HCA Healthcare Inc

On July 9, the Affordable Care Act’s constitutionality was debated in the US Court of Appeals. How did healthcare stocks react?

After a relatively lackluster performance in 2017, the three major for-profit hospital stocks in the US have seen a rapid rise in 2018.

FLIR Systems was the S&P 500’s top gainer on July 25. FLIR Systems opened higher on July 25 and rose to record high price levels.

Let’s look at the high yield bond markets. Junk bond issuers stayed away from the primary market for three successive weeks in December due to holidays.

Omega Advisors Inc. is a New York–based investment advisory firm founded in 1991 by Leon G. Cooperman. Omega started a 1.43% position in Freeport-McMoRan Copper & Gold.

Ramsay Health Care is a market leader in private healthcare in Australia, treating almost 3 million patients each year.

In 1Q17, the Advisory Board earned a major part of its healthcare business revenues from consultancy services, but it expects to see higher demand for health tech.

If the US Senate passes the AHCA, the CBO estimates that ~23 million people could become uninsured by 2026. The CBO projects that Medicaid spending could fall $880 billion in the next ten years.

Auto-enrollment is now being considered as an alternative to the individual mandate of Obamacare—something that would reduce the current penalty to $0.

Trumpcare’s failure is considered to be a boon by hospital companies treating a significant portion of Medicaid members.

On March 24, 2017, House Speaker Paul Ryan pulled back the American Health Care Act, also known as “Trumpcare,” before votes were cast.

KKR (KKR) is expected to post earnings per share (or EPS) of $0.49 in 1Q17 as compared to a loss per share of $0.65 in the corresponding quarter last year.

KKR & Company has seen a recovery after substantial losses in 1Q16. In 3Q16, it posted EPS of $0.71, beating Wall Street analyst estimates of $0.65.

The effects of repealing Obamacare Donald Trump is definitely not in favor of the Affordable Care Act, known as Obamacare. As he wants to repeal the act completely and replace it with another policy, the hospital sector fell on November 9, the day after the election. Trump believes that providing healthcare facilities to illegal immigrants costs […]

KKR & Co. is expected to post earnings per share (or EPS) of $0.50 in 3Q16, compared to EPS of -$0.37 in 3Q15 and EPS of $0.23 in 2Q16.

The consumer discretionary sector has been the primary drag on the UNCGX in YTD 2016.

The Ivy Global Growth Fund is not like most funds in this review because of its inclination towards US stocks.

Earlier in this series, we looked at Danaher’s return on invested capital on a standalone basis. However, we were only looking at half the story.

In the week ended August 3, 2016, leveraged loan funds saw inflows worth $60.4 million. In the previous week, leveraged loan funds had outflows of $15 million.

According to S&P Capital IQ/LCD, US leveraged loans saw an allocation of $18.4 billion worth of dollar-denominated senior loans in the week ended August 5, 2016.

The Ivy Global Growth Fund (IVINX) is not like most funds in this review. This is due to its inclination toward US stocks.

KKR & Co. (KKR) is expected to post EPS of $0.39 in the June quarter—compared to $0.88 in the same quarter last year and losses in the previous quarter.

According to data from Lipper, leveraged loan funds saw an inflow for the second consecutive week. The quantum of inflows came in at $176 million last week.

Leveraged loan funds saw inflows in the week ending March 9 after 32 consecutive weeks of outflows. However, the amount of inflows was small at $55.0 million last week.

The Ivy Global Growth Fund – Class A (IVINX) was incepted in April 1986 and has an expense ratio of 1.5%.

DaVita HealthCare Partners (DVA) was one of the biggest winners for the week ending March 4 with a return of 6.1%.

Wall Street analysts have projected that Universal Health Services’ net profit margin will increase marginally from 7.5% in 2015 to 7.6% in 2016.

Universal Health Services’ acute care revenues rose by 10.9%, from approximately $4.2 billion in 2014 to $4.6 billion, in 2015.

Universal Health Services’ behavioral health revenues rose by 9.7%, from $4 billion in 2014 to $4.4 billion in 2015.

On February 26, 2016, Universal Health Services (UHS) was trading at a forward PE (price-to-earnings) multiple of about 13.8x.

On a same-facility basis, emergency visits at LifePoint fell by 1.8% year-over-year, leading to a fall in same-hospital equivalent admissions during 4Q15.

LifePoint released earnings for 4Q15 and 2015 on February 12, 2016. Following the earnings release, analysts revised their recommendations on the company.

Same-facility admissions for LifePoint (LPNT) fell by 4.2% to 55,000 during 4Q15. During 4Q15, its equivalent admissions fell by 1.1% to 146,000.

During 4Q15, salaries and benefits for LifePoint Health (LPNT) amounted to $652.7 million, up 6.6% in comparison with the same quarter of the previous year.

What drives LifePoint’s revenue? Major revenue drivers for LifePoint Health (LPNT) include: Equivalent admissions Medicare case mix index Average length of stay Inpatient and outpatient surgeries Emergency room visits Outpatient factor To learn more about the company’s organic growth strategy, please refer to Organic growth strategy at LifePoint Hospitals. Admissions on a consolidated basis LifePoint’s consolidated […]

HCA Holdings released its 4Q15 and fiscal 2015 earnings results on January 28, 2016. In Bloomberg’s survey, 68.0% of the analysts rated HCA Holdings a “buy.”

In 2015, HCA Holdings’s bad debt expense—represented by the provision for doubtful accounts—totaled $3.9 billion. It rose by ~23.5% YoY (year-over-year).

In 2015, HCA Holdings deployed ~$2.4 billion in capital expenditure. It planned to increase capital spending to $2.7 billion in 2016.

In 4Q15, HCA Holdings spent about $8.1 billion on salaries, supplies, and other operating expenses combined—an increase of 5.3% from $7.7 billion spent in 4Q14.

In 4Q15, HCA Holdings earned ~$6.1 billion in revenue from inpatient admissions. It also earned about $4.1 billion in revenue from outpatient admissions.

In 4Q15, HCA Holdings’s core strategy of selecting key geographic markets continued to be a major factor. It contributed to the company’s strong volume growth.

BlackRock is not upbeat about fixed income in 2016. It’s more optimistic about stocks than it is about bonds, specifically European and Japanese equities.

Stocks at the top of the SPDR S&P 500 ETF (SPY) on January 11 were Macy’s (M), Kohl’s (KSS), and HCA Holdings (HCA).

Mednax is a national medical group. It had issued junk bonds worth $750 million on December 1. Mednax would use the proceeds of the loan for refinancing.

High-yield bond funds have become out of favor with investors. Recently, the ICI released weekly data on estimated fund flows for high-yield bonds funds.

The Health Care Select Sector ETF (XLV) rose by 1.1% and closed at $72.38 on December 23. XLV is trading well above its 20-day, 50-day, and 100-day moving averages.

High-yield bond issuance fell to zero last week due to two main reasons. Junk bond issuers stayed away from the primary market due to fears of default risk.

An indirect and wholly owned subsidiary of Clear Channel Outdoor Holdings, Clear Channel International issued $225 million in dollar-denominated junk bonds.

On December 1, the healthcare-services subgroup outperformed all other subgroups in XLV with a return of 3.3%. The biotechnology subgroup returned 0.8%.

XLV closed at $71.56 on November 24, 2015, trading 0.35% below the 100-day moving average price of $71.89 and 0.2% above the 20-day moving average price of $71.40.

Qorvo is a company involved in radio frequency systems and defense. It issued junk bonds worth $1.0 billion last week that were rated as Ba1/BB+.

Universal Health Services (UHS) is expected to benefit from its leading market position in the behavioral health business in 3Q15.

In 3Q15, Universal Health Services was actively involved in exploring growth opportunities, both in its acute care as well as behavioral health business.

Wall Street analysts expect that Universal Health Services (UHS) will report higher net profit margins in 3Q15 compared to margins in 3Q14.

According to Wall Street, Universal Health Services’ 3Q15 revenues are estimated to be about $2.2 billion—growth of about 9.5% on a YoY basis.

Investors should note that high-yield bonds are risky securities to begin with. The add-on risk of widening spreads may not suit all types of investors.

In a recent interview with Fox’s Wall Street Week, activist investor Carl Icahn asserted that high yield bonds are becoming more risky than ever.

Junk bond, or high yield debt, issuers returned to the primary market after looking out for the monetary policy announcement by the Federal Reserve in the previous week.

Universal Health Services’ behavioral health segment registered 14% growth in total revenue—from $946 million in 1Q14 to $1,076.3 million in 1Q15.

HCA Holdings stock rose on positive developments that prompted a major healthcare ETF, the Health Care Select Sector SPDR Fund (XLV), to add it to its portfolio.

HCA Holdings (HCA) operating expenses are expected to rise in 2015 as the hospital operator continues to employ more physicians. Salary per admission at the company is currently $5,600.

Same-facility inpatient admissions rose by 5.1% in 1Q15 on a year-over-year basis. Same-facility equivalent admissions, a measure of total inpatient and outpatient admissions, grew by 6.8%.

DaVita posted 4Q14 net earnings of $208 million, or $0.96 per share, compared with $212.3 million, or $0.99 per share, last year.

Tiger cub Stephen Mandel’s Lone Pine Capital’s US long portfolio saw a slight fall from $25.5 billion in 3Q14 to $23.8 billion in 4Q14.

Due to the fall in yields, returns on high yield debt were positive in the week ending February 27.

Sandell wants Brookdale to revamp its board because It has no director with real estate experience and lacks in independent shareholder representation.

LifePoint Hospitals (LPNT) has adopted a four-pronged organic growth strategy to boost its revenues, a key element of which is physician recruitment.

LifePoint Hospitals’ ambitious acquisition strategy is to buy hospitals in states that are adopting or are thought to be adopting Medicaid expansion.

The major hedge funds project that the Affordable Care Act will benefit LifePoint Hospitals and increase the company’s revenues.

LifePoint Hospitals’ geographic strategy is to provide medical and surgical services in mainly non-urban markets.

With 67 hospitals, acquisitions continue to strengthen its position in rural markets, especially where LifePoint Hospitals is the sole healthcare provider.

Although the increase in total admissions for behavioral health has been more than the acute care segment, revenue per admission declined for the former segment.

In case of behavioral health services, CMS uses a per diem type of fee-for-service payment method. Hospitals are reimbursed based on the length of a patient’s stay.

Universal Health Services (UHS) has displayed a trend in payer mix from 2011 to 2013 that differs from other companies in the healthcare industry (XLV).

Change “Ebitda” to “EBITDA” in both graphs.

Since 2011, the healthcare industry has seen a surge in mergers and acquisitions (M&A) activity, especially in the outpatient medical market.

Universal Health Services entered the UK market by acquiring Cygnet Healthcare, a leading behavioral health provider, in an all-cash deal of $335.0 million.

Universal Health Services’ (UHS) net revenues increased by 4.6% from $6.96 billion in 2012 to $7.28 billion in 2013.

Same-facility inpatient admissions and equivalent admissions in the behavioral health services segment increased by 3.2% and 3.5% from 2012 to 2013.

For-profit hospital operators each focus on one service line in addition to acute care services to reduce their business risk and earn sustainable profits.

Universal Health Services (UHS) earns more than 50% of its total revenues from the Texas, Nevada, Florida, California, and District of Columbia markets.

Universal Health Services’ (UHS) strategy focuses on markets with above-average population growth in the US.

The ownership structure of the healthcare sector is mainly dominated by institutional investors such as mutual funds, hedge funds and private equity funds.

Universal Health Services (UHS) has consistently provided good returns. Its performance surpassed that of the Health Care Select Sector SPDR ETF (XLV).

In terms of payer mix, the percentage of HCA Holdings revenues contributed by Medicare rose from 28.0% in 3Q13 to 30.3% in 3Q14.

Salaries account for more than half of total operating expenses. HCA Holdings spent marginally less on salaries in 3Q14.

HCA Holdings earned 38% of its total revenue from outpatient services in 3Q14. The company also announced the acquisition of CareNow.

The Supreme Court has agreed to hear a case deciding whether a tax subsidy should be provided to low- and moderate-income people buying insurance federally.

The implementation of this tax, called the Cadillac tax, will take effect beginning 2018. Post-2018, the threshold will be indexed to general inflation

Economic conditions like falling oil prices affect the healthcare industry with a lag. This makes the hospital industry a good investment option.

National healthcare spending is a major driver of the hospital industry. National spending on hospital care is expected to amount to $973 million.

The healthcare industry, represented by the Healthcare Select Sector SPDR, is affected by the unemployment rate. Income affects people’s health choices.

Inflation closely relates to the performance of the healthcare industry (XLV), as it affects the rates that hospitals charge and the costs of medical care.

Economic changes in interest rates affect hospital companies, depending on the company’s cost-structure and expansion strategies.

Hospital admissions are classified in two categories, inpatient admissions and outpatient admissions. Patients who are admitted overnight are inpatients.

According to the ACA, Medicaid expansion programs involve states changing the eligibility limits of Medicaid coverage to include population up to 138% of the federal poverty line.

These exchanges—also called “health insurance marketplaces”—sell federally regulated, subsidized health insurance to individuals and small businesses.

The hospital sector is widely considered a non-cyclical or defensive industry, meaning demand for hospital services doesn’t change with the economic cycle.

With solutions such as flexible staffing and optimal group purchasing provided by Parallon, HCA Holdings has better operating margins as compared to its peers.

As a result of high operating performance, despite high debt levels, HCA Holdings stock is expected to perform better than most of its industry peers.