Washington, D.C. — The three Rs of Healthcare—regulation, reimbursement and reform—took center stage at the annual HCap Conference at the J.W. Marriott Dec. 7 to 9 in the nation's capitol, as providers and investors met to discuss the state of the industry along with the investment opportunities that exist within it.

Amid high-level strategic discussions about everything from the impact that the Affordable Care Act is having on Medicare to the way physician groups are developing differentiated models of Accountable Care Organizations, the conference also sought to address a critical question on the minds of many providers: Do private investors see healthcare as a good sector to place capital, and if so where?

The myriad of issues debated over the course of the conference's 18 seminar sessions, one-on-one meetings, numerous networking receptions and a lively Town Hall debate led to the conclusion that yes, healthcare is indeed a good place to invest, with one prevailing caveat: In an industry riddled with regulation and legislative uncertainty, investors and providers would be wise to do their homework.

“Healthcare today is in transition, and private capital tends to do well, from a return standpoint, when businesses are in transition and dealing with things like convergence and regulation uncertainty,” said Kevin O'Brien, Managing Director, CCMP Capital Advisors, during a session devoted to private equity investment. For this and other reasons, fellow investors echoed similar refrains, including Russ Herakovich, Managing Director of GE Capital, Healthcare Financial Services, who said that now may be a good time for providers to diversify.

“Diversification is clearly the trend right now. It reduces one's risk, and makes companies less concentrated (in one area),” Herakovich told attendees during the final general session. “If you have a home health and hospice company and there is a big cut to home health reimbursement rates, well you still have your hospice business that may not come under pressure at the same time.”

Understanding and identifying precisely where the various pressures lie in healthcare—and how to alleviate them—was the focus of many of the educational sessions throughout the three-day conference. Attendees heard from a panoply of thought leaders, each with their own vested stake in the future of healthcare, including large providers, private equity firms, physician groups, policy makers, Fortune 500 employers, managed care companies, and more.

Although opinions differed greatly at times about the ways in which reform should be implemented, one mantra that emerged above all at HCap 2011 is that healthcare is slowly but surely migrating away from the current fee-for-service model. What it ultimately will be replaced by, and when, is a tougher question to put one's finger on, panelists said. Some suggested a slight adaptation to the Obama plan, while others predicted—and advocated for—a new plan, such as the one being promoted by U.S. Representative Paul Ryan (R-WI).

“We all know the (current) system is broken, and it's too late at this time to go back,” Ron Lissak, CEO of Integral PET Associates, said at the Provider Town Hall. “The expectation is that it's got to be fixed one way or another. It might change depending upon who's in (Washington). But you're not going to turn the clock back. . . . There are too many things that are already going to be enacted.”

HCap'11, therefore, proved once again to be fertile ground for the ongoing debate on how to fix healthcare, which Dan Mendelson, President of Avalere Health and a moderator at this year's conference, characterized as an industry going through “a time of massive and very fundamental change.” As Mendelson and others repeated often, healthcare has its share of significant challenges, but it also is an industry with significant opportunities.

“Ultimately, there is going to be a shift in risk. The aggregators are going to ask the providers to participate in the risk . . . and margins are going to come down. Then we have to think about where's the new frontier,” said Mark Heaney, President and CEO of Addus Healthcare.

In the immediate term, what happens inside the Washington Beltway over the next 12 months will go a long way in determining what that ‘new frontier’ is, according to many of the panelists at HCap. Perhaps Dean Rosen, a Partner with Mehlman Vogel Castagnetti, positioned it best when he said that healthcare is going to continue to face “downward pressure” in 2012.

“The next big issues will be to see what the Supreme Court decides in terms of the Affordable Care Act and what happens in the elections,” Rosen said. “I think we're going to be dealing with deficit reduction 2.0 or 3.0, and the mix of the political actors will be critical.”