Healthcare Services on the Move: Navigating Challenges and Trends in the Medical Sector

The Medical Services sector is undergoing a notable transformation, driven by technological advancements and a stronger emphasis on patient-centered care. The rise of remote healthcare has accelerated the growth of digital health options, leading to significant increases in telemedicine and AI-based services. Hospitals and healthcare providers are utilizing these tools to enhance operations, improve diagnostic accuracy, and provide better treatments. Meanwhile, value-based care models, which prioritize patient outcomes rather than the number of services provided, are becoming more prevalent, encouraging healthcare providers to adopt preventive measures and tailored treatment approaches.

According to a recent Grand View Research report, the global healthcare analytics market was valued at $43.1 billion in 2023. This market is projected to grow at a CAGR of 21.1% between 2024 and 2030. Key players—payers, healthcare professionals, and patients—will all gain new insights and services from advanced healthcare data and analytics. Stocks such as Doximity (DOCS), BrightSpring Health Services, Inc. (BTSG), and Embecta Corp. (EMBC) are anticipated to flourish alongside this rapidly evolving landscape.

Furthermore, as the world continues to face challenges like aging populations and an increase in chronic diseases, the demand for skilled nursing professionals has surged. By 2025, this trend is expected to persist, significantly impacting the service industry within healthcare. However, the post-pandemic world has unveiled a global shortage of healthcare workers, particularly affecting manual labor positions. A report from Mercer projects a shortfall of over 100,000 healthcare workers in the United States by 2028, with nursing assistants facing the steepest expected deficit of more than 73,000. Such shortages contribute to rising labor costs and healthcare expenses.

Understanding the Industry Landscape

The Zacks Medical Services industry includes various third-party service providers and caregivers associated with primary healthcare companies to achieve economies of scale. Key players include pharmacy benefit managers, contract research organizations, wireless MedTech companies, third-party testing labs, surgical facilities, and healthcare workforce solutions providers. Over time, this industry has shifted from volume-based to value-based care. The resurgence in medical tourism is also fueling growth. This shift necessitates the recruitment of specialized external service providers, reinforcing the industry’s crucial role in modern healthcare management.

Three Trends Influencing the Medical Services Industry

Digital Transformation: The U.S. medical device market is increasingly embracing digital platforms. A 2024 report by Statista forecasts a 9.2% CAGR for the digital health market from 2024 to 2028. The rising availability of unstructured health data and demand for personalized services highlight the critical role of big data in healthcare. A Roots Analysis report estimates that the global big data in healthcare market will expand from $78 billion in 2024 to $540 billion by 2035, with a CAGR of 19.20%. Companies employing artificial intelligence have seen treatment costs decrease by 50% and patient outcomes improve significantly.

Evolving Nursing Care: By 2025, nursing roles will further develop due to advances in technology and changes in healthcare models. Telehealth and remote monitoring have allowed nurses to reach patients in underserved areas. There is a growing demand for specialized nurses, such as nurse practitioners and critical care specialists. As noted by the Bureau of Labor Statistics, employment for nurse anesthetists, nurse midwives, and nurse practitioners is expected to grow by 40% from 2023 to 2033, significantly outpacing other professions.

Workforce Shortages: Even after the COVID-19 health emergency was declared over, many healthcare workers continue to leave the field due to the stress of recent years. The aging population (approximately 10,000 individuals aged 59-77 join Medicare plans daily) intensifies the need for qualified personnel. According to a report by the WHO, a shortfall of 15 million healthcare workers worldwide is expected by 2030, leading to increased healthcare costs. A report from HR for Health mentions a 15.6% rise in labor expenses per adjusted discharge at hospitals compared to pre-pandemic levels.

Industry Outlook and Performance Comparison

The Zacks Medical Services industry is a part of the larger Zacks Medical sector and holds a Zacks Industry Rank of #140, placing it in the bottom 44% of over 250 Zacks industries. This ranking indicates less favorable near-term prospects for the group. Historical data shows that the top half of Zacks-ranked industries tends to outperform the bottom half by more than two to one.

Next, we will highlight specific stocks poised for market outperformance based on encouraging earnings projections. But before that, it’s essential to evaluate the industry’s performance and current valuation.

Comparative Performance: Medical Services vs. Sector and S&P 500

Over the past year, the Medical Services Industry has underperformed relative to its sector and the S&P 500. Stocks within this industry have collectively lost 13.7% during this period, contrasting with a 6.2% decline in the Medical sector and a notable 25.3% gain in the S&P 500 composite.

One-Year Price Performance