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The healthcare industry (also called the medical industry or health economy) is an aggregation and integration of sectors within the
economic system An economic system, or economic order, is a system of Production (economics), production, resource allocation and Distribution (economics), distribution of goods and services within a society or a given geographic area. It includes the combinati ...
that provides goods and services to treat patients with curative, preventive, rehabilitative, and
palliative care Palliative care (derived from the Latin root , or 'to cloak') is an interdisciplinary medical caregiving approach aimed at optimizing quality of life and mitigating suffering among people with serious, complex, and often terminal illnesses. Wit ...
. It includes the generation and commercialization of goods and services lending themselves to maintaining and re-establishing health. The modern healthcare industry includes three essential branches which are services, products, and finance and may be divided into many sectors and categories and depends on the interdisciplinary teams of trained professionals and paraprofessionals to meet health needs of individuals and populations.HEALTH PROFESSIONS
/ref> The healthcare industry is one of the world's largest and fastest-growing industry (economics), industries. Consuming over 10 percent of
gross domestic product Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
(GDP) of most
developed nations A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastruct ...
, health care can form an enormous part of a country's economy. U.S. health care spending grew 4.6 percent in 2019, reaching $3.8 trillion or $11,582 per person.  As a share of the nation's Gross Domestic Product, health spending accounted for 17.7 percent. The per capita expenditure on health and pharmaceuticals in OECD countries has steadily grown from a couple of hundred in the 1970s to an average of US$4'000 per year in current purchasing power parities.


Backgrounds

For the purpose of finance and management, the healthcare industry is typically divided into several areas. As a basic framework for defining the sector, the United Nations
International Standard Industrial Classification The International Standard Industrial Classification of All Economic Activities (ISIC) is a United Nations industry classification system. Wide use has been made of ISIC in classifying data according to kind of economic activity in the fields of emp ...
(ISIC) categorizes the healthcare industry as generally consisting of: # Hospital activities; # Medical and dental practice activities; # "Other
human health Health, according to the World Health Organization, is "a state of complete physical, mental and social well-being and not merely the absence of disease and infirmity".World Health Organization. (2006)''Constitution of the World Health Organiza ...
activities". This third class involves activities of, or under the supervision of, nurses, midwives, physiotherapists, scientific or diagnostic laboratories, pathology clinics, residential health facilities, or other
allied health profession Allied health professions are health care professions distinct from optometry, dentistry, nursing, medicine, and pharmacy. They provide a range of diagnostic, technical, therapeutic, and support services in connection with health care. Definitio ...
s, e.g. in the field of optometry, hydrotherapy, medical massage, yoga therapy, music therapy, occupational therapy, speech therapy, chiropody, homeopathy, chiropractic, acupuncture, etc. The
Global Industry Classification Standard The Global Industry Classification Standard (GICS) is an industry taxonomy developed in 1999 by MSCI and Standard & Poor's (S&P) for use by the global financial community. The GICS structure consists of 11 sectors, 24 industry groups, 69 industrie ...
and the
Industry Classification Benchmark The Industry Classification Benchmark (ICB) is an industry classification taxonomy launched by Dow Jones and FTSE in 2005 and now used by FTSE International and STOXX. It is used to segregate markets into sectors within the macroeconomy. The I ...
further distinguish the industry as two main groups: # healthcare equipment and services; and #
pharmaceuticals A medication (also called medicament, medicine, pharmaceutical drug, medicinal drug or simply drug) is a drug used to diagnose, cure, treat, or prevent disease. Drug therapy (pharmacotherapy) is an important part of the medical field and rel ...
,
biotechnology Biotechnology is the integration of natural sciences and engineering sciences in order to achieve the application of organisms, cells, parts thereof and molecular analogues for products and services. The term ''biotechnology'' was first used b ...
and related
life sciences This list of life sciences comprises the branches of science that involve the scientific study of life – such as microorganisms, plants, and animals including human beings. This science is one of the two major branches of natural science, the ...
. The healthcare equipment and services group consists of companies and entities that provide medical equipment, medical supplies, and healthcare services, such as hospitals, home healthcare providers, and
nursing home A nursing home is a facility for the residential care of elderly or disabled people. Nursing homes may also be referred to as skilled nursing facility (SNF) or long-term care facilities. Often, these terms have slightly different meanings to in ...
s. The latter listed industry group includes companies that produce biotechnology, pharmaceuticals, and miscellaneous scientific services. Other approaches to defining the scope of the healthcare industry tend to adopt a broader definition, also including other key actions related to health, such as education and training of health professionals, regulation and management of health services delivery, provision of
traditional A tradition is a belief or behavior (folk custom) passed down within a group or society with symbolic meaning or special significance with origins in the past. A component of cultural expressions and folklore, common examples include holidays or ...
and complementary medicines, and administration of
health insurance Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among ma ...
.


Providers and professionals

A
healthcare provider A health care provider is an individual health professional or a health facility organization licensed to provide health care diagnosis and treatment services including medication, surgery and medical devices. Health care providers often receive ...
is an institution (such as a hospital or clinic) or person (such as a physician, nurse,
allied health profession Allied health professions are health care professions distinct from optometry, dentistry, nursing, medicine, and pharmacy. They provide a range of diagnostic, technical, therapeutic, and support services in connection with health care. Definitio ...
al or
community health worker A community health officer is a member of a community who is chosen by community members or organizations to provide basic health care, health and medical care within their community, and is capable of providing preventive, promotional and rehabilit ...
) that provides preventive, curative, promotional, rehabilitative or palliative care services in a systematic way to individuals, families or communities. The
World Health Organization The World Health Organization (WHO) is a specialized agency of the United Nations responsible for international public health. The WHO Constitution states its main objective as "the attainment by all peoples of the highest possible level of h ...
estimates there are 9.2 million physicians, 19.4 million nurses and midwives, 1.9 million dentists and other dentistry personnel, 2.6 million pharmacists and other pharmaceutical personnel, and over 1.3 million community health workers worldwide, making the health care industry one of the largest segments of the workforce. The medical industry is also supported by many professions that do not directly provide health care itself, but are part of the management and support of the
health care system Health, according to the World Health Organization, is "a state of complete physical, Mental health, mental and social well-being and not merely the absence of disease and infirmity".World Health Organization. (2006)''Constitution of the World H ...
. The incomes of managers and administrators,
underwriters Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liabilit ...
and
medical malpractice Medical malpractice is a legal cause of action that occurs when a medical or health care professional, through a negligent act or omission, deviates from standards in their profession, thereby causing injury or death to a patient. The negligen ...
attorneys, marketers, investors and shareholders of for-profit services, all are attributable to
health care costs Health, according to the World Health Organization, is "a state of complete physical, mental and social well-being and not merely the absence of disease and infirmity".World Health Organization. (2006)''Constitution of the World Health Organiza ...
. In 2017, healthcare costs paid to hospitals, physicians,
nursing home A nursing home is a facility for the residential care of elderly or disabled people. Nursing homes may also be referred to as skilled nursing facility (SNF) or long-term care facilities. Often, these terms have slightly different meanings to in ...
s,
diagnostic Diagnosis is the identification of the nature and cause of a certain phenomenon. Diagnosis is used in many different disciplines, with variations in the use of logic, analytics, and experience, to determine " cause and effect". In systems engine ...
laboratories,
pharmacies Pharmacy is the science and practice of discovering, producing, preparing, dispensing, reviewing and monitoring medications, aiming to ensure the safe, effective, and affordable use of medicines. It is a miscellaneous science as it links healt ...
,
medical device A medical device is any device intended to be used for medical purposes. Significant potential for hazards are inherent when using a device for medical purposes and thus medical devices must be proved safe and effective with reasonable assura ...
manufacturers and other components of the healthcare system, consumed 17.9 percent of the gross domestic product (GDP) of the United States, the largest of any country in the world. It is expected that the health share of the
Gross domestic product Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
(GDP) will continue its upward trend, reaching 19.9 percent of GDP by 2025. In 2001, for the
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...
countries the average was 8.4 percent with the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
(13.9%),
Switzerland ). Swiss law does not designate a ''capital'' as such, but the federal parliament and government are installed in Bern, while other federal institutions, such as the federal courts, are in other cities (Bellinzona, Lausanne, Luzern, Neuchâtel ...
(10.9%), and
Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
(10.7%) being the top three. US health care expenditures totaled US$2.2 trillion in 2006. According to Health Affairs, US$7,498 be spent on every woman, man and child in the United States in 2007, 20 percent of all spending. Costs are projected to increase to $12,782 by 2016. The government does not ensure all-inclusive health care to every one of its residents. However, certain freely supported health care programs help to accommodate a portion of people who are elderly, disabled, or poor. Elected law guarantees community to crisis benefits paying little respect to capacity to pay. Those without health protection scope are relied upon to pay secretly for therapeutic administrations. Health protection is costly and hospital expenses are overwhelmingly the most well-known explanation behind individual liquidation in the United States.


Delivery of services

The delivery of healthcare services—from
primary care Primary care is the day-to-day healthcare given by a health care provider. Typically this provider acts as the first contact and principal point of continuing care for patients within a healthcare system, and coordinates other specialist care t ...
to secondary and
tertiary Tertiary ( ) is a widely used but obsolete term for the geologic period from 66 million to 2.6 million years ago. The period began with the demise of the non-avian dinosaurs in the Cretaceous–Paleogene extinction event, at the start ...
levels of care—is the most visible part of any healthcare system, both to users and the general public. There are many ways of providing healthcare in the modern world. The place of delivery may be in the home, the community, the workplace, or in health facilities. The most common way is face-to-face delivery, where care provider and patient see each other in person. This is what occurs in general medicine in most countries. However, with modern telecommunications technology, ''in absentia'' health care or Tele-Health is becoming more common. This could be when practitioner and patient communicate over the phone,
video conferencing Videotelephony, also known as videoconferencing and video teleconferencing, is the two-way or multipoint reception and transmission of audio signal, audio and video signals by people in different locations for Real-time, real time communication. ...
, the internet, email,
text messages Text messaging, or texting, is the act of composing and sending electronic messages, typically consisting of alphabetic and numeric characters, between two or more users of mobile devices, desktops/ laptops, or another type of compatible comput ...
, or any other form of non-face-to-face communication. Practices like these are especial applicable to rural regions in developed nations. These services are typically implemented on a clinic-by-clinic basis. Improving access, coverage and quality of health services depends on the ways services are organized and managed, and on the incentives influencing providers and users. In market-based
health care system Health, according to the World Health Organization, is "a state of complete physical, Mental health, mental and social well-being and not merely the absence of disease and infirmity".World Health Organization. (2006)''Constitution of the World H ...
s, for example such as that in the United States, such services are usually paid for by the patient or through the patient's
health insurance Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among ma ...
company. Other mechanisms include government-financed systems (such as the
National Health Service The National Health Service (NHS) is the umbrella term for the publicly funded healthcare systems of the United Kingdom (UK). Since 1948, they have been funded out of general taxation. There are three systems which are referred to using the " ...
in the United Kingdom). In many poorer countries,
development aid Development aid is a type of aid, foreign/international/overseas aid given by governments and other agencies to support the economic, environmental, social, and political International development, development of developing countries. Closely-rel ...
, as well as funding through charities or volunteers, help support the delivery and financing of health care services among large segments of the population. The structure of healthcare charges can also vary dramatically among countries. For instance, Chinese hospital charges tend toward 50% for drugs, another major percentage for equipment, and a small percentage for healthcare professional fees. China has implemented a long-term transformation of its healthcare industry, beginning in the 1980s. Over the first twenty-five years of this transformation, government contributions to healthcare expenditures have dropped from 36% to 15%, with the burden of managing this decrease falling largely on patients. Also over this period, a small proportion of state-owned hospitals have been privatized. As an incentive to privatization, foreign investment in hospitals—up to 70% ownership has been encouraged.


Systems

Healthcare systems dictate the means by which people and institutions pay for and receive health services. Models vary based on the country with the responsibility of payment ranging from public (
social insurance Social insurance is a form of Social protection, social welfare that provides insurance against economic risks. The insurance may be provided publicly or through the subsidizing of private insurance. In contrast to other forms of Welfare, soci ...
) and private
health insurers Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among ma ...
to the consumer-driven by patients themselves. These systems finance and organize the services delivered by providers. A
two-tier system A two-tier system is a type of payroll system in which one group of workers receives lower wages and/or employee benefits than another.Sherman, Arthur W.; Bohlander, George W.; and Snell, Scott. ''Managing Human Sesources.'' Cincinnati, Ohio: South- ...
of public and private is common. The American Academy of Family Physicians define four commonly utilized systems of payment:


Beveridge model

Named after British economist and social reformer
William Beveridge William Henry Beveridge, 1st Baron Beveridge, (5 March 1879 – 16 March 1963) was a British economist and Liberal politician who was a progressive and social reformer who played a central role in designing the British welfare state. His 19 ...
, the Beveridge model sees healthcare financed and provided by a central government. The system was initially proposed in his 1942 report, ''Social Insurance and Allied Services—''known as the
Beveridge Report The Beveridge Report, officially entitled ''Social Insurance and Allied Services'' (Command paper, Cmd. 6404), is a government report, published in November 1942, influential in the founding of the welfare state in the United Kingdom. It was draft ...
. The system is the guiding basis of the modern British healthcare model enacted post-
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
. It has been utilized in numerous countries, including The United Kingdom, Cuba, and New Zealand. The system sees all healthcare services— which are provided and financed solely by the government. This single payer system is financed through national taxation. Typically, the government owns and runs the clinics and hospitals, meaning that doctors are employees of the government. However, depending on the specific system, public providers can be accompanied by private doctors who collect fees from the government. The underlying principal of this system is that healthcare is a fundamental human right. Thus, the government provides universal coverage to all citizens. Generally, the Beveridge model yields a low cost per capita compared to other systems.


Bismarck model

The Bismarck system was first employed in 1883 by Prussian Chancellor
Otto von Bismarck Otto, Prince of Bismarck, Count of Bismarck-Schönhausen, Duke of Lauenburg (, ; 1 April 1815 – 30 July 1898), born Otto Eduard Leopold von Bismarck, was a conservative German statesman and diplomat. From his origins in the upper class of J ...
. In this system, insurance is mandated by the government and is typically sold on a non-profit basis. In many cases, employers and employees finance insurers through payroll deduction. In a pure Bismarck system, access to insurance is seen as a right solely predicated on labor status. The system attempts to cover all working citizens, meaning patients cannot be excluded from insurance due to pre-existing conditions. While care is privatized, it is closely regulated by the state through fixed procedure pricing. This means that most insurance claims are reimbursed without challenge, creating low administrative burden. Archetypal implementation of the Bismarck system can be seen in Germany's nationalized healthcare. Similar systems can be found in France, Belgium, and Japan.


National health insurance model

The national insurance model shares and mixes elements from both the Bismarck and Beveridge models. The emergence of the National Health Insurance model is cited as a response to the challenges presented by the traditional Bismarck and Beveridge systems. For instance, it is difficult for Bismarck Systems to contend with aging populations, as these demographics are less economically active. Ultimately, this model has more flexibility than a traditional Bismarck or Beveridge model, as it can pull effective practices from both systems as needed. This model maintains private providers, but payment comes directly from the government. Insurance plans control costs by paying for limited services. In some instances, citizens can opt out of public insurance for private insurance plans. However, large public insurance programs provide the government with bargaining power, allowing them to drive down prices for certain services and medication. In Canada, for instance, drug prices have been extensively lowered by the Patented Medicine Prices Review Board. Examples of this model can be found in Canada, Taiwan, and South Korea.


Out-of-pocket model

In areas with low levels of government stability or poverty, there is often no mechanism for ensuring that health costs are covered by a party other than the individual. In this case patients must pay for services on their own. Payment methods can vary—ranging from physical currency, to trade for goods and services. Those that cannot afford treatment typically remain sick or die.


Inefficiencies

In countries where insurance is not mandated, there can be gaps in coverage—especially among disadvantaged and impoverished communities that can not afford private plans. The UK National Health System creates excellent patient outcomes and mandates universal coverage but also has large lag times for treatment. Critics argue that reforms brought about by the
Health and Social Care Act 2012 The Health and Social Care Act 2012c 7 is an act of the Parliament of the United Kingdom. It provided for the most extensive reorganisation of the structure of the National Health Service in England to date.'' BMJ'', 2011; 342:d408Dr Lansley's M ...
only proved to fragment the system, leading to high regulatory burden and long treatment delays. In his review of NHS leadership in 2015, Sir Stuart Rose concluded that "the NHS is drowning in bureaucracy."


See also

*
Acronyms in healthcare Acronyms are very commonly used in healthcare settings. They are formed from the lead letters of words relating to medications, organisations, procedures and diagnoses. They come from both English and Latin roots. Acronyms have been described as j ...
* Big Pharma *
Health administration Health administration, healthcare administration, healthcare management or hospital management is the field relating to leadership, management, and administration of public health systems, health care systems, hospitals, and hospital networks ...
*
Health care Health care or healthcare is the improvement of health via the prevention, diagnosis, treatment, amelioration or cure of disease, illness, injury, and other physical and mental impairments in people. Health care is delivered by health profe ...
* Health policy *
Health sciences The following outline is provided as an overview of and topical guide to health sciences: Health sciences are those sciences which focus on health, or health care, as core parts of their subject matter. Health sciences relate to multiple ac ...
* Health system *
Health economics Health economics is a branch of economics concerned with issues related to efficiency, effectiveness, value and behavior in the production and consumption of health and healthcare. Health economics is important in determining how to improv ...
*
Hospital network A hospital network is a public, non-profit or for-profit company or organization that provides two or more hospitals and other broad healthcare facilities and services. A hospital network may include hospitals in one or more regions within one o ...
*
Biotechnology Biotechnology is the integration of natural sciences and engineering sciences in order to achieve the application of organisms, cells, parts thereof and molecular analogues for products and services. The term ''biotechnology'' was first used b ...
*
Medicine Medicine is the science and practice of caring for a patient, managing the diagnosis, prognosis, prevention, treatment, palliation of their injury or disease, and promoting their health. Medicine encompasses a variety of health care pract ...
*
Medicare fraud In the United States, Medicare fraud is the claiming of Medicare health care reimbursement to which the claimant is not entitled. There are many different types of Medicare fraud, all of which have the same goal: to collect money from the Medicare ...
*
Pharmaceutical industry The pharmaceutical industry discovers, develops, produces, and markets drugs or pharmaceutical drugs for use as medications to be administered to patients (or self-administered), with the aim to cure them, vaccinate them, or alleviate symptoms. ...
**
List of pharmaceutical companies This listing is limited to those independent companies and subsidiaries notable enough to have their own articles in Wikipedia. Both going concerns and defunct firms are included, as well as firms that were part of the pharmaceutical industry ...
*
Philosophy of healthcare The philosophy of healthcare is the study of the ethics, processes, and people which constitute the maintenance of health for human beings. (Although veterinary concerns are worthy to note, the body of thought regarding their methodologies and pr ...
*
Unnecessary health care Unnecessary health care (overutilization, overuse, or overtreatment) is health care provided with a higher volume or cost than is appropriate. In the United States, where health care costs are the highest as a percentage of GDP, overuse was the ...


References


Further reading

* Mahar, Maggie
''Money-Driven Medicine: The Real Reason Health Care Costs So Much''
Harper/Collins, 2006. *


External links

* {{DEFAULTSORT:Health Care Industry Industries (economics)