By Sahar Arshad, co-founder and COO, CloudMedx
A new report shows a sector of the economy that’s experiencing rapid growth and presenting myriad opportunities for investors. The global preventive healthcare market was estimated at $3.4 billion in 2021, is expected to reach $3.7 billion this year, and is projected to grow to more than $5.5 billion by 2027, according to market research company ReportLinker.
It’s a sign of an important shift in healthcare, the largest industry and employer in the United States. For far too long, the healthcare system has focused on responding to illnesses, without doing enough to help prevent them. But as Goldman Sachs Asset Management recently reported, healthcare has reached “a critical inflection point,” and the industry is changing “how it treats patients by shifting the focus from reactive to preventive medicine.”
As an engineer and co-founder of a company that works with major players across the healthcare sector, I’ve come to see what it takes for businesses to succeed in this new reality. As investors look to make smart choices, here are keys to watch out for.
Very often, businesses in preventive healthcare are designing their products and services to appeal to medical institutions such as hospitals and doctors’ practices, as well as to payers, such as insurance companies. These providers and payers are looking for new solutions, partly because of a move toward value-based healthcare, in which providers are paid based on patient health outcomes.
What’s most impactful in this industry are businesses that work to combat the most common risk factors to people’s health. So, a company is more likely to be successful if it focuses on a problem that affects a large number of people in a specific market.
To help figure out what these problems are in different areas, you can see the Chronic Conditions Explorer that my company created. It shows, down to the county level, the different risk factors and how prevalent they are in a population. How many people in a given area are smoking? How many suffer from obesity? How many are physically inactive? It also digs into the prevalence of chronic illnesses like COPD (chronic obstructive pulmonary disease), kidney disease, diabetes and more.
A preventive care business is a strong bet for investors if it takes concrete action to combat these problems in regions of the country that need them the most. It also needs to significantly increase provider-patient engagement and drive behavior change, helping all stakeholders succeed.
There’s also a broader realm for preventive care, which focuses on social determinants of health. As the U.S. Department of Health and Human Services defines the term, these are “the conditions in the environments where people are born, live, learn, work, play, worship, and age that affect a wide range of health, functioning, and quality-of-life outcomes and risks.”
They have a profound impact on health outcomes. Some preventive care companies are focused on improving these social factors. In our SDOH explorer, you can see these factors in every community, from food insecurity to pharmacy and transportation access, internet access, housing and more.
The more a business does to improve these social factors as part of a “whole person” approach, the more of a difference it will make — and the better its chances of long-term success.
Any company in the preventive healthcare sector is only a good bet if it’s using the highest quality data. This can mean integrating with care providers and payers to make sure the data is constantly updated. It can also mean engaging proprietary sources as well, and building in best practices to ensure the algorithms are doing accurate, frequent calculations.
Integrating into the systems of these companies is also essential for another reason. They’re less likely to take on a new solution if it requires an entirely new system. If it’s an easy add-on to their existing tech infrastructure, it’s much more appealing — and, therefore, a much better investment. Interoperability is a must for any new healthcare technology to succeed.
Many advisors are encouraging retail investors to put money into healthcare stocks, and there are lists of specific preventive healthcare stocks (as well as ETFs that own shares). As more and more preventive care companies jump into the fray, be sure to check whether they have taken these crucial steps to find and target the right markets for their solutions. When they do, they’ll deliver greater returns — and a healthier society.
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