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Investment Framework: U.S. Health Care Services

Investment Framework: U.S. Health Care Services

May 07, 2021

This week we had a call with Capital Groups Natalya Zeman out of London where we touched on ESG (environmental social and governance) investing. Since we focus on clients in the healthcare sector we wanted to highlight some of the takeaways from our discussion and their process.

There are four main material issues that affect the investment framework within the Health Care services industry. These are consumer safety, affordability & access, Privacy & Data Security, and Management quality, ethics & accountability. All of these are equally important in the framework and have a large relevance in investment analysis.

Consumer safety is relevant because patients place enormous trust in health care providers. Patient welfare must be of the utmost priority. Long-term competitive success depends on superior health results. Management must prioritize patient outcomes and quality must be measured to keep patients healthy. Rigorous multi-year improvements goals must exceed regulatory standards.

Affordability & access is an important factor in the investment framework. Quality health care must be affordable and accessible to patients across the socioeconomic spectrum. Failure to achieve this goal could lead to higher regulatory intervention. It is important to focus on value-based health care aims to deliver better outcomes for less cost. Best practices should allow price transparency and affordability innovation. Management should maintain a proactive partnership with government programs. 

Privacy & data security allows for patient data to enable better care, but can present a vulnerability if not fully secure. Health care firms must maintain patient trust by appropriately securing data in a vault or other secure place. The provider should adhere to the E.U.-U.S. Privacy Shield Framework for best practices. Any security breach should be disclosed and rapidly addressed. Proactive use of data will improve patient outcomes in the future.

The last relevant factor is management quality, ethics and accountability. Management ethics are a key lens to understanding all ESG issues. It is vital to identify management teams with steadfast integrity for long-term investment success. Best practices would include linking management incentives to patient outcomes, including a culture of regulatory compliance in law & spirit, and ensuring culture is anchored in community service as social well-being.