Hospital Outlook 2018

Written By: Bryce Ray

Hospital Outlook 2018

None of us have a crystal ball for what the future will bring the healthcare industry in 2018; however, I believe it is important to take a moment and evaluate some key observations. First, thankfully the United States continues to experience favorable economic conditions such as low unemployment, positive GDP growth, low inflation, low interest rates, strong US manufacturing and the potential tax reform. Within the hospital industry revenues are expected to continue to increase from 2017’s $1 trillion dollar figure to the forecasted 2020 revenue figure of $1.2 trillion. The projected annual industry revenue growth of approximately 3% is certainly positive. It has been partially impacted by the increased number of people with private health insurance, an aging population, and advances in healthcare which have helped extend life expectancy.

Hospital Purchasing Decisions

Based on figures published in 2017 there are 5,564 hospitals (all types) which are broken up into 2,845 non-government non-profits, 1,034 for-profit, 983 state and local government, 212 federal government, and 490 other hospitals. When comparing the numbers of hospitals to prior years there is actually a reduction in the overall number of hospitals. This is due to the industry consolidating to reduce costs and improve negotiating power with suppliers and payers. Interestingly enough even with all of the consolidation there is still no major player in the hospital industry with no system concentration greater than 5%.

As I have monitored hospital trends in 2017 I observed continued profitability compression due to increasing expenses and tightening reimbursements. Many hospitals are experiencing increased expenses to salary and wage costs in order to find and retain talented and qualified healthcare professionals. With a continued low interest rate environment, hospitals continue to have plenty of financing options allowing for new capital equipment and expansion. Hospitals continue to be impacted by their respective payor mixes as commercial insurance provides for a better bottom line. Additionally, many for-profit hospitals have the added burden of taxes and a leveraged balance sheet which can be impactful.

In general for 2018 and beyond, hospitals will need to continue to find ways to become more efficient, conserve cash, and diversify revenue streams to handle the headwinds. The industry will need to address several issues including healthcare reform, reimbursement trends, threats from hackers and continued personnel shortages. With that said I believe 2018 will be a good year for healthcare, looking much like 2017, as I do not see much change occurring over the next 12 months. No matter the hospital outlook for 2018 Med One will continue to be committed to making medical equipment available in a creative, simple and responsive way.

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