Radio Advisory's Rachel Woods sat down with Advisory Board Research Vice Presidents Shay Pratt and Vidal Seegobin to debate the belief that healthcare is recession-proof, reflecting on how past dislocations affected the healthcare industry, and what leaders can — and can't — learn from these events to help them interpret current turbulence.
Below is a summary of key points from the interview. Download the episode to hear the full conversation.
The myth of recession-proof healthcare
The idea that healthcare is immune to economic downturns largely stems from its performance during the 2008 financial crisis, when healthcare employment remained relatively stable.
However, Pratt cautioned against overgeneralizing from that experience. "There are many reasons why I would say we're less resilient than we think we are," he said.
While people still needed care during the 2008 recession, many lost employer-sponsored insurance, leading to a spike in uncompensated care.
"The average reimbursement per case declined," Pratt said. "That was largely because of that uncompensated care impact."
Pratt specifically noted the difference between the 2008 recession and the COVID-19 pandemic. During the financial crisis, unemployment soared and remained high for years, leading to long-term financial strain on providers. However, the pandemic saw a rapid economic rebound, thanks in part to aggressive federal stimulus efforts.
Yet the pandemic brought its own challenges. Utilization of healthcare services plummeted as patients deferred elective procedures and avoided care. "Volumes bounced back quite quickly, but those volumes weren't quite in the same place they were in the beginning of 2020," Pratt said.
In addition, the pandemic accelerated existing trends, such as the shift from inpatient to outpatient care and the rise of high-deductible health plans. These changes have reshaped the financial landscape for providers, making it harder to recover lost margins even as patient volumes return.
What makes the current moment especially precarious, Pratt and Seegobin said, is not a single crisis, but a convergence of multiple, overlapping threats.
"It's in some ways easier to confront [a single crisis] than what we're talking about right now," Pratt said. "I'm kind of worried about several successive things happening across time that will actually be a protracted series of disruptions."
Among the most pressing concerns are cuts to Medicaid and Medicare, changes to Affordable Care Act legislation, shifts in 340B pricing, and reductions in research funding.
"There are six, seven, eight things … that organizations should be taking stock of now and trying to game their potential ripple effects," Pratt said.
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Strategic planning in a time of uncertainty
Pratt and Seegobin emphasized the importance of scenario planning and strategic foresight. "You have to do that work across every single one of them to really understand the potential scenarios you could be looking at," Pratt said, acknowledging that while this might sound like "Strategic Planning 101," the complexity of today's environment makes it anything but simple.
Seegobin noted that even in the absence of a textbook recession, healthcare organizations could still face recession-like conditions, including rising input costs, patient self-rationing of care, and sluggish consumer confidence.
"Even if we don't end up in the academically defined recession, we still may see all of the negative things we are afraid of when it comes to healthcare and recession," he said.
Pratt and Seegobin also noted the psychological toll of prolonged uncertainty, beyond just the numbers. "It felt a little bit coming out of the pandemic … we turned a corner," Seegobin said. "And then at the exact same time … someone grabbed the finish line and pulled it like another four miles into the future."
This sense of fatigue and disorientation is shared by many healthcare leaders, who are struggling to adapt to a constantly changing landscape. "They're not just 100% sure where the gas in the tank is in order to make that last leap," Seegobin said.
Ultimately, healthcare leaders need to focus on understanding and preparing for the specific risks that their organizations face. Resilience won't come from relying on outdated assumptions; it will come from rigorous analysis, strategic foresight, and a willingness to confront uncertainty head-on.
"It's actually hard to determine how resilient you will be to those shocks," Woods said. "The only way you can do that is to actually understand all of them at once in context with your organization."
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