Inflation has hit record levels this year as demand for goods and services far outpaced supply, and many companies are still trying to bounce back from the shutdowns of early 2020. Health systems, which have razor-thin operating margins even in the best of times, aren’t an exception—and experts told Healthcare Brew they’ll need to get creative to make it through.

“In the past, we’ve always said that healthcare was kind of recession-proof because demand for healthcare keeps going, regardless of what’s happening in the economy,” said Tina Wheeler, leader of consulting firm Deloitte’s US healthcare practice.

But in the last year, inflation hovered around 8% for much of the year, while medical-care prices increased by only 4.8%, according to Wheeler.

How badly is healthcare hurting?

• Inflation could cause an additional $370 billion more in healthcare spending than the expected baseline increase by 2027, according to McKinsey.
• The national health expenditure could grow at a rate of 7.1% over the next five years, compared to the expected economic growth rate of 4.7%, according to McKinsey.
• By the end of 2021, total hospital expenses per adjusted discharge were up 20.1% compared to 2019, according to the trade group American Hospital Association.

Rising interest rates also hurt hospitals since their main access to capital is through issuing tax-exempt bonds, Wheeler said. The rising cost of capital limits hospitals’ ability to fund projects, like opening a new oncology center to treat patients, for example. Keep reading here.—MA

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Although IBM’s Watson is long dead (or at least scrapped), artificial intelligence (AI) is very much alive in healthcare, and its role is growing rapidly. Machine learning—a form of artificial intelligence that uses algorithms and data to adapt and predict outcomes—is taking off not only within hospitals, but also in the pharmaceutical industry.

The industry is increasingly turning to machine learning to discover and develop new medications with the hope of expediting the yearslong slog to get new drugs to market—and saving substantial cash. An Insider Intelligence report found AI could decrease the cost of discovering a new drug by as much as 70%, where it currently takes about $2.8 billion and 12+ years, on average, to bring one drug to market.

That promise has attracted growing investment in early-stage startups employing machine learning to discover and develop new drugs, said Jonathan Norris, managing director for business at Silicon Valley Bank’s healthcare unit. He put the amount plowed into seed and Series A funding for companies in this niche at up to $1 billion in the first half of 2022 alone, according to SVB research.

That’s slightly under the pace set in 2021, when $2.4 billion was invested for the calendar year, but Norris said it’s still multiples of the $600 to $700 million invested in 2020—and he doesn’t expect the investment pace to slow. Keep reading here.—MS

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Hospitals are increasingly treating gun violence as a public health issue, and it’s a costly one.

“It’s exponentially more expensive to treat someone with a gunshot injury than any other injury,” said Chethan Sathya, a pediatric trauma surgeon and director of Northwell Health’s Center for Gun Violence Prevention.

In the first year following a nonfatal gunshot injury, medical spending quadrupled to more than $30,000, according to a 10-year study published in the Annals of Internal Medicine in June. Medical costs can reach more than $25,000 in the first month after a gunshot injury alone, according to the study.

“When a patient comes in with a gunshot injury, they’re activated, usually as a level 1 trauma—the highest severity. What that means is that 20 to 30 critical care, physicians, surgeons, [emergency department] docs, nurses are all prepared and waiting for a period of 20 to 30 minutes for the patient to arrive, and then [they] engage in about one to two hours of resuscitation of that patient, followed by an operating room that could take anywhere from four to five to six hours if that patient needs surgery,” Sathya said of care provided at trauma centers like Northwell, which are equipped to treat critically ill or injured patients.

Hospital costs for “initial gun-injury care” exceed $1 billion annually in the US, according to the federal Government Accountability Office. But more research on gun violence is needed, and the financial toll of gun violence is underestimated, Sathya said. For two decades, the US didn’t fund gun research at all, until Congress reached a deal to provide financial support in 2019.

Harvard researchers put the total societal cost of gun violence at $557 billion annually, or 2.6% of gross domestic product, according to a figure published in JAMA, for everything from medical care to lost productivity. Given the economic and societal costs, Sathya said hospitals are overdue in prioritizing prevention of gun violence, the No. 1 cause of death in children.—MS

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Today’s top healthcare reads.

Stat: Nine in 10 Americans surveyed believe the country is experiencing a mental health crisis. (CNN/Kaiser Family Foundation)

Quote: “At the very least it has a picture of a fruit on it.”—Nicole LoRusso, a 23-year-old New Jersey woman, on her habit of consuming energy drinks, which are booming in sales since the start of the pandemic (the Wall Street Journal)

Read: The federal government’s Medicare Advantage program has allegedly been bilked by insurers. (the New York Times)