HEALTH & MEDICAL INDUSTRY PROFILE

Wages in the health care sector vary widely by job function and training requirements, from nurses and aides and orderlies at one end to surgeons and other medical specialists at the other. Overall, average wages for the sector in the US are slightly higher than the national average.

Injury rates in the US health care sector are significantly higher than the national average. Common injuries include back strains and sprains from moving patients or from falls.

Worldwide, health care expenditures reached about $9 trillion in 2021 according HIS Market. Health spending in the US is expected to reach about $1,500 to $2,000 per person by 2050, according to Statista. Leading global health care firms include Fresenius (Germany), HCA (US), National Hospital Organization (Japan), and Ramsay Health Care (Australia).

Developed countries around the globe face pressure to reconfigure their health care systems in order to?rein in costs?and deliver care more efficiently. Major expenses include?inpatient hospital stays,?outpatient care, pharmaceuticals, and long-term care. Health spending in industrialized countries has shown consistent growth in recent decades, other than a slowdown following the late-2000s economic crisis. Doctor per capita ratios are highest in Austria, Norway, Spain, Lithuania, and Germany, according to the Organization for Economic Co-operation and Development (OECD).

In countries around the globe, aging populations are putting a strain on health care delivery. As citizens get older, they are more prone to expensive chronic illnesses such as diabetes and heart disease. Not only high-income nations such as France and Japan but also emerging economies with improving health systems such as Brazil, China, and India are experiencing demographic shifts as life expectancies increase. By 2050, 80% of older people will live in low- and middle-income countries, according to the World Health Organization (WHO).

Developing countries are vulnerable to public health woes such as high infant and maternal mortality, undernourishment of children, and high rates of HIV/AIDS. Low-income countries’ health spending is typically financed by more than 40% out-of-pocket spending and about 30% external aid, according to the World Health Organization. Poor public health has an impact on a country’s wealth; for example, AIDS strikes adults who would normally be in the workforce. For these countries, the goal of reducing or alleviating these and other public health issues is complicated by lack of money and resources such as doctors, clinics, and medicines.

Globally, health spending has doubled over the past 20 years, reaching about $8.5 trillion in 2019. High income countries still dominated the overall spending for about 80% of global spending on health.

Doctors around the world are making use of electronic health records (EHRs), which can help a physician track a patient’s health, check for potential harmful drug interactions, and provide medical decision support. The use of EHRs among health providers is highest in countries that have a unifying government health IT organization, such as Denmark, Finland, and Sweden, where use of EHRs is nearly universal.

Major states with the highest number of health care establishments include?California,?Texas,?Florida, and?New York.

The US has an average of about 2.4 hospital beds per 1,000 people, according to the Kaiser Family Foundation. South Dakota has the highest number of hospital beds per 1,000 population, followed by the District of Columbia, and North Dakota. Oregon and Washington had the lowest average.

States with high Hispanic populations, such as California and Texas, often require doctors and staff to speak basic Spanish. Signs, disclosures, and forms are often printed in both English and Spanish.

Major services include patient care which accounts for about 85% of the industry’s revenue. This is followed by assisted daily living (ADL) which accounts for more than 5%. Other revenue sources also include dental non-surgical intervention; medical and diagnostic testing; appropriations from government; and government contributions. Leading health care entities in the US include a number of for-profit entities, an exception to the global norm of nationalized medicine. However, among the community hospitals in the US hospitals, around 60% are not-for-profit, according to Becker’s Hospital Review. Most doctor’s offices and ambulatory care centers are run as for-profit enterprises.

Hospitals can be operated by the government, charitable organizations, or for-profit corporations. Hospitals typically have between 50-1,000 beds and provide both inpatient and outpatient services, with larger facilities providing more complex care. Many hospitals are part of multi-facility health systems. Majority of hospitals are general medical and surgical hospitals, with only a quarter of hospitals provide psychiatric and other specialized services.

Federal and state governments are heavily involved in the US health care sector as direct-care providers (such as the Department of Veterans Affairs); operators of health insurance programs (Medicare for the elderly, Medicaid for the low-income and disabled); and as providers of various social services programs.

About 92% of Americans are covered by some form of private or government health insurance, according to Statista. Many are covered by combinations of private and government policies. More than half of Americans are covered by employer-sponsored health insurance, the most common type; others are covered by Medicare, Medicaid, direct-purchase, and military plans. The 2010 Affordable Care Act (ACA) has reduced the uninsured rate by extending health care coverage to more Americans through state health exchanges, subsidy programs, and expanded Medicaid programs. The combination of employer-sponsored plans, individual insurance, subsidized insurance, and the uninsured creates a complex web of payers (private insurance companies, the government, and self-payers), known in the industry as a multi-payer system.

Some providers enter managed care contracts with payers that encourage plan members to use certain facilities. Government and commercial health plans use tax dollars and premiums collected from individuals and businesses to reimburse providers for taking care of insured patients at pre-negotiated rates. Some companies and organizations are switching to self-funded insurance plans, where claims are paid for directly by the business, in order to reduce expenses. Beyond contributing to premiums, individuals also pay additional direct or out-of-pocket expenses to providers for health care services.

In total, US government expenditures grew by $111 billion in 2021 as compared to the prior year, according to Health System Tracker.

Technology

Growth in the industry is heavily dependent on scientific advances, medical research, and the development of health care information technology. Many of these advances are led by research hospitals that maintain a staff of PhDs specializing in research and discovery. Molecular biology, largely federally funded, has advanced understanding of the cellular processes involved in disease, largely by identifying defective proteins and gene mutations. New treatments, often developed in partnership with pharmaceutical and medical device firms, counter the effects of these abnormalities. Advances in computer technology have produced new diagnostic imaging systems like ultrasound, MRI, CAT, and PET that can detect abnormalities in their earliest stages, as well as minimally invasive surgical systems that reduce patient recovery times. The R&D that drives these discoveries is costly.

In response to health care reform mandates aimed at improving efficiencies, health care providers are implementing health information technology (HIT) systems. Electronic health records (EHRs) are used to share information and coordinate patient care among doctors at multiple facilities. More than 95% of US hospitals had adopted certified EHRs (systems that meet federal meaningful use criteria). Many US hospitals and doctors have received incentive payments from the Centers for Medicare and Medicaid Services (CMS) for demonstrating meaningful use of EHRs; eligible providers face Medicare reimbursement reductions for not demonstrating meaningful use. The US Office of the National Coordinator for HIT is working with technology firms to standardize system structures, data security methods, and services, including through open and accessible application programming interfaces (APIs). Protecting patient data is also a major concern.

Some physician practices are adopting personal health record (PHR) systems, where consumers can contact health professionals and access certain parts of their EHR, as a method of reducing repetitive in-person patient encounters. Other HIT systems include medical coding, claims filing, billing, inventory, and prescription management software. Some hospitals have adopted wireless technologies to give doctors and nurses access to records at bedside. Telemedicine and remote patient monitoring systems are also growing in popularity.

Health care reform efforts in the US and other developed countries are changing how providers are reimbursed for care. More attention is being focused on rewarding or penalizing institutions based on efficiency standards and the quality of care delivered. As pay-for-performance reimbursements are implemented, health companies are consolidating to better compete and negotiate with suppliers and insurers. Slim operating margins and a minimal ability to raise prices makes eliminating wasteful processes essential. Obtaining grants and federal funds is key to profitability in the case of many nonprofit health care providers.

Hospitals, surgery centers, and other facilities may compete for physicians, seeking to attract doctors with state-of-the-art equipment and quality work environments. Hospitals and ambulatory surgery centers also compete for procedure volumes, as health care shifts toward outpatient settings. Physician practices and ambulatory clinics in cities generally have several direct competitors in the immediate geographic area, but those serving in remote regions may have little to no competition for patients. Smaller care providers can find success in offering specialized services and building a local reputation for quality care. The US health care sector is highly fragmented: the top 50 organizations generate about 20% of revenue.

Competitive Advantages:

Diverse Services Network – Health networks that provide care in a variety of settings, including hospitals, clinics, and physician practices, can benefit from the shift toward outpatient care. Hospital care is becoming more specialized, while routine procedures are increasingly performed in ambulatory facilities. Increasing bargaining power with insurers and suppliers is essential in the changing health care landscape.

Advanced Technologies – Having access to the most advanced medical care technologies and emerging fields of medical research helps boost the reputation of health care facilities. Hospitals that participate in clinical research programs can offer patients experimental treatments and cutting-edge care techniques. Having access to digital systems that help determine treatment protocols and avoid redundant processes is also beneficial.

Insurer Relationships – Companies depend on commercial insurance contracts for the majority of reimbursement revenue. In the US, government mandates aim to lower Medicare and Medicaid spending, and commercial insurers often follow the lead of Medicare and Medicaid in setting rates. Managed care organizations include hospitals in their provider networks based on quality, price, and the availability of services in the area.

Companies to Watch:

HCA Healthcare is the largest for-profit operator of hospitals in the US, with about 190 facilities in 20 states. It also runs ambulatory, surgery, and urgent care centers across the country and has operations in the UK. The diversified company is expanding its portfolio of specialized hospital services and outpatient care facilities.

Fresenius operates nearly 4,000 dialysis clinics worldwide, as well as more than 100 hospitals in Germany and Spain. The company also provides infusion equipment and hospital management services. Fresenius operates in more than 100 countries and has expanded in recent years through acquisitions.

Tenet Healthcare operates major urban medical centers and small community hospitals in about 10 US states. Like HCA, Tenet operates ambulatory health centers and has operations in the UK. It also provides patient billing and communications services to affiliates and nonaffiliates across the US through its Conifer Health Solutions subsidiary.

Typical customers are individuals requiring urgent medical care, routine check-ups, and long- or short-term help including nursing home care, day care, and social services.

Marketing efforts vary depending on the type of service provided. Doctors typically stick with traditional approaches like word-of-mouth, referrals, and insurance approved-provider lists. A growing number of physicians use TV, online, and print advertisements and direct mailings (including email) and have websites and even personal blogs — though doctors must avoid violating patient’s rights and privacy laws when writing about specific cases or incidences. Hospitals market to doctors, insurers, and individuals using a variety of means, including medical presentations, brochures, magazine and newspaper ads, targeted press releases, informational websites, and TV and radio ads.

Prices vary depending on the services offered, the length of the patient stay, the patient’s insurance policy, and the level of government support. For hospitals, the average length of stay is about 4.5 days; the average cost of a stay is about $12,000. Medicare (and, in many cases, supplemental state insurance policies) sets limits on reimbursable charges. In a typical scenario, a doctor visit costs around $150, but Medicare may pay less than half of that. The patient pays the rest through Medigap insurance or out of pocket. To offset these losses, doctors often limit the number of Medicare patients they accept, shorten time spent with patients, or raise prices on private payers through what’s known as cost shifting.

Some hospitals have high levels of uninsured patients. As payer and service mixes change, and competitive and regulatory pressures rise, hospitals are looking to reduce wasteful processes. The ability to raise prices is limited. Hospitals, as well as ambulatory care providers, are consolidating to gain scale and are outsourcing noncore functions such as revenue cycle and environmental services.

Accounts receivable in the sector can be high, as payments from insurers may not arrive for months after a patient has been treated. Disputes with insurers are common, as insurers often deny or reduce reimbursement requests. Health care providers can lower the amount of write-offs from uncollected bills by working with insurance programs to increase the number of patients covered.

Health care providers are subject to extensive state and federal regulations. Almost all health care providers participate in Medicare or Medicaid programs, run by the Centers for Medicare & Medicaid Services (CMS). Medicare and Medicaid participants must abide by a large number of regulations concerning their operating, accounting, and billing procedures. Medicare has a major influence on the payments hospitals receive, as many other payers use Medicare payment schedules as their benchmark.

Recent federal legislation has tried to address the rapid growth in national health care costs, especially the health care reform law of 2010 (the Affordable Care Act, or ACA), which substantially expanded health care coverage to previously uninsured Americans. Other important laws affecting the health care system include the Balanced Budget Act of 1997 (BBA); the Medicare Balanced Budget Refinement Act of 1999; the Medicare, Medicaid, and State Children’s Health Insurance Program (S-CHIP) Benefits Improvement and Protection Act of 2000; the False Claims Act; the Criminal Health Care Fraud Statute; the False Statement Statute; the Anti-Kickback Statute and Stark Law (provisions of the Social Security Act; and the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH), part of the American Recovery and Reinvestment Act (ARRA), established financial incentives for Medicare providers to achieve meaningful use of electronic health records. The HITECH Act also strengthened HIPAA patient information privacy regulations.

State health and finance regulations can vary widely. Some states mandate a specific level of staffing per patient, or require a “certificate of need” before a hospital can invest in capital improvements. Most states manage a network of state health regulators to inspect health care facilities (such as hospitals, surgery centers, and clinics) to ensure safe working conditions and a low risk of infectious diseases. Physicians must pass exams and be licensed by a state medical board to practice in a particular state. State boards respond to complaints about doctors but typically don’t monitor activities or inspect offices.