Are hospital/healthcare markets really recession-proof?
We are often told that private hospital and healthcare services are recession-proof sectors. Yet the data available from the 2008-2009 period suggests that is far from the case.
How far an economic downturn affects healthcare sectors in the following 2-3 years depends on several variables. Clearly, sectors with a big discretionary self-pay portion and some medical tourism exposure like dentistry, cosmetic surgery, ophthalmology and IVF may shrink in the medium-term.
But if you are paying for your own hospital care, certain procedures considered medical necessary end up being discretionary too. In the US, studies from the 2008-2009 have shown that with every 1% increase in unemployment, cancer surgeries fell 2%. Across all hospitals, a separate survey found that outpatient surgeries fell 1% and inpatient 2% in Q4 2008.
And while European countries with a strong state willing to spend big on their citizens’ health might continue to increase budgets they may do so slower than before. As the chart below shows, the French for-profit hospital sector (which is 85-90% statutory insurance funded) grew from 2009 to 2015 at half the rate of 2003-2008: an average of 2.4% CAGR versus 5.1% before the economic downturn. The total hospital budget including public hospitals shows a similar trend.
In Italy, where 2008 is the first year data is available, a swift drop in private healthcare spend in 2009 and stagnancy in 2010 can be seen. These falls are despite public healthcare spending growing barely above 1% over the period and often falling. Patients did dip into their pockets substantially in 2011, spending 7.4% more than the previous year partially due to public spend falling 1.3% that year.
Operators with figures going back far enough are Hirslanden in Switzerland and Rhoen in Germany. Rhoen’s organic growth figures – used because it made a huge acquisition during the period – were on an upward trend in the years to 2008 before starting a downward one in the years after. Even including M&A, pre-crisis Hirslanden grew 8-12%, post-crisis 4-8%.
We would welcome your thoughts on this story. Email your views to Cameron Murray or call 0207 183 3779.
