Investing In Healthcare

The baby boom cohort has changed the world in which we live and the lens through which we view it. The aging of this cohort (roughly one third of the population) will continue to usher in dramatic changes across most business sectors and areas of our lives in the years to come. The boomer demographic in North America is also presenting unique challenges for government run social programs and presenting unprecedented opportunities for businesses with the right entrepreneurial mindsets and resources. While boomer consumptive patterns have evolved over time, there are still strong correlates between their wants/needs (and the wants/needs of their children) and the flow of capital across virtually all economic sectors. Clearly, as boomers are aging, their spending habits are evolving as well. This re-prioritization of spending has become an area of study for governments and investment organizations alike. One area that surfaces repeatedly and is becoming pre-eminent in the study of boomer consumption patterns is healthcare.

Healthcare is one of the industries that are most acutely impacted by this demographic shift. While many boomers will continue working, many are also retiring or are getting close to retirement. Most boomers are or still view themselves as reasonably young (mentally and physically) – the oldest, born in 1946 one year after the “boys came home” from WWII. For those of you without a calculator handy, the oldest boomers will be 62 years of age in 2008. This small but important factoid is lost on many bullish investors who see the present time as the “halcyon days” in healthcare investment in seniors housing options or Long-term care. Yet it will be 15 to 20 years before the leading edge of the boomers reach the age where these services will be in higher demand.

What many people, including even professional investors, forget or never learned is that much of the the current demand for healthcare is being driven by WWI babies, or what has been coined The Greatest Generation. The Greatest Generation is compromised of those who reached adulthood just before, and served in WWII. Many came from rural areas of Canada and the U.S. and settled in the larger centers after the War. This generation was entirely different than succeeding generations. While the differences are beyond the scope of this article, suffice to say that those who seriously study demographic shifts expect the baby boom generation to have an entirely different set of expectations regarding healthcare service and other services than their parents.

So, to recap thus far, there are a significant number of opportunities in the United States and Canada in healthcare investment; but these opportunities are not limitless and nor are they a sure bet. Demographic shifts are significant drivers of healthcare consumption patterns. It is important to attribute healthcare supply and demand drivers to the market and demographic to which they rightfully belong.

So, while healthcare investment opportunities abound, there is no replacement for sound judgment based on analytical inquiry. This is true of any investment decision. It is also key that current and projected changes across the following domains are reviewed in detail: demographics, finances, macro-economics, geography, consumer attitudes and behaviours, motivating factors (e.g., luxury, fear), urban/rural, SES, educational, cultural, risk orientation, and other personal and group-related factors. While this article zeros in on the effect that the baby boom will have on the healthcare investment market, there are a multiplicity of other factors and population segments that are, and will continue to exert significant pressure on healthcare economics and consumption patterns.

The following businesses related to healthcare delivery are and will continue to be worthy of consideration by individuals, private equity, and venture capital investors. Again, it should be noted that the list is only a starting point, and that investment decisions should be made on the best current and projective information possible. It will be necessary to use an array of analytical tools and methods (e.g., Porter’s Five Forces and other financial and statistical methods and models) to assess the industry/sector/business opportunity prior to making a significant investment into healthcare. Having said this, potential healthcare investment opportunities exist in the following areas:

Integrated Healthcare Centers, i.e., primary care (particularly where physician services, diagnostics (X-ray, CT, MRI), laboratory, and pharmacy are delivered within a short radius)
Providers of products & services for diabetes management, congestive heart failure, COPD, coronary artery disease, and other high incidence chronic diseases
Providers of mobility and other daily living assistive devices for those with a range of impaired gross or fine motor skills or other mobility limitations (e.g., caused by pain, arthritis, joint immobility)
Pharmaceutical and biotechology innovators and providers (care must be exercised due to patent limitations, proliferation of substitutes – generic drugs, lengthy approval processes, and other process and outcome risks such as the Vioxx controversy )
Health and hospitality services outsourcing (again, highly contextual and requires significant demand/supply driver analysis, political, environmental, union/non-union and other forces analysis)
In-home healthcare services (e.g., nursing, physical therapy, occupational therapy, care and support)
Medical or surgical retreats (highly specialized, significant risk)
Assisted Living or Long-term Care (these resources are capital intensive and targeted at the parents of the boomers, i.e., the WWI babies) – it will be 20 years before boomers will require these services in any great volume (be careful)
Major equipment and major/minor supplies providers (e.g., MRI, CT, ultrasound through to re-useable and disposable equipment)
Providers of re-furbished medical equipment to secondary markets, which include more price-sensitive purchasers (e.g. re-furbished CT scanner for a smaller rural hospital)
Alternative medicine centers (e.g., offering Ayurvedic Medicine, acupuncture, traditional Chinese Medicine)
Since information technology is a core function in healthcare, the following is a stand alone list of technology-related opportunities related to data/information collection and transfer:

Devices: quick, simple to use, portable, and ease workflow in high stress healthcare environments (e.g., emergency departments, tele-health)
Devices whose operating systems converge with mainframe of networked systems that admit, track, audit, and generate reports with minimum input and robust rule-based error checking
Devices or system that integrates disparate healthcare network data and traffic
Devices or systems which accurately expedite services
Devices or systems which improve the accuracy and speed of diagnosis
Devices or systems which improve reduce human error and increase the probability of appropriate and targeted treatment options
Translational devices and applications of all sorts, i.e. translating actual “hands-on” data into useable, and interoperable information which can be used for diagnostic, treatment, recovery, and planning purposes
Electronic dashboard technology for strategic decision-makers
Providers of software applications that integrate disparate healthcare value chain and supply chain fragmentation
Providers of software applications that integrate in-hospital processes (e.g., admission, discharge, transfer); care-finance-payments; care-supplies-payments and other A/P and A/R alignment platforms and applications
Providers of software applications which refine, simplify, or facilitate the care planning of patients
Providers of systems integration
Providers of software applications for Human Resources, CRM, Finance, and other corporate functions
These are a few opportunities which currently exist in the healthcare context. As you might guess, many areas are being explored by larger firms. Healthcare IT is particularly attractive to larger, more highly capitalized companies and software developers. The competition amongst these groups is fierce due to the large volumes of funds in healthcare and the market opportunities driven by demographics and the need to constantly improve system performance. To date, there is no one firm with a strategic competitive advantage in any one area, though some healthcare sectors (e.g., diagnostics) have a high concentration of highly capitalized firms (e.g., GE and Siemens competing in the CT, MRI market).

Whatever investment decisions you decide, the amount of money you risk should be in proportion to your risk tolerance. Even “slam dunk” opportunities can turn out to be dogs if the circumstances are not right; or a context specific barrier is not weighed; or social attitudes do an about face.

If you are scanning the healthcare markets for opportunities to invest, be sure to do your due diligence and get help to investigate this complex and ever-expanding area. The due diligence you do prior to investing significant capital is essential to ensuring high double digit returns whilst minimizing your risk.

Shane Busby, MBA, is a management consultant with 16 years experience facilitating business solutions in healthcare and emerging markets. Shane is an lifelong learner, and continues to focus his practice on strategic planning, business case development, performance management, and change management; primarily in healthcare and emerging markets.

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Healthcare Executive Leadership – Global Career Planning Creates New Opportunities

Healthcare executive leadership has gone global. As a result, a growing number of opportunities are becoming available for individuals whose career planning efforts have prepared them for the extraordinary challenges and the long-term rewards that an international assignment offers. However, the expectations are high when it comes to making Healthcare executive leadership placements into a foreign market, and a prospective executive must be fully prepared to meet those challenges head-on.

“Well done is better than well said!” is a quote from the New England Patriots’ Tom Brady (and Ben Franklin) and it summarizes the mindset of global investors and global operators as they recruit individuals to lead foreign or multinational business entities. In other words, a successful track record delivering superior financial and operational results will help your achieve your international leadership goals far better than merely words and potential. This is why personal global career planning pays off in the long-run.

We recently helped sponsor the “2007 Strategic Investing in Healthcare Forum.” This was an invitation only, one-day conference that brought together members of the Harvard Business School and the Argyle Executive Forum, plus 150 senior operating executives from public and private Healthcare firms, select private equity and hedge funds, prominent research fellows, and key senior advisors. And, as a result of these discussions, I now find myself thinking about ways that up-and-coming Healthcare executives can best prepare themselves to achieve their global career planning ambitions.

I should mention that over the course of this one day event, Healthcare leaders shared their focus and innovative approaches towards booming global markets, the financially-stretched domestic market, and the global demographic trends that will either clobber economies or empower businesses to solve complex issues. Speakers for the event included representatives from Apax Partners, GE Healthcare, GE Healthcare Financial Services, Bain Capital, Welsh, Carson, Anderson & Stowe, The Blackstone Group, CCMP Capital Advisors, Merrill Lynch, GTCR Golder Rauner, Ropes & Gray LLP, Bank of America, and Epstein Becker & Green, P.C.

All of the speakers were extremely candid and informative. However, here are just two examples of the broad array of globally-focused topics that were discussed:

Buddy Gumina, a Partner at US Healthcare – Apax, discussed coverage, consumerism and convergence as it relates to managed care, healthcare services, provider transparency, interactive technology, preventative medicine and outsourced pharma. Apax has a thirty year track-record as a global private equity firm with a strong healthcare presence.

Joe Hogan, President and CEO of GE Healthcare, stated that the company’s basis for growth and the focus of its global-leading $17 billion business is to continue to drive innovation and world-class dominance across IT and diagnostics. The breadth of opportunities for GE Healthcare is tremendous as a result of the exploding second and third world markets where infrastructure and utilization are the focus for the design and development of full-scale digital hospitals.

Other speakers focused on the current strategies that healthcare investors and operators are pursuing as providers, payers, investors, patients and technology converge. And, through this convergence, I am fortunate to play an active role in finding the outstanding Healthcare executive leadership talent that international Healthcare organizations will require to achieve their aggressive business goals.

As a result of my ongoing involvement in the Healthcare leadership arena, I have three career planning suggestions that aspiring international executives would be wise to adopt as they strive to develop the knowledge and skills to lead a global Healthcare business.

Use Coaches and Mentors. Tiger Woods has used multiple coaches over the years to help improve his game. Similarly, you need to identify two or three senior individuals who are interested in taking an active role in your executive leadership development. Whether as coaches or mentors, these individuals can provide you with invaluable insight and global career planning guidance. In addition, you can select your own informal mentors by watching Healthcare executive leaders who are currently successful in the roles you are striving to achieve. Study their successes and their mistakes. In completing more than 225 Healthcare retained searches, those who have achieved the greatest corporate success have aggressively pursued mentoring relationships throughout their career.
Be Seen and Be Known. Financial investors and operators who are deploying tens and hundreds of millions of dollars in new capital are consistently looking to hedge their bets through the recruitment of experienced, well-referenced and well-known executives. Show a keen interest in your industry, in your businesses fundamentals, and in your opportunities and obstacles in order to deliver stellar results and develop relationships with influencers. Through your efforts and success you will find interest from those within your industry to invite you to speak, present or join an industry panel on key issues and trends. The value of your business success can lead you to exceptional personal contacts, which in turn can significantly improve future business opportunities. Your business acumen and success can take you to the door of a global Healthcare executive leadership opportunity. Having strong industry relationships can be what actually opens that door and allows you to enter.
Do your Best Work Today. Without a doubt, ambition is required for the level of success you desire. However, focusing too early on your next opportunity can cause you to lose sight of your current business goals and responsibilities. This can negatively impact your trajectory. Outstanding performance is recognized and should always be your primary objective.
Establishing yourself as the winning executive for a global Healthcare executive leadership opportunity requires strong foundational skills, a successful track-record, solid relationships, keen industry insights, and much more. Global career planning presents new opportunities. Therefore, keep pushing yourself forward in your professional growth and remember, “Well done is better than well said.”

Paul Frankenberg is President, CEO, and Principal in Kraft Search Associates, a retained Executive Search Firm specializing in the recruitment of high-value Executive Leadership throughout the Healthcare Industry. Paul has completed more than 225 Senior Executive and Corporate search assignments during his 12-year career and is known for search process thoroughness, commitment to project success, focus on client business plan achievement and candidate retention rates that are among the highest in the industry. In 2007 Modern Healthcare magazine ranked Kraft Search Associates one of the nation’s Top 25 Healthcare Executive Search Firms. Paul is a frequent writer, guest speaker and panelist on leadership, executive development, entrepreneurship and recruiting industry topics

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