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January 26, 2023

Wall Street’s View on Prospects for the Healthcare Industry – 2023

Wall Street’s View on Prospects for the Healthcare Industry – 2023

Healthcare executives gathered January 19, 2023, for the Nashville Health Care Council’s signature event, “Wall Street’s View on Prospects for the Healthcare Industry,” to hear industry analysts discuss the investment outlook for the coming year.

Teresa Sparks, executive advisor, Valtruis, introduced the conversation, which was moderated by David Dill, Council board chairman and chairman and chief executive officer, Lifepoint Health. The panel included George Hill, research analyst, Deutsche Bank Securities, Inc.; Justin Lake, analyst – healthcare services, Wolfe Research, LLC; and Whit Mayo, senior managing director – equity research, SVB Securities.

The analysts reflected on 2022 investment activity and forecasted the direction of popular healthcare trends. Dill led exploration of various topics, including the ongoing labor shortage, price transparency, inflation and the impact of the most recent election cycle. Mayo indicated 2022 was “not a good year” and outlined key themes that shaped its investment narrative, such as value-based care models, the Centers for Medicare & Medicaid Services’ guardrails around Medicare Advantage and the emergence of startup health plans adding aggressively priced products to the marketplace.

Hill concurred with Mayo and added that global discord increased the level of uncertainty in the market. “People on Wall Street don’t like uncertainty. We like everything to unfold as we model it and unfortunately it rarely happens that way,” he said. “Discord and uncertainty put a bow on 2022 and that’s how we kicked off 2023.”

On a brighter note, Lake reported that payers and managed care remained well positioned and significantly outperformed the market last year.

“Higher interest rates are good for managed care because it sits on fixed income securities. [Managed care] remained at arm’s length from inflation and there was no real exposure to what was ailing the stock market – like supply chain issues, for example. However, there is still a fair amount of uncertainty around Medicare Advantage rates, Medicaid redetermination, cost trends and more going into January,” he said.

Looking ahead at 2023, trends to watch include familiar favorites such as digital and retail healthcare, primary care, behavioral healthcare and health equity. Mayo is paying close attention to value-based care and, more importantly, who is willing to participate in this model. “It used to be primary care and we’re seeing emerging enthusiasm from multi-specialty health systems, oncologists and orthopedists. There is really interesting activity across specialty providers now.

The panelists forecasted more vertical mergers and “blurred lines between payers, providers and retail giants.” Lake pointed to the Walgreens and Villagemd partnership; CVS’ purchase of Signify Health; and UnitedHealthcare descending into the coveted care delivery space.

“UnitedHealthcare has led what seems like every trend in managed care for the last 10 years. When United got into physician groups, Humana and CVS weren’t far behind. United bought behavioral health and then Humana bought behavioral health,” he said. “Payers have entered the delivery space and I think we’ll see more vertical M&A this year. Next up they will change the way the pipes work in financing.”

Dill asked the panel how Nashville healthcare organizations – represented by the executives in attendance – can drive investment, growth and success. Hill advised organizations to understand and articulate what they do well.

“Know why you’re here. If you understand the problem and what it costs, you know your value add and what you can charge,” he said. “Focus on the fundamentals and the path to profitability.”

Looking ahead to this year, Lake encouraged companies to “keep doing what they’re doing” and that the incubation of new ideas coming out of Nashville is “a lot of fun to watch.” Mayo reminded attendees to focus on strong governance, culture and accountability throughout the organization, while making sure to have the support of a solid board of directors. “I’m a firm believer that if you outwork everyone you always win,” he added.

Panelists also identified their top sector picks for 2023, some of which include Tenet Healthcare, Universal Health Services and McKesson.

To conclude the event, Council president Apryl Childs-Potter unveiled the inaugural Nashville Healthcare Sessions conference, a weeklong series of events designed to gather forward-thinking healthcare, finance and innovation leaders. Slated for Sept. 18-22, Nashville Healthcare Sessions will allow attendees from Nashville and across the country to connect in person and spark meaningful conversations about the future of healthcare.

“With so much rapid change in the healthcare industry, we believe now is the time to introduce an outstanding convening of the brightest minds, biggest thinkers and most influential investors. Nashville Healthcare Sessions will celebrate our city’s rich healthcare history and showcase how the companies in our family tree are shaping the future of the industry,” Childs-Potter said.

Bass, Berry & Sims served as presenting sponsor of the program with Alvarez & MarsalArdent Health Services, Cumberland PharmaceuticalsFirst Horizon, Gresham Smith, Hardenbergh Group and Jarrard Inc. as supporting sponsors. The program’s media sponsor was Modern Healthcare.



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