The medical industry in the United States will be $3.9 trillion in 2020 with an annual growth of nearly 5%, demonstrating that the industry has consistent and sustained growth. If you are an investor or a medical industry analyst, you are well aware of the factors for this growth and where to look to see it displayed. Chicago’s Oak Street Health is a great example. This 8-year-old company just completed its IPO and was fully subscribed.
The following are more details on Oak Street Health and other events that demonstrate the great health of the American healthcare industry.
Aging American Population – Increased Medicare Recipients
By the year 2030, every Baby Boomer will be age 65 or older, which means that 1 out of every 5 U.S. citizens will be of retirement age. Numerically, this amounts to 76.7 million people. For the first time in our history, in 2030 the number of older people is projected to outnumber children.
As America’s population ages the need for specific types of service shifts and medical services will become even more prominent. Healthcare is the largest industry in the US but the shortage of doctors and other medical professionals in critical areas of the industry is greatly straining the American medical system. The Association of American Medical Colleges (AAMC) says the U.S. will see a shortage of 46,900 to 121,900 physicians by 2032 in primary and specialty care. Similar shortages in healthcare facilities and primary caregivers are expected. These shortages run from the most densely populated urban areas to rural communities with spare populations.
With these considerations, medical centers to serve older citizens, most of whom are Medicare recipients, that can be built and outfitted quickly are part of the solution. They can be constructed in virtually any location within a short time, and can serve the community by providing many primary and some hospital procedures. With data on where Medicare patients live and a lack of local medical facilities and services, smart companies like Oak Street Health are filling an essential need and growing fast.
The Oak Street Health IPO
On August 6, 2020, one of Chicago’s top Medicare Center chains, Oak Street Health launched an IPO and successfully raised $328 million. The company provides good quality medical services to Medicare enrollees. Oak Street Health is the second Chicago Medicare and health-related company to go public in the past two months. Last month, GoHealth, which provides services to help people enroll in Medicare, raised more than $913 million in an initial public offering by selling 43.5 million shares of its stock.
Oak Street Health is an 8-year-old company that currently operates a network of 54 medical centers, in thirteen markets in eight states. Their centers provide care for about 85,000 patients and are critical health resources in the communities they serve. As of March 31st, the company employs approximately 2,300 people, including approximately 260 primary care providers. Many of their primary care providers are the only direct link patients have to medical care.
The fast-growing company targets Medicare beneficiaries in high-density urban and suburban areas and serves as a direct care service provider. They have been riding the boom in the growth of Medicare recipients in the US. As of 2018, there were approximately 60 million Medicare beneficiaries in the United States, with an additional 10,000 individuals reaching the age of eligibility every day.
Healthcare is the largest industry in America. Spending in the United States reached nearly $3.6 trillion in 2018 and Medicare accounted for more than $700 billion of spending in 2019. The company believes that its addressable market of Medicare-eligible recipients is 27 million patients with average annual revenue of $12,000 per member. When you multiply this figure by the number of those eligible for Medicare in their target markets, an annual total addressable market size of approximately $325 billion is estimated. This information comes from the company’s SEC filing.
Oak Street Health sees opportunities for fast and sustained growth and will use the funds to invest more aggressively on creating more centers and expanding the medical services they offer to Medicare patients.