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August 9, 2023
David Burda
Economics Innovation Outcomes

Manufacturers’ Disconnect on Healthcare Costs

Like everyone else, manufacturers in the U.S. are concerned about healthcare costs and the affordability of medical care. In this case, the concern is for themselves and for their workers, respectively.

However, manufacturers don’t share the same level of sophistication as other healthcare purchasers in how to reduce costs and improve affordability. That’s my backseat-driver takeaway from a new report by the National Association of Manufacturers, or NAM.

The 24-page report is based on a NAM survey of more than 160 small- and medium-sized manufacturing companies in the U.S., according to the report. NAM has 14,000 member companies, but I don’t know how NAM breaks down its members by size, e.g., annual revenue, number of employees, etc.

Regardless, the survey findings to me displayed a bit of naiveté regarding drivers of and solutions to rising healthcare costs. Spoiler alert: Telemedicine alone won’t save you.

Asked to rank eight healthcare challenges that manufacturers want Congress to address this year — challenges that presumably reflect manufacturers’ own priorities—the runaway and correct No. 1 was rising healthcare costs. Last on the list of eight? Consolidation of healthcare providers.

That whiff came despite the fact that 82.7% of the respondents said healthcare provider consolidation is occurring in their geographic areas. That’s not a coincidence or a correlation. That’s causation.

Asked what strategies they’re using to improve the “value “ of their healthcare spend, again there was a runaway No. 1 among the 11 choices: Offering telemedicine benefits for primary care, cited by 85.8% of the respondents. Virtual primary care ranked first despite the fact that the respondents said the leading cause of their increasing healthcare costs, in terms of medical events, was surgery, cited by 56.1% of the companies. Traumatic incidents were second at 50.9%.

Telemedicine platforms are smart and getting smarter every day. But performing surgery and treating trauma? I don’t think so. At least not yet. Further, nearly 60% of the respondents said 25% or less of their workforce even uses their telemedicine benefits.

Strategies that could have a bigger impact on their top drivers of healthcare spending were down on the list. Offering high-performance networks or a narrow network of higher-quality and lower-cost providers was third at 34.5%. Participating in Centers of Excellence was fifth at 14.2%.

Less than 10% cited direct contracting, financial disincentives for low-value care and no cost-sharing for primary care as strategies that they were pursuing.

If U.S. manufacturers want to reduce their healthcare costs and improve healthcare outcomes for their workers, they must see businesses in healthcare just like businesses in any other industry. They respond to the exact same economic incentives as companies in manufacturing.

Start paying for what you want. Stop paying for what you don’t want. And don’t automatically bite on the empty promises of new health information technologies, medical advances or care delivery models.

Thanks for reading.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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