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Not too many “great quarter, guys” could be heard in General Electric’s (NYSE:GE) first quarter conference call last week. The long cycle businesses fared well, appliances felt the housing pain, and financial services caught the Bear Stern’s (NYSE:BSC) cold. So said Jeffrey Immelt, even though GE’s CEO claimed he did not want to make excuses. The most difficult news for the analysts on the call to swallow was the 17% drop in healthcare. Sales of imaging equipment were down 18% or $100M to community hospitals. Immelt said it was probably due to a tighter credit environment.

Could GE’s drop in healthcare revenue be due to trend beyond the current credit crunch? The UK is asking Millennium Pharmaceuticals (MLNM) and its marketing partner Johnson & Johnson (NYSE:JNJ) to refund Velcade payments for patients not helped. Cancer treatment Velcade is only effective in a subset of patients. Pay for performance is starting to gain momentum outside to US for very expensive drugs. Germany is severely limiting reimbursement for Pfizer’s (NYSE:PFE) Lipitor when generic statins are effective. The entire pharmaceutical industry will take a major hit when doctors finally recognize "Your Brain Needs Cholesterol".

It appears that the US might finally be maxed out on its ability to buy healthcare. Healthcare hardware (equipment), software, and drug and medical device manufacturers might actually be facing a long period of slower growth. Immelt said growth outside the US will have to make up for declining US sales in the near future.

The America is growing old bullish argument is losing strength. Medicare continues to squeeze providers and will do more so under a change in administration. The healthcare industry cannot escape the fact that fewer workers have an unlimited healthcare budget. The Wall Street Journal reported the new Goodyear Tire & Rubber (NASDAQ:GT) workers are not even entitled to health insurance for the first six months. In "Are GP Doctors Obsolete?" I wrote about the difficulty of the medical establishment adapting to consumer driven, high deductable health insurance. Not one of the industry’s players has taken to heart that there is just no more money.

Disclosure: Author is long BSC and MLNM.