Alan Greenspan’s Right On Target

Alan Greenspan came out and told the world what we all need to hear.  Governments around the world are over leveraged and the consequences will be ugly — and we can forget about a V shaped recovery. My comments are embedded into the article.  This is MUST READING. Alan Greenspan OPED with comments

Tenet in Australia? HHS Warns Medicare Advantage

Today (Monday) however started out with a disclosure that HHS has a sent a letter to some major Medicare Advantage insurers warning them not to increase rates for fiscal 2011.  CMS is back in the business of bashing the industry and we need to expect this will be a long-term trend.   Margins in the business will come down and under this Administration we should expect that they will do everything in their power to lower profitability of health insurance. The only real fireworks last week was the disclosure that Tenet Healthcare may buy HealthScope, the largest Australian private hospital system.  The transaction would be about $1.5 billion and would require a major re-leveraging of the company’s balance sheet.  The stock dropped 15% on the news.  One would think that the management team got the message, but maybe not.  We bought the stock on the dip and sold it the next day for a nice one day pop.  Stock is back down where we bought it today.  KKR is also a bidder.  Perhaps when this is all over KKR can buy Tenet and merge it with HealthScope.  I think Tenet even thinking about doing this deal is stupid – haven’t enough …

Deals … Deals … Deals

The markets continue to roil as the world deals with its debt crisis.  Yet in the midst we are seeing more healthcare deal announced.  Psyc Solutions to Universal Health (positive deal for UHS); Gentiva buying Odyssey (positive for Gentiva) and now Tenet is rumored to be stalking Healthscope, the largest hospital operator in Australia (“stupid is as stupid does” … Forest Gump). My only concern with the first two deals is that the debt markets stay together long enough for closure.  Both are positive for the buyer.  In UHS’s case, it really transforms the company in to a psyc operator that also owns acute care, rather than the opposite.  The best thing Alan could now do is spin off the acute care hospitals and have two publicly traded companies.  We’ve been saying that for a long time – ever since the Ardent sale of its psyc hospitals to Psyc Solutions.  He hasn’t done it yet and probably won’t, but I think that would be ideal as it would allow the markets to value each business.  Perhaps he hopes the psyc side allows the acute care side to have a premium valuation, in the same way that historically was 180 degrees …

Grassley Goes After Home Health

A few exciting things happening.  According to several publications, Universal Health may end up acquiring Psychiatric Solutions for $33-34 per share, beating out Bain Capital.  You may recall that Bain has a major stake in HCA.  UHS was up nicely on Friday when the market was getting slammed, so this information must have been making the rounds and investors like the result.  I’d like to see Alan Miller spin off the acute care division from the psychiatric assets to make two pure plays.  I think shareholders would benefit.  We will see.  Should be a good deal for UHS and make them the gorilla in the industry. Senator Grassley and the Senate Finance Committee has written the publicly traded home healthcare companies asking to investigate billing practices.  The Committee has noticed that when CMS changes the rules, the number of visits performed by the home health companies change to take advantage of the new rules.  Will wonders never cease?  Of course they change behavior in response to reimbursement rule changes. This should be good for headlines for the Committee for a while.  The real test is whether or not CMS takes up the investigation.  If they do, these stocks get cut …

CMS Issues F2011 Proposal

CMS issued its preliminary fiscal 2011 proposal and while there was no big surprise, a proposed 0.5% reduction in hospital reimbursement is less than expected.  That said, the stocks hesitated about 15 minutes and then started to move sharply higher. I guess the expectation of the HCA IPO overshadowed a slight CMS reduction. This sector has once again become the darling of Wall Street, so we are nearing the seasonal high.  This coming week we have HMA, LifePoint & UHS in the hospital sector to report earnings.  The Community Health results were on target.  We will see if HMA can get the stocks moving higher. Unitedhealth nicely beat estimates and estimates ratcheted up.  We continue to see 2010 estimates raised and 2011 estimates lowered.  A WellCare director who was the chairman of the audit committee and a Harvard professor resigned from the Board.  In an SEC filing she raised accounting concerns and said other directors were not acting in the shareholder’s best interest.  For a company that has had more than its fair share of issues, this again brings questions about accounting to the forefront. Next week Aetna, Humana and WellPoint report earnings.  We should expect that they will exceed …