First Research US Industry Profile

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Health Care Sector
SIC Codes: 4119, 4522, 8011, 8021, 8031, 8041, 8042, 8043, 8044, 8049, 8051, 8052, 8059, 8062, 8063, 8069, 8071, 8082, 8092, 8093, 8099, 8322, 8331, 8351, 8361
NAICS Codes: 62
Last Quarterly Update: 5/11/2020
Companies in this industry provide a wide range of health care and social services through hospitals, doctors' offices, nursing homes, outpatient surgery centers, and other facilities. Major companies include Ascension Health, HCA, Kaiser Permanente, and Tenet Healthcare (all based in the US), as well as Fresenius (Germany), National Hospital Organization (Japan), and Ramsay Health Care (Australia).
Worldwide, health care expenditures total about $7.5 trillion annually, or about 10% of global GDP, according to the World Health Organization. Total health spending (both public and private) as a portion of GDP among industrialized nations ranges from about 4% in countries such as Turkey to about 17% in the US, according to the Organisation for Economic Co-Operation and Development.
The US health care sector includes about 890,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $2.7 trillion.
Competitive Landscape
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 15% 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 180 facilities in 20 states. It also runs more than 100 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.
Products, Operations & Technology
Major services include hospital medical care (45% of industry revenue) and outpatient care provided by physicians (20%). Other services include dental ... plus:
Sales & Marketing
Finance & Regulation
Regional & International Issues
Human Resources
Also includes the following chapters:
Quarterly Industry Update
Industry Indicators
Business Challenges
Trends and Opportunities
Call Preparation Questions
Financial Information
Industry Forecast
Industry Websites
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