The healthcare industry provides us with preventative medicine, heals us when we are sick and injured, and helps us live longer and safer lives. That’s why it’s popular for investors, who can look to generate gains while contributing to an industry that is keeping the world healthy. After all, even the smallest medical advance has the potential to save your life or the life of someone you love.

The healthcare industry is enormous. It encompasses companies like Moderna and Johnson & Johnson that developed COVID-19 vaccines; healthcare giants like Philips Healthcare investing in cloud technology; startups advancing CRISPR gene-editing technology; remote diagnostic tools for Baby Boomers aging at home; and even e-commerce companies like Amazon that are moving into the prescription delivery space. These examples and beyond create a mosaic of healthcare opportunities within reach for even the average “retail” investor.

The what, who, and “how to pay” of healthcare

The “what” of healthcare encompasses the people, innovations, and systems around a person’s health, from prevention, diagnosis, treatment, recovery or cure of diseases to injuries and any other physical problems they might be experiencing.

The “who” of healthcare are the people who deliver the care and services with maintaining and improving that person’s health, from doctors and nurses to therapists and athletic trainers. In the U.S., “healthcare” also includes the entire healthcare delivery system, ranging from individual doctor’s offices all the way up to hospitals and pharmaceutical companies.

Of course, healthcare has to be paid for, and that’s where the health insurance side of things comes into the picture. In the U.S., health insurance today is a tangled web of private plans, employer-provided plans, government-backed programs like Medicare and Medicaid and more, with the Affordable Care Act, introduced in 2010, intended to expand affordable coverage to all Americans.

Healthcare’s history of innovation and disruption

Modern medical care has scaled up from the lone country doctor doing house calls to networks of providers and integrated groups of hospitals that work together to serve communities. Hospitals have a tradition of serving as a type of public service. This has its roots in the first hospital in the U.S., the Royal Hospital in New Orleans, which opened in 1722 as a military facility but later switched over for civilian use. By that point it was too expensive for most of New Orleans’s residents to visit, so a second, charity-based hospital was built nearby.

In the 20th century, medical innovation accelerated, with the advent of new technologies like X-ray and Magnetic Resonance Imaging improving doctors' diagnostic capabilities. The expansion of vaccines helped to protect public health from infectious diseases, and new surgical technologies like anesthetics, antibiotics and radiologic imaging helped save people from acute ailments.

In 2019, the healthcare industry faced it's biggest challenge of the 21st century - the global COVID-19 pandemic. With challenges came innovations and stay-at-home orders and concerns over exposure at hospitals led to an explosion in the use of telehealth and digital health services, as well as the ubiquity of home diagnostics.

The stresses of the pandemic also threw healthcare inequities into sharp relief, revealing structural biases that impact people differently depending on where they fall along class lines, gender, and race. These inequities in the U.S. healthcare system currently cost the U.S. $320 billion (1). One can only imagine what that amount of money would do to reduce mortality rates of women of color in childbirth, for example. To address disparities, some companies have been developing low-barrier, equitable services from dental hygiene and diabetes care to vaccinations.

From “hospitals without walls” and community-based care to patient-centric health practices, digital technologies are leading the way to the future of healthcare.

Healthcare providers, health systems, and health insurance companies are turning to cloud-based technologies, to the tune of $17.9 billion in 2022 (2).

The growth in demand of home-care services will mean that three-quarters of U.S. medical practices could be using remote patient monitoring (RPM) devices by 2024 (3).

Artificial Intelligence will help in managing patient care, blockchain in handling patient health records, chatbots for customer service, and virtual reality for physician training.

As an industry, healthcare is massive. The global healthcare market is predicted to reach more than $665 billion by 2028, but that is dwarfed by U.S. numbers. The U.S. healthcare market was $4.3 trillion in 2021 and looks to hit more than $6 trillion by 2028 (4). In the U.S., healthcare isn’t just more expensive than other countries (on average $12,914 per person per year); it also represents nearly 20 percent of the GDP (5). Healthcare and social services is the largest industry in the US economy–fully 1 in 8 people in the U.S. work in this sector—and the fastest growing sector, with 3.3 million jobs expected added by 2030 (6).

What’s the main engine driving this surge in the U.S.? The 70 million Baby Boomers looking to keep healthy and active, and preparing to “age in place” at home (7). Most will be using Medicare, with all four sectors of healthcare expanding to meet their varied needs—from drugs and medical procedures to in-home services and remote medical devices.

The four main sectors of healthcare each offer opportunities for investors, in the form of company stocks as well as mutual funds and exchange-traded funds that expose investors to the broader healthcare industry (8).

medical devices, equipment, and hospital supplies manufacturers

medical insurance, medical services, and managed care

Another change that investors should note is the 

 within companies and health systems (9). Thanks to the stresses of COVID-19, high inflation, and Baby Boomers aging, many companies and systems have moved beyond core products or services to combine the sectors—like healthcare ecosystems.

Hospitals diversify by developing or acquiring primary care groups, ambulatory or pharmacy services, and health tech like telehealth services.

Several hospitals might diversify by joining together to deliver services to people within a neighborhood or a region, like one-stop-shops for all of their patient’s healthcare needs.

Companies have diversified their offerings. One of the key players in global healthcare is 

, a large-cap company that reaches across sectors. It supplies more than 400,000 customers—pharmaceutical, biotech, hospitals, diagnostic labs, research institutions and government agencies—with the tools and services they need to continue to advance medicine.

: You can invest in an exciting stock that may be higher risk than you’re comfortable with, but in a more diverse way.

 will bring up the stock but also a number of mutual funds and ETFs that include the TMO ticker.

The circular chart to the right of the name will show what percent of the fund is TMO. To find out whether TMO is the fund’s top holding, click the dropdown menu, and choose “Top Holdings.” This will show the other companies that the fund holds, and their percentages.

Healthcare is a huge industry, from drug development to medical devices, to home health services and much more. Start with a search for "healthcare" and add in additional search terms to narrow down your results.

“US Healthcare Industry in 2023: Analysis of the health sector, healthcare trends, & future of digital health,” January 1, 2023, Insider Intelligence, https://www.insiderintelligence.com/insights/healthcare-industry/.

Kurani, Nisha, and Jared Ortaliza, Emma Wager, Lucas Fox, and Krutika Amin, “How has U.S. spending on healthcare changed over time?,” February 25, 2022, https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/; “US Healthcare Industry in 2023: Analysis of the health sector, healthcare trends, & future of digital health,” January 1, 2023, Insider Intelligence, https://www.insiderintelligence.com/insights/healthcare-industry/.

“Employment Projections - 2021–2023,” news release, Bureau of Labor Statistics, U.S. Department of Labor, https://www.bls.gov/news.release/pdf/ecopro.pdf.

“US Healthcare Industry in 2023: Analysis of the health sector, healthcare trends, & future of digital health,” January 1, 2023, Insider Intelligence, https://www.insiderintelligence.com/insights/healthcar

Mutual Funds and Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk

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Investing in Healthcare

The saying health is not valued till sickness comes doesnt match the mindset of investors, who see valueand potential growth in what supports our health and well-being.

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