Decline in healthcare spending contributing to economic downturn

• Consumer healthcare spending fell 18% in the first quarter, as the coronavirus put non-emergency health-care services on hold, said a report by CNBC. 
• Healthcare executives say the nature of the impact of the coronavirus on consumers makes it hard to predict how quickly some of that healthcare activity will rebound, according to the same report by CNBC.
• A material decline in conditions requiring immediate care, including heart attacks and appendicitis, per a review by Cigna of its plan’s claims date is raising concerns that people are avoiding necessary care for fear of COVID-19.

CNBC is reporting: “Consumer health-care spending fell 18% in the first quarter, as the coronavirus put non-emergency health-care services on hold. As a result of steep revenue losses at hospitals and physician practices, the health-care sector saw 42,000 jobs lost in March, the first decline in 6 years. Some of the jobs and health-care spending are expected to bounce back, as more states are now beginning to allow elective procedures to resume. Still, health-care executives say the nature of the impact of the coronavirus on consumers makes it hard to predict how quickly some of that health-care activity will rebound.”

The decline in spending isn’t just for elective procedures. Researchers from Cigna looking at the plan’s claims data also report a material decline in conditions requiring immediate care, including heart attacks and appendicitis, raising concerns that people are avoiding necessary care for fear of COVID-19. This data supports the anecdotal reporting we’ve heard from members about volume declines for both emergent and non-emergent services.  

Takeaway

In the near term, predicting how much and how quickly demand for non-emergent services will return will be challenging. There is pent-up demand. How much of that materializes will depend on how long fears about contracting COVID-19 in a healthcare setting linger in the public imagination and if consumer preferences for virtual care impacts demand for typically in-office ancillary services. Pushing against that will be exacerbations of chronic conditions that  if left unmanaged will result in avoidable hospitalizations. Decreased demand for care will spill over into the rest of the economy (e.g. fewer medical supplies purchased/used, fewer staff at all skill levels needed and therefore employed).

Longer term, the shift to remote work and virtual visits for the industry could add ongoing drag to economic growth. If health systems and providers have reduced need for office space (both general and medical), it would have a negative ripple effect on rents, commercial property values and new commercial construction projects which will have a spillover effect on unemployment rates.