LCS International is a leading research and buy-side analyst firm in health care and related sectors. LCS has a multi-disciplinary team of senior consultants plus research and support staff, drawn from the fields of health care provider services, health economics and professional valuation.
Paul Saper is Managing Director at the firm.
What effects have you noticed on the Healthcare sector from the economic crisis?
In our view the economic downturn will affect the healthcare industry in the
Firstly, ring-fencing provides only for current levels of expenditure to be maintained and little more, while demand (due to demographics et al), will continue to grow. Secondly, ring –fencing is guaranteed only until 2014, while the aftermath of the economic catastrophe will be with us for at least a further seven lean years.
Thirdly, the lines between social care and healthcare are not distinct and the former is not immune from spending reviews.
While this will lead to inevitable cut backs, LCS believes that there will be interesting investment opportunities as value for money alternatives and greater productivity across the board continue to be sought. Among these will be:
• more investment in preventative care - delaying the onset of long-term conditions, even for a matter of months is a major saving in the longer term;
• more step-down care to free up acute settings more quickly;
• less institutional care and better healthcare and social care at home;
• reconsideration of the role of children’s homes in specialist children’s services;
• increase in the range of care in primary care settings;
• continued change on the behavioural medicine side. Fewer spot contracts and increase in block contracts. Also further increases in supported living;
• greater emphasis on measurement of outcomes and providing better quality care. Reduced re-admission is a key objective.
• changes in care-pathways with new opportunities for the independent sector.
• more expert tendering and more competition. Clear objective is more product for less cost.
What effect has this had on deal activity recently?
LCS is seeing an increasing number of deals in second quarter 2010 as banks sort out their loan portfolios and as management teams and investors look again at refinancing options. Vendors’ expectations are becoming more realistic.
Looking towards 2011, more particularly to the second half, LCS expects that the new direction of government will be increasingly felt in the market. The top end of the