United States: A clear acceleration  in the healthcare sector

A clear acceleration in the healthcare sector

In recent quarters, several macroeconomic figures have reported remarkable dynamism in the healthcare sector in the United States. Here are a few:

• In 2023 and 2024, spending on healthcare services experienced an annual growth of 8 to 10%, marking a rise that had not been as strong outside the COVID period since the early 2000s.  
• Not only has the revenues from healthcare services increased, but their profit margin has slightly improved over the last few quarters.  
• Job creations in the healthcare and social assistance sector accelerated in 2023 and 2024, to the point that it accounted for just over half of the job creations in the private sector in 2024, even though this sector only represents 17% of private employment. Without this sector, the slowdown in the labor market would have been much more pronounced and would likely have prompted a more significant response from the Fed.

In the following text, we propose to explain what is behind the acceleration of the healthcare sector. This cannot be attributed to a single factor, but results from a set of major trends that are transforming the medical and economic landscape.

The ageing of the population in an accelerating phase

The ageing of the population, of course, plays a central role. In the United States, the increase in the number of people over 70 years old, the most remarkable demographic phenomenon of the 2020s, mechanically leads to a rise in care, which becomes more numerous and complex with age. In addition, there is the rise of chronic diseases, exacerbated by the increase in obesity, a scourge that promotes diabetes and cardiovascular diseases. More patients means more treatments, and therefore more expenses.

Innovation as a driver of growth

The healthcare sector has experienced a number of innovations in very diverse areas in recent years: miniaturization, digitization, and the use of Artificial Intelligence (AI) for diagnostics and administrative tasks.

The miniaturization of medical devices, particularly catheters, represents a major advance in the treatment of cardiac patients. These catheters are becoming increasingly intelligent, allowing doctors to avoid highly invasive surgical procedures such as open-heart surgery.

Surgical robots are also one of the most significant advancements in recent years. Systems like the Da Vinci from Intuitive Surgical enable interventions with unparalleled precision, reducing postoperative complications and speeding up patient recovery. These machines, operated by surgeons, minimize incisions, decrease blood loss, and limit the risk of infection. For example, a traditional open prostatectomy typically requires two days of hospitalization and a recovery time of about two months.

In contrast, with robot-assisted surgery, the recovery time can be reduced to just 2 to 3 weeks. The fifth generation of the Da Vinci robot from Intuitive, launched in 2024, represents a major advancement in the field of robotic surgery, the result of a decade of research and innovation. This new model incorporates significant improvements, including force feedback technology that allows surgeons to feel the pressure exerted by instruments on patients' tissues. With computing power 10,000 times greater than its predecessor, the Da Vinci 5 paves the way for revolutionary applications such as augmented reality or real-time data analysis to optimize the duration of surgeries.

Digital tools are also transforming care management. Telemedicine and remote monitoring help reduce the need for physical consultations, alleviating the burden on healthcare facilities and facilitating access to care in rural areas. These digital health solutions saw considerable growth during the Covid pandemic. Real-time monitoring of vital signs finally allows for rapid intervention in case of any abnormalities.

Moreover, this continuous monitoring for many patients generates a wealth of information about each individual and provides the raw material necessary for intelligent systems using AI to predict, well in advance, health risks for a patient, enabling early intervention that again avoids costly treatments when the same illness is addressed late.

AI, for its part, is already revolutionizing diagnostics: in radiology, it detects anomalies with formidable precision, avoiding unnecessary exams and speeding up care. In oncology, a model recently developed by Harvard Medical School, named CHIEF (Clinical Histopathology Imaging Evaluation Foundation), perfectly illustrates this revolution. Trained on 44 terabytes of data, CHIEF achieves an impressive accuracy of 96% in diagnosing 19 types of cancer. This model specialized in computer vision is capable of analyzing images of cancerous cells with unmatched precision and also paves the way for more personalized treatments.

Finally, AI can help reduce administrative costs. It is little known, but administrative expenses in the US account for 25% of healthcare spending (according to the OECD, administrative costs related to health are more than twice as high as in all other countries in this organization), with a multitude of friction costs explained by the complexity of health insurers' organization, each using their own coding, their own software, and varying prices for care from one person to another depending on the insurer.

In light of these costs that contribute to making the burden of healthcare potentially explosive, we believe that AI has a fundamental role to play in streamlining and processing en masse all the medical information collected throughout the care pathway. Automation and digital tools will simplify administrative processes, reducing the time and resources needed for tasks such as patient scheduling or even record management.

Direct digital communication between patients and providers will also minimize the need for intermediaries, leading to cost reductions as well. Finally, by reducing administrative burdens, healthcare professionals can devote more time to patient care, thereby improving the overall efficiency of the system.

Medical advances that have a cost

Medical advances, as beneficial as they may be, come at a cost. On one hand, they allow for earlier diagnosis and more effective treatment, addressing previously unmet health needs and expanding the range of available treatments. On the other hand, they lead to an immediate increase in expenses. Cutting-edge equipment, such as surgical robotics, requires massive investments from healthcare facilities, even if these tools promise long-term efficiency gains.

Moreover, the cost of treatments is skyrocketing, particularly in the field of rare diseases. Gene therapies are revolutionizing the management of previously incurable conditions, but their development requires colossal budgets: the average development costs of a new drug reached $2.3 billion in 2022 and 2023 according to a study conducted by Deloitte¹. The case of Elevidys, a treatment for Duchenne muscular dystrophy priced at $3.2 million, illustrates this trend: staggering prices, but an effectiveness that transforms patient care.

Ultimately, it is clear that while innovations can lead to spectacular productivity gains in various areas and better healing possibilities for certain conditions, they can also result in a significant increase in investment budgets and very high price increases for some treatments. The question of financing the rise in these costs will therefore continue to pose a real challenge for American society (see the box on the "health" agenda of the Trump administration).

The healthcare sector in the United States has experienced strong growth over the past two years, in a more gloomy context. This can be explained by several factors: demographic changes, of course, but also the acceleration of innovation in very diverse areas in recent years: miniaturization, digitization, and the use of Artificial Intelligence (AI) for diagnostics and administrative tasks. However, these innovations lead to a significant increase in investment budgets and very high price increases for some treatments, and the question of financing will therefore continue to pose a real challenge for American society. In reality, the increase in healthcare spending is both a challenge for systems and an opportunity: treating more, but without increasing expenditure, requires treating better.

To meet this challenge, the deployment of innovations that allow for the earliest possible detection, the most effective possible treatment, and the lowest possible cost appears to be a solution. Medtech obviously has a role to play in this context, thanks to the combination of its R&D and the power of Artificial Intelligence.