Because resources are limited, health economists are concerned with determining what medical services to produce, how they should be produced, and who should receive them. As we will see in this lecture, the tools of economics can be applied to the health care sector to derive valuable insights about our health care system. | Industry Overview Health Economics Professor Vivian Ho Fall 2009 Health Care Expenditures in the United States, 1960-2007 1960 1970 1980 1990 2000 2005 2007 Nominal health expenditures $ 1, 1, 2, (billions of dollars) Annual rate of growth -- (average annual % change from previous period shown) Nominal per capita health $148 356 1,102 2,813 4,790 6,697 7,421 expenditures Health expenditures as percentage of GDP Source: CMS Homepage: The Health Care Industry is Rapidly Evolving Advances in medical technology and drugs are dramatically improving patient care But, these improvements are costly Aging . population % 65 years+ 1950 1970 2008 Source: Increased cost containment efforts Changes in government reimbursement of health care providers Private insurers are exercising more control over patient care Increased competitive pressures Mergers of existing providers Entry of new competitors Where are the most promising business opportunities? The Health Care Industry is Rapidly Evolving Which category has the largest share of health care expenditures? Hospital Care Physician Care Prescription Drugs In 2005: hospitals 31% docs 21% drugs 10% America’s Top 100 Fastest-Growing Companies FORTUNE, September 29, 2008 100 RANK COMPANY EPS GROWTH RATE REVENUES (millions) WHAT THEY DO 9 Intuitive Surgical 62% Makes and services surgical robots that allow for less invasive procedures 29 Natus Medical 57% Makes products to detect, treat and monitor newborn health conditions 64 Psychiatric Solutions 44% Provides in-patient behavioral-health services in 27 states 66 Omnicell 26% Sells devices for controlling, dispensing and tracking medications in 1,100 hospitals 67 Kendle International 44% . | Industry Overview Health Economics Professor Vivian Ho Fall 2009 Health Care Expenditures in the United States, 1960-2007 1960 1970 1980 1990 2000 2005 2007 Nominal health expenditures $ 1, 1, 2, (billions of dollars) Annual rate of growth -- (average annual % change from previous period shown) Nominal per capita health $148 356 1,102 2,813 4,790 6,697 7,421 expenditures Health expenditures as percentage of GDP Source: CMS Homepage: The Health Care Industry is Rapidly Evolving Advances in medical technology and drugs are dramatically improving patient care But, these improvements are costly Aging . population % 65 years+ 1950 1970 2008 Source: Increased cost containment efforts Changes in government reimbursement of health care .
