s supposed to take care of the market realities of today. But when you’re not basing it on a more recent pay structure, but a 7-year-old failed program, it makes the problem that much more dramatic.
All healthcare providers need to purchase a lot of “stuff.” Supplies, equipment, services. What kind of leverage do buyers have against rising prices?
Gundling: Organizations are always looking at group purchasing, volume purchasing, alternative suppliers. One thing that came out of the pandemic over the past two years is that a lot of providers came to realize, “Hey, I’m not going to be so dependent on one supplier or one country anymore.” We certainly saw that with some of the pharmaceuticals, when one country—China—was sourcing so much of it.
Ryan: If I’m General Mills, and the cost of grain goes up, I can increase the price of Cheerios. Home care providers cannot do that. We can leverage our equipment manufacturers the best we can and say, “You can’t do this to us,” but at some point they have to make a change and raise prices. And they have. We’ve seen increases of 15% to 40%.
Of course it’s primarily the Federal Reserve’s job to fight rising inflation, but what are you looking at on the policy front to ease the burden on healthcare providers?
Gundling: With rulemaking, it’s just to make sure policymakers are keeping up with the current state of inflation, because the rate really picked up in the past couple years. And if they do a look-back, we need to make sure they’re using current modeling. The other thing is to make sure they understand that the healthcare system is still frail because of the pandemic, which certainly isn’t over.
Ryan:We received some relief from the CARES Act (regarding certain rates), which has been tremendous. … But one of the biggest issues we have is that key product categories—oxygen, hospital beds, wheelchairs, 13 key product categories—did not get any CARES Act relief. (Policymakers) essentially left rates in place from 2015, and didn’t start giving a CPI increase until 2020. So we’ve had to go to (Capitol Hill).