New Credit Suisse Study on Swiss Healthcare Landscape

Zurich,  August 24, 2010

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 ten 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 bn. 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 ten 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 ten 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 introduction of diagnosis-related lump sums as of 2012 are helping to drive the change process and will result in a general shake-up in the hospital system. Moreover, the proposed "managed care" legislation looks set to intensify competition between the various healthcare provision models, accentuating the trend to larger medical practices and physicians' networks.

Decrease in Regional Disparities despite Trend to Larger Units

The healthcare sector is straddling a conflict between concentration and specialization on the one hand and proximity to customers (i.e. patients) on the other. In this process, the division of tasks and efficiency considerations often favor greater concentration in the provision of services. But at the same time, the need for customer focus and the mandate to provide a full range of services are pulling in the opposite direction. The Credit Suisse study shows that, despite the observed trend toward larger-scale operators, in terms of regional distribution only limited tendency towards concentration and specialization can be stated. The existing concentration of healthcare providers in the urban centers – a result of demand being concentrated in these areas – has not become more accentuated at the expense of peripheral regions. While the regional disparities are becoming less pronounced as regards the number of employees in relation to the number of inhabitants, this trend is not observable in the general hospitals segment.

Increase in the Number of Accessible Healthcare Providers in Peripheral Regions

In regional terms, the growth of healthcare provision has seen a disproportionately large increase in some of the peripheral areas and hence a narrowing of the disparities between regions. This comes as a surprise, given the concerns expressed about inhabitants of peripheral regions being underprovided, or less well provided, by healthcare services. This increased regional reach of healthcare provision, and the high level of services provided in rural areas, appear to result, on the one hand, from repositioning and, on the other hand, from policy considerations – i.e. from the wish to avoid disparities in healthcare provision or from regional policy-making. In general medicine in particular, providing an above-average level of healthcare services in peripheral regions is unlikely to generate any economic benefits. The extent to which the widely dispersed provision of healthcare is responsible for the high cost of Switzerland's healthcare system, and the question of whether the existing decentralized regulatory and decision-making structure can be reconciled with cost reductions, are open to conjecture.

Future Potential for Development in the Regions

A look ahead to the future demand for healthcare services shows that the various regions have potential for development even in a more fiercely contested market and despite the growing trend to specialization and concentration. Assuming that a basic level of healthcare provision will be maintained, increased specialization and a concentration of competencies are crucial to such a development. In the faster-growing regions within the catchment areas of the main economic centers, the continuing "pull" of these cities points to growing demand for the provision of basic medical services. In rural areas, the area of nursing services in particular should see above-average growth, as population densities in these areas are relatively low and the expected growth in the preponderance of older persons (65+ in relation to 20-64 year-olds) is especially high. Further potential arises from niche areas such as rehabilitation and spa treatments, or in the broader health-related sphere of wellness and esthetic services.