Recession and Healthcare: What Will The Impact Be?

Global financial markets have been thrown into turmoil, with the US, the UK, and Europe all entering a recession as the cost of living rises across the globe. Stagflation, declining consumer confidence, and declining spending power are the hallmarks of a recession – all of which can impact the healthcare sector significantly. 

Hospitals and medical practices associate the recession with an influx of patients experiencing major stress and a decrease in privately or employer-insured patients. Many patients are unsure of their ability to pay for treatment and fail to undertake preventative healthcare measures, which may lead to complications. 

However, it’s not all doom and gloom for the industry. The pandemic resulted in massive leaps and innovations in digital healthcare (as well as the widespread adoption of digital health systems), which may prove more resilient or even immune to economic recession. 

In this article, we’ll look at how recession could impact healthcare in the near future. 

How a Recession Affects Healthcare

A significant economic downturn will affect most people’s lives, including their finances and healthcare. Healthcare organizations should consider the financial impact of a recession and prepare for the changing healthcare landscape if they want to remain in business. Here are just a few of the impacts we’ve come to expect during a recession:

Reduction in Healthcare Workers

There is already a marked shortage of trained and experienced medical staff, and a shortage of qualified doctors and support staff may become a problem in the coming months. While this problem is usually resolved by deploying temporary or locum tenens staff, the demand for temporary staff may decline as patients are less likely to seek specialized healthcare. 

There is already a shortage of staff who provide direct care, as well as a shortage of specialists in behavioral health and addiction treatment, primary care physicians, and emergency room workers. 

During the last recession, more nurses postponed retirement or moved from part-time work to full-time work, which helped alleviate the shortage. Effectively managing a database of potential care workers will become essential for hospitals during a recession. 

Reduction in Demand for Specific Healthcare Services

According to a study by the American Academy of Family Physicians (AAFP), families with limited funding are far more likely to spend their money on essentials other than healthcare and reduce the healthcare services they used prior to the recession. Many people postpone medical treatment due to constrained finances. Data on hospital admissions and optional surgeries confirm this trend. 

These decisions can have a significant impact on surgeons, hospitals specializing in surgery, and other major healthcare systems. According to a survey during the last recession in 2009, the average 300-bed hospital experienced a decline of $3.7 million in medical billing as patients with commercial insurance had become unemployed, underemployed, or were otherwise constrained due to the rising cost of living. 

Healthcare providers will likely focus on expanding their options for outpatient care in order to deal with the decline in spending. Outpatient care is generally more affordable than conventional hospital admission and direct care. 

Impact on Procedure Volumes

According to Edwards Lifesciences, which specializes in cardiac surgeries, specialist hospitals are less likely to feel the negative impact of a recession because their procedures are deemed essential. 

However, hospitals have seen a slowdown during the pandemic to prevent the spread of the virus, which exacerbated staff shortages and left companies more vulnerable to economic decline.

Certain procedures, including hip and knee replacement surgeries, are considered less urgent and more deferrable, which may lead to spending drying up during a recession. This impacts the purchase and usage of expensive robotics systems and equipment, which in turn impacts device makers. 

Decrease in payments and donations

An increase in payment defaults, canceled appointments, and a decrease in donations and government funding will likely be on the cards during a recession. Healthcare providers will either need to write off patient debts or invest in debt recovery measures. Again, digitization can assist with managing these elements, but hospitals and smaller healthcare businesses will likely feel the impact. 

Digital Healthcare and the Recession

Indicators are that the healthcare industry will take the lessons learned during the pandemic about the benefits of digital health in protecting costs and reducing spending and apply them to recession-proofing their business. 

Digital health offers new opportunities to connect with patients and supports greater adherence to medical regimes (which leads to better outcomes) and reduced costs. A digital platform that can manage costs and patient relationships and improve revenues is a good investment to make in a time of economic uncertainty.

Healthcare has increasingly shifted to an outcomes-based model. Patients’ needs can be supported, and their outcomes managed more effectively by adding value through digital health channels. Many healthcare facilities have already deployed telehealth and other virtual care options to increase profit margins and improve patient engagement. 

Will funding continue to decrease?

Funding for digital health startups has declined since the beginning of the year, but that does not mean that demand is slowing down. Instead, spending has shifted to established solutions with extensive clinical results that prove their effectiveness. Venture capital firms are more cautious about their investments following the rush to invest during the pandemic, as funds focus on supporting the solutions that are currently gaining traction in the market. 

In addition, healthcare systems have taken an increasingly collaborative approach, cooperating with pharmaceutical organizations and other key players to consolidate care and improve outcomes for patients. Money is being invested but around more comprehensive digital solutions. Healthcare companies that are only now investing in digital systems will reap the benefit of a leaner, more experienced digital tech environment. 

Impact on Patients 

Digital health solutions are hard to define as either B2B or B2C – instead, they form a unique bridge between the provider and their patients with a single solution that has benefits for both parties. 

Unlike many other tools, digital healthcare is not considered a luxury in a declining economy but rather an essential. Digital health will continue to close the gaps that exist between patients, payers, and providers and produce valuable data on the outcomes of the various treatments, making it attractive to investors.

The Importance of Seamless and Positive Patient Experiences 

There is another reason why digital health solutions may have the edge over other segments of the healthcare industry. During a recession, companies face strong competition as well as internal pressure to provide positive customer experiences in order to both obtain and retain clients.  

Digitization is one of the fastest and more effective ways to streamline processes and support caregivers. 

The convenience of digital health will likely remain attractive for both customers and medical professionals in charge of their care.


A recession can have devastating consequences for both healthcare providers and patients. Cash-strapped patients will postpone or avoid elective or deferrable procedures. At the same time, a recession adds stress to their lives and can wreak havoc on their health and wellbeing. Patients may become underemployed or even unemployed, which impacts payers and healthcare providers. All of this reverberates throughout the healthcare industry that struggles to maintain adequate funding and staff levels. 

However, digital health providers will likely continue to experience positive growth as healthcare professionals (and the public) look for innovative ways to cut costs and access the care they need.