In business, bigger is often better. But that's not the case for hospitals when it comes to future growth of their bottom lines.
The signs are that healthcare will be a growth industry of the future with aging baby boomers increasing the demand for services, but don't look for that added business to pad hospital profits.
"Hospital operating margins will be thin at best, negative at worst, and in many cases cause hospitals to eat into their long-term financial investments, which have lately propped up total margins," according to Health Care 2000, the latest annual environmental assessment of the healthcare industry published by the VHA hospital alliance and the national consulting firm Deloitte & Touche.
The report is due to be publicly released this week.
"(Healthcare is) not an industry in decline by any stretch," said Daniel Bourque, group senior vice president at Irving, Texas-based VHA.
"It is absolutely a growth industry. The problem is that from a provider's perspective, with the limitation on reimbursement, it's growth with no margin," he said.
The 170-page report is a collection of easy-to-read charts and graphs compiled from a variety of sources.
This is the 15th year Deloitte & Touche has done the assessment and the sixth time that VHA has been a partner.
The report offers a mixed bag of information and opinions about the past, present and future state of healthcare.
So just how large will the healthcare industry likely grow in the coming years?
HCFA is predicting that national health expenditures will grow 65% to almost $2.2 trillion from 2000 to 2008, according to the report.
But even bigger growth is expected. For example, national expenditures on long-term care for people 65 and older are expected to increase by nearly 200% to more than $346 billion in today's dollars by 2040, according to the Congressional Budget Office.
The environmental assessment is meant to be used as a strategic planning tool for healthcare executives and hospital trustees.
"This gives them a one-stop source of information that they can take to planning retreats," Bourque said.
Some other tidbits from the report:
* The market for telemedicine will grow to $3 billion in 2002 from $65 million in 1998.
* The number of people aged 65 and older will more than double during the next 50 years to 80 million in 2050.
* Eighteen percent of healthcare organizations plan to adopt Internet technology for business transactions.
The data suggest that people shouldn't expect healthcare to be delivered in the future like it is today, said Merlin Olson, a principal in the New York office of Deloitte & Touche.
The face of healthcare will be fundamentally changed by clinical, technological and other advances, including the Human Genome Project to map human DNA in the hopes of helping create more effective drugs.
Besides any future economic concerns, "the point is that the even bigger impact on providers is the way in which healthcare is delivered," Olson said.
That's why he believes providers should rethink their strategies so they can respond to the eight strongest forces guiding healthcare:
* National health objectives.
* The growing number of uninsured.
* More governmental control.
* More educated and demanding consumers.
* A lopsided workforce with too many physicians and not enough nurses.
* Physician partnerships.
* Becoming more efficient.
But Olson said the future is nothing for providers to fear.
"They should be excited," he said. But, "That doesn't mean it'll be easy."