Hospitals Industry Overview

Excerpt from Hospitals Report

The US hospital industry includes about 3,600 organizations that operate about 6,500 hospitals with combined annual revenue of about $860 billion. Major companies include Ascension Health, Catholic Health Initiatives, HCA (Hospital Corporation of America), Kaiser Permanente, and Tenet Healthcare. The industry is fragmented: the top 50 organizations generate about 30 percent of revenue.

Competitive Landscape

Demand for hospital services is driven by demographics, illness and injury rates, and advances in medical care and technology. The profitability of individual companies depends on efficient operations, since many hospitals offer similar services, and customer perception, since in many cities hospitals compete for patients. Hospitals also compete for physicians, and seek to attract doctors with state-of-the-art equipment and an attractive work environment. Large companies have advantages in buying supplies, sharing best practices, and negotiating contracts with health insurers. Large hospitals may offer a wider variety of services. Small hospitals can compete successfully by serving a limited geographical area or offering specialized services. About 85 percent of the 6,500 US hospitals are nonprofits, affiliated with churches, charities, or local governments.

Products, Operations & Technology

Major services include in-patient hospital care (about 60 percent of industry revenue) and outpatient services that typically don't require an overnight stay (40 percent). Other sources of revenue include prescription drug sales, ambulatory surgeries, and contributions from private donors, nonprofit foundations, and the federal government.