Healthcare

Healthcare Strategy

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Thesis

Why this sector matters to investors right now. Structural, not market timing.

US large-cap healthcare on this page is four businesses that share a CMS dollar and not much else. National Health Expenditures grew 7.2 percent to $5.3 trillion in 2024, or $15,474 per person and 18.0 percent of GDP (CMS NHE fact sheet). Hospital care was $1,634.7 billion, physician and clinical services $1,109.7 billion, and retail prescription drugs $467.0 billion. That is the demand pool. The listed companies convert it through very different P&Ls.

Payers and PBMs sit on top of the pool. UnitedHealth 2025 revenue was $447.567 billion and CVS Health was $402.067 billion. HCA, the hospital operator, was $75.600 billion. Leftover pharma (JNJ $94.193 billion, BMS $48.194 billion, Gilead $29.443 billion, Vertex $12.0 billion) is a patent-and-LOE book, not a GLP-1 book. Medtech (Abbott $44.328 billion, Medtronic FY26 $36.364 billion, Stryker $25.116 billion, Boston Scientific $20.074 billion, GE HealthCare $20.625 billion, Intuitive $10.065 billion, Edwards $6.068 billion) is procedures, implants, and capital. Tools (Thermo Fisher $44.556 billion, Danaher $24.568 billion, IQVIA $16.310 billion) follow biopharma R&D spend and lab workflows. GLP-1 drug economics stay on the GLP-1 page. Vaccine P&Ls stay on Vaccines. UnitedHealth and CVS Medicare Advantage underwriting also live on Insurance.

Structural drivers

Forces that shape long-run demand and economics. Each driver is sourced.
  • •US health spending is still growing faster than the economy. CMS historical NHE rose 7.2 percent in 2024 to $5.3 trillion and 18.0 percent of GDP. CMS projects average NHE growth of 5.4 percent from 2025 to 2034 against 4.1 percent GDP growth, taking the health share to 20.6 percent of GDP in 2034. Source: CMS NHE fact sheet.
  • •Medicare is the fastest major payer in the projection window. CMS estimates Medicare spending growth of 7.7 percent a year from 2025 to 2034, versus 5.0 percent for Medicaid and private health insurance. In 2024 Medicare was already $1,118.0 billion (21 percent of NHE). Source: CMS NHE fact sheet.
  • •Hospital utilization is the volume engine for providers and for implant and capital medtech. Hospital expenditures grew 8.9 percent to $1,634.7 billion in 2024. HCA 2025 admissions were 2,297,065 and equivalent admissions 4,107,152, with revenue per equivalent admission of $18,407. Source: CMS NHE fact sheet; HCA FY2025 results and 10-K.
  • •Procedure mix, not just placements, prices robotics and structural heart. Intuitive reported about 3,153,000 da Vinci procedures in 2025 (+18 percent) and $6.019 billion of instruments and accessories against $2.474 billion of systems. Edwards 2025 TAVR was $4.488 billion of $6.068 billion continuing-ops sales. Source: Intuitive FY2025 earnings; Edwards FY2025 8-K.
  • •Recurring tools and CRO spend is the midstream of leftover pharma R&D. Thermo Fisher 2025 Laboratory Products and Biopharma Services were $23.984 billion of $44.556 billion. IQVIA 2025 Research and Development Solutions were $8.896 billion of $16.310 billion (legacy segment view). Source: Thermo Fisher FY2025 8-K; IQVIA FY2025 results.
  • •Franchise drugs still dwarf new launches inside leftover pharma. Gilead HIV was $20.752 billion in 2025, including Biktarvy $14.334 billion. BMS Eliquis was $14.443 billion and Opdivo $10.049 billion. Vertex total revenue was $12.0 billion, still mostly cystic fibrosis. Source: Gilead, BMS, and Vertex FY2025 results.
  • •Medtech scale is now a $20 billion-plus club, not a single category. Abbott Medical Devices were $21.387 billion of $44.328 billion in 2025. Stryker MedSurg and Neurotechnology were $15.647 billion of $25.116 billion. Boston Scientific Cardiovascular was $13.250 billion of $20.074 billion. Source: Abbott, Stryker, and Boston Scientific FY2025 results.

Structural risks

Forces that could compress demand, change economics, or break the thesis.
  • •Payer medical-cost and regulatory risk is not a hospital-volume story. UnitedHealth reported a 2025 medical care ratio of 89.1 percent and guided 2026 revenue to greater than $439.0 billion, below the 2025 print. CMS premiums were 44 percent of 2025 consolidated revenue. The Insurance sector page owns the DOJ and Medicare Advantage coding thesis. Source: UnitedHealth 2025 results and 10-K.
  • •Loss of exclusivity is the leftover-pharma binding constraint. Johnson & Johnson said STELARA was an approximate 1,040 basis-point drag on 2025 Innovative Medicine operational growth. BMS Legacy Portfolio fell 15 percent to $21.8 billion while the Growth Portfolio rose 17 percent to $26.4 billion, leaving group revenue flat at $48.194 billion. Source: JNJ FY2025 results; BMS FY2025 8-K.
  • •Life-science tools are not uniformly growing. Danaher Life Sciences 2025 core sales declined 1.5 percent even as Biotechnology core sales grew 6.5 percent. Thermo Fisher full-year organic growth was 2 percent on $44.556 billion. A second year of academic and biotech funding softness shows up here first. Source: Danaher and Thermo Fisher FY2025 results.
  • •Abbott Diagnostics is still working off COVID testing. Full-year 2025 Diagnostics sales were $8.937 billion, down 4.3 percent reported, with COVID-19 testing-related sales of $297 million against $747 million in 2024. Medical Devices ($21.387 billion, +12.6 percent reported) is carrying the print. Source: Abbott FY2025 8-K.
  • •Hospital payer mix can compress HCA even when admissions rise. 2025 managed care and other insurers were 48.9 percent of HCA revenue. Combined Medicare and Managed Medicare were 32.7 percent. Combined Medicaid and Managed Medicaid were 12.7 percent. Rate cuts or mix shift toward government payers change the $18,407 revenue-per-equivalent-admission figure without changing capacity. Source: HCA 2025 10-K.
  • •Edwards is still a TAVR company. TAVR was $4.488 billion of $6.068 billion in 2025. TMTT grew 56 percent to $551 million and remains a small line. A TAVR share or ASP shock is the equity, not the TMTT option. Source: Edwards FY2025 8-K.
  • •IRA negotiation and net-price pressure sit on the leftover-pharma names that still have large US retail books (Eliquis, Biktarvy, JNJ immunology). CMS projects retail prescription-drug spending as the fastest major NHE service line from 2025 to 2034 at 5.7 percent a year, which is volume and mix, not list price. Source: CMS NHE fact sheet; company FY2025 product tables.

Competitive landscape

How to think about the players. Framing along axes (pure play vs diversified, incumbent vs challenger, etc). Not stock picking.

Read the four tabs, not a GICS Health Care ranking. Medtech is implants, imaging, and robotics sold to hospitals and ASCs (Abbott devices, Medtronic, Stryker, Boston Scientific, GE HealthCare, Intuitive, Edwards). Tools are instruments, consumables, diagnostics, CDMO-adjacent services, and CRO data (Thermo Fisher, Danaher, IQVIA, plus Agilent, Waters, Mettler, Charles River on the roster). Leftover pharma and biotech is everything that is not the GLP-1 or vaccine thesis: JNJ, BMS, Gilead, Vertex, plus Zoetis, Viatris, Biogen, and Incyte. Providers are hospitals (HCA, UHS), labs (Labcorp, Quest), dialysis (DaVita), and the dual-home payer and PBM platforms (UnitedHealth, CVS). Dual-home mega-caps stay on the Companies tab so the S&P 500 gap is closed. They are not a reason to rebuild GLP-1, Vaccines, or Insurance on this page.

Key metrics to watch

The operational and financial metrics that matter most in this sector. Each one names its source and update cadence.
MetricSourceFrequencyWhy it matters
CMS NHE and the hospital / physician / Rx splitCMS National Health Expenditure Accounts (historical tables and fact sheet)Annual (historical year typically lags by about a year)This is the demand pool. If hospital care growth falls from the 8.9 percent 2024 print, medtech and HCA volume slow together.
HCA admissions, equivalent admissions, and revenue per equivalent admissionHCA 10-K and quarterly earnings releaseQuarterlyThe cleanest public-hospital volume and price read. 2025 was 2.30 million admissions and $18,407 per equivalent admission.
Intuitive da Vinci procedures and instruments-and-accessories dollarsIntuitive Surgical 10-K and quarterly earnings releaseQuarterlyTests whether robotics is a procedure compounder or a capital-cycle story. 2025 I&A was $6.02 billion against $2.47 billion of systems.
Edwards TAVR dollars versus TMTT dollarsEdwards Lifesciences 10-K and quarterly earnings releaseQuarterlyTAVR is 74 percent of 2025 sales. TMTT has to keep growing from $551 million before the equity is a multi-valve company.
Thermo Fisher LPBS versus Life Sciences Solutions, and Danaher Biotechnology versus Life Sciences core growthThermo Fisher and Danaher 10-K / 8-K segment tablesQuarterlyLPBS is the scale pile. LSS and Danaher Biotechnology are the high-margin biopharma read. Danaher Life Sciences core -1.5 percent in 2025 is the stall signal.
JNJ STELARA drag versus Oncology, Gilead Biktarvy, BMS Growth versus LegacyJNJ, Gilead, and BMS quarterly product tablesQuarterlyLeftover pharma is a franchise-versus-LOE tape. If Biktarvy or Eliquis slows while the growth book does not offset, the page is a patent cliff, not a pipeline.
UnitedHealth medical care ratio and Optum versus UnitedHealthcare mixUnitedHealth 10-K and quarterly release. Cross-check Insurance sector.Quarterly2025 MCR was 89.1 percent. CMS was 44 percent of consolidated revenue. This metric prices the dual-home, not HCA.

Catalysts and milestones

Known upcoming events that could move the sector. Dated where possible.
  • •CMS 2025 historical NHE release (expected around year-end 2026). The 2024 print was +7.2 percent to $5.3 trillion. A step-down toward the 5.4 percent long-run projection would reset hospital and Rx growth assumptions. Source: CMS NHE fact sheet.
  • •Medtronic MiniMed / Diabetes separation path after FY26. Diabetes was $3.112 billion of $36.364 billion. The parent becomes a more concentrated cardiovascular and hospital-tech company if the carve-out completes. Source: Medtronic FY26 results.
  • •Intuitive 2026 da Vinci procedure guide of about 13 to 15 percent, against 18 percent in 2025. The first two quarters are the test of whether 2025 was a catch-up year. Source: Intuitive FY2025 earnings.
  • •Edwards 2026 TMTT guide of 35 to 45 percent growth to $740 to $780 million. That band is outlook, not a chart. A miss leaves the equity as TAVR. Source: Edwards FY2025 8-K.
  • •Johnson & Johnson next STELARA and Oncology quarterly print. The 1,040 basis-point 2025 drag is the bar for whether Innovative Medicine can still grow. Source: JNJ FY2025 results.
  • •UnitedHealth 2026 revenue outlook greater than $439.0 billion versus 2025 actual $447.6 billion. The first two quarters decide whether 2025 was a reset year. Source: UnitedHealth 2025 results.
  • •IQVIA 2026 Commercial Solutions guide of about $7.2 to $7.3 billion and R&DS of about $9.9 to $10.0 billion on the recast segments. Book-to-bill and backlog conversion are the leading indicators. Source: IQVIA FY2025 results.

What would change the view

Conditions or evidence that would invalidate the thesis or materially shift the risk picture.
  • •CMS hospital-care growth falls to low single digits for two consecutive historical years while HCA equivalent admissions also stall. Medtech and hospital volume would then be a share fight, not a utilization cycle.
  • •Intuitive instruments-and-accessories growth falls to system-placement growth for two quarters. Robotics would look like a capital-equipment vendor rather than a procedure annuity.
  • •Danaher Life Sciences core sales stay negative while Biotechnology also slows. Tools would be a funding-cycle short, not a consumables compounder.
  • •Biktarvy or Eliquis reports a down year while the Gilead oncology book or the BMS Growth Portfolio does not offset. Leftover pharma would be a cliff tape.
  • •Edwards TMTT run-rate holds above $700 million while TAVR stays at least mid-single-digit. The company would start to look like a multi-valve franchise.
  • •UnitedHealth medical care ratio moves back through the mid-80s without a membership collapse, and 2026 revenue exceeds 2025. The dual-home would look like a reset rather than a structurally higher-cost MA book. Confirm on the Insurance page.
  • •A CMS NHE historical year that shows retail Rx growing faster than hospitals for two years running, with leftover-pharma net prices not collapsing. That would reopen a drug-mix reading of the $5.3 trillion pool.

What we are not covering

Sub-areas, technologies, or companies we are deliberately excluding from the analysis, and why.
  • •GLP-1 drug economics, obesity-care volumes, and the incretin pipeline. Those live on the GLP-1 sector page. Lilly, Pfizer, Amgen, and AbbVie are dual-homed here and are not rebuilt there.
  • •Vaccine product P&Ls (Gardasil, Prevnar, Shingrix, Spikevax, Beyfortus). Those live on the Vaccines sector page. Merck and Pfizer are dual-homed here.
  • •Medicare Advantage Stars, risk adjustment, and the UnitedHealth and CVS Aetna DOJ theses. Those live on the Insurance sector page.
  • •Private hospitals, private labs, private medtech, and ex-US names that are not on the locked S&P 500 roster (Roche Diagnostics, Siemens Healthineers, Philips, Fresenius, EssilorLuxottica surgical).
  • •Company-level custom KPI floors. Deferred on purpose. Sector-book charts are not a substitute.
  • •IQVIA, Circana, or EvaluatePharma category-share models that are paywalled and not independently verified here.
  • •2026 company outlook bands except where labeled as guide, not actual (Edwards TMTT, Intuitive procedures, UnitedHealth revenue, IQVIA segments).

Sources

Primary sources cited in this analysis. Links open in a new tab.

Audit trail

Record of the last review and what changed. Required on every refresh.
Last reviewed: 2026-08-25
Change log
  • 2026-08-25Replaced scaffold copy with sourced strategy. Thesis, drivers, risks, and metrics drawn from CMS NHE 2024, UnitedHealth 2025 10-K and results, CVS 2025 results, HCA 2025 10-K, Johnson & Johnson FY2025 results, BMS FY2025 8-K, Gilead FY2025 results, Vertex FY2025 results, Abbott FY2025 8-K, Medtronic FY26 results, Stryker FY2025 8-K, Boston Scientific FY2025 results, GE HealthCare FY2025 results, Intuitive FY2025 earnings, Edwards FY2025 8-K, Thermo Fisher FY2025 8-K, Danaher FY2025 results, IQVIA FY2025 results, Quest FY2025 results, and Labcorp FY2025 results.
Unresolved questions
  • •Pull 2025 primary prints for Zoetis, Viatris, Biogen, Incyte, Agilent, Waters, Mettler Toledo, Bio-Techne, Charles River, Revvity, Becton Dickinson, Baxter, Steris, Zimmer Biomet, ResMed, Align, Cooper, Solventum, Idexx, Henry Schein, DaVita, and Universal Health Services so those roster names can move from the table onto charts.
  • •Confirm CMS 2025 historical NHE when the next fact sheet posts, versus the 2025-2034 projection of 5.4 percent average growth.
  • •Confirm Medtronic Other revenue of about $174 million that sits between portfolio sales and $36.364 billion group sales.
  • •Confirm Vertex product-level CF versus CASGEVY versus JOURNAVX dollars from the FY2025 10-K, not only the $12.0 billion group figure and $116 million CASGEVY line.
  • •Reconcile CVS Health Services $190.425 billion segment total with the consolidated $402.067 billion after eliminations using the 10-K note, not only the earnings release.
  • •Decide whether JNJ MedTech $33.792 billion should also appear as a dual bar on the Medtech tab in a later pass.
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Healthcare Strategy: Market Data | Sterling