Health Care Industry Consolidation

Health care is a very large and important industry. Hospital and physician services are a large part of the U.S. economy. In 2009, hospital care alone accounted for 5.4% of GDP – roughly twice the size of automobile manufacturing, agriculture, or mining, and larger than all manufacturing sectors except food and beverage and tobacco products, which is approximately the same size. Physician services comprise 3.6% of GDP (Martin et al., 2011). The net cost of health insurance – current year premiums minus current year medical benefits paid – was 1% of GDP in 2009. The share of the economy accounted for by these sectors has risen dramatically over the last 30 years. In 1980, hospitals and physicians accounted for 3.6% and 1.7% of U.S. GDP, respectively, while the net cost of health insurance in 1980 was 0.34% (Martin et al., 2011).