Arrow going down and question mark and man stopping it

The U.S. healthcare industry faces stiff economic headwinds this year that will challenge the profitability of providers, according to a report by business consulting firm McKinsey & Company. 

Rising inflation and a shortage of workers prompted the company to revise downward profit pool projections for the industry. McKinsey estimated the industry will grow at 4% compound annual growth rate (CAGR) between 2021 and 2026. It previously estimated the industry would grow at 6% CAGR.

While the report expects the industry will overcome the challenges by next year, it also stated some sectors will continue to struggle, including post-acute care providers, such as home health. The post-acute segment is expected to experience zero to negative growth over the next few years. Those segments expected to experience higher growth include Medicare Advantage, ambulatory surgery centers and technology platforms. 

McKinsey estimated the healthcare payer pool will shift toward government payers as more of the nation’s 72 million baby boomers age into retirement over the next few years.

“Overall, the estimated profit pools for this segment are expected to be about 50 percent greater than the commercial segment by 2026 ($33 billion compared with $21 billion) as Medicare Advantage penetration is expected to reach 52 percent in 2026,” the report stated. 

The report did offer glimmers of optimism for post-acute care providers of in-home services. It said the adoption of value-based care is expected to increase as payers and providers try to better manage care and costs, while increasing the use of “alternative sites of care.” That could be a boon to home care providers. During a recent investors conference, UnitedHealth Group called home the “new frontier” of value-based care as it prepares to close on its deal to acquire home care giant LHC Group. 

The report also said some of the rising costs due to the labor shortage could be offset by the use of technology and through increased labor productivity.