What Does The Future Hold For Healthcare?
Having met with a CEO of a leading hospital in the United Kingdom, we were encouraged by the attitude of officials towards reforming their health care system. But what about the condition of health care in Australia?
There is a view in the United Kingdom that more hospitals are not necessarily the answer to dealing with the ageing population. Rather than adding more beds, the focus is shifting to productivity improvements and integrated care. This has important implications for the Australian healthcare system, where companies like Healthscope (ASX: HSO) and Ramsay Healthcare (ASX: RHC) are spending hundreds of millions of dollars each year expanding capacity.
This theme of integrated care incorporates a number of initiatives, with perhaps the most pertinent being a restructure of the health care system so that patient treatment is coordinated across services, rather than in isolation. On the surface, this seems like an ambitious task for the United Kingdom given their healthcare system is similar to our own; comprising numerous parties that have a natural incentive to act in their own interests, with doctors in particular being fiercely independent.
Bold actions are required by the Government in order to drive coordinated change across industry participants. In Australia, the current political debate is centred on balancing the budget, but it won’t be long before healthcare becomes the critical issue.
The Government does not want to foot the bill for an ageing population, but current initiatives are doing little to reduce the cost of health care. The Government is encouraging greater adoption of private health insurance by increasing the penalties for those that aren’t covered, but since health care premiums are rising faster than wages eventually something will have to give.
Reforming the health system will be a very difficult task, but we are encouraged by the dialogue in the United Kingdom. We hope that a similar dialogue is being shared in Australia, before the pressures from an ageing population trigger an emergency.
Ben MacNevin is an Analyst with Montgomery Investment Management. To invest with Montgomery, 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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Tony C
:
Hi Roger
Thanks for taking the time to explain things to your average investor
Look outside the box comes to mind
Tony
Tony C
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Hi Roger
I can see that debt has doubled due to acquisition but on all other measures it looks to me like a quality business hence my question
You have often said a C4 or 5 business is not investment grade and basically junk but last time i looked RHC was in the fund
Roger Montgomery
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Hi Tony, We look forward and meet with management to provide a sense of how quality scores might change in the future (as they have in the past). The current Skaffold score is a forecast of the full year based on half year results but these can change. Ramsay has almost always been investment grade at B3
Tony C
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Hi Roger
I was surprised to look at RHC the other day in Skaffold and find it is rated C poor quality and 4 business has been declining which is non investment grade.
Several of the high flying health care stocks are marketed as very poor quality business am i missing something
Tony
Roger Montgomery
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The quality scores change. Worth looking at the history nd then thinking about how performance and balance sheet might change in the future.