One trend in the medical real estate sector that will become more evident, which ties to trying to help lower high health care expenditures, is an increased focus on lower-cost treatments and options for patients without forgoing quality of care, as procedure volume and rates of utilization remain flat due to the U.S. macroeconomic backdrop, says Kevin Ellich, a Principal and Senior Research Analyst at Piper Jaffray & Co.
“The other side of the equation is reimbursement and the regulatory environment. And quite frankly, I don’t think many people expect reimbursement to increase meaningfully over the next couple of years. We’re in an environment where health care is 17% of GDP, and there definitely needs to be something done to reduce higher health care expenditures. It all boils down to health care reform and what can we do,” he said.
Ellich likes NxStage Medical, Inc. (NXTM), a home hemodialysis manufacturer that makes a device called System One for patients who dialyze at home, and is considered the best technology in the market. He says the overall cost to the health care system, as well as providers, should be lower because these patients are usually in better shape than in-center patients, and the cost to providers is lower due to not having as much nursing expense and overhead.
“That said, home hemodialysis is a very small percent of the overall treatments used for the patient population, only about 1% to 1.5%. Over time, I think it will grow. It’s a long-term opportunity. There are a number of things that need to be done,” Ellich said. “You’ve to get the right reimbursement in place. You have to get the right incentives for the providers in place. You need better training reimbursement and just more patient awareness and provider education.”
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