by Tony Chen

I encountered two very interesting articles recently about the health care/hospital sector. One was a narrated chart from McKinsey (free registration required) that basically showed value creation by healthcare sector over the last 20 to 25 years. As you can guess, the bottom line (yes, the one at the bottom all by its lonesome) represents providers. Since 1985, the provider sector was the only sector in healthcare to underperform the S&P 500.

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Add to that the thoughts of Jeff Willwock, an award-winning Wall Street Journal analyst who says there is little or no future for the for-profit hospital business. The money quote (no pun intended):

"Medicare officials have become experts in reading Wall Street research to determine the profitability of each type of Medicare service. Medicare can--and will--figure out how to price services to insure that providers stay in business but don't make money...If the first major cuts are enacted in 2010 and the second major cuts are enacted in 2014, investors need to be positioning today to exit healthcare in 2009 and 2010."

And given that a bunch of well-insured baby-boomers are about to start relying on Medicare, this is going to cut margins for even the best of us.

Nonetheless, this news doesn't really affect my everyday life here in the hospital, except to reinforce one emerging theme: If this economy has taught me anything, it's that in times of turmoil, strong, well-managed companies get stronger, and weak ones die or get bought out. This seems to be happening across all sectors now--from banks to biotech to the web to hospitals. And I have to wonder if that's true at some level for individuals, too. Strong professionals seem to shine brightest during danger/opportunity times like this.