Investors have plenty of capital to invest in acute care hospitals, and hospitals need that cash to prepare for the demographic wave that’s about to crash over them.
Richard Rollo, a managing director in the New York City office of Hammond Hanlon Camp, gave that assessment in a recent interview.
The firm, which refers to itself as H2C, sells strategic consulting and investment banking services to health care organizations. The consultants help client organizations figure out what kinds of deals to make, and how to pay for the deals.
Rollo said, based on research he did for a white paper, that he believes most people involved with health care services planning are suffering from a critical misunderstanding about U.S. patient demographics.
“They all know people are getting older,” Rollo said. “But they haven’t really applied the math.”
The U.S. baby boom started in 1946 and ended in 1964. The oldest boomers started turning 65 in 2011. This year, the oldest boomers are turning 70.
Because the baby boom generation is so much bigger that the preceding generation, the silent generation, and the younger members of the silent generation have been more numerous than the older members of the silent generation, the average age of the U.S. senior population has been falling since about 2006, Rollo said.
In other words, even though the average age of people in the United States has been rising, the average age of the biggest consumers of hospital services has been dropping, Rollo said.
“That’s about to reverse,” Rollo said.
The charts he’s made, based on Census Bureau figures that anyone can download, show that the average age of the Medicare-eligible population will start to increase rapidly around 2020, and that this trend will continue until about 2040.
“By that time,” he said, “you have an enormous senior population.”
Pressure to control costs
Hospitals generally like caring for Medicare enrollees, but Medicare bargains for low prices, and the rapid aging of the Medicare-eligible population will make the pressure on Medicare program managers to push for even tighter control of costs more intense than most health care services executives are expecting, Rollo said.
Rollo sees little obvious cost fat in the commercial health coverage sector.
Many, for example, point to California as a state in which strict health maintenance organizations have done a good job of holding down costs.
But one of the big, well-known HMOs there looks as good as it does because it has few Medicaid patients, Rollo said.