The Coordination of Health Care
Health care costs continue to rise above inflation, but perhaps the main insight the public has received into resolving this issue has been the increased publicity of negotiations between hospitals and insurers. It’s important to note that other players are actively working to provide more value in the system.
An effective way to keep patients out of hospitals is earlier treatment at primary health clinics. With a large network of medical centres, laboratories and radiologists, Sonic Healthcare (ASX: SHL) and Primary Health Care (ASX: PRY) are uniquely positioned to drive meaningful change within the industry, and both companies discussed the potential for greater coordination at the 2015 financial year result.
Sonic Healthcare considers that contracting with health funds will become a greater part of their business in the future. Health funds offer packages with a range of services, so they are well positioned to understand the future demand for services on a large scale. Approaching the medical networks with this information, who in turn can provide better data upon administrating care, can lead to better outcomes for all parties involved.
Primary Health Care, with its extensive network of GPs, is exploring the best ways to record data from consultations. Primary Health Care also has an investment in a Private Health Insurance entity to better understand the interests and workings of outside parties.
Despite this focus on adding value in the chain, we’ve previously discussed elements which must be considered before investing (see here and here). While we remain on the sideline, it’s very promising to hear these companies pursue greater coordination within the industry, which should ideally result in more effective care and lower premium growth.
Ben MacNevin is an Analyst with Montgomery Investment Management. To invest with Montgomery domestically and globally, find out more.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
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