US military fire merchant transformation: do not make a bomb as a doctor

Release date: 2014-12-11

It seems that from a certain moment in recent years, those top-ranking armament manufacturers in the United States have suddenly put down their weapons and began to take the road of caring for human health and well-being.

It’s not because of the sudden disappointment, but that the emerging medical health industry has replaced the traditional arms manufacturing industry as the next lucrative rich mine.

Many analysts like to call the health care industry "new oil," but in the eyes of these arms manufacturers, the health care industry is not a new oil, but a new F-35 fighter or top destroyer - and Someone pays the bill.

Arms dealers who lay down their weapons

A large-scale defense enterprise group in the United States, and the largest contractor of the federal government, General Dynamics, had a loss of $2 billion in a single quarter two years ago. Analysts said that the profitability was "depressed."

The diminishing preparations and the sharp drop in defense spending have caused the arms manufacturer’s profits to shrink sharply, but General Motors seems helpless to find a new direction – from manufacturing submarines and tanks to medical health. industry.

Since Obama’s affordable health bill was approved by Congress four years ago, General Dynamics acquired Vangent, a health data company, and became the largest partner in the US federal health insurance and Medicaid program today.

“They saw their traditional profitable market conditions getting worse and worse,” said analyst Sebastian Lagana. “At the same time, they also saw new legislation driving a lot of money. Medical industry."

General Dynamics' strategy has proven to be correct. The company is still the main partner of the federal government, but its main growth opportunities have come from the federal government's health care rather than war armament programs.

Other large arms manufacturers have also embarked on the same path. Once the weapons suppliers have now moved their products from the battlefield to the bed.

For example, Lockheed, the first to do missile defense software, now specializes in early diagnosis of sepsis. Lockheed also has a new business that is responsible for managing the computer systems of the US health department. The company won a $15 billion contract with other companies such as Accenture in 2012; it is also bidding for another value of 110. The big project of billions of dollars - the Pentagon intends to upgrade the military's medical record computer system.

Known for manufacturing the B-2 Stealth Bomber, Northrop is now responsible for managing health data shared with the National Institutes of Health for the US Department of Health to help governments control costs and improve policy efficiency in the health care system.

"We have 200 epidemiologists, we have clinical statisticians, we also have physicians and nurses," said an expert at Northrop.

M&A has become the main route

In addition to cybersecurity, Washington is now most concerned with analytical skills in health.

However, many armaments have found that the fastest and most effective way to obtain the expert resources needed by the Ministry of Health is to buy a ready-made professional company directly like General Dynamics.

In October, office equipment manufacturer Xerox said it acquired a software company specializing in case management and disease surveillance. In the same month, Boss Allen, an outsourcing consulting firm that the US government and defense department relied on for a long time, also purchased a health business part of a technology company.

But defense companies' acquisitions in the health care arena are not all that good. In 2011, General Dynamics had intended to spend $1 billion to buy Vangent from Wilhelm Software, but the conflict in the acquisition was caused by cultural conflicts between technology companies and defense companies.

But in the end, thanks to Vangate, General Dynamics finally got a contract to set up a customer service call center for the government. Since the website that was registered for medical insurance was smashed a year ago, the business of the call center has become more popular than expected. General Dynamics finally hired 8,000 temporary employees to support the Obama medical reform hotline. Because the position of the call center is a cost-plus contract, that is, every time a person hires a person, the Ministry of Health pays more than one person, so the more the company hires, the more profit it has.

If not the vaccine manufacturer, General Dynamics' contract price of $815 million became the highest contractor with the US Department of Health in 2014.

Ministry of Health into a large budget

In recent years, the stalemate between the two parties in the US political arena and the tight budget, only the government procurement of the federal government's health sector has doubled in the past decade, reaching 21 billion US dollars, which is expected to continue to grow.

The US Department of Health is the third-highest federal government department after the US Aerospace Administration and the Department of Homeland Security. The health department alone surpasses the Ministry of Justice, the Ministry of Transportation, the Ministry of Finance, and the Ministry of Agriculture. Total purchase budget.

If, as many investors say, the health care industry is “new oil,” the US federal health department is one of the largest bonanzas. In addition, the Department of Defense, the Department of Veterans Affairs, and the Treasury are also in urgent need of upgrading medical databases. Providing great opportunities for related service providers.

“The defense market is very weak,” says Harvard management professor Steve Kelman. “The only two areas where the number of contract contracts is growing are cybersecurity and medical health, so now everyone wants Try to enter these two areas to get a piece of it."

There is also a large amount of new funds being invested in medical record software, insurance websites, claims processing, data analysis, consumer education and other sub-sectors.

Of course, compared with more than 200 billion U.S. dollars spent on aircraft bombs and other equipment in the same year, the US Department of Health’s $21 billion is nothing in terms of amount. However, from the trend, since the budget cuts began in 2011, today’s defense contract expenses have been reduced by 1/3 compared to 2008.

Few people think that this will happen to medical contracts, and analysts expect the Ebola crisis to add an additional billions of dollars to the Ministry of Health budget.

“It will be harder and harder to get more money,” said Stephen Fuller, an economist at George Mason University who closely tracks federal spending. “But the Ministry of Health is still in a good position to easily maintain the current budget level, and other departments will find it increasingly difficult to secure funding sources.”

Traditionally, the Ministry of Health's suppliers handle claims, development of vaccines, and management-related information in federal health insurance. As early as 2009, before the passage of the Health Act, the US Department of Health spending peaked because of the additional vaccine development costs brought about by the H1N1 flu virus. But the introduction of the Obama Medical Bill will completely change the rules of the game by expanding coverage, resetting welfare mechanisms, and transforming payment methods.

“On the outset of the 'Affordable Care Act', the healthcare business has doubled in the past five years,” said Nelson Ford, a consulting firm that helps the US Department of Health analyze and regulate private insurance companies. ) said.

The new bill not only promotes many new companies that start from scratch, but also stimulates many existing companies to develop new health-related businesses.

hCentive is the beneficiary of the Affordable Care Act. The Virginia-based company helped the federal government build an online healthcare platform, while also helping to build insurance portals in Massachusetts, New York, Colorado, and Kentucky.

Another company, called HighPoint, has quickly moved from a few million dollars to $100 million a year since it started helping many new insurance business customer service centers to train employees and quality control.

Another high-tech bill in 2009 encouraged hospitals to buy medical record software from private companies through a $30 billion Medicare compensation program.

Source: First Financial APP

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