Investors should look to companies with quality assets as the provider side of the medical real estate sector continues to face the major trends of cost cutting, reimbursement and consolidation, in addition to the uncertain economic and regulatory environment, says Thomas Gallucci, a Managing Director and Senior Analyst at Lazard Capital Markets.
“The third thing that I would mention over and above cost cutting and the changing reimbursement environment would be consolidation. In a difficult macro environment, in an environment where reimbursement systems may be evolving, I think it increasingly leaves the less sophisticated and less well-capitalized hospitals in a weaker position,” he said.
Gallucci favors HCA Holdings (HCA) because it is a diverse company with a variety of business segments, although it is still predominantly an acute care company. He says HCA owns an array of the highest-quality assets in the industry and are in strong spots geographically.
“We also believe that they have a very sophisticated management team. So I tend to gravitate toward HCA because I believe in a fundamentally more difficult operating environment those higher-quality assets ultimately lend better visibility on solid results in the long run,” Gallucci said.
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