What history tells us about financial recovery in the healthcare sector

Recessions happen. Companies and organisations either have a strategy to get through them effectively or they fail. This should mean that any organisation has access to guidance from someone who has been through it before, that the lessons of the past have been learned. In reality that isn’t always the case.

We can still look back at what has happened in the past and use it to inform our decisions going forward. Different types of organisations are affected by dips in the markets at different times. You can’t expect retail to behave in the same way as technology even though the two have close links. So, what does history tell us about how healthcare handles recessions?

The data

Looking at analysis done by McKinsey & Company of the four most recent US recessions, we see that recessions begin with falling retail sales. This then has a knock-on effect on materials, energy and the industrial sector as retailers decrease their stock orders.

Resilience

The most resilient sectors are consumer staples (we all have to eat) and healthcare. Healthcare is often one of the last sectors to be affected by recession because people prioritise their health and the care of their dependent family members. History also tells us that healthcare companies tend to take less of a hit to their share prices than other sectors. This is to be expected, given that healthcare is an important service rather than an optional extra.

Recovery

Unfortunately, financial recovery in the healthcare sector tends to start later than in other areas too. When the markets begin to pick up spending tends to be in the consumer discretionary and IT sectors – those that were first affected. The good news is that healthcare follows as it’s importance to people’s lives ensures that it remains a spending priority.

Perspectives

It isn’t just we in the UK who can learn from the USA. They are also studying our NHS to learn how our superior spending will impact the economy. As they consider repealing and replacing Obamacare, they are looking at our ‘free at the point of delivery’ treatment model with interest. Our investment in healthcare is significantly higher than theirs, so comparisons are useful.

Your healthcare business

If you own a healthcare business and you are concerned about the possibility of another recession, what can you do? If you have an understanding of finance then you can watch the markets yourself, however, if you don’t then it might be a good idea to take some expert advice and to have a recession plan in place to protect your business.

Knowing that healthcare is one of the last sectors to be affected gives you plenty of time to put a plan into action and be prepared for whatever may come. Put as much thought into what you will do if something goes wrong as you do into plans for a prosperous future and you will be prepared for anything.

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