Healthcare Services: Navigating Uncertainty

“Healthcare is competing with rising energy costs, fuel costs and food inflation for a share of the consumer wallet.”

— Katya Zubareva, Partner, London

Treatment waiting lists and backlogs, issues with affordability, clinician shortages, the need to redesign patient pathways and reimagine healthcare delivery – all of these challenges that the healthcare services sector has faced for some time still loom large. Additionally, rapidly rising inflation has added new pressures - our recent inflation surveys shine a clear light on this across sectors and industries and show Healthcare Services companies being squeezed hard on both revenues and costs.

For any services that are paid by the patients out-of-pocket, demand will be impacted. Healthcare is competing with rising energy costs, fuel costs and food inflation for a share of the consumer wallet, and is far from immune. The impact will vary by treatment type, depending on a number of factors:

• Urgency – is the patient in pain? will the condition deteriorate if left untreated? Clearly the more urgent the treatment, the more the patients (or their families) will prioritise the spend 

• Importance – for example, fertility famously holds up better in a recessionary environment than many other sectors 

• Overall cost of treatment and availability of financing – providers can support patients’ ability to access treatments by creating affordable private propositions, and/or lining up easily accessible affordable financing 

• Whether the patient will pay for the treatment out of monthly income (directly or via a financing package) or with savings – monthly spend is under significant pressure, while if the patient had saved up for a treatment (e.g., a cosmetic procedure), they might decide to go ahead with it regardless

For providers, salaries, energy, consumables, and logistics costs are all increasing as inflation bites. Clinicians and other staff are requesting significant salary increases as their own finances are stretched by inflation. Coupled with shortages of clinical staff across most of the European countries, this puts significant pressure on provider P&Ls.

Price increases are an obvious way of dealing with inflationary pressure, and our own recent surveys show that in general people are accepting of increases, particularly in inflationary times. Interestingly, there has been a historical reluctance from the providers within the sector to implement price increases – and while we must of course tread carefully to not create more demand issues, in the current climate, providers run the risk of being too conservative and absorbing too much of the cost increases.

Beyond price increases, it is important to remember that there are many other levers to consider. Broader commercial effectiveness measures, as well as operational resilience, pro-active talent retention and tight financial management can also help businesses absorb cost pressures.

How we are helping clients

We are doing a lot of work across the sector helping navigate the demand uncertainty. We are also increasingly getting involved in pricing as well as broader commercial excellence and organisational design, leveraging our deep sector knowledge and functional expertise, to help give our clients a real advantage in the years ahead.