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The Healthcare Market in 2022: A Global Outlook

As one of the largest and most complex sectors, Healthcare is composed of a broad range of companies that sell medical products and services. This includes companies that sell drugs, medical devices, digital healthcare solutions, and insurance, as well as hospitals and healthcare providers. It is a space that has capture investors’ attention, since some of these companies have been receiving regulatory approval for drugs to treat COVID-19 and for the distribution of vaccines. Additionally, other companies are accelerating their business to develop and win approval for their own COVID-19 drugs, while yet another group of companies are supplying products to test for and manage treatments of the virus.

All of this should mean that the healthcare industry has a bright future in 2022 and beyond, however, healthcare stocks as represented by the exchange-traded fund (ETF), Health Care Select Sector SPDR ETF (XLV) have underperformed in the broader market; the stocks posted a total return of 12% compared to the Russell 1000’s total return of 15% in the year ending Jan. 20, 2022.[1]

A Strategic Approach: The Global Healthcare IT Market

That being said, analysts are currently reporting that the global healthcare IT market in particular is set to reach $484 billion by 2026.[2] A speedy increase in applications and devices is in fact leading to a new realism in healthcare, with IoT set to dominate almost all areas of human life, including this industry, which will increase its efficiency. However, the technology developments already happening in healthcare are creating challenges, especially in terms of vulnerability and risks.

In terms of specific sectors, services is projected to grow at a 15.2% CAGR to reach $306.8 billion by the end of the analysis period. Growth in the software segment is estimated to have a CAGR of 15.8% for the next 7-year period; the software space currently accounts for a 29.5% share of the global healthcare IT market.

What will be critical to the further growth of this market is that the performance and availability of healthcare services right through hospital networks, clinics, medical buildings, insurer/payer systems and public/private cloud data centres is ensured. Network services have to become virtualized, while enterprises are expected to turn into “as-a-service” model in the next few years. At present, about one-third of enterprises are using “as-a-service” solutions for their businesses, and a number of healthcare applications are already available (especially EMR or electronic medical record solutions). In addition, the use of cloud storage by medical institutions is also growing due to its agility and flexibility, which is vital for maintaining a large number of data-heavy imaging files.

Simply put, healthcare applications are becoming increasingly crucial to healthcare systems as disruptions are not welcome and could impact patient care. Studies in this area have indicated that 40% of healthcare companies are using the services of two or more public cloud providers in order to address this issue.

Further Projections and the Path Forward

For more evidence on the fact that the healthcare IT market is the place to be for investors, one need not look further than the projection that this market was estimated to be worth US$85.8 billion in 2021 in the US alone; the country also currently has a 36.2% share in the global healthcare IT market. Coming in at a close second is China; it is expected to reach an estimated market size of US$29.4 billion by the year 2026 (trailing a CAGR of 22% through the analysis period.)

Truthfully, the impact of the COVID-19 pandemic has to be recognized as one of the key factors for the accelerated growth of this sector. Large numbers of medical institutions – as a result of the situation – had to embrace virtual care, and federal and state governments announced waivers and changes to existing guidelines for removing the obstacles patients have in making virtual service payments. Additionally, the number of primary care virtual visits increased dramatically from just 1% pre-pandemic to around 43.5% during the peak period. Similarly, the rate of patient satisfaction also grew, which signals that virtual modes of healthcare, including telehealth, are indeed going to witness a higher uptake of their services in the post-pandemic phase.

Yet, this change also signifies an industry that is already being disrupted; it is a call for healthcare organizations to recognize that there is growing competition from new players that will limit their ability to fully control and own these service delivery pathways. As such, they will need to also rethink their existing processes in order to accommodate the delivery of less expensive digital services in order to compete with these tech-savvy innovators.