Recovery in the Healthcare Sector

The article below is from our BRIEFINGS newsletter of 24 June 2021
 

Management teams from more than 220 healthcare companies participated in Goldman Sachs’ 42nd annual Global Healthcare conference in June to share their thoughts on the recovery, vaccine rollouts and the evolution in the delivery of healthcare services. We sat down with Goldman Sachs Research’s Asad Haider, a business unit leader in healthcare, and Veronika Dubajova, head of Medical Technology Research in Europe, who shared key takeaways from the event.

As global economies begin to lift lockdown restrictions, where is the healthcare industry on the path to recovery?

Asad Haider: The conversations we had with management teams at the conference paint a picture of uneven recovery. Companies in certain areas of biotech, for example, struck a fairly conservative tone on the near-term outlook, as their volumes are still trailing pre-COVID levels. But in areas like medical technology and dental, the tone was much more upbeat in telling a story of normalization, albeit with some caveats. In these areas, we’re hearing about patients who may be postponing elective surgeries to take vacations and travel first, following vaccinations.

Veronika Dubajova: In the medtech sector, the overall volumes of medical and elective procedures appear to be running at 95% to 100% of pre-COVID levels. The U.S. is almost back to normal, while Europe is lagging a bit given the slower pace of vaccinations. China, meanwhile, is already above pre-COVID levels. So we are slowly but surely moving in the right direction. There is, of course, a bit of variability depending on the type of healthcare procedure. So individuals with heart problems, for example, are booking their procedures sooner than, say, someone with a hip issue. Looking ahead, we expect to see pent-up demand from people who had postponed medical procedures last year to drive growth in the second half of the year, though this “pent-up demand” will likely not materialize at the same pace everywhere.

How do you think the delivery of healthcare may change post COVID-19?

Veronika Dubajova: We expect three key shifts in healthcare delivery as a result of the pandemic. The first is focused on decentralization. As more services are shifted to an outpatient setting, that should increase efficiencies, lower costs and reduce infection rates as patients reduce the amount of time they spend in hospitals. And as hospitals build additional satellite sites, we expect to see higher demand for operating theater equipment, imaging machines, MRIs and X-rays for these outpatient centers. The pandemic also accelerated the digitization of the healthcare sector. While some healthcare providers are starting slowly by building online portals for patients to book appointments or conduct telehealth visits, others are using predictive analytics or automating through AI to improve productivity. Finally, we’re seeing greater investments overall into healthcare. Governments across Europe are investing in healthcare infrastructure, and there is now a central European healthcare fund, the first of its kind in Europe. China, meanwhile, is building fever clinics to accommodate future COVID-19 outbreaks.

Asad Haider: Along those lines, we would describe the hospital capex cycle as strong. Leading equipment manufacturers say they expect a significant rebound compared with the 2020 trough, driven by a combination of improving hospital finances, constrained capacity and pent-up demand.

Finally, what are you seeing in terms of COVID-19 testing and vaccination progress?

Asad Haider: The good news is that as the vaccine rollout continues, we’re seeing a decline in COVID-19 testing, especially in countries with high vaccination rates such as the U.S. and Israel, where COVID testing has fallen about 60% to 80%. On the vaccine front, the need for third-dose boosters was underscored in some cases, as was the potential to move into the private market following the pandemic phase-driven government orders. Additionally, a couple of suppliers for the various inputs that go into vaccine manufacturing have told us that they’re already starting to see orders for 2023, which shows not only a willingness from vaccine manufacturers to be prepared but also signals that they believe it’s going to take some time to get vaccinations everywhere. So that’s something that we’re watching pretty closely.