While we research and position clients for many economic themes, one we continue to see playing a pivotal long-term role in investor portfolios is the escalating cost of healthcare, explains small-cap expert Ryan Irvine, the CEO of KeyStone Financial and a contributing editor to Internet Wealth Builder.

The U.S. healthcare system will have 11,000 new people qualifying for Medicare every day for the next 19 years. The reality of this demographic cost burden is forcing the U.S. to find and embrace more cost-effective value-based health care solutions. 

Over the past several years, we have conducted significant research into unique healthcare equipment and service providers. Our goal has been to uncover companies that have been and will continue to benefit from this powerful trend.

KeyStone has recommended a number of such companies to our subscribers over the past two years. This week, we are adding one of these — Viemed Healthcare Inc. (VIEMF) — to our recommend lists.

Viemed, through its wholly-owned subsidiaries, Sleep Management and Home Sleep, is a participating Medicare durable medical equipment supplier that provides post-acute respiratory care services in the United States.

In layman's terms, the company places a respiratory therapist in the home to treat patients with very sick lungs. Many of these patients are unfortunately at the end stage of their life, at a time when they are most likely to visit a hospital. Viemed's service prevents these hospital readmissions from occurring.

The primary disease treated is chronic obstructive pulmonary disease (COPD). With almost 25 million Americans reporting that they have been diagnosed with COPD, it is the country's third largest killer behind cancer and congestive heart failure.

The company provides a solution for people who suffer from this debilitating disease. Viemed uses non-invasive ventilators (NIV) which allows them to ventilate the patient with a mask versus forcing them to be in a bed – the quality of life is better, and the healthcare costs decrease.

Viemed recently reported another record set of quarterly results with revenue growing 45% $20.4 million and EBITDA rising 27% to $4.8 million. The balance sheet remains strong with $7.4 million in cash and an unused $10 million credit facility.

Viemed has made initial inroads into the Veterans Administration (VA) system. While Viemed has only 10 patients at four VA hospitals, it is believed this huge opportunity could come to the fore in the mid-term future.

Investors should also be aware that Medicare and Medicaid currently account for about 75% of Viemed's business and a combined total of 56% of accounts receivable. Although there are significant benefits around Viemed's service in the interest of Medicare and Medicaid, there is still risk of losing these revenue streams resulting in a significant decrease in recurring revenue.

The potential market for NIV is large and, despite its growth, Viemed is only scratching the surface. In fact, the entire NIV market penetration is less than 10% of its potential. As physicians and care givers become aware of the clinical efficacy of the therapy, there is potential that the referrals from them could snowball.

With its infrastructure in place (respiratory therapists and registered nurses), it appears the company can provide more in-house services to the same client. Product diversification strategy could not only reduce risk but grow its brand as a one-stop service company.

Given the company's clean balance sheet and solid net cash position, we see a fair value over the course of the next year to the range of $10.25. Action now: Buy.

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