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Knockin’ on healthcare’s door: finding value in an industry under the knife

Valuations in the US public hospital sector are looking attractive, and that’s led us to reassess the investment opportunities within the US high-yield healthcare universe. But a highly selective approach is needed. New research by Mitch Reznick, Co-Head of Credit and Geoffrey Wan, Credit Analyst at Hermes Investment Management looks at the factors causing volatility as well as the opportunities in this market.

Mitch and Geoffrey, said: “Although the sector is often viewed as defensive and non-cyclical, hospitals in the US are facing a structural, secular shift. US healthcare spend per capita is the third highest in the world, at around 18% of annual GDP. However, by most metrics the quality of healthcare in the US is not viewed as commensurate with this level of spending. As such, scrutiny of insurers and patients’ demands for lower costs have driven a move away from the fee-for-service model that healthcare providers are familiar with to a model that demands value and quality in exchange for payment.”

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