Investing in Health Care in Light of Reform

admin — Mon, 24 Aug 2009 22:24:26 +0000

The health care reform debate will take new life as members of Congress return to Washington to take up the issue again this fall. Regardless of what happens with the current agenda for reform, some sort of change will emerge.

As we continue to express to our elected representatives, we want to see free enterprise make the most significant impact on health care reform rather than more government regulation. When market forces have been allowed to act in other industries the quality of products and services improves while prices decline.

We know from experience that big changes invariably lead to big opportunities. We believe that still holds true for the health care industry and believe there will always be good opportunities for investment, provided there are models that genuinely promote expanded access, improved quality and cost savings.

Nueterra Capital Management will continue to invest in the types of facilities that are focused on being more efficient, showing better patient outcomes, higher rates of patient satisfaction, all at lower costs than traditional hospitals. We think these areas are still good opportunities; they already offer higher quality at lower cost. If reform results in greater access, then prospects for success are indeed good.

We will also be investing in pharmaceuticals and medical device companies. These types of companies are creating products to improve the quality of people’s lives while reducing medical errors and improving patient safety; products that will cost less in the future because of improved efficiencies. This will require innovation, which itself creates opportunities.

Financing Is Still Available For Medical Development

admin — Wed, 29 Jul 2009 19:48:33 +0000

Despite the toughest lending environment in recent memory, financing is still available for high quality medical real estate developments. Great Bend Regional Hospital, a portfolio company of Healthcare Properties Fund, recently completed an $11M expansion of their hospital property. The expansion increased the size of the facility from 10,000 square feet to 40,000 square feet, added overnight patient beds, operating rooms, and medical office space. This hospital is a joint-venture between local physicians and Nueterra Healthcare.
In March, Nueterra Real Estate broke ground on the 65,000-square-foot $35M Methodist McKinney Hospital, also a portfolio company of our fund. This hospital is a joint-venture between local physicians, Methodist Health System, and Nueterra Healthcare. It will feature six operating rooms, two procedure rooms, 15 overnight patient beds, comprehensive diagnostic imaging, and a 24-hour emergency room.

Financing is also secured for two other portfolio companies, which we expect will break ground in the next few months.

While it wasn’t easy to arrange financing for all of the above developments, it wasn’t impossible, contrary to some recent reports. Marred in the controversy of the federal TARP program, some banks definitely have tightened their lending standards recently and some have quit lending altogether. However there is still plenty of capital available from healthy banks for the highest quality projects. Medical developments such as ambulatory surgical centers and specialty hospitals appear to be the types of quality developments that these banks now covet and represent a move away from other commercial, retail, and residential developments.