search results for 
Logo

Health care industry

The health care sector is one of the world’s largest industries. It is relatively insensitive to economic fluctuations compared to other sectors and has posted above-average growth over the past several years.

The main growth factors are:

  • rising medical needs deriving from aging populations
  • the growing number of chronically ill or multimorbid patients
  • stronger demand for innovative products and therapies
  • advances in medical technology
  • growing health consciousness, which increases the demand for health care services and facilities

In the emerging countries drivers are:

  • expanding availability and correspondingly greater demand for basic health care
  • increasing national incomes and hence higher spending on health care

At the same time, the cost of health care is rising and claiming an ever-increasing share of national income. Health care spending averaged 9.5% of GDP in the OECD countries in 2009, with an average of US$3,223 spent per capita. The United States had the highest per capita spending (US$7,960), as in previous years, followed by Norway (US$5,352) and Switzerland (US$5,144). Germany ranked ninth among the OECD countries with per capita spending of US$4,218.

HEALTH CARE SPENDING AS % OF GDP


in % 2009 2000 1990 1980 1970
Source: OECD Health Data 2011
USA 17.4 13.6 12.2 9.0 7.1
France 11.8 10.1 8.4 7.0 5.4
Germany 11.6 10.3 8.3 8.4 6.0
Switzerland 11.4 10.2 8.2 7.3 5.4

in % 2009 2000 1990 1980 1970
Source: OECD Health Data 2011
USA 17.4 13.6 12.2 9.0 7.1
France 11.8 10.1 8.4 7.0 5.4
Germany 11.6 10.3 8.3 8.4 6.0
Switzerland 11.4 10.2 8.2 7.3 5.4

Per capita health care spending in the OECD countries grew at an average annual rate of 4% between 2000 and 2009. In Germany, per capita health care spending increased by 2% per year over the same period. This is one of the smallest increases among all OECD countries during this period. The relatively slow growth in health care spending in Germany is due in particular to the introduction of cost-containment measures.

The public sector is the main source of health funding in all OECD countries, except Chile, the United States and Mexico, where public spending was below 50% in 2009. In Germany, 76.9% of health spending was funded by public sources in 2009, above the average of 71.7% in the OECD countries, but below the over 80% public share in the Czech Republic, Japan and Luxembourg (both in 2008), New Zealand as well as several Nordic countries, such as Sweden.

Most of the OECD countries have enjoyed large gains in life expectancy over the past decades thanks to improved living standards, public health interventions, and progress in medical care. In 2009, the average life expectancy in the OECD countries was 79.5 years. In Germany, life expectancy of 80.3 years was nearly a year more than the OECD average. Japan has the highest life expectancy of all OECD countries with 83 years.

Health care structures are being reviewed and cost-cutting potential identified in order to contain the steadily rising health care expenditures. However, such measures cannot compensate for the cost pressures arising from medical advances and demographic change. Market-based elements are increasingly being introduced in the health care system to create incentives for cost and quality-conscious behavior. Overall treatment costs shall be reduced through improved quality standards and optimized medical processes. In addition, ever greater importance is being placed on disease prevention and innovative reimbursement models linked to treatment quality standards.

In the United States, the government passed a sweeping health care reform in 2010. It is planned to phase-in health insurance coverage for the roughly 46 million people – about 15% of the population – who are currently not insured. Basic health insurance is to be compulsory from 2014 onwards. Larger companies must offer their employees health insurance coverage, while small companies and low-income households will receive government assistance to take out health insurance. Several lawsuits have been filed in federal courts challenging the constitutionality of the reform, some of which upheld it while others declared portions of it a violation of the U.S. Constitution. A decision of the United States Supreme Court is expected in 2012.

Sources: OECD Health Data 2011; German Bundestag, Research Papers, Health Care Reform in the USA, June 2010

Our most important markets developed as follows:

The dialysis market

In 2011, the value of the global dialysis market was approximately US$75 billion, equivalent to growth of 4% in constant currency. The market for dialysis care (including renal pharmaceuticals) accounted for approximately US$62 billion and the market for dialysis products for about US$13 billion.

The number of dialysis patients worldwide increased by about 6% to around 2.2 million. The pie chart shows their regional distribution:

Prevalence, which is the number of people with terminal kidney failure treated per million population, differs widely from region to region, ranging from well below 100 to over 2,000 patients per million population (p. m. p.). Prevalence is highest in Taiwan with 2,850 p. m. p., followed by Japan with 2,520 p. m. p., and the United States with approximately 1,950 p. m. p. It averages about 1,050 in the 27 countries of the European Union. The far lower global average of approximately 400 p. m. p. is due, on the one hand, to differences in age demographics, distribution of renal risk factors (such as diabetes and hypertension), and genetic pre-disposition and cultural habit, such as nutrition. On the other hand, access to dialysis treatment is still limited in many countries. A great many individuals with terminal kidney failure do not receive treatment and are therefore not included in the prevalence statistics. A comparison of economic output and national prevalence rates suggests that access to treatment is restricted especially in countries where GDP per capita is less than US$10,000 per person per year. In countries with a higher GDP, there is no noticeable correlation between economic strength and prevalence. However, the generally rising global prevalence rate suggests that more and more people are receiving renal replacement therapy treatment over the years.

Dialysis care

Of the around 2.2 million patients receiving regular dialysis treatment in 2011, more than 89% are treated with hemodialysis, while about 11% choose peritoneal dialysis. The majority of hemodialysis patients are treated in dialysis clinics. There are about 31,700 dialysis clinics worldwide with an average of 70 hemodialysis patients per clinic.

The organization of the clinics varies significantly depending on whether the health systems in the individual countries are state-run or private: In the United States, most of the approximately 5,800 dialysis clinics are run privately, and only about 1% are publicly operated. By contrast, about 60% of the approximately 5,400 dialysis clinics in the European Union are publicly owned. In Japan, private nephrologists play a key role, treating about 80% of dialysis patients in their facilities.

In the United States, the market for dialysis care is already highly consolidated. Taken together, Fresenius Medical Care and the second largest provider of dialysis care − DaVita − treat about 66% of all U.S. dialysis patients. In 2011, Fresenius Medical Care maintained its market-leading position of approximately 33%.

Outside the United States, the markets for dialysis care are much more fragmented. Here, Fresenius Medical Care competes mainly with independent clinics and with clinics that are affiliated with hospitals. Fresenius Medical Care operates 1,081 dialysis clinics in about 40 countries and treats approximately 95,000 patients. Together, these represent by far the largest and most international network of dialysis clinics.

In 2011, the number of peritoneal dialysis patients worldwide was about 237,000. Fresenius Medical Care has a market share of about 19% (2010: 17%) according to sales. The increase in the market share is mainly a result of the acquisition of Gambro’s global peritoneal dialysis business, closed in December 2010. Fresenius Medical Care is the global No. 2 in this market after Baxter. In the United States, our market share was 41%.

Dialysis reimbursement systems differ from country to country and often vary even within individual countries. In the United States, the treatment costs for terminal kidney failure are covered by the public health insurers. The public health care programs, the Centers for Medicare & Medicaid Services (CMS), cover the medical services for the majority of all dialysis patients in the United States. In 2011, CMS reimbursements accounted for about 30% of Fresenius Medical Care’s revenues. Changes in the CMS rates or method of reimbursement therefore have a significant importance on our business in North America.

Dialysis products

In the dialysis products market, the most important products are dialyzers, hemodialysis machines, concentrates and dialysis solutions, and products for peritoneal dialysis. Fresenius Medical Care is the world market leader in dialysis products with a market share of about 33%, followed by Baxter with 19% and Gambro with 13%. These top three manufacturers serve about 65% of the market demand. Each of the other competitors, mainly from Japan, have a single-digit percentage market share.

Dialyzers are the largest product group in the dialysis market with a worldwide sales volume of around 211 million units in 2011. Around 93 million, or almost half, were produced by Fresenius Medical Care.

Of the approximately 73,000 new hemodialysis machines: that were brought onto the market in 2011, about 55% were from Fresenius Medical Care. In the United States, our most important business region, Fresenius Medical Care had a share of over 80% of the independent market in these two product segments. We define the independent market as all dialysis clinics that do not belong to the major dialysis care provider Fresenius Medical Care or DaVita. In 2011, China was our second largest market, where we sold more than 6,030 new hemodialysis machines. Over 49%, or almost half of all machines used in China, were produced by Fresenius Medical Care.

The market for infusion therapy and clinical nutrition, intravenously administered drugs, and medical devices

In the market for infusion therapy and clinical nutrition, therapies that offer high standards of health care paired with cost advantages are increasingly gaining importance in Central and Western Europe due to the general cost pressure. Studies show that, in cases of health or age-induced nutritional deficiencies, the administration of food supplements can reduce hospital costs by an average of €1,000 per patient – through shorter stays and less nursing care. At the time when they are admitted to hospital, at least 25% of all patients in Europe are suffering from nutritional deficiencies, or have an elevated risk of developing nutritional deficiencies. Much higher figures of 50 to 60% are reported for people who require nursing care, especially the elderly. The costs caused by healthinduced nutritional deficiencies are about €170 billion per year Europe-wide.

In Central and Western Europe, the total market for infusion therapy and clinical nutrition is growing at a low singledigit rate. Growth rates are in the high single to double digits in the emerging markets of Asia-Pacific, Latin America, and Eastern Europe.

Based on its own estimates, Fresenius Kabi considers its relevant market for infusion therapy and clinical nutrition (excluding the United States and Japan) to be about €9 billion.

We also expect the demand for generics to continue growing. Generic drugs are more advantageous from health economics aspects than original drugs because of their significantly lower price and they already make a vital contribution to health care today. In our view, and judged from today’s vantage point, the focus is mainly on the pricing of patented drugs and the prescription drugs segment in the pharmacy market.

The market for IV generics is characterized by moderate volume growth, steady price erosion, and fierce competition. Growth is mainly achieved through new generics that are brought to market when the original drug goes off-patent. In Europe and the United States, the market for IV generics is growing at a mid-single-digit rate. We expect the U.S. market for IV drugs that go off-patent from 2012 to 2022 to grow to approximately US$ 20 billion on a cumulative basis. These figures are based on the sales of the original drugs in 2010 and do not take account of the usual price erosions for generics. We therefore see considerable growth potential for generic drugs.

Based on its own estimates, Fresenius Kabi considers its relevant market for intravenously administered generics (without Japan) to be around €15 billion.

The market for medical devices for infusion therapy, IV drugs, and clinical nutrition is growing in Europe at midsingle- digit rates. Here, the main growth drivers are technical innovations that focus on application safety and therapy efficiency.


Sources: German Society for Nutritional Medicine (DGEM) 2009; IMS; Company research, market data refer to Fresenius Kabi’s relevant and addressable markets. Those are subject to annual volatility due to currency fluctuations and patent expiries of original drugs in the IV drug market, among others; German Federal Statistics Office

The German hospital market

The total volume for hospital treatment (excluding research and teaching) in Germany was about €77 billion in 2010. This was approximately one-fourth of total health care expenditures. Personnel costs account for about 61% of hospital costs, and material costs for 39%. Personnel and material costs rose by 3.6% each.

  2010 2009 2008 2007 2006 Change 2010/2009
1 Total costs, gross
Source: German Federal Statistics Office
Hospitals 2,064 2,084 2,083 2,087 2,104 -1.0%
Beds 502,749 503,341 503,360 506,954 510,767 -0.1%
Beds per 1,000 population 6.15 6.15 6.13 6.16 6.20 0%
Length of stay (days) 7.9 8.0 8.1 8.3 8.5 -1.3%
Number of admissions (millions) 18.03 17.82 17.52 17.18 16.83 1.2%
Average costs per admission in €1 4,432 4,327 4,146 4,028 3,932 2.4%

  2010 2009 2008 2007 2006 Change 2010/2009
1 Total costs, gross
Source: German Federal Statistics Office
Hospitals 2,064 2,084 2,083 2,087 2,104 -1.0%
Beds 502,749 503,341 503,360 506,954 510,767 -0.1%
Beds per 1,000 population 6.15 6.15 6.13 6.16 6.20 0%
Length of stay (days) 7.9 8.0 8.1 8.3 8.5 -1.3%
Number of admissions (millions) 18.03 17.82 17.52 17.18 16.83 1.2%
Average costs per admission in €1 4,432 4,327 4,146 4,028 3,932 2.4%

The number of hospitals in 2010 was 2,064 (2009: 2,084). After declining for years, the number of beds only fell slightly to 502,749 (2009: 503,341). Over the last five years the number of beds has declined at an average annual rate of 0.4%. Nonetheless, with 6.15 beds per 1,000 population, Germany is still well above the OECD average of 3.5 (2009). The average stay of a patient in an acute care clinic in Germany fell slightly over the same period and was 7.9 days in 2010 (2009: 8.0 days).

On the other hand, the number of inpatient admissions has increased. This is largely due to changing demographics. In 2010, the number of admissions increased by about 216,000 or 1.2% compared to 2009 and increased for the first time to more than 18 million. This is equivalent to 221 admissions per 1,000 population (2009: 218). Other countries rank well below the German level. In the years 2006 to 2010, the number of admissions in Germany has risen at an average annual rate of 1.7%. The average costs per admission have increased by 3.0% on average over the five years leading up to 2010.

According to a survey by the German Hospital Institute (DKI), the economic situation at many hospitals in Germany remains difficult: 48.8% of the hospitals expect to earn a surplus in 2011 (2010: 56%), 20.6% expect to make a loss (2010: 16%), and 30.6% expect to break even (2010: 28%). Of the clinics surveyed, about 41% assess their economic situation as good and 18% as unsatisfactory. The other 41% saw the situation as mixed. Consequently, the assessment of the economic situation has worsened even further compared to the previous year.

Many hospitals are facing a difficult economic and financial situation as well as significant investment needs. This is due in large part to an investment backlog that has accumulated because the federal states have not met their statutory obligation to finance necessary investments and major maintenance measures sufficiently in the past due to budget constrains. Moreover, the investment needs are mainly driven by technological advances, higher quality requirements, and necessary modernizations. The Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI) estimates that the investment backlog at German hospitals is about €14 billion.

According to the German Federal Statistics Office, the privatization trend in the German hospital market continued in 2010, albeit on a modest scale, with the share of private hospital beds rising to 16.9% (2009: 16.6%). However, as the chart shows, with a share of 48.6%, the bulk of the hospital beds continued to be in the public sector (2009: 48.7%).

Source: German Federal Statistics Office

In 2011, however, the privatization of hospitals increased once again: According to our research, about €850 million in hospital transaction revenues were acquired in 2011, which was a significant increase compared to the previous year (2010: €230 million).

Quality is increasingly becoming a key competitive factor for the hospital market. Transparency and comparability of the treatments for the patients and their doctors will play an ever more decisive role.

In 2010 the post-acute care market in Germany comprised a total of 1,237 clinics, almost the same as the year before. The number of beds was 171,724 (2009: 171,489). 56.1% (2009: 55.8%) of the clinics were private clinics. An almost unchanged 25.9% (2009: 26.1%) were independent non-profit clinics and the share of public clinics decreased to 17.9% (2009: 18.1%). Private clinics accounted for 67.0% of the total number of post-acute care beds (2009: 66.8%). Independent non-profit clinics and public clinics accounted for 15.8% (2009: 16.0%) and 17.2% (2009: 17.3%), respectively. The total number of admissions in Germany decreased by about 30,800 admissions to 1.97 million. The average length of stay decreased to 25.4 days (2009: 25.5 days).


Sources: German Hospital Institute (DKI) – Krankenhaus Barometer 2011, OECD Health Data 2011, RWI, Krankenhaus Rating Report 2011

The market for engineering and services for hospitals and other health care facilities

The market for engineering and services for hospitals and other health care facilities is very country-specific and depends to a large extent on factors such as public health care policies, government regulation, levels of privatization, economic conditions, and demographics.

In markets with established health care systems and mounting cost pressure, the challenge for hospitals and other health care facilities is to increase their efficiency. Here, demand is especially high for sustainable planning and energy-efficient construction, optimized hospital processes and the outsourcing of medical-technical support services to external specialists. This enables hospitals to concentrate on their core competency − treating patients. In emerging markets the focus is on building and developing infrastructure and improving the level of health care.

QUICKFINDER

History

Tools