The impact of the recession on U.S. hospitals may present problems for the $47 billion in vitro diagnostic industry, says a new report from a healthcare market research publisher.
Hospitals are the primary purchasers of in vitro diagnostics equipment and reagents, but in the current bad economic climate they are facing cash crunches, reduced patient admissions and unpaid bills. As a result, growth for diagnostic companies will be more challenging over the next few years, according to "In Vitro Diagnostics in a Recessionary Economy," from Kalorama Information.
Many hospitals and health systems have seen their stock portfolios shrink in recent months and have had a difficult time obtaining credit to finance operations. A recent survey from the American Hospital Association indicated that the majority of hospitals are seeing a moderate or significant decline in their financial health in 2009 versus the same period in 2008.
Forty percent of hospitals expected losses in the first quarter of 2009. Recent employment information from the Bureau of Labor Statistics confirms that hospital employment is no longer growing and that the number of mass layoffs for hospitals reported in February was more than double what it was a year ago.
Six out of ten hospitals nationally are seeing a greater proportion of patients without insurance coming through their emergency departments.
"The health of the hospital industry is obviously related to the success of the diagnostic industry, and right now its health is not good," said Shara Rosen, lead diagnostics analyst for Kalorama Information and author of the study. "Hospital financing is in jeopardy, income is down and cash is strained. For the IVD industry, this could mean fewer purchasers of equipment and reagents."
According to Rosen, consolidation is also possible since weaker hospitals may not survive and will be acquired, while larger hospitals will seek to acquire smaller entities instead of paying to expand existing facilities. Such consolidation will further erode the customer base for diagnostic products.
Nevertheless, Rosen predicts steady - but modest - growth for the diagnostics industry, although she cautions that grandiose expansion plans may be thwarted and potential new industry entrants intimidated.
There has already been downsizing and cost cutting in the industry, Rosen noted. She thinks government programs and emerging markets will balance out downward sales to some extent.
"So much of the IVD market is still critical to the basic investigation of a disease that it's hard to imagine a cutback in those core areas," Rosen said.