Healthcare Recession Proof?

Nashville Post – October 2003 Over the last two quarters, the hospital industry has experienced an unprecedented flattening, and in some cases an absolute decline, in inpatient admissions. In addition, most have experienced a lack of growth in outpatient services. Investors, who have long viewed the healthcare service sector as a recession proof, safe haven in times of economic turmoil, are starting to reassess this view. What has caused this change, and what does it mean for investors and for healthcare service companies? In preparing this column, we have talked with many senior healthcare executives, and have also reviewed Wall Street research. As is often the case, much of the Wall Street view, in my view, misses the mark. There has been much discussion about the role of higher co-payments and deductibles by employees, the shift of demand caused by technology and increased competition by third-party outpatient service businesses, such as surgery centers and the newer specialty surgical hospitals. While all of these may have a minor role, frankly I see this as fishing in the wrong stream. Higher co-payments might slightly reduce physician visits, but an inpatient hospital visit uses a typical employees co-pay and deductible in the first …

Nursing Shortage?

Nashville Post – July 2003 About three years ago, Wall Street healthcare analysts started to hear about a new challenge in the hospital industry – nurses increasingly in short supply. Since then, hundreds of articles have been written about the nursing shortage. Nurse staffing companies became the rage among investors. Unless you haven’t noticed, the nurse staffing “crisis” is no longer a crisis. In fact, investors may start wondering what the fuss was all about. Just like most other trends (oil at $35 a barrel going to $100, gold at $700 an ounce going to $1,000), markets and companies tend to react to dislocations in supply or demand. Nothing is constant, and drawing straight lines into the future yields the wrong conclusion about 100% of the time. Either new supply is created, or companies learn how to reduce demand. Nurse staffing is no different, and apparently the tide has turned. Bottom line: Nurse staffing companies will have trouble making Wall Street earning estimates and healthcare providers will have lower salary & benefit inflation than expected. What changed? The original problem was caused by many factors. Over the past twenty years, the nursing profession has dramatically changed. Nurses found they were …