Size has its advantages, and one of them apparently is profitability.
That's according to a new study that shows that larger healthcare companies are more likely to be profitable than smaller companies, a conclusion that's often discussed amid the industry's consolidation.
WDI Capital Markets, a Hilton Head Island, S.C.-based investment banking firm, looked at the revenues and profits of 650 publicly traded healthcare companies. The analysis included providers and pharmaceutical, managed-care, and medical device and supply companies.
According to the analysis, only 18% of companies with annual revenues of less than $10 million were profitable. Yet profitability increased as revenues increased. For example, 73% of companies in the $25 million to $50 million range in an-nual revenues were profitable. At the top of the scale, 98% of companies with annual revenues of $500 million or more were profitable, WDI reported.
Smaller provider companies fared better than the healthcare industry in general, mostly because of the lower cost of entry and the lack of research and development expense, WDI reported.
For example, 45% of providers with less than $10 million in revenues were profitable, compared with just 18% of that size in the industry in general. In the $10 million to $25 million range, 63% were profitable. In the $50 million to $100 million range, 81% of providers were profitable. Among companies with $100 million to $500 million in revenues, 88% were profitable, and among those with more than $500 million in revenues, 98% were profitable>