Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

1 Sector Getting a Boost From Obamacare

Page 1 of 2

You might be surprised which sector appears to be picking up steam as a result of the Affordable Care Act, commonly known as Obamacare.

When Obamacare was signed into law, medical device makers as a whole weren’t happy campers. After all, the health reform legislation introduced an unwelcome 2.3% excise tax. Higher taxes either have to be absorbed by companies, which lowers profits, or passed along to customers through higher prices, which can hurt sales.

There is a part of the medical device industry, though, that Obamacare should help: consumer medical products. Here are a couple of reasons why.

Admission isn’t free
While hospitals hope to receive a carrot from Obamacare in the form of lower numbers of uninsured patients, so far they have mainly received a stick. That stick comes in the form of financial penalties that must be paid if Medicare readmission rates are too high. Hospitals with high readmission rates stand to lose as much as 1% of their Medicare reimbursement this year if patients are readmitted within 30 days. The penalty increases to 3% in 2015.

Barack Obama seriousTo avoid those costly penalties, large hospital operator Tenet Healthcare Corp (NYSE:THC)  focused on staying in touch with discharged patients in an effort to keep them from being readmitted. Tenet staff call former patients to make sure they’re taking their medications and visiting their doctors at scheduled appointments.

Research conducted last year by Simione Healthcare Consultants in partnership with the Home Care Association of New York State suggests another effective way of keeping readmission rates down. The study found that the use of home monitoring telehealth programs helped dramatically lower readmissions.

Another study by the Commonwealth Fund reported similar results. The organization’s researchers concluded that use of home monitoring programs reduce hospitalizations and cut costs, while simultaneously improving patient care.

Reports like these seem likely to make medical devices used in home monitoring attractive to hospitals seeking to avoid paying penalties for high readmission rates. With similar penalties in the works for skilled nursing facilities, demand could also increase for medical devices used in tracking conditions of nursing home and rehab patients.

Value hunters
Obamacare certainly generates plenty of controversy. One aspect of the legislation that isn’t as controversial, though, is a focus on transitioning health care from a fee-for-service model to one geared more toward the value of care provided.

Research firm IHS estimates that sales for consumer medical devices could increase by 5% to 9% annually over the next several years. A key driver for this growth, according to IHS, is the push for value-centered care. IHS analyst Roeen Roashan stated that “home monitoring will play an important role in increasing the quality of health care and decreasing the costs.”

This makes a lot of sense if you think about it. If medical professionals can keep tabs on patients while they’re at home and take appropriate actions as needed, those patients are less likely to develop severe — and costly — complications. Remote monitoring could be used to not only lower hospital readmission rates as discussed earlier but could also help physicians know when a patient should be hospitalized more quickly to prevent conditions from worsening.

Getting a boost?
How can investors profit from increased use of consumer medical devices, particularly those that are part of home monitoring solutions? There are many smaller companies in this market that aren’t publicly traded, but several investing opportunities exist as well.

Cardiocom stands out as one of the leaders in telehealth. The company began marketing telehealth devices back in 1999 and has received the Frost & Sullivan award for best remote patient monitoring enabling technology. Until recently, Cardiocom wasn’t an alternative for investors. However, large medical device maker Medtronic, Inc. (NYSE:MDT) acquired the company in August. Medtronic appears to have overcome headwinds related to the new Obamacare tax. Shares are up more than 28% year-to-date.

Another potential play is Johnson & Johnson (NYSE:JNJ). J&J is known primarily for its broad array of consumer health products, prescription medications, and medical devices for clinical professionals. However, the company’s LifeScan business unit claims the blood glucose home monitoring system that’s most recommended by endocrinologists and primary care physicians.

It’s not actually a consumer medical device company, but QUALCOMM, Inc. (NASDAQ:QCOM) should benefit from the trend in use of home monitoring products. Qualcomm Life’s 2Net platform connects consumer medical devices from many leading vendors with back-end systems. The company’s products also include HealthyCircles, a “care orchestration engine” that helps medical professionals manage patient care remotely.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!