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Analysis of the health care (hospital) industry in the USusacarinsuranceideas.com/blog-posts/analysis-of-the-health-care-hospital-industry-in-the-us

Introduction

The healthcare industry is most important for the economic growth of the countries

because it’s for the life and the betterment of the people globally. The healthcare industry

is integration and the aggregation of the sectors in the economic structure that offers the

services and the goods to treat the patients with the curative, rehabilitative, palliative care

and preventive care.

It involves the commercialization and generation of the services and the goods that leads

them to maintain and re-establish the health in the nation. The healthcare industry is the

most leading and the fastest growing sector in the world that contributes highly toward

the GDP and economic growth. In the US the health care service is provided by numerous

distinct organizations (Rosenthal, 2013).

According to the report of the World Health Organization, almost USD 9,403 are spent on

healthcare per capita in the United States. The United States (US) don’t have the universal

health care program like the other advanced and developed industrialized countries this

affects the healthcare industry of the United States and even after much of the reforms

and revolutions in the health care sector it is still facing issues that affect patients in the

United States (Fisher, 2012).

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Issues in the healthcare industry in the US

The healthcare industry is highly significant for people globally. The healthcare industry

includes a wide range of players like the hospitals, doctors, pharmacies, nursing homes,

medical device manufacturers, diagnostic laboratories and numerous other elements of

the system of health care. The US health care uses more artificial intelligence in

improving the healthcare service in the US and for providing efficient service at

reasonable charges (Wire, 2018)

The healthcare of the United States is working for finding the way to balance the quality of

the health care service and the fee charged for this service in order to support the people

that provide them better health that is useful for the country economic growth because

when people in the economy are healthy they work more that improves productize and

boost all the sectors of the economy and raise the economic development of the country.

But the ever-changing processes, policies, complexities, and capabilities impose the

significant negative impact on the healthcare industry of the United States. Moreover, the

factors like the raising revenue pressure, demand for innovative and latest technology and

equipments, consistently decreasing margins and the limited financial resources make it

challenging and difficult for the healthcare providers like hospitals to ensure quality

services with lower fee charges and this raise the issue in the healthcare industry of the

United States (Deloitte, 2019).

The healthcare industry of the US has often covered the other industries of the US when it

occurs to the modernizing but the payment system, reliance on the face to face

negotiation and the complicated barriers of the regulations, high investment of the private

equities, etc. this affect the growth of the healthcare in the United States of America.

A degree of Competition in the Industry

In all types of businesses, the competition is encouraged as this competition helps the

industries to grow and better their products for more customer satisfaction. In other

words, petitions are about getting better than your rival in every aspect of delivering,

creating and communicating the value of your product to satisfy the customer needs

better.

Traditional competition in health care is about convenience, price, quality and superior

services: however, on the other hand, competition can also be based on new technology

and innovation. The purpose which gives this competition momentum is that the costs

which need to be reduced for better services and higher selling of the service.

The competition is essential as it eliminates the inefficiencies in the processes which

would otherwise result in higher costs which will ultimately affect the patient’s level of

service and costs higher. Fuch 1988 noted that America is going to change its health

industry structure by allocating the scarce resources to the industry (Glover, 2010).

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However, on the other hand, ReinHardt (1996) comes with the theory that it is not

increasing the competition as all the bills paid in terms of health industry are three

quarters from the insurance in all the bills paid. Porter and Teisberg 2004 suggested that

the competition in the US market has become at the sub-zero as the health industry is

more focused on dividing the value than creating the value for customers (Goddard,

2015).

In this Porter and Teisberg has identified some features which increase the need of

concern as they are affecting negatively to the competition in terms of value creation, bad

strategic choices high focus on the cost reduction sometimes compromising quality of the

services and goods, focusing on satisfaction surveys and giving the improper incentives to

the providers and also subscribers.

Supply/Demand Dynamics for the Industry’s Products

The supply and demand are important to create balance in providing the services in 2018;

Senate failure to develop, replace, repeal or change the Affordable Care Act (ACA) has

occurred which left the market unchanged in terms of legislative implementation. Outside

from the larger cities where the healthcare system is developed and has some problems in

rural areas for the patients who have difficult access to the cities suffer from lower quality

services by providers and patients suffer because of this. According to the American,

Healthcare Association, rural hospitals provide the services of more than 57 million

people including essential health care services (Santilli, 2018).

The people living in rural countries declined in numbers by 200,000 from the period of

2010 and 2016 which was the first ever recorded decrease in rural population. Rural

healthcare providers are in crisis due to the cost cuts, cost-saving and spending cuts due

to which the operations are distressed.

According to the server 1 in 3 hospitals are facing the finance shortage, at the current level

of finance shortages the 25% of hospitals are estimated to be non-operational in the

decade. Further, these problems are added by a shortage of physicians, the growth of high

deductible health plans and a lack of choices added to the health epidemic including the

opioid epidemic.

All these factors collectively added to the poor supply and demand due to the finance

shortages in the rural area hospitals which indicate the supply problems and the surveys

conducted also shows that the financials of the rural areas are not satisfying to cope up

with future demand.

Industry Cost Structure

The industry cost structure gives insights about the costs of the industry. According to

stats published by American economist’s states that America is spending $650 billion

higher than expected on healthcare. Which is also more than any high income 11 countries

including Canada, Germany, Australia, and the UK.

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The US economy spends 17.8% of its total GDP on healthcare services which are far higher

than the other compared which are spending 11.5% of their GDP. On the per capita basis,

the US spends $9403 per capita which is also double than the countries compared with

the US health cost structure (Farrell et al., 2008).

The findings explain that the US cost structure of the healthcare system is inflated across

the board all the treatment, diagnostic test, medicine, and doctors all are perceived to be

high paying which makes these prices inflated. The additional costs are administrative

costs which are higher due to the higher prices and administrative spending of managing

the finances further increase the costs of healthcare in the US (Blumberg, 2018).

Drugs costs are also higher and so thus the spending which also accumulates 15% of the

total amount which is more than the expected budget of the US. Health administration

costs are also made up of 9% of the higher expected spending in the US economy on

healthcare. Government programs for less privileged can also be considered a factor as

governments spend on the welfare of the people of the country.

All these costs are also higher due to the poor system of healthcare in the US compared to

the other nations which are managing better, and their spending is less than the American

spending on health care. The higher number of specialists are also to be considered as the

specialists cost more than physicians which are also a factor in higher spending in the US

(Deloitte, 2019).

The degree of Government Regulation-Favourable or Not

The current estimation shows that the healthcare industry of the United States spends the

highest cost for pharmaceuticals all over the world. Almost 85 percent of the US citizens

avail the health insurance service through their organizations, employers or they

purchased individually. The federal government of the US does not guarantee the

universal service of healthcare to all of the US citizens.

The healthcare schemes that are funded by the government only provide the service to

some of the elderly, poor and the disabled persons. In the United States, the Federal laws

ensure the public access and admission to the emergency services irrespective of their

capability to pay for the service fee. Those people in the US who don’t avail any of the

health insurance plan or coverage are likely to pay privately for the medical services,

which is much costly (Farrell, et al., 2008).

In the United States, the utmost common cause for personal bankruptcy is an expensive

medical bill and health insurance. But the developing trends and patterns in the industry

of the United States healthcare are trying to bring significant changes into the landscape

of the market. In the United States, government regulations in health care are complex,

and this sometimes affects the healthcare industry growth in the US. The US government

has to improve their policies and regulations and offer more programs that reduce the

healthcare cost in the US for reducing the health issues in the US.

Exposure to the Business Cycle

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In the business cycle as the US health industry is improving its situation day by day

through using efficient artificial intelligence technologies, skilled people, high investment,

and improving processes and policies that make them reach the expansion and recovery

phase of the business cycle. It is expected that in the future the United States healthcare

industry will be improved highly and they will mitigate all their issues and become able to

offer low cost and high quality of healthcare service to the people that support them to

reach the prosperity phase of the business cycle.

Size of Industry

In terms of the market size, the US healthcare industry is one of the leading in the global

world because of high spending in the GDP. It’s the 2.8 trillion USD market that serves

millions of people each year. In the United States, the facilities of health care are mainly

operated and owned by private businesses. According to the statistics of United States of

America hospital 2019 almost 62 percent of the United States community hospitals are

owned and controlled by non-profit organizations, 20 percent are owned by the

government, and almost 18 percent are owned and controlled by the profit-seeking

organizations (The American Hospital Association, 2019).

From the facts of the United States hospital healthcare sector, it is revealed that a total

number of hospitals in the US is 6,210 hospitals in 2019. The total admission of patients

in all of the US hospitals is 36,510,207 out of which 34,305,620 admissions are in the

community hospitals. The overall expenses of all of the US hospitals are

$1,060,933,249,000 out of which $966,204,239,000 expenses are for the community

hospitals in the US (The American Hospital Association, 2019)

Conclusion

It is concluded that the healthcare of the United States is working for finding a way to

balance the quality of the health care service and the fee charged for this service in order

to support the people that provide them better health that is useful for the country

economic growth because when people in the economy are healthy they work more that

improves productize and boost all the sectors of the economy and raise the economic

development of the country. Drugs costs are also higher and so thus the spending which

also accumulates 15% of the total amount which is more than the expected budget of the

US.

It is concluded that in the United States the government regulations in health care are

complex and this sometimes affects the healthcare industry growth in the US. In the

business cycle as the US health industry is improving its situation day by day through

using efficient artificial intelligence technologies, skilled people, high investment and

improving processes and policies that make them reach the expansion and recovery phase

of the business cycle. Therefore, the US government has to improve its policies and

regulations and offer more programs that reduce the healthcare cost in the US for

reducing the health issues in the US.

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References

Blumberg, Y. (2018, March 22). Here’s the real reason health care costs so much more in

the US. Retrieved from cnbc.com: https://www.cnbc.com/2018/03/22/the-real-reason-

medical-care-costs-so-much-more-in-the-us.html

Deloitte. (2019). 2019 US and Global Health Care Industry Outlook. Retrieved from

https://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/us-and-

global-health-care-industry-trends-outlook.html

Farrell, D., Jensen, E., Bob Kocher, M., Lovegrove, N., Melhem, F., Mendonca, L., &

Parish, a. B. (2008). Accounting for the cost of US health care: A new look at why

Americans spend more. McKinsey Global Institute.

Fisher, M. (2012). Here’s a Map of the Countries That Provide Universal Health Care

(America’s Still Not on It)”.

Glover, P. A. (2010). Health care competition, strategic mission, and patient satisfaction:

research model and propositions. Health Organ Management, 627-641.

Goddard, M. (2015). Competition in Healthcare: Good, Bad or Ugly? Health Policy

Management, 567-569.

Rosenthal, E. (2013). News Analysis – Health Care’s Road to Ruin. New York Times.

Santilli, F. R. (2018). Healthcare Trends for 2018. Am Health Drug Benefits, 48-54.

The American Hospital Association. (2019). Fast Facts on U.S. Hospitals, 2019. Retrieved

from https://www.aha.org/statistics/fast-facts-us-hospitals

Wire, B. (2018). 2018 US Healthcare Industry Overview and Top Trends | Quantizing.

Retrieved from Yahoo Finance: https://finance.yahoo.com/news/2018-us-healthcare-

industry-overview-140300005.html

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