Investing In Healthcare

The baby boom cohort has changed the world in which we live and the lens through which we view it. The aging of this cohort (roughly one third of the population) will continue to usher in dramatic changes across most business sectors and areas of our lives in the years to come. The boomer demographic in North America is also presenting unique challenges for government run social programs and presenting unprecedented opportunities for businesses with the right entrepreneurial mindsets and resources. While boomer consumptive patterns have evolved over time, there are still strong correlates between their wants/needs (and the wants/needs of their children) and the flow of capital across virtually all economic sectors. Clearly, as boomers are aging, their spending habits are evolving as well. This re-prioritization of spending has become an area of study for governments and investment organizations alike. One area that surfaces repeatedly and is becoming pre-eminent in the study of boomer consumption patterns is healthcare.

Healthcare is one of the industries that are most acutely impacted by this demographic shift. While many boomers will continue working, many are also retiring or are getting close to retirement. Most boomers are or still view themselves as reasonably young (mentally and physically) – the oldest, born in 1946 one year after the “boys came home” from WWII. For those of you without a calculator handy, the oldest boomers will be 62 years of age in 2008. This small but important factoid is lost on many bullish investors who see the present time as the “halcyon days” in healthcare investment in seniors housing options or Long-term care. Yet it will be 15 to 20 years before the leading edge of the boomers reach the age where these services will be in higher demand.

What many people, including even professional investors, forget or never learned is that much of the the current demand for healthcare is being driven by WWI babies, or what has been coined The Greatest Generation. The Greatest Generation is compromised of those who reached adulthood just before, and served in WWII. Many came from rural areas of Canada and the U.S. and settled in the larger centers after the War. This generation was entirely different than succeeding generations. While the differences are beyond the scope of this article, suffice to say that those who seriously study demographic shifts expect the baby boom generation to have an entirely different set of expectations regarding healthcare service and other services than their parents.

So, to recap thus far, there are a significant number of opportunities in the United States and Canada in healthcare investment; but these opportunities are not limitless and nor are they a sure bet. Demographic shifts are significant drivers of healthcare consumption patterns. It is important to attribute healthcare supply and demand drivers to the market and demographic to which they rightfully belong.

So, while healthcare investment opportunities abound, there is no replacement for sound judgment based on analytical inquiry. This is true of any investment decision. It is also key that current and projected changes across the following domains are reviewed in detail: demographics, finances, macro-economics, geography, consumer attitudes and behaviours, motivating factors (e.g., luxury, fear), urban/rural, SES, educational, cultural, risk orientation, and other personal and group-related factors. While this article zeros in on the effect that the baby boom will have on the healthcare investment market, there are a multiplicity of other factors and population segments that are, and will continue to exert significant pressure on healthcare economics and consumption patterns.