HCA Healthcare is an American business operator for healthcare facilities dealing in medical education, stroke care, maternal safety and enhanced surgical recovery. The company was founded in 1968 and has its headquarters based in Nashville, Tennessee, United States. HCA healthcare is expanded over more than 180 locations in both United States and the United Kingdom, including a surgery centre, emergency rooms and physician clinics. As of 2020, the company generated an excellent revenue of 51.53 billion US dollars, and the company has an ongoing employment figure of over 270,000 (HCA, 2020). From a perception of the healthcare industry, an examination of Porter’s five forces would guide future initiatives for an advanced understanding of the organization’s situation
Competitive Rivalry in the Market
The competitive rivalry in the healthcare industry is considered high because it is one of the fastest-growing industries in the world. With the increasing population come more complex ailments that need to be treated and taken care of. As a result of this increase, several profits and not for profit institutions and healthcare providers have dominated the sector to provide the appropriate treatment and healthcare services. The major competitors of HCA healthcare in terms of health systems based on several hospitals are Ascension Health, Common Spirit Health, Community Health Systems, Trinity Health and Life point Hospitals. As of 2019, HCA healthcare has the most number of hospitals that is 185, while others have 151, 142, 105, 92 and 86 hospitals spread over the country (Statista, 2019). Thus, the presence of such large firms in the market enables the industry’s environment more competitive.
Threat of Substitutes
The threat of having substitute products and services in the healthcare industry is considered moderate because of several healthcare providers and medicines. Consumers usually try to go for the cheaper prescription medicines by visiting big marts or medical stores for discounted prices, but the complete health coverage plan lacks those substitutes. Another factor could be alternative medicines and herbal treatments consumers can avail. Furthermore, the drug’s use is secured by a patent, and no one can provide a replacement while the time is in effect. Therefore, healthcare firms must deal with substitutes for their medications as the patent has expired. (Song and Han, 2016). Thus, the likeliness of substitutes in the healthcare sector is considered moderate.
The Threat of New Entrants
The threat of new entrants in the healthcare industry is considered low as there are plenty of firms already working within the community and have raised the entry barriers high enough for new providers to step into the market at the same level. The entire product establishment, supply chain, and promotional strategies all lead to an increased cost. In addition, existing firms in the sector have maintained economies of scale, making it further difficult for entrants to capture the market. Moreover, the control of resources, finance and affordability makes it more difficult for new firms to enter the market (Khatib et al, 2014). Hence, minimizing the way of entry for new firms in the industry.
Bargaining Power of Buyers
The Bargaining power of consumers in the context of the healthcare industry is low because buyers usually purchase the medicines and drugs prescribed to them even though the firm charges a high price for them. Consumers are more focused on taking the health insurance and pay it according to the plan as they may not be able to afford any significant treatment or medications. Furthermore, an individual who signs the health care policy can use only one provider for a specific period and because of high switching cost (Heiss et al, 2016). Consumers’ power increases as they have knowledge about market pricing and ranges. Keeping in view such a manner, buyers’ bargaining power is considered low in the industry.
Bargaining Power of Suppliers
The Bargaining power of suppliers in context to the healthcare industry is considered high because, to meet the medications and drug supplies, healthcare firms are dependent on the suppliers in this regard. Despite the increase in the healthcare facilities and services cost, the need and demand do not stop because of the nature of the industry as the firms and government is more concerned in providing better health and quality of life. Therefore, big suppliers can influence the industry product dynamics and swing the supply chain (Saluja and Sekhon. 2016). Hence, the bargaining power of suppliers is high in the healthcare industry.
References
HCA, 2020. HCA Healthcare – Financials – Annual Reports. [online] Investor.hcahealthcare.com. Available at: https://investor.hcahealthcare.com/financials/annual-reports/default.aspx.
Heiss, F., McFadden, D., Winter, J., Wuppermann, A. and Zhou, B., 2016. Inattention and switching costs as sources of inertia in medicare part d (No. w22765). National Bureau of Economic Research.
Khatib, R., Schwalm, J.D., Yusuf, S., Haynes, R.B., McKee, M., Khan, M. and Nieuwlaat, R., 2014. Patient and healthcare provider barriers to hypertension awareness, treatment and follow up: a systematic review and meta-analysis of qualitative and quantitative studies. PloS one, 9(1), p.e84238.
Saluja, V. and Sekhon, B.S., 2016. The regulation of pharmaceutical excipients. Journal of Excipients and Food Chemicals, 4(3), p.1049.
Song, CH, and Han, J.W., 2016. Patent cliff and strategic switch: exploring strategic design possibilities in the pharmaceutical industry. SpringerPlus, 5(1), pp.1-14.
Statista, 2019. Top US health systems by number of hospitals | Statista. [online] Statista. Available at: https://www.statista.com/statistics/245010/top-us-for-profit-hospital-operators-based-on-number-of-hospitals/.