Cost of Healthcare

A big determiner for whether or not to invest in a market is whether or not a market's price is greater or less than the average cost of production. One struggling industry we could easily apply this concept to is healthcare in America. It is no secret to the average American that our nations healthcare is under going major changes, reconfiguration, and exits.

Healthcare costs are also increasing for the consumer: "Between 2005 and 2013, average premiums for individual plans increased 37%." Rising Premiums But of course preceding consumer costs is the rise in costs for providers. The cost of malpractice systems, expensive drugs and devices, and tighter regulations (among many other variables) lead to increasing costs to maintain a feasible hospital. Some added regulations have come with the Affordable Healthcare Act that makes it mandatory to provide certain “essential health benefits” Rising Premiums. In 2011 a study found that "The average American worker costs their employer $12,000 annually for health care benefits and this figure is increasing more than 10 percent every year." 1/3 Hospital Closing

One study of the Massachusetts Hospital Association from 2008 showed that between 2004 and 2008 hospitals experienced a 50.2% wage increase for RNs alone. Massachusetts hospitals also saw an annual increase of 8.7% in Patient Care Supplies and Other Expenses. Hospitals also do a lot of their business with the government. With insufficient Medicaid and Medicare reimbursement hospitals sustain heavy losses. In the FY 2008 alone Massachusetts hospitals experienced Medicare payment deficits of $317 million MHA Costs. 

With healthcare costs only rising some think the new Accountable Care Organizations could provide an answer. Does the problem of rising costs really come from the payment-for-treatment system? Will hospitals be able to operate on a "payment-for-healthy-patient" system? Many hospitals are finding the average costs of operation too high and are closing their doors. The fourth hospital in two years in the state of Georgia has recently closed Hospital Closing. Another harsh side-effect is that these closings are more common in poorer areas. Some are even predicting by 2020, 1/3 of all hospitals will close their doors or be completely reorganized 1/3 Hospital Closing.