PODCAST: Stock Market Impact on Health Care

The Dramatic Rise in the Stock Market Over the Last 10 Years Has Caused Institutional Investors Like Pension Funds to Re-balance to Private Equity

EP269: COVID-19—Prepping for the Next Wave: What Payers ...

By Eric Bricker MD

A Typical Pension Fund Portfolio Will Be 51% Bonds, 28% Equities, 6% Real Estate, 5% Private Equity, 4% Other and 6% Cash. As a Result of Rebalancing Money Out of Skyrocketing Equities, Private Equity Funding Has Doubled to Over $1.2 Trillion in the Last 10 Years.

Specifically in Healthcare, Private Equity Investment in Providers (i.e. Physician Groups, Surgery Centers, Imaging Centers, etc.) Doubled to $30 Billion in Just ONE YEAR. The Private Equity Investment on the Payor Side of Healthcare PALES in Comparison at Only $1 Billion. The Majority of These Private Equity Investments Plan on Making Money By INCREASING Healthcare Costs in a Fee-for-Service Payment Environment.

Healthcare Costs Don’t Rise By Accident. They Rise Because Specific People Make Specific Plans to Increase Costs to Earn a Return on Their Investment.

Sources: https://www.ssga.com/investment-topic…​, https://www.barrons.com/articles/reba…​, https://www.privateequityinternationa…

Private equity sees a lot to like in healthcare

PODCAST LINK: https://www.youtube.com/watch?v=X3hpyeQaKDk

ASSESSMENT: Your thoughts are appreciated.

Diversification: https://medicalexecutivepost.com/2014/11/12/the-negative-short-term-implications-of-diversification/

Hospital Endowment Fund: https://medicalexecutivepost.com/2015/01/08/on-hospital-endowment-fund-management/

ORDER Textbook: https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

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3 Responses

  1. Healthcare and the Stock Market

    Just like all other investments private equity has a lot of pros and cons. These risk include but are not limited to liquidity risk, management risk, concentration and non-diversification risk, leverage risk, etc. These are all from the investors point of view.

    But from the hospital or institution accepting the private equity investment – investors can change their minds. It is their money and their investment and they can choose to leverage those assets in a different way which in some cases means they sell a controlling stake can take their funds and leave which is the example that we see in this article.

    Private equity can deliver some substantial returns but those are typically higher because of the additional risk that you’re taking on as an investor. When receiving a private equity investment in your business or hospital it can certainly allow you to drive your own development without having to use your own capital or do it on a smaller budget but the types of risk outlined in this article are risk that you have to be aware of and comfortable with before you receive the money or accept the investment.



  2. STORY

    Two decades ago – analysts like Mary Meeker of Morgan Stanley, Dean Witter and Jack Grubman from Salomon Smith Barney, were involved in similar healthcare VC fiascos. Although sad, this story is a matter of public record.

    Hopefully, doctors now understand that the big brokerage houses that underwrite and recommend stocks may have credibility problems, and that physicians got burned with the adrenaline rush of “advisor-directed” investment portfolios.

    Dr. David E. Marcinko MBA


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