Bain research shows US healthcare industry profit pools will grow at a 5% annual clip over the next five years to $603 billion in 2024, up from $477 billion in 2019. Medtech and healthcare information technology (IT) profit pools will grow will grow the fastest during that span. Rising disease rates, new innovative therapies, increased enrollment in Medicare Advantage and continued (though slowing) growth in pricing will more than offset ongoing government reimbursement pressures and consolidation in some sectors.
- Pharma: Blockbuster specialty drugs and new technologies will fuel revenue growth and expand the profit pool by 35% to $170 billion by 2024.
- Medtech: Innovation in premium products and increased focus on category leadership will expand the profit pool by 38% to $72 billion.
- Healthcare IT: A small portion of the profit pool today, healthcare IT will be the fastest-growing segment, doubling over the next five years to $28 billion, propelled by consumer IT and data and analytics investments throughout the industry.
- Providers: An aging population and a rise in chronic diseases will increase provider revenues, but declining reimbursement rates and a shift to outpatient care sites will squeeze operating margins and limit profit-pool growth to 9% over the next five years.
- Payers: Vertical integration and expansion of services should improve margins, and continued growth in Medicare Advantage will further help to increase the profit pool 36% to $117 billion.
Tim van Biesen leads Bain & Company’s global Healthcare practice. He is based in the firm’s New York office. Joshua Weisbrod leads Bain’s Americas Healthcare practice and is based in the New York office.