Why does the health care industry continue to prosper when other parts of the economy – from clothes, to cars, to computers – continue to shrink? That’s because hospitals, clinics, diagnostic centers, health care management organizations, manufacturers of medical devices, pharmaceuticals and health care outsourcing services are growing.

Hospitals, particularly those that have bought or merged with other hospitals, have become networks with enough capacity and clout to dominate local markets. In addition, each hospital network tends to acquire or establish dozens of stand-alone clinics to be closer to their patient base. Manufacturers of medical devices continue to innovate and introduce new and improved products. Managed care companies are protecting their growth by controlling health care costs, requiring their members to pay more for branded prescription drugs, turning to lower-priced generics and even dropping money-losing customers.

According to a study published late in 2002 by Health Affairs, a scholarly journal, the fastest growth in health care is coming from the escalating costs for in-hosptial care. The study also indicates that out-patient costs are growing fast, along with higher salaries and incentives to address the short supply of nurses. This growth is not expected to slowdown through much of the country and for years to come.

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