You might think ASX healthcare shares would be among the most insulated from the digital disruption, but that view doesn’t gel with all experts.
In fact, some are predicting that the healthcare sector could be next to be shaken by the digital and online revolution, reported the Australian Financial Review.
The news may worry many investors holding ASX healthcare shares. They only need to look at the media and retail sectors to see how significant the impact of this may be.
ASX medical shares and the digital disruption
The idea that some medical services could be heading online and away from brick-and-mortar outlets isn’t that preposterous. COVID-19 proved the benefits of telemedicine.
But before you equate the Myer Holdings Ltd (ASX: MYR) share price with the Ramsay Health Care Limited Fully Paid Ord. Shrs (ASX: RHC) share price, Sonic Healthcare Limited (ASX: SHL) share price or Healius Ltd (ASX: HLS) share price, consider these points.
The experts quoted in the AFR article spoke more about data collection than visits to doctors or hospitals.
More about data than visitation
The idea is that the pooling of non-identifiable patient data could help medical practitioners and patients make more informed decisions.
Such stats might be useful for Monash IVF Group Ltd (ASX: MVF) for instance where statistics could help improve the chances of a successful treatment.
But change never comes easy. This is especially so for the medical fraternity as these professionals are trained to avoid risk and to stick to tried and proven methods.
What’s needed to drive the digital change
The factor that could counteract the resistance for change is cost savings. This is one of the largest expenditure items for federal and state governments.
This provides a big incentive to embrace digital technologies, especially during these times when government budgets have blown out due to the pandemic.
If consumers believe that the digital disruption will also help them cut their bills, including health insurance bills, and speed up treatments, they could also be a powerful push factor.
Real risk to earnings from digital disruption
On the other hand, if digital medicine does lower costs, medical facility owners could feel the squeeze in parts of their operations.
Even if margins stay constant on a percentage of sales basis, profits will drop as the top-line drops.
Further, the digital revolution will provide opportunities for new rivals to challenge and beat the incumbents. We don’t need to list any examples here.
But there’s no need for ASX investors to panic. Even if there is a greater acceptance of telemedicine, changes come slowly. It took years for digital alternatives to dislodge newspapers and brick and mortar retailers.
This gives the sector precious reaction time to pivot and adapt.