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SunLink Health Systems Is Extracting Value By Breaking Itself Up
- The complete (and positive) reversal in strategic direction has been overshadowed by lower reimbursement rates and patient volumes.
- However, management has derisked the company by selling off two hospitals and using the proceeds to reduce debt by ~50%.
- Advisors have been hired to evaluate selling two of the remaining four hospitals, which should receive a premium as they are the only hospitals in their respective rural communities.
- Another value-enhancing idea is a complete liquidation in which the assets of the healthcare facilities and specialty pharmacy segments are sold to larger peers at high EBITDA multiples.
- The downside is limited by the 30% discount to TBV and 54% insider ownership, which provides a strong incentive to pursue the course of action that extracts the most value.
Tue, Dec. 2, 10:22 AM
- Based on data collected from the analysis of medical records, the Centers for Medicare and Medicaid Services (CMS) report that U.S. hospitals saved 50,000 lives in 2013 by making 17% fewer medical mistakes. The improvement includes a 9% decline in hospital-acquired conditions such as infections, bedsores and pneumonia.
- Secretary of Health and Human Services (HHS) Sylvia Burwell is scheduled to announce the findings today at the CMS Healthcare Quality Conference in Baltimore.
- In 1999, the Institute of Medicine estimated that almost 100K people die each year from medical mistakes and poor quality of care. In 2010, the HHS inspector general estimated that poor care contributed to the deaths of 180K Medicare patients.
- One motivator for the improvement is a change in the way Medicare pays hospitals. Under updated rules, CMS reduces the reimbursement rate for hospitals that readmit too many patients within 30 days of discharge, an indicator of substandard care the first time.
- ETFs: IRY, IXJ,
- Hospital tickers: (HUM)(HCA +0.2%)(UHS -0.3%)(SEM +0.8%)(LPNT +0.4%)(CYH +0.3%)(SSY -0.2%)
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- SunLink Health Systems (NYSEMKT:SSY) reports results:
- Fiscal Q4: Net Revenues: $25.1M (-1.5%); Operating Profit: $2.0M (-23.8%); Net Earnings: $1.4M (-37.6%); EPS: $0.14 (-39.1%); Quick Assets: $3.6M (+35.0%); CF Ops: $0.6M (-75.4%).
- Fiscal 2014: Net Revenues: $105.4M (-2.7%); Operating Loss: ($40K) (+96.3%); Net Loss: ($0.6M) (+87.9%); Loss Per Share: ($0.06) (-112.5%); CF Ops: ($3.9M) (+293.1%).
- No financial guidance given.
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- Money is flowing into hospital management firms today on bullish views about the impact of The Affordable Care Act. LifePoint Hospitals (LPNT +7.2%) leads the charge after it increased its earnings guidance earlier today.
- (UHS +6.6%) (HCA +2.3%) (SEM +0.4%) (THC +8.8%) (SSY -4.2%) (CYH +3.8%) (CHDX) (SCAI +1%) (ADPT -1.1%)
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- The federal mandate expanding the number of diagnostic codes to 69,000 from today's 14,000 and procedure codes to 85,000 from 13,000 stresses healthcare providers. The mandate's intent, termed ICD-10, is to increase the accuracy of reporting and reduce fraud.
- Healthcare institutions face significant investments in training and IT system updates in order to comply with the new rules.
- The original conversion date was October 1, but the Senate passed a bill on Monday granting institutions a one-year reprieve.
- (UHS) (HCA) (SSY) (LPNT) (THC) (CYH) (CHDX) (SEM) (SCAI)
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SunLink Health Systems Inc provides healthcare services through two business segments: - Healthcare Facilities & Specialty Pharmacy. The company also owns & leases hospitals, nursing homes & medical centers & offers pharmaceuticals & biological products.
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