While most Americans see hospitals as critical hubs for patient care, in reality they operate as profit-driven assembly lines. Every patient who walks through the door and every procedure has an assigned dollar amount. Hospitals are big business with big profits to match.
The Healthcare industry: How big a business?
The healthcare industry consists of business corporations (“nonprofit” hospitals and other “nonprofit” providers are business corporations) that provide medical services, manufacture medical equipment or drugs, provide medical insurance, or otherwise facilitate the provision of curative, preventative, rehabilitative, and palliative healthcare to patients.
The US healthcare industry is just that, an industry—an economic force, big business first and foremost, a way to make money just like a manufacturing plant, restaurant chain, consulting or investment firm, or Walmart.
Various financial services create their rankings a bit differently depending on what businesses they include in a business sector. That said, healthcare ranks near the top of the US foodchain in both revenue (what comes in the door) and profits (what’s left over after companies pay their expenses) in pretty much every industry analysis. Here’s one revenue ranking showing healthcare as the 5th largest revenue-producing industry in the US economy.
Largest US industries ranked by revenue, 2019
1. Real Estate
2. Professional and business services
3. State and local governments
4. Finance and Insurance
5. Healthcare and social assistance (social assistance is small part)
Here’s a ranking by profitability (revenue less expenses) showing the most profitable US industries (this list shows subsets of the healthcare industry)
Total US healthcare spending
Total US healthcare spending projected for 2019 (final numbers are not available):
$3.82 Trillion!
This amount is larger than the gross domestic product (GDPs) of Brazil, the UK, Mexico, Spain, and Canada.
Here’s how the $3.82 trillion spend breaks down in percent accounted for by each healthcare subset.
32.8% Hospital Care
26.5% Professional Services (physicians, dentists, all other healthcare professionals)
12.8% Retail Medical Products (prescription drugs and other medical products)
5.2% Residential and Personal Care
6.6% Private Health Insurance Administration
4.7% Nursing Care Facilities and Continuing Care Retirement Communities
2.8% Home Healthcare
2.4% Government Public Health Activities
1.3% Government Administration
1.5% Research
And more: U.S. healthcare expenses are projected to grow 56% over the nine-year period 2019 to 2027, reaching an expected $6 trillion in 2027.
The Center for Medicare and Medicaid Services (CMS) projects that healthcare costs in 2027 will comprise about 19 percent of the country’s GDP. Relative to the size of the economy, healthcare costs have increased dramatically over the past few decades, from just 5 percent of GDP in 1960.
US Healthcare spending per person
How does US healthcare spending break down per capita (per person)?
Healthcare expenditures:
· $10,586 per person in 2018
· $11,500 per person projected for 2019
· $17,000 per person projected for 2027
In fact, the US has the most expensive healthcare system in the world. US residents spend almost twice as much per person on healthcare as every other developed country and for similar or worse outcomes.
Why are US healthcare costs so much higher?
A January 2019 study on the website of John Hopkins Bloomberg School of Public Heath lays it at this doorstep:
““The United States, on a per capita basis, spends much more on health care than other developed countries; the chief reason is not greater health care utilization, but higher prices, according to a study from a team led by a Johns Hopkins Bloomberg School of Public Health researcher.”
The paper appears in the January issue of Health Affairs.
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Who benefits from higher prices? The profit-seekers and administrators of the overpriced US healthcare system.
Love or Money?
On April 12, 2020, Penny Wheeler, CEO of twin cities’ Allina Health, appeared on a segment of CBS Sunday Morning entitled What American Needs from Its Leaders during a Crisis. She said that a former mentor told her that healthcare is more about love. That may be comforting to the public, especially in a global pandemic (the caring angle shows up in every provider’s marketing pieces). But no. Healthcare isn’t about love. It’s about money.
Next
Next installments will discuss US hospital systems, particularly the “nonprofit” hospitals, healthcare’s business focus and how that focus failed public health and healthcare workers in a pandemic, and the handsome compensation of hospital administrators and others.