The global health-care market
Abstract
The global health-care market has increased over the recent years, accruing a compound annual growth rate of 7.3% since the year 2014. With the rising consumer demands, a vast opportunity for expansion of the Kaiser Permanente organization, which is a key stakeholder in the health-care market. However, Kaiser Permanente faces competition from Mayo Clinic, Dignity Health, Collective Health, Bright health, HF Healthcare, and Health Net. The increased competition in the health-care market has increased over the years as service providers compete to meet the rising consumer demands through the reduction in cost, improvement in the quality of service delivery, and increased technological innovation. Kaiser Permanente has therefore initiated performance improvement systems, which has streamlined service delivery, increased profitability, increased efficiency, and also obtained a competitive advantage against its formidable competitors.
Kaiser Permanente company is made up of two organizations, Kaiser Foundation Health Plans, and Permanente Medical Groups, which work hand-in-hand to provide medical insurance cover and health care services to its members. The organization continues to invest heavily in advanced medical equipment and as well as improvement in the digital platform service delivery through electronic record systems. The organization has also endeavored to provide health care services to the local community as well as training of locals who play a major role in providing the necessary skilled workforce in the health care sector.
The success and profitability of the organization are dependent on both socio and economic factors. The implication of these factors plays a major role in the overall outcome of the company in terms of supply of necessary task force, affecting the market demand for health-care products and hence influence the overall health market outcomes. Based on the socio-economic factors, the Kaiser Permanente organization provides health care services to both high-income individuals as well as to low-income individuals hence maintaining its high customer base in its operating states.
Based on macro-economic indicators, the increase in the GDP of the US has positively led to an increase in the company’s income. There is a direct relationship between an increase in GDP and an increase in income; this is because an increase in the GDP increases the customer expenditure as well as health-care expenses. However, in order to give a clear future projection, another macro-economic indicator, the unemployment rate, is analyzed. The short-term projection shows that the current economic state is not feasible for business expansion. However, the long-term projection supports business expansion.
Introduction
Various concerns have arisen from the Affordable Care Act of 2010, whereby changes in the payment were thought to reduce the number of Medicare Advantage enrollment. However, the number of enrollments has continued to increase. By the year 2014, the enrollment increased by 41% percent, the enrollment occurring across all states. The main purpose of medicare advantage plans is to reduce the out-of-pocket costs for health-care services. In the year 2018-2019, the enrollment increased by approximately 8% (1.6 million). The growth rate in the numbers of enrollment has been consistent in the previous year, with projections that the enrollment will increase by approximately 47% by the year 2029. with the rising number of enrollment, the Kaiser Permanente with about 7% of the total medicare advantage enrollment provides to expand its operations and have a competitive advantage.
Background and Products
Company’s market sector and industry
The global health-care market attained a value of approximately $8452 billion in the year 2018; this is after accruing a compound annual growth rate of 7.3% from the year 2014, with a projection of the market value reaching of $11908.9 billion by the year 2022 (Marsha, Jacobson, Anthony, and Neuman, 2014). the positive growth has been attributed to the rising population of the elderly, diversification of health insurance worldwide, rapid economic growth as well as a decline in oil prices. Other factors leading to the rapid growth in the health-care sector are technological evolution and an increase in the incidences of diseases as a result of sedentary lifestyles. The health-care market is highly divided, with rising numbers of small health-care providers. The health-care market is one of the most profitable industries. Kaiser Permanente faces competition from Mayo Clinic, Dignity Health, Collective Health, Bright health, HF Healthcare, and Health Net. Increased competition in the health-care market has increased over the years as service providers compete to meet the rising consumer demands through a reduction in cost, improvement in the quality of service delivery, and increased technological innovation. Kaiser Permanente initiated a performance improvement system with the main aim being the improvement of quality, safety, and efficient service delivery (Jacobson, Freed, Anthony, and Tricia, 2019). Through this Kaiser, Permanente has given its members access to all health-care services they may need such as, personal physicians, hospital care, laboratory services, maternal care services, and cancer treatment at a lower price. In addition, the main company focus is not treatment alone but rather ensuring the overall well-being of its members, which helps in cutting costs and prevents life-threatening conditions. Through innovation and technological integration, members and specialists or caregivers have access to the company’s electronic health records. Members can access their health records online, at any time. Similarly, doctors can access lab results, order prescriptions, and also make appointments that have improved service delivery and increased service delivery efficiency. Since Kaiser Permanente’s health plan is a non-profit organization, its priority is members’ health, where most of the resources are channeled towards providing health care, building health facilities, and support local communities.
Kaiser Permanente company is made up of two organizations:
Kaiser Foundation Health Plans which provide prepaid health plans and insurance to the members. The health plan is non-profit and provides a tax-exemption for the profit of medical groups.
Permanente Medical groups, they provide medical care for Kaiser Foundation Health Plan members.
Assessment of Company and products
Social and economic factors affect the livelihood and health status of individuals. These factors affect the healthy decisions and choices people make in regard to, purchasing medical care, housing as well as stress management. The social and economic opportunities available, such as employment, education form a strong foundation towards the achievement of good health and healthy living standards. Social and economic factors have a great impact on health over time. Therefore, the improvement of these factors leads to improved health outcomes (Friedman & Banegas, 2018).
One key economic factor that affects the health care market is income. Income provides economic strength, which plays a significant role in determining the health decisions and shape the choices we make. The source of income in relation to health-care can vary from employment, government assistance programs, or retirement benefit plans. With high and a stable source of income, families, and individuals have the ability to purchase insurance and medical care, and also have the opportunity to make healthy lifestyle decisions. According to Business Apac, Kaiser Permanente aims at providing equal opportunities by offering economic support in local communities. Through this, the organization hire, build facilities, and partner with the local communities, in a move that has helped in strengthening local economic opportunity. The move has helped in improving the purchasing power of the products offered by the organization, hence the rise in the demand for health care services.
Similarly, through the provision of jobs and employment to local communities, there is a continuous supply of the necessary workforce, which helps to meet the rising need for health care personnel. The construction of new facilities locally, neighborhood revitalization, and community engagement has helped in improving local awareness (2018 Annual Report). Based on the financial structure of the organization, about 3.5% of the organization’s members are beneficiaries of the Medicaid program. The organization is devoted to providing health care services to low income and unemployed individuals with 5% of the admissions to community hospitals belonging to uninsured people within the local community.
Kaiser Permanente continues to invest more in sophisticated advanced technologies, which has allowed convenient and quality service delivery. Kaiser has an integrated electronic health record, where customers can obtain their personal medical information. Similarly, through digital platforms, members can be sessions with their doctors, and doctors can obtain laboratory results and give prescriptions online. The digital integration has helped in streamlining service delivery and reduction in time taken to serve an individual patient, hence increased profitability (Schilling, Dearing, Staley, Harvey, Fahey, & Kuruppu, 2011). The organization has also invested heavily in advanced health care equipment which provides services such as x-ray imaging, cancer screening, and also advanced laboratory machines, which provides health care service to its members and local communities at a lower price, and maximized profits.
Economic outlook
GDP
The nature and the level of a country’s economy has a great impact on the health status of the citizens of the country. Similarly, the health of the citizens has a greater impact on the productivity and economic development of a country. These two forces are interdependent on each other and hence act as major targets towards the achievement of socio-economic development. Kaiser Permanente’s organization has achieved a major breakthrough in terms of profitability over the last years. According to Medcity News (2020), the net income of the organization in the year 2019 was almost triple the net income made by the company in the year 2018 ( Elise Reuter, 2020). the high increase in net income is observed during a time at which the country recorded a 2.30% growth rate in the GDP in the fourth quarter of 2019. As much as the relationship between health care spending and economic growth in terms of GDP is complex, it is clear that rapid economic growth and local prosperity has a positive impact on health care expenditure. With increased growth rate, it is clear; there is an increase in rising health expenditure, which leads to increased profitability.
The macro-economic indicator that provides some reassurance or points to future growth
The unemployment rate has a negative effect on overall health, not only during the time of unemployment but also in the long run. An increase in unemployment rates reduces health care spending and decrease in utilization. It is clear that periods of economic contractions lead to a reduction in health care utilization due to a decrease in the demand for medical services (Norström, Waenerlund, Lindholm, Nygren, Sahlén, & Brydsten, 2019). With the current corona epidemic and economic contractions, millions of jobs have been lost, which has led to a decrease in the unemployment rates in the first quarter of 2020. The implications of unemployment are clear as the Kaiser Permanente Organization also recorded a $1.1billion net loss in the first quarter of 2020, according to MedCity News(2020), the endpoint of the epidemic is not clear. Therefore the rates of job loss might increase, plunging the country into tough economic times. The effects of the epidemic may be detrimental, as its gonna take time for the country to fully recover economically. In the short-term perspective, the rising unemployment rate will have negative impacts on the organization. However, in the long-term perspective, there is room for further development as there is a rapid growth in the demand for health-care services. Based on this, the company should aim at expanding its operations in the long-run after economic recovery.
Conclusion
The health-care market has continued to grow over the last decade, providing I vast customer base and opportunities for business expansion. The competitive health-care market also provides a room for innovation and technological improvement, for the Kaiser Permanente Organization, which will maximize the company’s profits as well as possess a competitive advantage. Finally, with the current economic state in the US, short-term expansion operations may not be feasible; however, in the long-run, there is an opportunity for business expansion to meet the rising consumer demands.
References
Business Apac. The prominence of Competition in the Healthcare Industry. Retrieved from https://www.businessapac.com/prominence-of-competition-in-the-healthcare-industry/
Elise Reuter (2020, Feb 10). Kaiser Permanente Tripled Income in 2019. Medcity News. Retrieved from https://medcitynews.com/2020/02/kaiser-permanente-tripled-income-in-2019/
Elise Reuter (2020, May 11). Kaiser Sees $1.1B net loss in the First Quarter, Driven by Investment. Retrieved https://medcitynews.com/2020/05/kaiser-sees-1-1b-net-loss-in-first-quarter-driven-by-investments/?rf=1
Friedman, N. L., & Banegas, M. P. (2018). Toward addressing social determinants of health: a health care system strategy. The Permanente Journal, 22.
Gretchen Jacobson, Meredith Freed, Anthony Damico, and Tricia Neuman( 2019, Jun 6). A Dozen Fact About Medicare Advantage in 2019. Retrieved from https://www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advantage-in-2019/#:~:text=Between%202018%20an202019%2C%20total,about%2047%20percent%20by%202029.
Kaiser Permanente. 2018 Annual Report. Retrieved from https://about.kaiserpermanente.org/who-we-are/annual-reports
Marsha Gold, Gretchen Jacobson, Anthony Damico, and Tricia Neuman ( 2014, May 1). Medicare Advantage 2014 Spotlight: Enrollment Market Update. KFF Org. Retrieved from https://www.kff.org/report-section/medicare-advantage-2014-spotlight-enrollment-market-update-overall-trends/
Norström, F., Waenerlund, A. K., Lindholm, L., Nygren, R., Sahlén, K. G., & Brydsten, A. (2019). Does unemployment contribute to poorer health-related quality of life among Swedish adults?. BMC public health, 19(1), 457.
Schilling, L., Dearing, J. W., Staley, P., Harvey, P., Fahey, L., & Kuruppu, F. (2011). Kaiser Permanente’s performance improvement system, part 4: creating a learning organization. The joint commission journal on quality and patient safety, 37(12), 532-AP5.