What Healthcare Investors Are Thinking
Last week we participated in the GE Healthcare Investors Conference. The focus of the event was overall healthcare services and technologies from patient through payer and all providers in between. Similar to a number of other areas of the federal market (e.g., cybersecurity), the lines are blurring between then private vs. public sector participation and applicable technologies. Simply speaking, healthcare IT (“HIT”) services and solutions are bridging the federal policy making to the private sector implementation. The chaos around healthcare and healthcare reform, present a variety of investment opportunities for both capital providers and solutions providers. Select noteworthy takeaways are as follows:
- Focus on cost avoidance. These are the solutions the federal market is thirsty for, and investors want to invest in. The key to effective healthcare reform and especially lightening the burden of healthcare on the budget deficit has a direct line to cost avoidance efforts. However, these cost avoidance measures must also be mindful to not compromise the quality of care – conflicting priorities on the face of it. Fortunately there are many ways to play this trend ranging from fraud, waste and abuse avoidance technologies to architecting and integrating IT systems that support the organization, tracking, and payment processing for new models of care, amongst others.
- Don’t bet on regulation- that’s gambling. While there’s consensus as to the need for healthcare reform, there are too many forms it may take and the time frame is unclear. Investors are not looking to bet on Supreme Court decisions or Administration changes (or continuation), but rather the non-policy solutions the address the drivers of the healthcare crisis. See point #1 above.
- Invest in or target areas that avoid reimbursement risk. Pricing pressure on providers is a near certainty irrespective of what healthcare reform looks like. Outside of providers for whom greater reimbursement equates to higher income, the rest of the healthcare ecosystem is incentivized to drive costs down. This theme will naturally push providers to find efficiencies within their business model, but hopefully not to the detriment of quality of care (can we avoid the “factory” general practitioner model). Try to stay one layer away from direct reimbursement. Some ideas are to focus on the systems, HIT applications, and the big data of healthcare.