Why Investors Should Seek out Healthcare Platforms
By Tashfeen Suleman, CEO, CloudMedx
Savvy investors are paying more attention than ever to healthcare stocks -- and for good reason. Business Insider calls healthcare “a massive market sector that offers unparalleled diversification for portfolios." It notes that health care stocks “represent more than 10% of the Nasdaq Composite Index.” In the United States alone, growth in health spending is expected to outpace GDP growth, reaching $6.2 trillion by 2028.
But amid all this opportunity, there is also a lot of confusion. This is understandable of course, given the complexities of the industry and myriad new companies sprouting up. So what should investors look for?
Working in the field of healthcare technology, I’ve come to see one of the most important, promising segments: healthcare platforms.
Beyond a la carte solutions
For many years, the healthcare industry has been populated by technologies designed to provide only one, or perhaps a few, specific solutions. It’s an “a la carte” system. Stakeholders across the industry -- hospitals, insurers, medical corporations, and more -- are presented with hundreds, or even thousands, of different technologies to choose from that fit specific needs. These are also sometimes referred to as point solutions.
A platform presents a much greater opportunity. In simple terms, it serves as a single place for data across a company to come together, with all sorts of solutions built in. And over time, more and more solutions are created, operable within that same platform. Healthcare institutions don’t need to worry about integrating each new solution with the others; the platform automatically does that.
In a recent report, the MIT Sloan School of Management noted that, “Healthcare has been slow to adopt platforms. But investment, the threat of competition, and the potential to save lives is pushing the industry forward.”
Part of the impetus to move to platform models is the development of value-based care, in which healthcare providers are paid based on patient outcomes -- rather than, for example, being paid for each visit or each test conducted. Reducing waste and duplication is an important part of this.
There are also reasons that platforms are an especially good investment in the current economic climate.
‘Full steam ahead’
“Investors are understandably cautious this year as the Federal Reserve tightens monetary policies and financial markets erased the gains from the last 12 months,” Fenwick & West reported in June. “Public company investors in sectors with enticing upside—like digital health—are waiting for headwinds to abate before they jump back in.”
But while overall M&A deal making in healthcare has trended downward, “acquirers are still keen on cloud-based healthcare platforms and new digital tools,” the law firm’s life sciences group wrote in its analysis. And with hospitals expected to face fundamental changes, the acquisition of platforms could “continue full steam ahead.”
And McKinsey, in a July posting, said it predicts long-term growth for health science and technology (HST) supported by software and platforms, which “have performed especially well, with CAGRs of 10 percent and 17 percent, respectively.”
Choosing platforms to back
In selecting which platforms are most promising, look for those using the highest quality technologies, including robotic process automation and natural language processing. Ask leaders of these companies about the data sets they’re using, to make sure they are robust and include a wide range of information such as social determinants of health. Ask investor relations representatives what systems are in place to make sure that the data sets are updated frequently and include all the relevant, accessible information. (The company that I co-founded is one such platform that bundles these technologies and solutions in one place.)
It’s no surprise that numerous advisers include healthcare platforms in lists of top stock picks. While top-notch platforms offer promising rewards to shareholders, they also offer something even more important, of course: better health. As the Biden administration’s Office of the National Coordinator for Health Information Technology (ONC) says, its “vision is better health enabled by data.”
In this era, “big data” can do more to improve the state of people’s health -- in the United States and across the world -- than ever before. The healthier people are, the faster the economy grows -- and everyone, including shareholders, comes out ahead.
Tashfeen Suleman is cofounder and CEO of CloudMedx. Based in Palo Alto, California, CloudMedx is a health data platform that automates workflows using Artificial Intelligence, Natural Language Processing, and Robotic Process Automation, giving patients, providers and payers the information they need to ensure the best care, reduce costs, and improve processes.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.