Elliott Forrest: Welcome to Five Minute Capital, CIT’s executive insight series which takes on financial issues in five minutes or less. Today we’ll be talking about the rise of outpatient healthcare with Margaret Au Brown, the executive vice president of CIT Healthcare. Good to see you.

Margaret Au Brown: Hello, Elliott.

Elliott Forrest: Outpatient healthcare is on the rise. Yes?

Margaret Au Brown: Yes, it is.

Margaret Au Brown: Why is that?

Margaret Au Brown: Well, you get better care, it’s less expensive and it’s a more pleasant patient experience.

Elliott Forrest: In addition to the economy is part of this about technology?

Margaret Au Brown: Yes it is. Even a decade ago you couldn’t imagine doing the kinds of procedures that you can do on an outpatient setting today.

Elliott Forrest: Let’s talk about some of the trends behind this growth. What are your thoughts on that?

Margaret Au Brown: Well, I think the overall trend is the desire to reduce healthcare costs and doing a procedure on an outpatient setting is less expensive. So that’s the number one factor driving this. The second factor driving this, I think, is that doctors who are a key ingredient to a successful outpatient venture, like to be in control of their own destinies and this gives them a way to do that. And thirdly I think patients prefer a more pleasant experience. And this gives them that, too. Elliott Forrest: So, when you talk about financing for inpatient, that’s hospitals. When you’re talking about financing for outpatient, what are you financing?

Margaret Au Brown: Well, you know the financing mechanisms for outpatient centers is fairly new. So we have a focus on middle market companies, in general, such as surgery center chains, dialysis center companies and we also provide financing at the center level, which is unique in the market place. Traditionally these are not easy ventures to finance because they are typically start-ups. We look for the involvement of the doctors, a reputable developer, and sometimes a hospital will be a partner. So we are pretty active in this space.

Elliott Forrest: What about the medical devices in these facilities? What kind of devices are you seeing, specifically, that’s on the growth?

Margaret Au Brown: Well outpatient centers vary. And depending on the center’s business, it will have different device or technology needs. Not all of these are extremely technology heavy. Some are. Imaging, for instance, they require an MRI or a variety of equipment. So there is definitely equipment involved, but we provide a holistic financing solution. We will finance just the equipment, but we’ll also often times provide the working capital, as well as the tenant improvement financing for the center.

Elliott Forrest: And is your approach different in financing outpatient as opposed to hospitals – or is it basically the same?

Margaret Au Brown: Well, I think the underlying analysis for any of our services is the same, which is the credit worthiness of the borrower. You approach it differently. You would look at different things for a hospital than for an outpatient center. But it’s about the ability of the enterprise to repay your debt.

Elliott Forrest: And is this the sign of a bigger change? What I mean is, is society changing and is this the way people would prefer to be treated?

Margaret Au Brown: I think so. The growth of outpatient centers has been just tremendous. I can share with you a startling statistic. In the year 2006, Medicare-certified surgery centers grew over ten percent, and it was the largest year-over-year growth for this business and I don’t see that growth abating at all.

Elliott Forrest: do you think the current presidential election is going to have an impact on healthcare services?

Margaret Au Brown: Well, I think the current election will have an impact on overall healthcare spending. I think that at least the democratic candidates are suggesting that healthcare should be more broadly accessible and I think that is going to be good for the industry.

Elliott Forrest: And I assume you think this is a growth industry in investing and financing in outpatient.

Margaret Au Brown: Yes, I do. If you just think about the aging of our population, you know the demographics alone argue for a greater demand of healthcare services over time. I don’t see that abating.

Elliott Forrest: Any final thoughts on outpatient healthcare services? Margaret Au Brown: Well, it’s a growing business. I think healthcare is a great business to be in. I do. And we provide a lot of different financing and advisory services to the industry.

Elliott Forrest: Margaret Au Brown, Executive Vice President, CIT Healthcare. Thanks so much for joining me here today. Margaret Au Brown: Thank you.

Elliott Forrest: And thank you for listening to Five Minute Capital. Please log on to podcasts.cit.com for more. I’m Elliott Forrest. This has been a production of CIT. CIT. Capital redefined.