Roulston Healthcare Partner Ed Berger on How Healthcare Reform Politics Shouldn’t Affect Investment Opportunities or Strategy

The long debate over, and eventual passage of, healthcare reform fostered a vibrant cottage industry devoted to identifying the potential winners and losers that would result from the legislation. It seemed a foregone conclusion that a policy initiative of such ambition and scope would create new business and investment opportunities while simultaneously deflating the prospects of some established enterprises. The fact that no such dramatic affects have yet been observed might of course be attributed to the legislation’s long implementation timeline – we are still, for example, a long way from the state health exchanges and broad coverage mandate that were and remain the focal point for the reform debate. And the prospects for implementation of those and other elements of the reform bill have been thrown into question by the apparent commitment of the House Republican majority to either repeal major elements of the initiative or deny the funding they require. Two questions remain for investors: “Does the reform legislation as it stands really create new winners and losers?” and “Should investment strategy be predicated upon expectations concerning the success of efforts to repeal or frustrate implementation of reform?”

I’d answer “No”, fairly resoundingly, to both questions. Worry about the investment strategy impact of the politics of healthcare reform is as overheated and futile as the political debate itself. Step back from the political rhetoric for a moment and consider what the healthcare reform bill really entails:

1. At full implementation, it mandates that (almost) everyone buy health insurance, or pay a penalty for failing to buy insurance;

2. It regulates insurance company business practices;

3. It creates mechanisms, through expansion of Medicaid and creation of state insurance exchanges, to provide insurance to individuals and families that can’t afford it in the current market;

4. It (partially) pays for increased public subsidies through a variety of Medicare cost control measures;

5. It mandates broader implementation of electronic medical records and related health information technology ((HIT) tools;

6. It funds an ambitious comparative effectiveness research (CER) initiative;

7. It enables a broader program of Medicare alternative payment demonstration projects, most specifically and notably trials of accountable care organizations (ACOs) as a model for implementing incentives to control costs while improving quality.

Healthcare reform “works” – i.e. achieves the cost control and quality improvement goals its advocates seek – if and only if near-universal insurance coverage is accompanied by altered provider incentives (such as those posited for ACOs) and the more efficient use of resources enabled by CER and HIT. But the important thing for investors to understand is that the movement toward CER, HIT and ACOs predates the passage of reform, and that repeal of reform might slow, but would certainly not stop, that movement.

The insurance companies that adapt most effectively to their regulatory environment, and to the pressures to control costs, will flourish at the expense of those that do not. Companies that improve healthcare data access and management are advantaged in the evolving marketplace. Medical technologies and/or therapeutics to improve clinical outcomes will be good investments, and those that do so while reducing costs will be the best of those investments. Provider organizations that effectively address the structural, managerial and care delivery issues that will allow ACOs to succeed will flourish at the expense of those that do not. And it is a good bet that all of these things would have been true absent healthcare reform, and will remain true regardless of the near term political debate.


Dr. Edward Berger, has more than 25 years of experience working in senior management or as a consultant with medical device, biotechnology and health services companies, dealing with problems at the intersection of U.S. and international health care policy, corporate strategy development, and strategically sensitive corporate communications with government, investors and the media. He is the founder and principal of Larchmont Strategic Advisors which helps life sciences companies create and implement integrated strategies to address the many policy and regulatory obstacles and opportunities they face in their efforts to secure public and private insurer coverage and optimal reimbursement for new or evolving technologies.

Details from June 8th Retail Roundtable Event with Roulston Retail Partner Arnie Cohen

In our Consumer Roundtable Arnie Cohen discussed cotton prices reaching their peak two months ago. Companies seem to have a better handle on this and labor prices since the holiday season while freight costs continue to be a burden. Look for possible new cotton sourcing out of Africa. The differentiating stickiness in retail continues to drive Arnie’s views on those who are growing. Pricing isssues are impacting primarily lower end markets in a trifurcated market. Higher end retailers are able to maintain much of their margin as price elasticity is tied to stickiness of customer and more unique product mix where customer is more accepting of price change with style change. Trends and traffic are consistent at that end of the market.

The lower end is struggling with both pricing and traffic and changed consumer behavior. Unemployment, big box challenges and dollar store models are all impacted by both demographic changes and margin pressures. Arnie sees JCrew men’s trends stronger and he feels the company seems to have regained in women’s from a dismal holiday. Urban, maybe after to many risks at Holiday seems to have regained some touch. Some companies continue to be out of touch with who is their core customer while others are still challenged. Abercrombie seems to be having traffic and product challenges. PVH was cited as improving recent trends from management decisions and consistent execution. The group discussed Macy’s where Arnie continues to have concerns with Vendor issues and treatment of the 60% of branded product where the best innovators increasingly are treated roughly and Macy’s leverage in this space and leverage pushed on suppliers may have longer term repercussions. Target has missed on the fashion trends but Arnie still has a positive impression if they can get their handle on pricing.



Mr. Cohen has spent the 27 years immersed in the retail and consumer direct industry. He has held a variety of senior executive positions with Gucci, J. Crew, Macy’s, American Eagle and others, incubating, leading and fixing brands and distribution platforms both domestically and abroad. Arnold is well known as one of the top merchandisers in the industry, both in the US and overseas

Roulston Technology Partner Keith Mallinson on the Proposed Acquisition of T-Mobile USA by ATT

Much of the debate on the proposed acquisition of T-Mobile USA by AT&T is about what antitrust lawyers and economists call horizontal competition issues among wireless carriers. What choice do consumers have: how many wireless carriers are competing locally, nationwide and how will this affect prices for basic services in voice minutes, texts and megabytes of data? Until quite recently in the last couple of years, vertical issues—in supply chain competition between carriers and their handset vendors, operating system suppliers and applications providers—have never figured much in discussions on telecom carrier mergers, despite the fact that major US wireless carriers wielded significant control over their supply ecosystems.

It is a very different competitive landscape today with the balance of power flipping over. Apple has an increasingly strong competitive position versus carriers on the one side, and with mobile applications developers and content providers on the other. The iPhone company is extracting a lion’s share of total ecosystem profits. Similarly, Google with its increasingly popular Android operating system and ecosystem, is also a powerful competitive counterbalance to the aspirations of wireless carriers in value-added offerings above and beyond connectivity services.

Such is the increasing vertical competition from Apple, Google and over-the-top providers such as Skype, with wireless carriers increasingly dependent on efficiency-based competition in commoditized connectivity services, there is increasing justification to allow smaller and insufficiently profitable players, such as T-Mobile USA, to be acquired. The increased heft of combined carriers, such as an even larger AT&T, would be a more effective foil to the rising might of these others. The Wall St Journal has recently reported that the Justice Department has concerns about Apple as a prospective purchaser of patents, including those for wireless technologies, from bankrupt Nortel. Google is under antitrust investigations in Europe. Forcing continued uneconomic fragmentation upon wireless carriers will imbalance competition across the broader ecosystem.


Keith Mallinson is founder of WiseHarbor, providing expert commercial advisory to technology and services businesses in wired and wireless telecommunications, media and entertainment serving consumer and professional markets. He is also regular columnist with Wireless Week, FierceWireless Europe, and IP Finance. Prior to forming Wise Harbor Mallinson led Yankee Group's global Wireless/Mobile research and consulting team as Executive Vice President. He currently forecasts the long-term outlook in mobile operator services, network equipment and devices to 2025 which is available to purchase on his website at http://wiseharbor.com/forecast.htmlhttp://wiseharbor.com/forecast.html

Roulston Technology Partner on Fallout from Recent Data Breaches

Roulston Technology Partner Bart Perkins recently wrote a blog posting about the recent high-profile data breaches to consumers personal data. Cybercrime has been in the headlines recently with the Sony PlayStation Network compromising 77 million user’s personal data, email marketer Epsilon exposing consumer data from fortune five-hundred companies such as Citibank and Disney, and Vodafone Australia making millions of customers names, addresses, and credit card information freely available. Bart explains how most people consider data security to be an IT problem but a breach comes with tremendous direct costs which averaged 7.2 million dollars in 2010, or $214 per compromised consumer record. Direct costs include hiring extra staff to help control the breach, external legal counsel, and credit monitoring services for victims whose personal data was compromised.

Bart states, “Although frequently overlooked, indirect costs of breaches are often higher than direct costs.” He mentions that the primary indirect costs are:

1. Staff
2. Public Relations
3. Finger-pointing
4. Government Inquiries
5. Political Attacks
6. Customer Inconvenience

To read Bart’s full article and see how these six issues affect companies that have data breaches follow the link to Computerworld’s website at http://www.computerworld.com/s/article/356892/Data_Breaches_Costly_Fallout


Bart Perkins has over 25 years experience leading IT efforts for major corporations and consulting firms. Former CIO of YUM! Brands and Dole Food Company, Bart developed technology supplier management systems to reduce risk, improve service levels and lower costs. Bart has been a Partner at KPMG Peat Marwick (Nolan, Norton & Co.), a Vice President at Technology Solutions Company, and co-founder of The Value Sourcing Group, an IT vendor management consulting firm. His consulting engagements span a wide range of industries. Bart's clients include Marriott, Blockbuster, Thermo-Fisher Scientific, Diageo, General Foods, Kraft, Nabisco, IBM, Kaiser Permanente, PepsiCo, NCR, Thomson Reuters, Barilla, Boeing, Aetna, Georgia Pacific, and Heineken. Bart writes a monthly column on IT Management for Computerworld and is a judge for CIO Magazine's CIO 100.

Roulston Technology Partner on Future of Mobile Broadband

Roulston Research’s Technology Partner Keith Mallinson recently was interviewed at the Mobile World Congress 2011 hosted by GSMA Mobile Broadband in Barcelona, Spain. He spoke about the rapid rise in mobile in general since the 1990’s especially after the introduction of GSM to now having over 5 billion connections with mobile voice and text worldwide. The rise in mobility came about through vision, reduction of costs, and the introduction of prepaid phones. He believes mobile broadband is at the tipping point of having most of the world access the internet through mobile devices. The industry will have to introduce new technologies like HSPA and Evolved to drive down costs. They will also have to increase backlog with fiber technologies to increase capacity and performance. These changes will bring about large changes in the service and delivery side along with innovation on pricing from the traditional flat rate to pricing options that offer the consumer more flexibility. He believes these changes will allow the industry to have mobile broadband accessible to the masses over the next 10-15 years. You can hear his full interview at http://www.gsmamobilebroadband.com/mwc/summary.asp



Keith Mallinson is founder of WiseHarbor, providing expert commercial advisory to technology and services businesses in wired and wireless telecommunications, media and entertainment serving consumer and professional markets. He is also regular columnist with Wireless Week, FierceWireless Europe, and IP Finance. Prior to forming Wise Harbor Mallinson led Yankee Group's global Wireless/Mobile research and consulting team as Executive Vice President. He currently forecasts the long-term outlook in mobile operator services, network equipment and devices to 2025 which is available to purchase on his website at http://wiseharbor.com/forecast.htmlhttp://wiseharbor.com/forecast.html

Roulston Media Partner on How Traditional Radio Can Battle Pandora

Roulston Media Partner Mark Ramsey wrote a blog posting several weeks ago on how Pandora radio is real radio and that traditional broadcast radio should pay attention to the medium. This past week he wrote a new posting about how traditional radio can battle Pandora radio. Most of the traditional broadcast companies dismiss Pandora and feel they have the strengths of being local, big, and useful in an emergency. Mark dismisses these so-called advantages because Pandora offers personalization, which makes it better than being local in many ways, and offers value every time the listener turns on the radio.

Mark believes that the biggest advantage Pandora has over traditional radio is through advertising and not customization, which is why terrestrial broadcasters should consider it a rival entertainment medium. Pandora’s ads can be delivered to people with similar characteristics so there is very little waste in the advertiser's budget. Some traditional broadcasters are trying to create personal versions of their radio brands. Mark dismisses this idea and thinks the main advantage traditional radio has over Pandora is content. He states, “Pandora has personalization. Radio has personalities.” Radio’s advantage is that it is live and in the moment so offering a selection of non-music content that appeals to a broad audience is the key to their success. He suggests that traditional radio shouldn’t compete against Pandora directly with a knockoff weaker version. Instead it should focus on its strengths of creating and monetizing first class on-air shows with talent that will attract advertisers. You can read part 1 of his article at http://www.markramseymedia.com/2011/05/how-radio-can-battle-pandora-part-1-wake-up-radio/ and part 2 at http://www.markramseymedia.com/2011/06/how-radio-can-battle-pandora-part-2-beyond-music/


Mark Ramsey Media is one of the best-known research and strategy providers to media companies in America. He has worked with several television and innumerable radio broadcasters over his career, including all the biggest names, from Clear Channel, CBS, Bonneville, Sirius XM, and Greater Media in the US to Corus and Astral Media in Canada. Clients from outside broadcasting have included EA Sports and Apple.

Roulston's Technology Consultant on Microsoft's New Mobile Phone Operating System Codenamed "Mango"

Roulston Research’s Technology Consultant Ross Rubin spoke about Microsoft’s next version of its mobile phone operating system codenamed “Mango” that will be introduced this fall in his blog posting this week. Mango offers improved Web browsing and email capabilities including the ability to run multiple applications at once. It is the first major update to the Windows Phone 7 that was introduced last fall and Microsoft hopes it will help them increase their market share aginst rivals in the smartphone business Apple and Google. Microsoft stated that all previous Windows phones that have been released will be upgradeable to the newest version. This will help Windows Phone efforts with its strong domestic partners Samsung, LG, and HTC. However, Ross believes that the biggest impact of Microsoft maintaining control over which handsets will be upgradeable with Windows 7 will be felt overseas. The Mango will be featured in the first Windows based phone from Nokia who will have the creative freedom to do almost anything it wants to with its Windows phone license. You can read Ross’s full blog posting on how he feels the introduction of Mango will affect Microsoft on NPD’s website at http://www.npdgroupblog.com/2011/05/where-mango-will-bear-fruit/#more-1260


Ross Rubin is a director of industry analysis for The NPD Group. With over 20 years experience analyzing and writing about the technology industry, Rubin leads The NPD Group’s coverage of consumer electronics with an emphasis on connected intelligent devices and convergence. He will be participating in the Wireless and Mobile Devices Roundtable event in New York City on June 8th at 2 PM with Farpoint Group Principal Craig Mathias.