The Signal - Episode 3: A healthcare crisis in the making: Medicare and Medicaid

  • Public Equity
  • Healthcare
  • North America

This episode digs deep into the factors driving a US healthcare crisis with Third Bridge’s Global Sector Lead for Healthcare, Lee Brown, and Safa Elshanshory, a strategist at a private healthcare services company. They discuss the potential impact of Medicare and Medicaid’s projected insolvency, how a recession will worsen the situation, and where that could leave those most in need of care.

Several compounding issues are driving a US healthcare crisis but the projected looming bankruptcy of Medicare is “front and centre”, said Lee Brown. With the US – and many other countries – still reeling from the impacts of the COVID-19 pandemic, there is little capacity for the healthcare system to absorb the shock of a global recession, particularly with Medicare’s contribution to national debt at roughly 29%.

Both Brown and Safa Elshanshory agreed that a concerted shift from fee-for-service to value-based healthcare is needed to help avoid – or indeed recover from – a healthcare crisis. Although some models have been successful to date, ascertaining exactly what a scalable value-based model looks like remains a significant roadblock.

With that said, our panellists highlighted a number of areas in which momentum towards a more market-efficient healthcare system is increasing. The migration from inpatient to outpatient ambulatory surgical centres (ASCs) is a USD 60bn annual investment market opportunity, Brown said. Investors are also taking note of ongoing nursing shortages and the pressure of this on SG&A, which could “compress margins on top of a really difficult economic environment”. Tenet was also described as a company to watch, having acquired SurgCenter Development and its ownership interests in 86 ASCs.

Other business models mentioned by Elshanshory included D2C telehealth player Hims & Hers Health, and Tempest, which uses cancer data and technology to personalise treatment. Online pharmacies and D2C models are also “fascinating”, Brown added, along with the exponential advances in cell and gene therapy. As individuals become more savvy in their approach to healthcare, wearables are expected to gain ground and telehealth become the norm, feeding into a wider trend characterised by solutions that facilitate a more personalised level of care.

In the event of a global recession, Brown and Elshanshory warned there will be a rise in uninsured and under-insured individuals, as well as a reduction in employer-sponsored insurance. Those already marginalised will be disproportionately impacted, Elshanshory added, given their disproportionate reliance on commercial payers.

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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