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Nathan Snyder, CFA  

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  • High Conviction: A Hospital Operator That Benefits From Healthcare Reform [View article]
    I will address the concerns listed above in reverse order. We like LPNT as well and for many of the same reasons. We do not believe that CYH will be making any large acquisitions, but given their cash flow they can handle small acquisitions and continue to de-lever their balance sheet. HCA floating stock is not likely to hurt and will provide more liquidity in the industry. We feel that more liquidity will be beneficial to valuations, although we understand why that may seem counterintuitive. We are not aware of any propositions to lower Medicare reimbursements to hospitals, but it is safe to assume that reimbursements could fall. Generally speaking lower Medicare reimbursement rates are cost shifted to private rates in any case (with a lag). This is a short term issue in any case. We invest with a 2-3 year horizon so such noise is relevant but not a reason to stay away. There has been no change in guidance from the company regarding more aggressive bad debt expense. In fact the hospitals have gone out of their way to highlight the fact that they have not seen an end to the recession. Perhaps the street has baked in more aggressive assumptions. We develop our own earnings numbers so I have not checked the models of the street analysts. We like CYH because we believe that valuations will improve with some resolution to the health care reform debate going on in Washington. All proposals on the table at this point would be helpful to CYH and no legislation would not hurt CYH.
    Mar 2, 2010. 11:41 AM | 3 Likes Like |Link to Comment
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