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Which Healthcare Verticals are Your Best Investment Bet in 2021?

In 2020 external factors had a big impact on the healthcare industry, and here at Bancroft we expect that trend to continue. Examining those factors in detail can help investors make decisions about which healthcare sectors are best bets for investment this year.

New Administration

A new presidential administration means new policies and approaches. President Biden has signaled that he favors incremental healthcare reform with some expansion of Medicare. He advocates Medicaid expansion in all states and additional flexibility for states in handling healthcare matters. His administration will defend Obamacare and try to repair the damage inflicted on it during the Trump administration.

All these policy goals are good for the healthcare industry. However, most of the administration’s initiatives must get through Congress. Unfortunately, that may not happen quickly because lawmakers will be busy with the twin crises of Covid and impeachment.


Obviously, the Covid pandemic has had an enormous impact on healthcare, particularly hospitals. Most US hospitals lost money last year; even many big, well-known hospital systems lost hundreds of millions of dollars. This relates to the nature of healthcare reimbursement where a small set of procedures drive the vast majority of hospital profits. With the number of non-Covid treatments declining dramatically, pressure on costs and staffing necessarily results. Additionally, many states are asking health systems to support Covid vaccination distribution-- putting them under even more stress.

Unfortunately, this stress arises from outside forces that hospitals themselves cannot easily address. The result is plenty of financial and operational challenges. Expect any Covid initiatives from the Biden administration to try and help; though most fixes are likely to be band-aids on the problems.

Impact for Private Equity Investors

Recognizing these trends allows investors to develop a road map that illustrates which sectors are likely to be the best bets for investment.

Red: Don’t Invest

Any organization that specializes in the provision of in-person care is under stress at best, and many are in even more dire straits. This stress affects hospitals, doctors, medical offices, nursing homes, and other industries that relate directly to the provision of care. If you’re considering healthcare investing in 2021, Bancroft would rate facility-based care providers a red for the challenges ahead.

Yellow: Invest with Caution

Other sectors present a more mixed investment picture. In the life sciences field, we rate a yellow for investing--with the likelihood of longer-term price pressure. We rate the payer market as green (with some caution) given the growth in key markets, particularly Medicare Advantage. Both sectors have good, investable opportunities, but you must know where to look for them.

Green: Investment Friendly

Organizations that provide digital healthcare services are more attractive investment targets—promising less risk and more growth. These organizations tend to be consumer-focused and their approach to healthcare is likely to be supported by the new administration. Companies in the digital health delivery sector are a particularly good bet; we’d rate them a double green. Those in digital health infrastructure are also green, although investors must exercise some caution.

Do you need help and advice about investing in the healthcare market? Contact the experts at Bancroft!

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