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A: Absolutely. Finding companies that mitigate health care costs is an important aspect of [our] approach. Examples include companies developing solutions such as medical devices that help reduce the length of hospital stays; diagnostics that better ensure expensive drugs are used only to treat patients that are likely to benefit from therapy; generic drugs that are less expensive versions of branded drugs, and health care information technologies that reduce billing-related costs while improving accuracy.
Q: Our health care system delivers the most expensive technology and treatments but similar or worse outcomes than other industrial countries that spend less on universal health care. Obamacare, if I understand it, expands access and also puts a bigger focus on prevention and primary care and reimbursing providers more for outcomes instead of every procedure and $30 for every aspirin, etc.
A: As a portfolio manager, I focus on the investment opportunities at hand, whether they are created by industry, regulatory or policy changes. What I can tell you is that the [Affordable Care Act] will drive more health care spending in the near term. The Centers for Medicare and Medicaid Services estimate national health expenditures have increased approximately 3.9 percent over the last five years; it expects that number to increase to 7.4 percent in 2014. The degree to which this “upfront” spending reduces costs down the road will determine whether the ACA is indeed a good thing.
Q: Is now a good time to invest in health care stocks?
A: The combination of the [Affordable Care Act] driving tens of millions of new consumers into the U.S. health care market, along with baby boomers entering their peak years of health care expenditures, should create a backdrop for significant growth in health care spending over the next several years.
In the near term, we’re looking at the vast majority of the [Affordable Care Act] being implemented by January 2014, with major implications for health care investing. The act is changing the rules of the game — more than anything in recent history — creating new winners and losers. Because stock prices typically reflect investors’ future expectations for a company, the time is now to identify stocks that will reap significant opportunities and those that will face considerable headwinds.
Neal St. Anthony • 612-673-7144