The Unchanging Hospital Economy
Grant Hesser@granthesser
+5.7%
since Sep 29
The idea
I don't think AI is disrupting healthcare anytime soon, so I'd rather own the parts of the system that just keep grinding: hospital operators, the consumables and devices used in every procedure, the distributors and sterilizers that sit as tollbooths in between, and the labs running bloodwork. Insurers get a smaller slice since they draw more political attention. It's spread across the whole chain rather than concentrated in any one name, with a bit of cash held back, built to sit for years rather than trade around news.
What it owns
- Every surgery uses syringes, IV bags, catheters, and implants regardless of upstream software changes. · StrykerIt makes the implants, tools, and equipment that orthopedic and trauma surgery physically require, growing with joint replacements and aging-related procedures., Becton DickinsonIt makes the syringes and needles used in nearly every medical encounter, an unchanging requirement of patient care., MedtronicIt makes pacemakers, surgical staplers, insulin pumps, and other devices used across many procedure categories, a broad exposure to steady procedure volume., Baxter InternationalIt makes IV bags and infusion pumps that hospitals burn through daily, revenue tied directly to admission volumes., ICU MedicalIt sells the tubing, connectors, and infusion supplies that hospitals reorder constantly as core consumables of patient care., TeleflexIt makes single-use catheters and procedure kits thrown away after each use, so revenue tracks raw procedure counts directly.28%
- Distributors and sterilization providers collect a fee on nearly everything a hospital touches, a tollbooth between maker and operating room. · McKessonIt moves a large share of America's drugs from manufacturer to pharmacy and hospital, collecting a distribution fee on volume., CencoraIt is the other major drug distributor to hospitals and pharmacies, so owning both ensures exposure to the distribution tollbooth., SterisIt sterilizes surgical instruments and medical products at scale, a step no procedure can skip and few competitors can perform reliably., Henry ScheinIt distributes everyday medical and dental supplies to clinics and offices that reorder them constantly, a tollbooth one level below hospitals.23%
- Procedure volumes rise with an aging population, and the operators who staff the beds get paid on every one. · HCA HealthcareIt runs more hospital beds than any other operator in the country, and bed occupancy grows as the population ages., Tenet HealthcareIt owns hospitals and surgery centers where procedures physically happen, collecting revenue as volumes grow with the aging population., Universal Health ServicesIt runs both general hospitals and behavioral health facilities, two types of care that require a staffed bed and building., The Ensign GroupIt operates skilled nursing facilities, the least software-disruptable corner of healthcare, growing as the population ages and needs long-term care.21%
- Claims still flow through the same large payers whoever provides the care, held as a smaller slice given regulatory scrutiny. · UnitedHealth GroupIt is the largest health insurance claims payer in the system, processing claims regardless of where care gets delivered., Elevance HealthIt operates Blue Cross plans covering tens of millions of people, insurance so embedded in employment that displacement is unlikely., The Cigna GroupIt pays claims through its insurance operations and runs a large pharmacy benefit manager, two toll positions on healthcare spending.14%
- Bloodwork and diagnostics are ordered on almost every patient visit and do not get replaced by automation. · Labcorp HoldingsIt runs the clinical laboratory testing that nearly every diagnosis and checkup requires, and no software can replace a blood sample that was never drawn., Quest DiagnosticsIt is the other half of the routine testing market with Labcorp, so together they own the lane where doctors order tests continuously.9%
- Companies serving essential healthcare functions with durable economics. · It distributes prescription drugs to pharmacies and hospitals, controlling one of the three tollbooths through which nearly all American prescription volume flows.3%
- Cash2%