Wednesday, August 30, 2006

Who's Getting Paid in the Health Care Industry?

When the answer to that question is "everyone," the next logical question is: "Who's getting paid the most?"

We often focus on how much money is going into the US health care industry, which allows little time to consider who exactly is taking all that money out of it.

When you offer up the question of who's getting paid the most in the health care industry, a flurry of finger pointing between the suspects ensues. Insurers point to hospitals, who point to doctors, who point to insurers, and so on.

But according to a recent report in the Denver Business Journal, the biggest winner in the health care industry is Big Pharma. At least, that is, when you break it down by profit margins.

Pharmaceutical companies have averaged around a 17 point profit margin over the past decade, whereas other industry players can usually expect somewhere between 3 and 6 percent. However, it should be noted, some hospitals have been raking it in lately, posting margins into the teens in some areas.

A few other notable points from the Denver Business Journal report:
  • As hospitals merge, it becomes increasingly difficult for the more disbursed insurance industry to negotiate with them.
  • When insurers do merge, their administrative costs cut in half.
  • The more uninsured people there are in the country, the higher health care costs become for everyone in the system. (Tie that one in with the latest Census Bureau report on the rising number of uninsured in the US to get the full effect.)
Talk about writing on the wall.

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