Despite high fixed costs and increasing competition, hospitals have shown steady historical growth in part because of government assistance through legislation. Since most U.S. hospitals are not-for-profit and in rural settings where the hospital may be the only source of medical care for many miles around, the government has an unwritten obligation to ensure they are financially able to operate, according to an article on the Forbes magazine website.
Therefore, any hospital that can maximize its profits by running efficiently through cost controls and garner market share by offering a better service and productcan grow faster than its peers, said Kristina Zucchi in her commentary.
The stock prices of companies operating healthcare facilities are primarily driven by the Medicare reimbursement level. When Medicare makes changes to its payments, it often impacts profits and share prices to a greater degree than expected, both on the upside and downside, the article said.
Other drivers include cost growth – the largest components are labor and supply costs, and a hospital’s ability to contain them.
Read the article.
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