Hospitals in Crisis

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Hospitals in Crisis

For the first time in American history, conditions are ripe for reducing the total cost of health care.  What are the implications for the hospital industry?  What role will politics play in this new era of change?  And who will be the big winners and losers?  We’ll show you.

A recent New York Times article on medical tourism highlighted an analysis by the Wisconsin-based Gundersen Health System. It was intended to find out the real cost of a knee replacement a procedure Gundersen charged more than $50,000 to perform.  It tracked all the inputs and concluded the whole thing actually cost about $10,550.  The story went on to chronicle the experience of a woman who chose to have her knee replacement surgery performed in Cancun, Mexico, rather than Wisconsin.  Her total bill – including the procedure, hospital, transportation, food, and hotel – was just $12,000.  Furthermore, the knee replacement was performed in a state-of-the-art, private hospital by an American surgeon who graduated from the Mayo Clinic.  For her “troubles,” she received a check for $5,000 from her husband’s employer as a “thank-you” for all the money she saved them on health costs.

This boom in medical tourism, which Trends first predicted in 2007, is an indictment of America’s broken health care system.

The system’s failings are well-documented.  It’s disjointed and has few checks and balances.  For the 50 years ending in 2016, health care costs grew at an average rate of 8.9% per year, while the CPI rose by about 3% per year.  Since patients rely primarily on insurance companies or the government to cover the costs, they usually have no idea what they’re paying for medical care.  And, worse yet, most hospitals don’t even know their real underlying operating expenses.

The U.S. has tried to fix its health care system many times over the past 100 years.  But those efforts largely failed.  And even the few that succeeded are now in dire straits because of cost inflation in health care

Reform is desperately needed.  And that reform will inevitably disrupt America’s largest industry sector.

Why?  Because health care costs in the U.S. are skyrocketing.  According to the Centers for Medicare and Medicaid Services, they rose 7% per year, over the thirty years from 1986 to 2016.

As of 2018, health care represented 17.9% of GDP.  That’s more than $3.5 trillion, which is equivalent to the total GDPs of major countries such as India, France, the U.K., and Germany.

And it’s growing in relative, as well as absolute terms...

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