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What the Advisory Board’s Health Business Expects from Technology Sales

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Health technology sales

In 1Q17, the Advisory Board (ABCO) earned a major part of its healthcare business revenues from consultancy services. But the company expects the demand for health technology to pick up by end of 2017 and continue in 2018.

According to estimates by the Centers for Medicare and Medicaid Services, spending on healthcare services is expected to reach $5.5 trillion by 2025. In 2016, spending was around $3.4 trillion, or 18.1% of the total US GDP.

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Healthcare members

In 1Q17, the Advisory Board’s member renewal rate for healthcare clients was 92%. Excluding its 400 international clients, however, the renewal rate was higher at ~93.4%. The member renewal rate was similar to what we witnessed in 1Q16 at ~96.0%—if US hospitals alone are considered.

In 1Q17, the company served 1% more healthcare members on a YoY (year-over-year) basis, involving 3,000 hospitals in the US, 400 hospitals in international markets, and 1,100 non-provider healthcare organizations.

Uncertainty around the ACA

Since there is a high level of uncertainty related to the healthcare law that could replace the Affordable Care Act, hospitals such as HCA Holdings (HCA), Universal Health Services (UHS), and LifePoint Hospitals (LPNT) have been involved in expanding their networks, focusing on financial metrics, and introducing clinical and cost efficiencies.

These strategies are expected to benefit healthcare companies, regardless of the coming changes in the regulatory framework. The Advisory Board aims to leverage this opportunity to boost the sales of its solutions in the core areas of healthcare system growth, care variation reduction, and revenue cycle optimization.

Notably, the Vanguard Industrials ETF (VIS) has ~0.08% of its total portfolio holdings in ABCO.

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