Key Takeaways:
There was a significant amount of fluctuation in the healthcare industry in 2023, with hospitals being the most successful performers, posting a 23% gain in revenue. A recent Nashville Health Care Council Wall Street discussion on February 6, 2025, moderated by Marty Bonick, President and CEO of Ardent Health, brought together industry experts to examine these changes. The panel featured AJ Rice, Managing Director of US Managed Care & Facilities at UBS, Jess Tassan, Senior Equity Research Analyst at Piper Sandler & Co., and Matt Gillmor, Director at KeyBanc Capital Markets.
The conversation centered on important elements influencing the healthcare sector, such as the ambiguity of policies, difficulties in managed care, and new investment prospects in life sciences and healthcare IT. In 2023, hospitals emerged as strong performers, while managed care and staffing companies faced challenges. Investors are becoming more interested in healthcare IT and life sciences companies that have a variety of revenue sources, as opposed to those that are entirely reliant on provider payments. With new regulations on the horizon from the incoming administration, healthcare organizations need to come up with smart strategies to handle possible policy changes and keep growing sustainably.
The healthcare industry experienced notable volatility in 2023, with hospitals standing out as the strongest performers, posting a 23% increase. On the other hand, managed care companies faced difficulties because of pricing challenges linked to utilization trends, which resulted in tighter profit margins.
At the same time, healthcare IT and life sciences companies demonstrated resilience, especially those with a mix of income sources like pharmaceutical marketing and education services. Companies that support providers and hospitals are looking good, but value-based care providers, which became popular in 2022, are seeing less interest from investors now. Strong business fundamentals and various revenue models help companies weather market volatility.
The new administration’s regulations are creating a lot of uncertainty for healthcare stocks. Some important things to think about are:
Some panelists think that Medicare Advantage reimbursement might get better, but others warn that tougher Medicaid eligibility checks could hurt managed care providers and hospitals. Although it is unlikely that comprehensive legislative reforms will occur, healthcare organizations must remain vigilant and adaptable to address the possibility of incremental policy modifications.
Healthcare organizations need to keep an eye on regulatory changes and stay flexible in their strategies to handle policy uncertainty effectively.
To effectively handle a policy climate that is constantly shifting, organizations that place a strong emphasis on adaptability, strategic planning, and financial resilience will be in the best position.
To keep growing and gain the trust of investors, healthcare IT and value-based care providers need to embrace new strategies.
However, investor enthusiasm for value-based care models has cooled, requiring a more cautious approach. Companies that have smart capital allocation plans and clear routes to profitability are receiving a majority of the attention from investors. Healthcare IT companies can win over investors by showing they are fiscally responsible, run efficient operations, and have a well-rounded revenue model.
Healthcare businesses can greatly benefit from digital technologies and AI when it comes to optimizing operations.
Healthcare businesses can improve their efficiency while retaining the delivery of high-quality treatment if they integrate digital health tools and automation driven by AI.
The healthcare business is primed for further transformation as market forces and policy dynamics shift.
Companies that focus on being efficient, exploring new revenue streams, and embracing technology will be in the best spot to succeed in an uncertain environment. To succeed, we need to be flexible, engage with regulations ahead of time, and focus on sustainable business practices.
Dealing with the challenges of the healthcare sector requires being proactive and staying informed. LBMC provides support in financial due diligence, regulatory compliance, and improving operations to assist healthcare organizations in navigating changing challenges. By using data insights, careful planning, and proven industry methods, companies can reduce risks and take advantage of new opportunities.
To keep up in this changing environment, healthcare organizations need to be flexible, invest in technology, and connect with others in the industry. If you want more insights and personalized financial advice, get in touch with LBMC today.
Note: All material presented above was sourced from the Nashville Health Care Council Wall Street panel experts.
Content provided by Harrison Sturm, Manager, Transaction Advisory Services, LBMC, PC, and Alex Gomer, CPA, Senior Manager, Tax Services, LBMC, PC.
