Daniel Andres Jacome

Daniel Andres Jacome
Contributor since: 2006
you fail to mention pricing concerns....
PS - do you know how profitable the UNH biz was?? U said 7% of sales, what abt % of EBIT or earnings??
interesting buy - stock has gotten crushed after ~30% or more CMS cut to eqpt they sell - could be a value trap unless LNCR finds a way to capitalize on this as smaller operators are unable to deal with cuts and ultimately fold, so LNCR, if it survives, could gain share
lot of scrutiny on these stocks given that rival AMED is usually cited by shorts as bilking medicare
obvious beneficiairies of the generic upcycle given higher earned spreads
employers are having issues understanding thier true speciality PMPM cost so upside for these guys in that vein. On the st, lots of investors waiting for clarity on biosimilars bill/waxman moves. Specialty unit costs help off set top line being lowered by generic substitution.
a lot of pushback from WAG bears is that company lowered its cap ex outlook for the next few years and hence the company doesnt deserve as high a multiple as it used to get. that said, PE multiple drive off mkt share, too, not just growth, so the compresison should be offset as WAG and CVS continue to grab share. independent Rx stores are going by the wayside, as everyone knows. the last 2 years are evidence of this, as many were rolled up and many others folded after getting smoked by AWP rollbacks and/or depressed Medicaid reimbursments
shocked this article didnt discuss the basket cuts to home hlth layered into Obamacare
surprised this article didnt mention anything about CA market comments made on the call
these companies are blaming reform (GILD) and weather (DGX, LH) for soft volumes. Companies should have updated guidance mid qtr or after reform was passed - its pathetic on their behalf and even more sad how buyside is caught off guard by all of this
HCA was smart to go private before the economy blew up and bad debt shot up, now that that that trend is presumably abating, they are going live at about 1-2x turns a higher EBITDA multiple (they were taken out at about 6x). Smartly, they reduced a lot of debt in the last 18 months and will be more feasible a stock for debt-averse PMs
@ Donald Johnson - medicaid and Medicare (at least on a Part D ASO basis; RDS is pretty profitable) are not the "big" markets for PBMs, so not sure what you are driving at. please elaborate
the article didnt mention SXCI. looking into that business may help you solve the riddle you pose in the last question of your article....
this article is greatly misinformed in that it suggest CVS/Caremark is not under "political scrutiny" and that the PBM business is on "neutral" political ground. Caremark has long been under the regulator's eye and the reform that just passed specifically has stuff in there that puts PBM practices (rebate transparency) under the microscope...
this information is not new (was discussed on WLPs Q4:09 call),
Doesnt hit AET numbers at all unless the sanction isnt lifted by the Fall...enrollment open period ended 3/31
hospice is lower margin but I beleive thier is more visibility there and earnings are less "at risk"
the real question on this increased volume should be what is their margin profile versus BEFORE reform. In general, the volumes will come in at lower profits. Some company will pass along fees, others will not. Some will get healthy customers, some will not. Some companies will not see enough of a boost in volumes (maybe the mandate and penalties to small business are not enough) to offset the degradation in margins. As for pharma, the narrowing of the Part D gap also has mixed ramifications, given more adherence, more brand uptake presumably, but at the cost of providing rebates of ~50%....
captain jack, the subsidy is still there, the tax advantage is wiped out
so what? this was expected and has been known since last summer...what is more interesting: what will happen to the PBMs that service these employers. Presumably, some clients will drop the retirees and kick them into a PDP.......then what??
Did you tax effect that +$0.31 EPS? Can you walk me through that EPS calculation again. 3% is the price add on? And there is a margin AMED gets off that, what is it? Just confused by your math
minimum MLR for some med advatange plans not good...the grp will have to play some reclassifying games b/t SG&A and med costs in order to please govt...oh well
** PE isnt really the best way to look at these guys since they are so cap intensive - EV/EBITDA much better...THC should be FCF positive sometime this year - thats a notable break from recent trends last few yrs
** agree that they will benefit from medicaid pool expnading - lots of exposure THC and HMA have to crowded ERs and un/underinsureds.....
** hard to see multiple expansion without their commerical volumes improving. Last q's trend wasnt what I was looking for on a sequential basis but as the economy improves, THC should see improvement.
** they have done an awesome job de-levering and people may not be giving them enough credit - thats has long been an overhang on the name. Last time I checked, CYH was most geared up name
Thanks for article Zach!
Real good article – thank you. I guess the argument against your thesis would be that the PSYS price right now doesn’t take into account that PSYS is the prime beneficiary of a regulatory ruling that passed in 2008.
The legislation, THE MENTAL HEALTH PARITY ACT, outlaws health insurance practices that set lower limits on treatment or higher co-payments for mental health services than for other medical care. Typical annual limits in the past have included 30 visits to a doctor or 30 days of hospital care for treatment of a mental disorder. Otherwise stated, the new playing field mandates that plans require equivalence, or parity, in coverage of mental and physical ailments. This means managed care plans have to redesign benefits to better accommodate mentally ill people. I believe this should lead to an uptick in PSYS admissions over the long-term.
If PE is looking at this, you are right, they’ll probably do the deal in the low 30s even though I think the stock is worth more that – its just that as you know, PE doesn’t want to give all the upside to current stockholders and rather keep more for itself when it refloats this in 2 years or sells it to an HCA or larger hospital system.
nice thoughts. agree -- either way, bigger players will benefit from shift in reimbursment cycle and mom/pops will get rolled up. Industry should get more concentrated, you are right.
you are right - and as someone mentioned, the CBO score assumes the -21% cut to docs persists - back that out and you get a +$1T costing bill. The cost is higher than purported, the savings will likely be lower than purported. hocus pocus
the jump in MLR guidance for 2010, 100 bps was due to reclassification of G&A stuff migrating to the MLR line...normalized, its +70 bps y/y
the blowup a few wks ago was silly - the segment they were going to restate was single digit % of sales - and yet 1/4th of the analysts who cover it downgraded it - rash reaction if you ask me.
** the big question is what happens to RAD. There is still too much saturation in NYC - getting RAD out of the picture thru their demise, or selling off assets to WAG, would be terrific.
** Duane Reade was a .3x sales on a cash basis and they [WAG] got a solid sales/sq foot generator so Im optimistic about that deal longer-term.
WAG front end sales will be weird until the CCR initiatives is rolled through 3000+ stores – that’s roughly 43% of their store base. You made a good profit, so no hurt taking some $ off the table. Thinking more LT, however, its interesting how WAG is building a vast health services empire – the recent “rumored” deal with Delta may insinuate that they are trying to beef up their alternative PBM “eliminate the middleman” model….time will tell. Valuation on WAG is one of the highlights, but I don’t expect the PE to widen anytime near-term
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A major problem for group health care insurers during a declining payroll economy is that younger workers in excellent health choose to self-insure ( take their chances) and not to buy insurance, while those already in bad health or currently collecting more in benefits than they'll every pay in premiums stay insured through COBRA. "
EXCELLENT POINT...adverse selection and member attrition are behind the rate hikes
excellent background info - thanks!
avoiding health care stocks because they are targets of a govt being run from the deep left is silly - if anything, the death of reform spells PE expansion as risk is muted - do you have any idea where the group trades at now versus median multiples going back to 2000 and 2002? We're looking at a 33% discount at least!