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.
The principle extends beyond hospitals. At St. Thomas Community Health Center, a Federally Qualified Health Center in New Orleans serving many uninsured and Medicaid patients, redesigned appointment operations enabled 80% to 90% of requests for same- or next-day care to be met while patient satisfaction with access reached 97%. Better access began not with constructing another clinic or hiring an entirely new workforce, but with examining how existing capacity was used.
None of this eliminates the forces driving healthcare inflation. New drugs and technologies are expensive. An aging population requires more care. Labor shortages are real. Some facilities genuinely need expansion. Operational improvement is not a substitute for necessary investment; it should come before unnecessary investment. That distinction matters especially now. Families feel healthcare costs through premiums, deductibles and prescriptions; employers see them in compensation budgets; government sees them in Medicare and Medicaid spending. A recent Gallup poll found healthcare affordability at its lowest level in five years. Healthcare cost is a leading economic concern among Americans across party lines as the midterm elections approach.
The conventional debate asks who should pay more: government, employers or patients. There should be a question before that one: What are we paying for that we could be using better? Employers have considerable leverage to force that question into the healthcare conversation. They don’t need to decide how hospitals should operate, but they should demand evidence that operational efficiency has been examined before higher prices and additional capacity are accepted as unavoidable.
America will inevitably spend more on some forms of healthcare. Medical progress itself guarantees that. But the answer to every shortage cannot be another check. Before employers pass the next increase to their workers, they should make sure they are getting everything they can from what they already buy.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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