When it comes to achieving the Sustainable Development Goal on the United Nations’ global agenda focused on good health and well-being, private equity investment in healthcare can be particularly helpful, according to Glenmede private investments research analyst Jennifer Wong, CFA.
Working alongside government and nonprofit initiatives, private equity can help fill existing healthcare gaps and introduce valuable new technologies in emerging market countries.
Adapting to New Priorities
Private equity funds are able to invest in healthcare in emerging markets but have focused on managing noncommunicable diseases (NCDs) like heart disease and cancer rather than fighting infectious diseases like HIV and malaria, says Wong.
“A lot has been done by the international community to combat infectious diseases like AIDS,” Wong explains. New HIV/AIDS infections fell by 30% worldwide between 2000 and 2013, according to the UN. But success in diminishing infectious diseases has allowed for the increase of NCDs in emerging markets.
“People are living longer. Their lifestyles are becoming more sedentary. Diets are becoming more meat-based and westernized,” Wong says. “That convergence of longer lifespans, differing diets and lifestyles means there’s a higher prevalence of NCDs. The needs are quite daunting for a lot of developing countries. These health sectors are often resource-constrained, and money isn’t directed toward NCDs.”
Many emerging market governments are struggling to provide the necessary healthcare access and services to everyone, and nonprofit organizations have focused on infectious diseases, according to Wong. She says that nonprofits are oftentimes asked to measure outcomes of donor dollars—something that translates less well to NCDs, given their chronic nature. That leaves room for private equity investment in healthcare to fight NCDs in developing nations.
Leveraging Innovative Technology
“Private equity has also begun to play a role in technology and in medicine development, such as researching new vaccines,” Wong says.
Remote care services like telemedicine, for example, are often used at private equity–backed facilities. The two main areas of focus include using telemedicine opportunities to scale healthcare worker training and democratize access to specialized providers in other areas of the world.
Healthcare innovation is also rapidly developing. “It’s now possible to screen for cervical cancer using a smartphone,” Wong says. Healthcare records technology also shows progress in emerging markets. “Developing countries can leapfrog the legacy systems that developed countries still have to deal with,” according to Wong.
Crowdfunding platforms have risen to meet people’s healthcare needs, too. “There is a culture around the family unit,” she says. “If an elder gets sick, the rest of the family can contribute to providing for healthcare, or they can ask the community for help. Now we are seeing that in the digital space.”
Improving Infrastructure and Operations
Private equity healthcare investment also includes infrastructure in emerging markets—hospitals, laboratories, clinics, and pharmacies. “The public sector in developing countries has put systems in place, but many countries’ doctor-to-patient ratios don’t meet recommended levels set by the World Health Organization,” Wong says.
Private equity investors can also leverage their operational background to make sure a business is run efficiently. “If a private equity fund is investing in a hospital in Kenya, it’s likely to have done so in another country—say, India—as well,” Wong says. “So private equity investors can leverage learning from one country to another.” She also stresses that these investments are for-profit, self-sustaining entities.
Bringing Models Together
Wong suggests that positioning private equity investment in healthcare to fight NCDs could make sense from a business perspective. “For things like renal disease and cancer, treatment is ongoing—you don’t get treated with single shot,” she says. “That means recurring revenue from patients, showcasing the opportunity to build sustainable businesses that can address issues in global health.”
According to Wong, this model is a natural complement to the activity of governments and nonprofits. Medical facilities like hospitals—the “hub” of healthcare services—can be developed by private equity and offer access to specialized services, while nonprofits develop the “spokes” to refer patients in more rural areas to these services in order to sustain healthcare systems in the long term.
“A lot of nonprofits and governments are trying to expand to rural communities—the last mile,” Wong says. “Private equity has the ability to work with nonprofits so that the spokes in last mile care delivery can refer back to the hub.”