Mental health conditions have been on the rise, growing revenue through the recession
Los Angeles, CA (PRWEB) May 12, 2012
The Psychiatric Hospitals industry treats about 15.0% of the US population in any given year, according to a report by the Surgeon General, and the incidence and awareness of mental illness and substance abuse disorders has been on the rise. Partly due to the mounting awareness of mental health, the industry is expected to grow 1.9% per year on average to total $20.4 billion during the five years to 2012. The economic recession only had a minor impact on the industry in 2009, causing revenue growth to slow that year. Revenue is expected to expand a moderate 1.1% in 2012, which reflects a weak economic recovery. According to IBISWorld industry analyst Sophia Snyder, reduced capacity, mental health parity legislation and increased demand for behavioral health services have improved industry fundamentals during the past five years. The government has been making efforts to reduce healthcare costs by emphasizing care in community and residential settings. Additionally, managed-care organizations are becoming larger through consolidation, which has increased the price negotiating power of these companies. The net result has been a reduction in psychiatric beds. Although consolidation has been increasing in recent years, the Psychiatric Hospitals industry remains fragmented. The top firm is Universal Health Services Inc. Concentration can be particularly high within some geographic regions, since location is a key success factor; once a large psychiatric hospital has established itself in a market, it is more difficult for a small company to compete.
There has been substantial merger and acquisition activity among for-profit firms and an increase in the management of state-owned facilities by private operators, continues Snyder. Most notably, Universal Health Services acquired Psychiatric Solutions in 2010. Consolidation in the Psychiatric Hospitals industry has been occurring for quite some time. Prior to the announced deal between Universal Health and Psychiatric Solutions, both companies generated a significant portion of their growth through acquiring smaller operators. Part of the contraction in psychiatric hospitals came from consolidation in the overall healthcare sector. As managed care organizations merged in the 1990s, hospitals, general and psychiatric care alike, consolidated. This improved hospitals' ability to negotiate with MCOs on payments and pricing.
The number of industry hospitals is expected to decrease to 516 in the five years to 2012. This trend is expected to continue during the next five years as companies consolidate, particularly following the merging of the two largest players in the industry. Although the number of companies is expected to decline, bed counts will begin to stabilize to meet demand as the remaining operators grow in capacity. An improved balance between supply and demand will weaken the industry's ability to negotiate with managed-care organizations and governmental bodies, which will restrain profitability in the five years to 2017. During this period, operating profit is forecast to decline slightly. The favorable Medicaid reimbursement environment of recent years is forecast to come under pressure during the next five years as states look for ways to cut healthcare spending. This, together with mounting wage and supply costs, will put downward pressure on profitability in the industry. In contrast, the economy is forecast to improve, which will boost the number of people with health insurance coverage and raise disposable income. Consequently, revenue is forecast to increase. For more information, visit IBISWorld’s Psychiatric Hospitals in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes establishments licensed to provide diagnostic, medical treatment and monitoring services for inpatients who suffer from mental illness or substance abuse disorders. These establishments maintain inpatient beds and a staff of physicians. Facilities that emphasize counseling for mental health and substance abuse rather than medical treatment are not included in the industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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