Credit Suisse: Swiss healthcare sector - regional supply withstands heavy cost pressure (CH)

Healthcare is one of Switzerland's most important economic sectors. One of its biggest challenges facing it is the balancing act between the growing trend toward concentration and ensuring the provision of unimpaired access to healthcare service providers. In this context, the economists at Credit Suisse have just published a study examining the structure and evolution of Switzerland's healthcare sector.

Despite the general trend to larger units, the concentration and specialization processes among regional providers have been less pronounced. Instead, the network of healthcare service providers has become more widely distributed across Switzerland than was the case 10 years ago. A look ahead to future demand for regional healthcare services shows that the various regions have potential for development even in a more fiercely contested market.

Switzerland has a high-quality, but expensive, healthcare system. By the end of 2010, annual healthcare costs are expected to reach CHF 63 bln (approx. €47.8 bln.). In view of these high costs and the growing financial burden on private households and state budgets, reforms are inevitable. Changes are taking place very slowly, however. In their study, the economists at Credit Suisse have examined the question of the extent to which the current Swiss healthcare landscape is prepared for future changes in demand, as well as investigated the development potential this creates for the regions and the healthcare providers.

Strong growth in employment in almost all regions and subsectors
The healthcare sector is one of the mainstays of the Swiss economy. There are more than 365,000 full-time positions in healthcare and social services. Of these, healthcare in the stricter sense accounts for more than 200,000 positions distributed across a workforce of almost 500,000. In recent years, over 80,000 additional full-time jobs were created. This growth has a broad regional base. Only in the cantons of Appenzell-Innerrhoden and Glarus employment in healthcare has receded over the last 10 years. With the exception of psychotherapy/psychology and general practitioners, employment has grown across the board. It is striking that employment has grown much more rapidly in specialized medicine (specialist clinics and physicians) than in general medicine. The healthcare sector is highly diverse not only with respect to its structure, but also in terms of competition and density of regulation. The subsectors 'physicians' and 'paramedical' are dominated by very small businesses with between one and nine employees. By contrast, in the general hospitals segment more than two-thirds of operations (accounting for 95% employees) are large-scale enterprises.

Demand/supply distortions result in high costs
The problems facing the sector at the national level are well known. On both the demand and the supply side, incentives promote (overly) high consumption and (overly) high supply of services. Poor cost transparency, high regulatory penetration and demographic trends (aging) are distorting consumption, reinforcing redistribution (notably between young and old), and benefiting the players involved in different ways. The resulting rise in costs is bringing the system close to its tolerance levels. By international standards, however, Switzerland is doing well on many counts. Although costs are among the highest in relation to the size of the population, the quality of services provided in Switzerland is among the best in the world.

Some structural change apparent – further potential for efficiency gains
The last 10 years have seen a general trend toward a growth in scale among all healthcare providers. The major cost items (hospitals, physicians) are particularly prone to these concentration processes. This can be ascribed, on the one hand, to the large efficiency gains that can be achieved by concentration in these areas and, on the other hand, to the strong pressure being applied by the public and by the authorities. The reform of hospital financing and the associated

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