Robotic surgery is providing a much needed improvement to healthcare economics and patients’ lives. It provides an attractive investment opportunity in a market that has become harder for investors to find profitable growth due to financial pressures on the system according to AMP Capital Head of Global Equities, Simon Steele.
It comes as ageing populations put mounting pressure on already stretched healthcare systems around the world, forcing the private sector to demonstrate how it can help improve overall productivity.
“Reimbursement rates for robotic surgery are pretty much the same as conventional procedures, so it's not necessarily a cheaper procedure at the front end,” Steele said at the AMP Capital Insights forum on July 19. “But when we look at the broader healthcare benefits, including patient outcomes and costs, total t costs and benefits are significantly improved.”
Robotic surgery is controlled by a surgeon who benefits from improved dexterity and on-screen vision (a robotic system stitching a grape can be viewed here) enabling greater accuracy in confined areas and minimal invasiveness when compared to conventional ‘open’ surgery. Patients typically recover faster and suffer lower rates of secondary complications such as infections, while fewer need open surgery.
The global market for medical robotics and computer-assisted surgical equipment is expected to reach US$18bn by 2022, according to Bank of America Merrill Lynch’s Robot Revolution – Global Robot & AI Primer.
“You can perform a partial kidney removal through one incision now with a 25mm cannula incision which is quite incredible,” Steele, who is leading a new global equity capability within AMP Capital, said at the forum. “There's no reason that any traditional laparoscopic procedure couldn't be displaced and shouldn't be displaced by robotic surgery over time and the growth opportunity is extensive as robotic surgery moves from specialist to more mainstream surgery.”
A key challenge to growth remains getting buy-in from all levels of the healthcare system, particularly those providing patient care. Private pay market adoption of robotic surgery has outpaced the public sector, according to Steele, but the situation is changing as recognition rises about the broader benefits in public pay markets such as the UK.
“In the UK, there is now a much broader acceptance and understanding of value to the whole health care system rather than just the cost at the point of procedure.”
Those productivity benefits also increase the number of potential treatable patients, a factor that could positively change the investment dynamic for some in the medical robotics industry and the private hospital sector.
”In our view, Robotic Surgery is one of a few areas in global healthcare that meet all three of requirements for wealth creation - strong competitive advantage, sensible capital allocation and a runway for growth. These are the investment case foundations we demand before committing our clients’ capital to investments.’