In August, we reported that US Government data reported Healthcare as an industry was again leading in job growth in the U.S. economy. “Demographics is history” as Steve Sammartino wrote in “The Great Fragmentation.” For years, we’ve been noting in our blogs that there are few industries that have grown and expanded in both good and bad times, and even more relative to GDP than healthcare has since 1965.
Some could argue that technology labor has also been growing dramatically since the same time, but this is not totally correct. Note the healthcare jobs growth relative to information technology’s contraction in the August 2023 chart below from the Bureau of Labor Statistics:
This chart was issued Friday, September 1, 2023, and it shows that total employment for July 2023 grew by 187,000 jobs, and the US unemployment rate increased to 3.9%. To be fair, it is possible that the actors guild strikes in Hollywood, and most obviously in transportation, were affected by the bankruptcy of Yellow Corporation, a major U.S. inter – and intrastate trucking company; however, there are always exceptions.
As new companies enter medical delivery, these changes are not that obvious to most. In the past, we have also written about the big box companies like Walmart entering clinical operation, as well as Amazon first entering healthcare product delivery, then expanded into healthcare technology, and finally entering clinical operation with their purchase One Medical for $3.9 Billion. I must admit that I don’t see Amazon’s real strategy because providing medical care to Medicare patients in the short run will be complicated.
We have recently seen both CVS and Walgreen dive deep into clinical operations with very complicated results. There are very small margins in healthcare, razor thin in some respects, and getting thinner by the year with CMS cutting Medicare reimbursements. As we see from Amazon, it takes a large investment to obtain a recognizable fraction of the market, and there can be some big losses if operated like most other businesses.
Also in the headline last week was the resignation of Roz Brewer, the CEO of Walgreens. The headline continues “company seeks chief with deep healthcare experience.”[1] The challenge they will have is finding a ‘CEO’ with deep managed care experience. Amazon, CVS, and Walgreens have not just gone deep in healthcare but deep in managed care, and in particular, Medicare Advantage that provides care to ever larger (and more demanding) population of active 65+ individuals. That skillset exists in a very narrow field that excludes most with experiences in managing hospitals, diagnostics, laboratories, pharmaceuticals, as well as devices and most technologies.
A great video available from the Wall Street Journal headlines is How Amazon, CVS and Walgreens Are Tapping Into the $4 Trillion Healthcare Market:
The takeover of the U.S. economy by healthcare will continue, and ironically, it will provide a financial stability that is 100% domestic; the envy of many advanced economies that lack this huge economic driver. We continue to see an amazing opportunity for those that really understand healthcare. It is growing and profitable in the right segments with skilled management. In our series of blogs on Artificial Intelligence, we provide a great example of how healthcare can be changed with a narrow approach that has the multiple benefits of improving the quality of patients’ lives, generating profits, and advancing the science.
-Noel J. Guillama, Chairman
[1] https://www-cnbc-com.cdn.ampproject.org/c/s/www.cnbc.com/amp/2023/09/01/walgreens-ceo-roz-brewer-steps-down.html