There has been a gradual but
consistent shift in healthcare over the last decade or so from inpatient stays
to ambulatory care (outpatient care) and the advent of the Patient Protection,
as well as the Affordable Care Act (ACA), have accelerated this transition in
the overall healthcare business model substantially. According to healthcare
advisory firm Kaufman Hall, inpatient utilizations (per 1k) continually
declined from 2000 to 2011 and 71% of the states in their study showed
decreases of over 5%. A clear trend which is further evinced by Fitch Ratings’
report from August of 2014 showing a marked decline in inpatient activity and a
corresponding rise in ambulatory care in their sweeping rated hospital and
health system portfolio.
Some of the core reasons behind this
transition are a growing focus on risk-sharing arrangements and coordinated or
collaborative care, as well as the increasingly prominent financial benefits of
value-based payment models, particularly under the ACA, which has optimized the
playing field for low-cost, high-quality service in the most convenient
settings for the patient. With Medicare providing coverage to some 54 million
seniors last year, totaling $615.9 billion (including beneficiary premiums) and
the number of those covered set to rise sharply within the next 15 years to
around 81.4 million, as Baby Boomers continue to retire in droves, a perfect
storm is brewing in the outpatient care services market. Total expenditures on
healthcare in the U.S. for 2014 ran around $3.09 trillion, or 18% of GDP and
these costs are projected to rise 15.5% by 2017 to over $3.57 trillion, making
the future for service and product providers, particularly those who can master
the rising trend towards ambulatory care, a very bright one indeed.
One of the larger hospital and home
care agency focused providers in the U.S., Community Health Systems (NYSE:CYH),
serves as an excellent benchmark for the ongoing transition to ambulatory care,
with total associated revenues up around 1% year over year to 55.8% in 2014.
Other large hospital operators, like HCA Holdings (NYSE:HCA) and Tenet
Healthcare (NYSE:THC), also saw large chunks of their bottom line attributable
to ambulatory care last year, at around 38.4% and 36.2% of revenues
respectively. South Nassau Communities Hospital (Oceanside, NY) is another good
benchmark here, with a 62% to 38% inpatient to outpatient mix only five years
ago, having shifted to a 59% to 41% mix as of last year. COO and Executive VP
of Administration for the hospital indicated that their experiences were
consistent with the broader industry trend and that the drive to improve
outcomes and service in a cost-effective manner was a major priority as South
Nassau Communities Hospital as they transitioned more and more of their overall
care footprint from the hospital to the community.
One of the exciting up and comers to
provide an innovative approach amid this growing trend is MIT Holding
(OTCQB:MITD), which has developed a portfolio of products and services ranging
from custom compound pharmaceuticals and a wide variety of sold/rented home
medical equipment, to IV infusions, ambulatory/in-home therapies, and medical
management services. The company has emerged after a profile build up and
reorganization to post back-to-back profitable quarters (as of Q2 2014) on the
strength of several significant new revenue streams, including two key
contracts with the first company to automate the patient transition process,
Curaspan Health Group, whereby MITD can market their products and services
directly to patients of Curaspan’s 5.4k plus medical facilities.
As of the start of last year, MITD
revenues were on-track for a 32% net profit baseline and the company is pricing
future business on that basis. One of the new revenue streams, a sub-investigator
role (via the company’s facilitators) initiated back in November of 2014 for
the main investigator in a Phase 3 study evaluating treatments for complicated
bacterial and soft tissue infections, Melinta Therapeutics, not only validated
the company’s approach to landing more business in this lucrative and highly
specialized market, it opened the door for expansion of the contract on this
12-month study featuring two to four hour patient infusions and came with a 52%
gross profit margin. Growth opportunities like the sub-investigator role in the
Melinta study matches the company’s business model. MITD’s approval by over 130
insurance carriers goes a long ways towards helping to cement the company’s
role as a chief sub-investigator. The Melinta study highlights a now
established and growing presence in this highly profitable space for MITD.
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