Protect Your Portfolio with Healthcare-Associated Infection Plays

Healthcare-Associated Infections [HAIs] are a big issue - and in need of immediate attention. Effective October 1, 2008, Medicare will no longer provide incremental reimbursement to hospitals for a number of preventable conditions.Other Managed Care organizations are probably going to follow suit. I would wager that just about every reader has heard of someone, knows someone or had an HAI personally over the past three years. Our family had first-hand experience with a HAI, and it was a nasty experience.

The healthcare industry has of necessity become increasingly focused on HAIs as the incidence of resistant bacteria and costs to treat HAIs continue to rise. Based upon data published by the American Journal of Infection Control, the average cost of a single HAI is over $13,900. with no guarantee of satisfactory treatment. The Association for Professionals of Infection Control and Epidemiology estimates that Healthcare-Associated Infections cost many billions of dollars in the United States alone. There are several studies concluding that preventive measures by hospitals to reduce HAIs have a substantial impact upon the profitability of the institution, even before lawsuits commence.

Controlling HAIs is going to require a huge mega-billion dollar investment nationwide and worldwide. The challenge is daunting. Doctors and other healthcare professionals are spread over a larger patient base, creating more opportunities for pathogens to be transmitted. Over-prescription of anti-biotics over the last two decades have produced the mutation of drug-resistant strains of bacteria such as MRSA and VRE. Ineffective infection control programs in healthcare facilities are rampant.

It is apparent to me that this segment of the healthcare industry is poised for explosive growth. What companies stand to benefit? The following are at the forefront, but have yet to be fully recognized for future HAI profits:

Becton Dickinson $87.62 (BDX) is a HAI leader worldwide in a variety of areas, especially injection, infusion and blood collection products. Diagnostics are huge, too.

Steris $29.26 (STE) For disease control wash products.

Johnson and Johnson $66.29 (JNJ) Not a large part of this behemoth, but the company is active in the HAI field and is a good "buy" candidate for several reasons, imo.

Bard $96.68 (BCR) Is very focused on the HAI market. Their strength in infection control is with internal organ and body areas such as catheters.

Ecolab $47.71 (ECL) Cleaning and sanitizing chemicals plus a strong sterilization (instrument, skin and surface cleaning chemical) division bodes well for this HAI-sensitive company.

3M $74.91 (MMM) Is one of the top global companies dealing with HAI. It is growing its HAI preventive medley of services in many ways. I like it as I do JNJ.

There are others racing into this field. An ETF for HAI companies would be interesting. Given the present slaughter of stocks,companies that are likely to profit from the woes of Healthcare-Associated Infections may be good for your financial health.

Disclosure: The author does not own any stocks mentioned in this article.

Comments

[chriscql]

Why no mention of Cepheid (CPHD) in this line up? Technology is in VA hospitals and well ahead of the other companies mentioned.

[granger]

This market will be gignatic. I have several family memebers in the medical industry. I gave them the artilce. They sia dthat the problem is even bigger than expected worldwide.