Five predictions for health tech and services in 2017

By Dan Gebremedhin MD, MBA
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5. Health tech industry innovation will not waver over the next 4 years, it will subscribe to republican orthodoxy and free market forces

Most of the preceding predictions will be impacted by the election of a Donald Trump administration, and perhaps more importantly, a systematic republican transfer of power. Post the 2016 election, Republicans have the majority in both houses of congress: Senate (R – 52, D – 46, I – 2) and House (R – 241, D – 194). On a state level, there is a predominance of republican governors (R – 33, D – 16, I – 1) and republican controlled state legislatures (32 states – accounting for 61 percent of the population). This is important given that a likely GOP ACA replacement plan would leave much fine-tuning of policy to the states. It should be no surprise then that traditional republican policy will prevail, and prudent entrepreneurs and investors should prepare for that.

For the next four years, we should expect legislative reforms that reflect traditional republican principles, specifically: deregulation and less federal government oversight of industry, privatization of federal programs, and re-appropriation of funds from entitlement programs. We should expect a very active climate of legislation as both the legislative (Congress) and executive (Health and Human Services) branches of government promise to enact healthcare reform. The key representatives of both branches have made attempts to replace Obamacare and are on record regarding their wish lists. Representing the legislative branch, Speaker Paul Ryan has spearheaded a concerted effort on behalf of his congressional caucus and think tank groups to author his “A Better Way” series for his vision on the elements of a repeal plan. Representing the executive branch, HHS nominee Dr. Price has previously submitted his version of a replacement plan -- Empowering Patients First Act, HR 2519 -- four times in four different congresses. Finally, the last republican congress actually passed an ACA repeal bill – Restoring American Healthcare Freedom Reconciliation Act of 2015, HR 3762 --  that was ultimately vetoed by President Obama. Ultimately the details of the ACA replacement plan will become clear in the months to come, but the essential elements of the plan will be held in the plans noted above.

And as expected, in joining my brethren of investor health tech bloggers, I am compelled to include my guesses at what replaces the ACA. Sticking with the trends approach, I’ve selected key items that will face either headwinds or tailwinds in the new congress. I’ve also included the sources that led to these predictions.
 

Overall, our team at Flare Capital is very bullish about continued value creation in the healthcare sector through traditional free market forces. Whereas the last eight years have seen healthcare innovation driven by the federal government, we believe the market will now become the leading driver of change. We predict that enterprises will attempt to improve their bottom line, gain market share, and achieve differentiation through continued adoption of innovative health tech and services. We believe that many big businesses will be built by providing solutions to this end for the multi-trillion dollar US healthcare market. We hope that this market-driven lens, combined with the preceding sector specific predictions, provides all participants a guide to navigating dramatic change in the coming year.