The value of healthcare providers’ healthcare liabilities, which are typically backed by insurance companies and sometimes with a broad range of indemnities, has fallen sharply over the past decade.
The result has led to a rise in healthcare indemnity rates for some companies, such as the pharmaceutical and medical device companies, and a corresponding rise in the premiums of others, according to data from a healthcare consulting firm.
While hospitals and insurers continue to take advantage of healthcare indemnities to shore up losses, the cost has pushed companies to reduce the amount of their liabilities.
Some companies have been forced to cut healthcare liabilities in order to remain solvent, with some companies paying much less than they did a decade ago.
The healthcare industry, however, continues to suffer from the effects of the financial crisis.
The average hospital indemnification rate fell to 4.6% in 2016, according the consulting firm Avalere Health, up from 3.7% in 2015.
In a separate study from the same firm, which also found a similar rate of decline, the average healthcare indemnification for hospital-based services fell from 4.8% in 2017 to 3.6%.
In the latest Avalere study, hospital-related liabilities rose by almost $2 trillion in 2018, from $1.2 trillion to $1,965 billion.
The overall healthcare liability burden rose from $2.3 trillion in 2017, to $3.4 trillion in 2019, to a staggering $7.5 trillion in 2020, the company said.
According to the firm, the decline in healthcare liabilities has been driven by a number of factors, including an aging population, rising healthcare spending and the global financial crisis that began in 2008.
The healthcare industry is also facing a rise of infections, as healthcare costs are not being reimbursed as quickly as they were during the financial downturn, Avalere noted.
In the last two years, the US healthcare industry has seen its share of revenue fall by more than half, according with the consulting company.
Healthcare spending is down across the board, and the company estimated the healthcare industry’s healthcare costs in 2020 will fall by 10.6%, from $6.6 trillion to just $4.9 trillion.
“The healthcare sector is facing a steep drop in profitability due to the financial and economic uncertainty and also due to a decrease in patient demand,” the firm said.
Despite the downturn, the healthcare sector has been able to withstand the challenges by continuing to focus on the primary care business.
Healthcare providers have been spending more money on healthcare services, particularly on primary care, but the healthcare costs have not kept pace with the growth in the overall healthcare costs, Avalore said.