The Bottom Line: Investing in Healthcare: Participating in the U.S. Healthcare System Overhaul
The growth of personalized medicine, technological breakthroughs, and new healthcare reform laws – all brought on by the rising cost of healthcare and quality control issues – are creating new opportunities in the healthcare space for long-term investors, according to research released by UBS Wealth Management Research (WMR) as part of its Decade Ahead report.
The success of companies specializing in healthcare delivery, systems, and technology will be largely dependant on the companies' ability to provide a cheaper and more efficient healthcare experience for doctors and patients, according to the Decade Ahead chapter "Healthcare: From Healing to Fixing."
With that in mind, companies that, among other things, promote better coordination among healthcare providers, cost-saving healthcare delivery methods, and innovative medical treatments will be well-positioned over the next decade to benefit from both private and government support for such initiatives.
“Reducing costs and improving the quality of care provide much of the motivation for healthcare innovation," said Jerry Brimeyer, an analyst with UBS Wealth Management Research. "We expect considerable technological innovation this decade to better coordinate our fragmented healthcare system and apply our knowledge of the human genome to personalize medicine.”
A healthcare-themed chapter of the Decade Ahead report outlines the factors contributing to the reshaping of the U.S. healthcare system, including behavioral changes that could lead to less discretionary healthcare consumption and enhanced price shopping. Such behavioral shifts, the report says, could reduce the number of unnecessary tests and procedures that often increase health costs.
To meet the demands for greater efficiency in healthcare, managed care organizations will be tapped in the coming years to implement new payment schemes and vertically integrate healthcare delivery paradigms, presenting investors with new opportunities in companies that provide such services.
Technological innovation will also play a large role in the future of healthcare. For instance, at the behest of the U.S. government, electronic record-keeping will be used more prominently by 2020, potentially leading to processing improvements and fewer medical errors. Other technological innovations cited in the Decade Ahead report include robotics and enhanced medical devices.
The next decade is also expected to feature new opportunities in companies specializing in genetic research, which could enable doctors to provide more targeted and effective treatments to patients for many conditions, including cancer, Alzheimer's, and heart disease.
There are several ways to incorporate healthcare investments into your portfolio. For example, one method involves investing in equity funds that are concentrated in healthcare stocks.
Given that many of the companies and medical sub-sectors that stand to benefit from the healthcare system overhaul are not yet well-established, a professional portfolio manager could be helpful in providing recommendations on such niche markets.
For more information about whether healthcare investing may be an option for you, contact your financial advisor.
This article has been written and provided by UBS Financial Services Inc. for use by its Financial Advisors. The information contained in this article is based on sources believed reliable, but its accuracy cannot be guaranteed. This article is for informational and educational purposes only and should not be relied upon as the basis for an investment decision. Consult your financial advisor, as well as your tax and/or legal advisors regarding your personal circumstances before making investment decisions. UBS Financial Services Inc. is a subsidiary of UBS AG. ©2011 UBS Financial Services Inc. All rights reserved. Member SIPC.