Horizons newsletter – Week 9 // 2017
Horizons is a bi-monthly Dasym Research initiative to show you how the Dasym themes have been in the news. We publish the Horizons on our website and as an email newsletter. If you wish to receive the email, please contact Investor Relations.
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Value for money
With an ageing global population, the rise of chronic diseases and austerity budgets, the pressure on healthcare systems to reform is big. The traditional model of fee-for-service that pays healthcare providers per treatment can lead to overtreatment and unnecessary medical procedures. An alternative model of value-based healthcare (VBH) that focuses on quality healthcare, reduced length of hospital stay, and lower treatment costs is a growing in popularity. Implementing telehealth solutions and increasing patient engagement for instance can result in more streamlined care, improved quality and fewer bureaucratic inefficiencies. According to Goldman Sachs, the shift to VBH in the U.S. could generate $650bn in savings by 2025. VBH is not just pie in the sky. In the U.S. several health insurers pay out almost half of their reimbursements via VBH and many hospital boards’ salaries are increasingly tied to performance. In Europe, a first step towards VBH is found in bundled payment for well-defined care episodes such as hip replacements. The shift from quantity to value is thus an important component of tackling complex global healthcare problems.
Opening borders in Latin America
Foreign relations in Latin America are changing. Mexican relations with the United States have soured and there are talks of renegotiating NAFTA. Mexico is the weaker party, but the country does have options. With Brazil and Argentina, it is negotiating increasing trade ties in agricultural products. Brazilian leader Temer and Argentina’s Macri said they want to give the regional bloc Mercosur “a historic push”. This is in line with a broader trend. Under Chavez, da Silva, the Kirchners and Morales, Latin America went through the ‘pink tide’, pursuing leftist and protectionist policies. As this tide is now waning, the region is shifting towards more free trade relations. And this is not just the case within the continent. Angela Merkel said she wants to pursue trade talks between the E.U. and Mercosur and China is taking over Venezuela’s role as Cuba’s main creditor. Since the 1823 Monroe Doctrine, Latin America has been the U.S.’s backyard and the NAFTA deal tied in with this. Now that the deal is being questioned, a more multipolar Latin America is emerging.
Less listings, more profits
Public companies have been the engine of capitalism. But in the recent years, their number has fallen throughout the West: between 1996 and 2015, the number of publicly listed companies in the U.S. almost halved. Two main reasons can be identified. The first is that most startups and small companies increasingly prefer to borrow capital instead of raising it by going public, because of stricter post-crisis regulations and increased market volatility caused by geopolitical risks. For example, the average number of IPOs in the U.S. decreased from 236 between 1999 and 2007 to 138 between 2007 and 2015. The second reason is the M&A boom caused by ultra-low interest rates and QE programs. The total value and number of M&A deals in Europe both more than doubled between 2009 and 2016. This trend in fewer IPOs (lower new listing rate) and more M&A (higher delisting rate) has resulted in more market consolidation and higher corporate profits. This requires investors to have a keen understanding of key assets in these changing and complex value chains.