Health-Care Industry Offers Investment Opportunities

Article excerpt

No matter how it happens, growth in the health-care industry offers tremendous opportunities for investors willing to risk government-initiated changes, according to Donald Johnston, president of Massey Burch Investment Group Inc., a Nashville-based venture capital company.

The health-care industry is expected to reach 17 percent of the U.S.

gross national product within this decade and up to 25 percent in our lifetime, said Johnston.

Health care now represents about 12 percent of the gross national product, or $2,600 per capita in 1991 dollars. That is up from 6 percent or $700 per capita in 1960, he said, in 1991 dollars. Factors contributing to that growth include increased utilization of services, new technologies and an aging population.

"The rising health-care cost is a very alarming trend and a major campaign issue," but what the government will do about the problem is uncertain.

Johnston said investing in the industry in that environment, though scary, is being done because "that kind of change will create chaos, which ought to create opportunity."

His comments Wednesday were directed to the Oklahoma Venture Forum, a group that promotes economic development through education in the venture capital process.

Health care is one of four industry focuses Massey Burch has in its $170 million portfolio. The company, the successor to a firm founded in 1968, is the oldest and largest venture capital firm in the South. It has 45 active investments in companies that generate more than $1.8 billion in revenues and have more than 20,000 employees.

Johnston, an Ardmore native, said his company's location in Nashville is one reason for its emphasis on the health-care industry. Nashville became a regional center of health care because of Vanderbilt University, which is located there, and the creation of Hospital Corp. of America (HCA), which owns Presbyterian Hospital in Oklahoma City.

HCA, which was part of the Massey Burch portfolio before it went public, gave rise to entrepreneurial managers who created other health-care delivery companies.

"We provided financing around these budding companies," and as they grew, a momentum built attracting more health-care companies to Massey Burch.

He said the initial public offerings of HCA and a spinoff raised more than $1 billion in capital, which went back into Nashville and back out of the state again through the funding of more health-care companies. …