Hospital Outlook 2019

Written By: Bryce Ray

The 2019 Hospital Outlook remains positive due to the healthcare industry’s non-cyclical nature and revenue drivers such as: an aging population (in addition to people living longer), better quality healthcare provided, low unemployment, a good economy, higher disposable income, rising prevalence of chronic disease, and increases in an insured population. Within the hospital industry, revenues are expected to continue to increase from 2018’s $1.1 trillion-dollar figure, to the forecasted 2023 revenue figure of $1.3 trillion. The projected annual industry revenue growth rate of approximately 3.3% is positive, however these increases are somewhat counterbalanced by the rise in high deductible health insurance plans, more outpatient treatment, and the shift towards more effective/efficient treatments.

Based on figures published in 2018 there are 5,534 hospitals (all types) which are broken up into 2,849 non-government non-profits, 1,035 for-profit, 956 state and local government, 209 federal government and 485 other hospital types. When comparing the numbers of hospitals to prior years, there is actually a reduction of the overall number of hospitals as the industry consolidates 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 2018, 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. 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 sheets which can be impactful. It appears as though health systems are making material investments in health technologies and are working to leverage the power of big data. This is to increasingly become more efficient and effective in patient care and hospital operations.

Since 2015 the Federal Reserve has increased the Federal Funds Rate 9 times and is expected to continue increasing rates in 2019 & 2020. All of these rate increases have sparked many hospitals to take advantage of these historically low rates by financing new capital equipment with equipment leases and other fixed rate financing options. For 2019, equipment leasing continues to be very attractive to most healthcare providers.

In general, in 2019 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. I do not see much change occurring over the next 12 months, with that said, I believe 2019 will be a good year for healthcare as it will look much like 2018. No matter the hospital outlook for 2019 Med One will continue to be committed to making medical equipment available in a creative, simple and responsive way.

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