There has been a widely-held belief that the healthcare sector of the U.S. economy is recession-proof. A recent spate of studies indicate that the economic downturn is having an adverse effect on the industry and the impact is hitting all parts of the healthcare sector, from hospitals and providers to the pharmaceutical industry. Health professionals worry that the burden to the system will increase as uninsured Americans put off preventive care.

The American Academy of Family Physicians just released a national survey that reported over half (54%) of survey participants saw fewer patients since the early days of the recession in January 2008 and 64% reported seeing fewer patients with employee-sponsored or private insurance.

"The survey found that patients are canceling or deferring important preventive screenings such as pap smears, mammograms and colonoscopies,” said Ted Epperly, MD, AAFP president. “They also are failing to return for recommended follow-up visits or refill medications that are vital to managing their chronic conditions. Rather than forgoing needed medication altogether, some patients opt to cut their prescriptions, without their physician’s knowledge, to make them last longer."

As those patients cut their prescriptions to make them last longer, we will start to see the effects of these cuts on the pharmaceutical industry. IMS Health, a pharmaceutical market research firm recently projected that the US pharmaceutical market will contract by 1-2% in 2009. The contraction is significant given that the industry has not experienced a downturn in 50 years. IMS Health attributed the negative growth in the U.S. to a higher proportion of cash payment by patients for their medication.

“To the now-familiar factors impeding market growth such as patent expirations, a slowdown in innovative product launches, and hurdles imposed by payers on market access and acceptance, we can now overlay the economic downturn,” said Murray Aitken, senior vice president, Healthcare Insight, IMS. “There is a clear correlation between demand for medicines and key macroeconomic variables such as GDP, consumer spending and government expenditures. We see the worldwide financial crisis contributing to record-low sales growth this year. The pharmaceutical industry is not recession-proof, but it is insulated to a greater extent than other industries where spending is more discretionary.”

With hospitals often acting as the caregiver of last resort, the economic downturn's impact is already apparent. The American Hospital Association (AHA) conducted a survey in March that found nine of 10 hospitals cut expenses in the first quarter, with almost half (48%) of reporting hospitals eliminating jobs. Other measures included selling assets, reducing overtime, cutting staff hours, freezing salaries, cutting benefits and reducing supply costs. Some hospitals (9%) are even considering mergers to reduce costs.

The secondary effects of those cutbacks will be felt in the construction and Health IT industries as nearly 80% of hospital CEOs surveyed indicated that they have either stopped, postponed or scaled back facility upgrades and information technology projects.

Hospitals are being pressured by a rise in the needy and unemployed, with 60% of patients who seeking care at hospitals not covered by insurance. “Today’s findings signal what many of us in health care are concerned about: people put off care when they lose their job, which can complicate health care issues for many down the road,” said AHA President and CEO Rich Umbdenstock.