Global healthcare systems are reaching breaking point. In developed markets, rising costs, aging and growing populations, an increase of chronic and communicable diseases are the perpetual and metaphorical headache. In developing markets, systems and infrastructure are more primitive and urgently need to improve, but without costing the earth.
There is hope however: technology and innovation.
The very same forces that have powered the likes of Uber, Airbnb and Netflix to near-overnight stardom also have the potential to revolutionise healthcare. And to a large degree, the revolution is already underway.
Wearable devices and mobile health-tracking apps are just the start. Better use of data and healthcare analytics can help doctors connect the dots and reach quicker and more accurate diagnoses (likely aided by information sources such as social media and Google search history). Further efficiencies, both on the part of the patient and doctor, will be obtained through the use of virtual appointments.
Blended together, these factors combine to form what’s becoming known as ‘connected health’. The potential for positive change is huge, particularly for the developing world where transportation and infrastructure challenges need to be overcome. As with banking and the skip straight to mobile, we could see developing markets like India and China bypass many now-clunky developed market solutions in favour of more appropriate and efficient tech-enabled solutions.
Robotic surgery, 3D printed body parts and advances in drug treatments provide a further glimpse to what lies ahead. Slightly less exciting, but no less significant, are developments in operational efficiencies. A recent Deloitte Global health care outlook “Battling costs while improving care” estimates that the NHS in England is expected to be paperless by 2020.
Yet not all advances need to be cutting edge. In theory, many solutions should be simple, particularly given that a significant proportion of the developed world’s problems are self-inflicted – caused by lifestyle behaviours. Obesity and diabetes are cases in point. ‘Nudges’ originating from our pockets will go a long way to promoting healthier behaviours.
The Deloitte study also reminds us that things aren’t black and white. Advances in technology can’t always be relied upon to drive down costs. High price tags can mean that they do exactly the opposite. Deloitte point towards drug cures for hepatitis C disease, where the substantial costs of the drugs result in their limited availability.
A balancing act between highly-effective treatment and the high associated cost will need to be made. Not an easy task for policymakers.
Fragile funding
The private sector also has a crucial role. Creating the right environment for young companies to flourish, however, is a challenge. Given the early-stage nature of many innovations and developments, the role of private equity to support funding is key. Investment trends are bearing this out. Figures from Bain Capital show a record level of healthcare mergers and acquisitions activity in 2015, 2.5 times higher than the average annual deal value of the previous decade.
What is more, many of the big pharmaceutical firms have been struggling with shrinking profits, stiff competition, high costs and ever stricter regulation. Some have started to outsource activities that were previously their bread and butter, including research and development of new treatments and drug manufacturing. All this creates opportunities for private equity firms to step in and invest.
As with most investments it’s important not to be seduced by shiny new products and devices. In fact, it’s the healthcare services market that, while far less exciting, holds the most potential value. Healthcare services have limited exposure to technology risks, a less stringent regulatory environment and are usually mature, stable businesses. This compares to devices firms, which are largely young and very often richly priced.
Returns won’t be seen overnight though. Unquote, a private equity research agency reports that private equity firms are starting to hold on to their companies for longer, thereby taking a committed view to the assumptions that underpin their investment rationale.
The changes occurring in the global healthcare industry are vast. Technological solutions will be at the heart of progress toward better-value and more effective care. Allocating capital effectively, both private and public, will be essential to ensuring that the integration of communication, diagnosis, treatment and monitoring improves how we manage illness and disease.
Healthcare is not merely an exciting space to invest over the next year and beyond – it also offers the satisfaction of playing an integral role in the bettering of people’s lives.
