Before employers shift more healthcare costs to workers, they should ask hospitals a question
Eugene Litvak
Sat, August 15, 2026 at 4:30 PM GMT+5:30
4 min read
American employers are approaching an uncomfortable choice: absorb another large increase in healthcare costs or pass more of it on to workers. Mercer projects that employer health-benefit costs will rise 6.7% in 2026, the steepest increase in 15 years, pushing the average cost above $18,500 per employee. Nearly half of large employers expect medical plan changes in 2027 that will increase employees’ out-of-pocket costs
Before employers ask workers to pay more, however, they should ask healthcare providers a question they routinely ask every other major supplier: Are we using what we’re already paying for efficiently? Companies would not respond to an inefficient manufacturing operation simply by purchasing more machinery. A CFO considering a major capital investment would first ask whether the shortage was real or resulted from how existing resources were managed. Yet employers spend enormous sums purchasing healthcare without consistently demanding the same operational discipline.
Consider hospital capacity. Emergency demand is inherently variable: hospitals cannot schedule heart attacks, automobile accidents or appendicitis. Elective procedures, however, are scheduled. Many hospitals concentrate scheduled surgeries and admissions on particular weekdays, creating artificial peaks in demand for beds, nurses, operating rooms and diagnostic services. Emergency patients may wait for inpatient beds, nurses become overloaded and surgeries are delayed. What appears to be an absolute shortage may partly be a scheduling problem. Hospitals that have addressed this artificial variability provide an important lesson.
At Cincinnati Children’s Hospital Medical Center, changes in patient flow management improved access to critical care capacity while allowing surgical activity to grow. The financial benefit ultimately reached $137 million annually, and the hospital avoided a planned expansion costing more than $100 million after determining that the additional capacity was unnecessary. At The Ottawa Hospital, operational improvements were associated with approximately 40 fewer deaths and $9 million in annual savings. These examples do not mean every hospital can achieve identical results or that America never needs additional healthcare investment. They demonstrate something more basic: before purchasing additional capacity, determine whether existing capacity can be used better.
That should matter enormously to American business. Healthcare is now a major operating expense. Mercer recently found that roughly three-quarters of CFOs rank healthcare among their five biggest operating cost concerns. Average family health insurance premiums reached $26,993 last year, according to KFF, with workers contributing $6,850 before deductibles and other cost sharing. When costs rise, employers can absorb them, leaving less money for wages, hiring and investment, or shift more of the burden to employees. But large self-insured employers have another lever: purchasing power. They can demand greater operational accountability from the organizations providing care. When negotiating with health systems, insurers and provider networks, employers should ask not only what services cost, but why. Before accepting higher prices or paying for additional capacity intended to relieve overcrowding, they should ask whether avoidable peaks in scheduled admissions contribute to the problem and what operational improvements have been attempted first. This is not an argument for employers to micromanage medicine. Diagnosis and treatment belong to clinicians. But scheduling predictable demand, deploying capacity and managing patient flow are operational questions. Every sophisticated business manages comparable questions in its own industry. Healthcare should not be exempt.
