Where the Opportunities Are.
The firm targets companies in healthcare services, healthcare information technology, and less frequently medical devices. At approximately $2.8 trillion and growing in the United States, the healthcare sector continues to create tremendous opportunities for investment. Constant cost pressures and reform efforts create substantial changes, threatening some segments of healthcare while enabling new possibilities in others.
Why healthcare services?
Healthcare services represent a large and rapidly growing sector of the U.S. economy. Spending on U.S. healthcare services reached $2.4 trillion in 2016, fully 80% of all domestic healthcare expenditures and 14% of GDP. Healthcare spending has increased more rapidly than the overall U.S. economy for the past five decades. The many large and fragmented markets within healthcare services present attractive investment opportunities for executives and investors steeped in the underlying dynamics.
We are focused on markets within healthcare services that are cost effective and can deliver net savings to the US healthcare system. While we will be opportunistic in finding great teams and companies, there are certain markets within healthcare services that we find particularly attractive.
Caring for patients in less expensive settings. The dynamics of healthcare favor sectors and companies that generate savings. Often there are safe, effective care settings that do not require a patient to be in an expensive hospital.
Providing behavioral care. Treating mental illness generates great savings in both healthcare and criminal justice costs. The combination of reduced stigma and policy changes in support of mental health parity continues to increase the proportion of patients who are diagnosed. Treatment allows many individuals, including our wounded warriors, to return to fulfilling and productive lives.
Managing Health Insurance Functions. The health insurance sector is experiencing significant growth and change as Medicare and Medicaid managed care expand, and as the general trend toward higher deductible benefit designs continues.
While the regulatory and reimbursement environments make the development of new medical technology more challenging than in recent years, there are still many great opportunities in medical devices. The key is to seek a new archetype of company, one with a recognized clinical need in a field where one can prove not only clinical results but also economic benefits to the physician, hospital, and payer communities. These companies will be capital efficient in getting to market, will have a concentration of volume to make sales force economics viable, and will be attractive to several potential acquirers.