News & Insights
January 23, 2020
Last week, a team from Waller headed to San Francisco for the 38th annual J.P. Morgan Healthcare Conference, which brought together thousands of investors from around the world to try and understand the trends that will be shaping healthcare in the years to come.
When our team returned, we asked them to share some of the biggest trends they gleaned from being firmly positioned at the intersection of key healthcare and finance executives. Here’s a look at the top 7 takeaways from this year’s gathering.
1. There is significant interest in healthcare service ancillaries, including staffing companies and healthcare tech and devices. Over the last decade, the largest healthcare-focused exchange-traded fund (ETF) (Health Care Select SPDR ETF) has outperformed the S&P 500 by a healthy margin. Seasoned healthcare investors already know that tremendous opportunity exists in healthcare and have been seizing on those core opportunities in recent years. These ancillary businesses are seen as a way for investors who do not have experience in healthcare services to get exposure to the healthcare sector.
2. Interest is growing in concierge medicine platforms. Although the numbers of these providers remain small, the model holds a lot of promises for physicians looking to reduce the potential for career burnout by creating a better work/life balance. According to some studies, the patient load can be 80 percent lower than a traditional practice. The caveat here is that it’s not clear that any of these platforms have had experienced healthcare counsel to walk them through the many sandtraps that exist in that space. Investors need to get educated on the topic fast.
3. Investment in healthcare service specialties will remain hot, although the interest will likely shift to new areas. Key specialties poised for growth include orthopedics, gastro, behavioral and home health.
“By having more transparency everybody can start competing on the basis of cost and quality, and without transparency we don’t have that.” #JPMHC20— Administrator Seema Verma (@SeemaCMS) January 15, 2020
4. Price transparency is still a work in progress. With the Department of Health and Human Services (HHS) publishing proposed guidelines in November for transparency in pricing, the political push for this effort continues. Payors and hospitals remain united in opposition to the type of price transparency that HHS is demanding. Instead, they argue that transparency could actually stifle competition, which is the exact opposite of what the administration is hoping for with the proposed rules. While nothing would take effect until sometime in 2021, the battle over this will only intensify in the coming year.
“Just having price transparency is not enough. You need to have price AND quality information. When people look at just pricing they do not always pick the best provider, because they may think there is something wrong with the low cost option.” #JPMHC20— Administrator Seema Verma (@SeemaCMS) January 15, 2020
5. Providers are still grappling with the future of consumer-driven healthcare. The vision is that empowered and educated consumers will make better – and more cost-effective – decisions about their own healthcare, but that hasn’t exactly happened yet. For some patients, the “best care” remains synonymous with the “most expensive” option as long as the insurance company is picking up the largest portion of the tab. Even with the proliferation of more high-deductible health plans in recent years, the effects on overall pricing and cost of care hasn’t changed dramatically.
6. Two burning questions: How will digital healthcare companies work with more traditional companies? Can the “communications gap” be bridged? Digital healthcare is hot; in the third quarter of 2019 alone, investors poured $1.6 billion into healthcare artificial intelligence startups. The interest among investors for digital tech is not going away, but the challenge is finding the best way to integrate digital tech into everyday life for physicians and providers. As we’ve seen with electronic health records, the challenges remain steep. A 2018 study from Stanford University found that 40 percent of primary care physicians saw more challenges than benefits to EHRs. Digital tech will be the shiny object in 2020, but truly understanding how it will intersect with patients and providers will be the Holy Grail for investors.
7. The 2020 election may prove to be a wildcard by the fourth quarter. Stability is also a concern for potential investors and any major changes in our political climate can have repercussions on the private sector as well. While it looks like the Supreme Court has punted on a final decision about the Affordable Care Act for this term, the elections this fall will certainly be something to watch. Many said they expect to see deal volume drop off after the end of the third quarter, and that could potentially mean that deal volume might be a bit higher than expected during the first three quarters of the year.
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