Veteran's Administration Contractors: A Good Investment - Barron's

by: Judy Weil

Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

Turning Khaki Into Green by Jim McTague

Summary: Though criticized recently for poor veteran hospital care, the Veteran's Administration is one of the largest and better run U.S. agencies. Its $36 billion 2008 budget makes it the largest U.S. healthcare provider with 60 million patient visits annually, and the sixth largest U.S. insurer. Veteran\'s AdministrationVA Secretary R. James Nicholson cites VA medical excellence awards, innovation and efficiency measures ranging from completely digitized medical records to eradicating expensive drug-resistant hospital staph infections, but he's pushing hard for greater streamlining. Beneficiaries are public firms vying for the VA's contracts like McKesson Pharmaceuticals (NYSE:MCK), who received $3.6 billion in contracts from the VA in 2005 and Northrop Grumman (NYSE:NOC), who got $94.9m. Shares in 13 of the 20 companies awarded contracts this year have appreciated by 43% from January- Mid-March. And if one staph patient costs $182,000 to treat, and the VA plans to buy a $30,000 staph detection device for each of its 154+ hospitals, then device manufacturers like Becton Dickinson (NYSE:BDX), Cepheid (NASDAQ:CPHD) and Roche Holding (OTCQX:RHHBY) could benefit. VA efficiency measures could be copied by private industry, benefiting some VA contractors.

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