State of the Chicago Health Care Industry
Total Page：16
File Type：pdf, Size：1020Kb
STATE OF THE CHICAGO HEALTH CARE INDUSTRY UPDATED MARCH 2018 Introduction: Chicago’s Health Care Business Climate............................................................................................. 3 Political and Economic Climate 3 Overview of Sections 4 Section I: Chicago Health Care Sectors...................................................................................................................... 5 Providers 5 Commercial Health Insurance 7 Illinois Medicaid Managed Care 8 Digital Health 10 Medical Device and Technology 12 Life Sciences 13 Associations 14 Section II: Workforce Development......................................................................................................................... 15 Medical Education 15 Health Care Vocational Training 15 Section III: Mergers, Acquisitions, and Capital Formation..................................................................................... 16 Merger and Acquisition (M&A) Activity 16 Providers 17 Payers 17 Medical Device and Technology 17 Life Sciences 17 Nontraditional Entrants 18 Chicago Capital Stock 18 Private Equity 18 Venture Capital 18 Capital Allocation 18 Investor Expectations 18 Increasing Chicago Investment Potential 20 Section IV: Health Care Innovation and Incubation............................................................................................... 24 Corporate Innovation 24 Innovation Hubs 24 Incubators and Accelerators 24 Section V: Health Equity and Public Health............................................................................................................. 26 Economic Environment 26 Social Determinants 26 Health System Access 27 Disease Prevalence 27 Conclusion................................................................................................................................................................. 28 About HC3................................................................................................................................................................. 29 STATE OF THE CHICAGO HEALTH CARE INDUSTRY 2 INTRODUCTION: CHICAGO’S HEALTH The budget impasse drastically affected many components of day-to-day life, including public schools, CARE BUSINESS CLIMATE social services, and health care. The Chicago Tribune Historically bolstered by its proximity to the Great Lakes reported that in June 2017, a federal judge ordered and railroad infrastructure, Chicago has long operated the state to start paying $293 million towards monthly as the crossroads of American commerce, and much of Medicaid receivables and an additional $1 billion over the the country’s historic trade has graced the terrain of the next year to pay down $3 billion in overdue payments to Windy City. Unsurprisingly, Chicago’s history is replete providers. In Chicago alone, hospitals that serve Medicaid with manufacturing and transportation expansion, patients are owed an estimated $10 – $32 million each.2 spawning new enterprises and industries across a wide With claims still awaiting payment, hospital executives swath of fields. Although the nature of these industries have had to make drastic cuts, stall payments to vendors, continues to evolve, Chicago’s entrepreneurial spirit and delay upgrading facilities and equipment. has maintained an inventive identity, especially in Despite the tumultuous political and reimbursement the areas of health care, technology, and molecular climate, Chicago’s health care industry—mirroring the science. Headquartered in Chicago are leading academic rest of the U.S.— comprises an estimated 12.2 percent medical centers, medical device manufacturers, health of Chicago’s total economic production, or $69.7 billion care information technology (HIT) companies, and in combined health care services-related Gross Regional pharmaceutical innovators. Products (GRP) in 2016.3,4 Chicago, itself, is home to For this report, we define Chicago proper and the more than 26,000 health care-related companies and outlying areas commonly referred to as “Chicagoland” over 600,000 health care-related employees, with many (including the city of Chicago and the surrounding workers and consumers relying on this growing sector. counties of Cook, DeKalb, DuPage, Grundy, Kane, Kankakee, Kendall, Lake, McHenry, and Will) as ‘Chicago’. EXHIBIT 1: ESTIMATED IMPACT OF ILLINOIS Although this expansive geographic footprint contains HOSPITALS’ SPENDING AND EMPLOYMENT5 varied communities and neighborhoods, they are bound together by their proximity to Chicago and its unique role Direct Impact Indirect Impact Total ($Billion) ($Billion) ($Billion) in American industry. Payroll $16.9 $23.9 $40.8 POLITICAL AND ECONOMIC CLIMATE Supplies $17.0 $23.9 $40.9 Part of Chicago’s emerging role as a health care hub can Capital $3.0 $4.1 $7.1 be attributed to the political and economic climate of Total: $36.9 $51.9 $88.8 the past several years. However, political and economic challenges that are germane to Illinois have started to Direct Jobs Indirect Jobs Total introduce unique pressures on this progress. Having been 201,828 290,995 492,823 stymied by political impasse, the State of Illinois passed its first budget in three years in July 2017, having accrued an additional $6 billion in debt over the span of the last fiscal year alone. Prior to July, spending had continued at levels set by the 2014 budget, when revenues were higher. These spending rates—coupled with the impasse—ushered in an era of economic instability. And, until the July 2017 budget was passed, Illinois was on track to become the first state to have its credit rating downgraded to “junk” status. STATE OF THE CHICAGO HEALTH CARE INDUSTRY 3 OVERVIEW OF SECTIONS Section IV: Health Care Innovation and Incubation This report aims to capture the multi-faceted aspects Chicago’s entrepreneurial spirit is most apparent in its of Chicago’s health care industry. Although it is not innovation hubs, incubators, and accelerators. The driving exhaustive, we hope that this analysis will provide a useful motivation of these entities is to hasten innovation overview for health care professionals, industry leaders, and develop solutions for tomorrow’s challenges. policy makers, and others invested in Chicago’s health Corporate investors are forging partnerships with care sector. We have outlined this report in five sections: Chicago’s academic medical centers and research hubs, providing the opportunity for universities and industry Section I: Chicago Health Care Sectors to collaborate on scientific development. Incubators and This section evaluates the health care industry through accelerators located in Chicago help health care startups its sectors (i.e., providers, commercial health insurance, connect with the resources and capital needed to bring Illinois Medicaid managed care, digital health, medical their solutions to market. devices and technologies, life sciences, and associations). Section V: Health Equity and Public Health Understanding the background, trends, and recent milestones in each of these sectors provides context to Any analysis of Chicago’s health care industry would be Chicago’s overall health care landscape. incomplete without addressing the health of its citizens. A major challenge to industry and political leadership lies in Section II: Workforce Development connecting Chicago’s most vulnerable inhabitants with key Here we address medical education and vocational social and medical services. A 2016 public health initiative, training. Chicago is home to numerous teaching hospitals Healthy Chicago 2.0, outlines a plan for improving and has a strong vocational ecosystem, providing training environmental conditions and reducing health inequity. for a breadth of health care workers. Medical education in Chicago brings energy, academic rigor and funding, and a steady workforce pipeline of physicians, nurses, technicians, and other health care workers. Section III: Capital Formation This section examines Chicago’s health care industry through the lens of mergers and acquisitions (M&As), capital formation, and investment. It also reports intelligence gathered through HC3 interviews of more than a dozen Chicago-based venture and private equity firms. STATE OF THE CHICAGO HEALTH CARE INDUSTRY 4 SECTION I: Chicago entities: Northwestern Memorial Hospital, ranked thirteenth overall in the nation; Shirley Ryan AbilityLab CHICAGO HEALTH CARE SECTORS (formerly Rehabilitation Institute of Chicago), ranked first Chicago’s diverse and growing health care ecosystem in rehabilitation; Rush University Medical Center, ranked is a critical element to the city’s evolving future. Driving fifth nationally for orthopedics; and Ann & Robert H. Lurie innovation and contributing to Chicago’s economic Children’s Hospital, tied for seventh in children’s hospitals. development are companies that generate services Rush University’s Doctor of Nursing Practice (DNP) provided outside of Chicago and core clinical services program was also ranked fourth in the nation. provided within the city, including services rendered by In recent years, there has been an increase of proposed hospitals, primary care, specialty care, behavioral health, mergers as various clinical entities have sought to health insurance plans, and employers. expand their market share. In Chicago, there is a plurality of hospitals with smaller market share, PROVIDERS establishing benefits to consolidation.8 Provider systems are integral to Chicago’s health care There has also been a shift in physician practice ecosystem,