Health care is big business in America — 17.5 cents of every dollar spent in the U.S. in 2014 went to pay for it. Minnesota companies have benefited directly from all of that spending over the years.
While some health care companies populated the first Star Tribune 100 list 25 years ago, many have grown faster than those in other categories — and the largest have grown much more quickly.
Back in 1991, when health care spending consumed just 12 percent of the U.S. gross domestic product, neither Minnetonka-based for-profit insurer United HealthCare Corp. nor Fridley-based medical device maker Medtronic cracked the top five in the list of largest Minnesota companies by market capitalization.
Today, both have market caps north of $110 billion, making them by far the two largest Minnesota-managed companies in the state in any industry, according to this year’s Star Tribune 100.
UnitedHealth Group’s $157 billion in revenue was larger than the sales totals at Target Corp., U.S. Bancorp and the other top 10 most valuable public companies combined.
Meanwhile, Medtronic, which is legally domiciled in Ireland but still managed from offices in Fridley, is now the second-most-valuable public company in the state, behind UnitedHealth Group. It had $28 billion in revenue in calendar year 2015, which represented 63 percent growth compared with the prior year, before Medtronic acquired surgical supplier Covidien in a $50 billion megadeal.
Though it’s not reflected in lists of public companies, Minnesota is also home to large and growing nonprofit health systems.
The internationally known Mayo Clinic health system had $10.3 billion in revenue last year. HealthPartners, a hybrid nonprofit health care provider and insurer, had $5.7 billion in revenue, according to financial statements.
Stephen Parente, director of the Medical Industry Leadership Institute at the University of Minnesota, said the state’s for-profit and nonprofit health care companies form a strong symbiotic system of companies that manufacture medical technology, provide health care directly to patients, and then pay for it and analyze trends afterward.
“It’s a very interconnected and reinforcing set of actors that make up a kind of broad ecosystem,” Parente said.
Minnesota is the birthplace of the health-maintenance organization, or HMO. It helped launch the modern med-tech industry through the invention of the first battery-powered wearable pacemaker. And pioneering doctors at the Mayo Clinic and the University of Minnesota have led the way in important medical advances through the years.
Minnesota’s corporate health care family has been successful over the years, Parente said, by combining an aspirational desire to improve lives with a hard-nosed business sense about what it takes to be financially successful. That strong stewardship of native resources helps attract skilled people from outside who sometimes branch off and create their own new companies, which can then grow or get bought up.
Such innovation includes medical technology invented by engineers. But it also encompasses new surgical techniques for the operating room, care processes in hospitals, insurance and contracting mechanisms at the bargaining table, and data analytics breakthroughs in huge health care databases.
There are good reasons to think that the future will bring more large health care players in the state.
The challenges of effectively managing the wave of baby boomers moving into their Medicare years and Americans who are gaining private coverage through the Affordable Care Act will require large innovative companies that can draw on global resources.
“The reality is, demographically, we are an aging society and costs will continue to go up,” Parente said. “And so innovation has a real chance.”