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The Future of US Health Care Profits

Article
With the post-2021 recovery in health care, profits for providers are expected to continue to rise. What are the implications for health care valuations?
5 minute read
August 18, 2022

Key Assumptions and Valuation Impact for Providers

In The future of US healthcare: What’s next for the industry post-COVID-19, published by McKinsey & Company on July 19, 2022, the authors analyze and predict the financial performance for five large segments within the health care industry over the next four years. Providers represented the largest category, with reported EBITDA of $249 billion in 2021.

Interestingly, the article highlighted significant improvement in expectations for provider financial performance. In particular, it forecasts provider EBITDA to grow at an approximate 7.0% compounded annual growth rate over the next four years, from $249 billion in 2021 to $325 billion in 2025. It also predicted consistent shifts in payers and sites of care.

Key Assumptions

McKinsey Provider Growth Chart

 

Expectations of elevated provider profit pools after the post-2021 recovery are driven by several factors and key assumptions, including:

Yes, But…

Changes to key assumptions in the article could paint a different view.

Health Care Valuation Takeaways

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© 2022


This is one in a series of related health care valuation posts: