Employers Face Healthcare Cost Hikes, Question Hospital Efficiency

American employers are confronting a significant decision regarding rising healthcare costs, with projections indicating a substantial increase that may necessitate passing more expenses onto their workforce. Mercer forecasts that employer health-benefit costs will escalate by 6.7% in 2026, marking the steepest annual rise in 15 years. This projected increase will push the average cost per employee to over $18,500. Consequently, nearly half of large employers anticipate implementing medical plan changes in 2027 that are likely to increase employees' out-of-pocket expenses for healthcare services. Before employers consider increasing the financial burden on their workers, the article suggests they should pose a critical question to healthcare providers, a question they routinely direct to other major suppliers: "Are we using what we’re already paying for efficiently?" The analogy is drawn to manufacturing, where a company would not address an inefficient operation by simply acquiring more machinery. Similarly, a chief financial officer contemplating a significant capital investment would first investigate whether a perceived shortage of resources stems from actual scarcity or from mismanagement of existing assets. Employers, however, are spending vast sums on healthcare without consistently demanding the same level of operational discipline from providers. A key area of concern is hospital capacity, particularly in managing variable demand. While emergency situations like heart attacks, automobile accidents, or appendicitis are inherently unpredictable and cannot be scheduled, elective procedures represent a controllable aspect of hospital operations. Many hospitals tend to concentrate scheduled surgeries and admissions on specific weekdays. This practice can create artificial peaks in demand for essential resources, including inpatient beds, nursing staff, operating rooms, and diagnostic services. Such concentrated scheduling can lead to delays for emergency patients awaiting inpatient beds, overburden nurses, and result in postponed surgeries. The article posits that what may appear as an absolute shortage of capacity could, in part, be a consequence of poor scheduling practices. Hospitals that have successfully tackled this artificial variability offer valuable insights. Cincinnati Children’s Hospital Medical Center, for instance, implemented changes in patient flow management. These improvements enhanced access to critical care capacity while simultaneously enabling an increase in surgical activity. The financial benefits derived from these operational adjustments ultimately amounted to $137 million annually. Furthermore, the hospital was able to avoid a planned expansion project that was estimated to cost over $100 million, after determining that the additional capacity was not necessary due to improved efficiency in resource utilization.