2018 outlook: health care

Mounting costs have led to consumerism, and favor tech-enabled health care.

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Looking ahead to 2018 and beyond, the biggest trend I'm watching is the emergence of new technologies being used by health care companies to offer a more consumer-friendly approach to care. Companies are turning to technology-enabled services to improve efficiency and to modernize their business models, with a focus on proficient care coordination, overall cost reduction, and improved interoperability—the extent to which systems and devices can exchange data, and interpret that shared information.

The major impetus for this trend is the rising cost of health care. Over the past two decades, health insurance premiums have risen at a staggering pace. With more companies choosing to offer high-deductible health plans, the burden of paying for health care is increasingly falling on the consumer (see chart). Patients are being asked to make more informed decisions about care, and providers are faced with a changing system that encourages high-quality clinical outcomes over greater utilization, and rewards providers for both effectiveness and efficiency. Health care companies are increasingly using tech-enabled services to help meet these new demands.

Tech-enabled health care in action

I believe we're in the early stages of health care consumerism, but we're already seeing the adoption of tech-enabled services, providing a host of investment implications. For example, companies are beginning to use mobile apps to help consumers better understand and use their benefits, interact with care teams, and aggregate their clinical information. This trend should increase consumers' health IQs and help them navigate a very complex, yet highly personal area of their lives.

Elsewhere, innovative technologies in the form of medical devices are not only bringing down the costs of health care for businesses and consumers, but also making procedures more reproducible with fewer unwanted side effects. For example, image-guided assistance and robots are being used for major procedures, in place of more-invasive surgeries. Devices that continuously monitor a diabetic's blood sugar can cut down on or eliminate the need for finger pricking, which can help patients more effectively manage a potentially costly chronic condition. Telemedicine business models also are on the rise. Patients can engage in clinical interactions by phone, video chat, or alternative web applications, instead of at the doctor's office. Further, I believe genetics will fundamentally change our understanding of disease, and consumers are just beginning to see the benefits of research in this space, with more to come in the near future.

Going forward, I expect the way consumers interact with the health care system will continue to evolve, with the demand for tech-enabled services increasing along with the sector's focus on consumer value. Shifting to these newer services may take time for many consumers, but adoption has already begun. I'll continue to keep my eye on companies that can help consumers make more informed health care decisions and drive down costs.

Next steps to consider

Research the Fidelity® Select Health Care Portfolio (FSPHX).

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Go back to the full 2018 sector outlook.

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Eddie Yoon is a portfolio manager and research analyst for Fidelity Investments. Mr. Yoon is responsible for coverage of health care equipment and supplies stocks, and serves as the health care sector leader.
Fidelity Thought Leadership Vice President Kevin Lavelle provided editorial direction for this article.
Views expressed are as of Dec. 1, 2016, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.
References to specific investment themes are for illustrative purposes only and should not be construed as recommendations or investment advice. Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk.
This piece may contain assumptions that are “forward-looking statements,” which are based on certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual returns or results will not be materially different from those described here.
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