After three straight years of declines, healthcare industry stocks soared in 1995 with a 40% overall gain, according to WDI, a Hilton Head, S.C.-based investment banking firm.
Healthcare stocks did so well they outpaced the Dow Jones industrial average, which roared above the 5,000 milestone in 1995. The Dow's yearlong gain was 33.5%.
"With two years of health reform behind them, companies have learned to restructure, re-size and rethink how they're going to compete in the marketplace," said John Cumming, WDI's president and chief executive officer.
During the previous three years, healthcare stock prices declined 4.7%, 9.4% and 10.6%, respectively, WDI reported.
Nearly all segments of the industry performed well. Only long-term-care providers and laboratory services showed overall stock declines of 3.5% and 17.9%, respectively. The long-term-care segment was hurt by spiraling stock prices at two subacute firms. Shares of Integrated Health Services, Owings Mills, Md., slid 36.7%, and stock in Atlanta-based TheraTx dropped 38%.
As a group, providers did well, showing price gains of 25.9%. However, they were eclipsed by gains in vendor segments. Pharmaceutical companies saw their stock prices surge 52.3%, and medical device and supply manufacturers had stock gains of 51.4% in 1995, WDI reported. Those results represented huge turnarounds from 1994, when pharmaceutical companies took an overall hit of 21.9% on their stock prices and supply manufacturers saw a 4.1% slip.
Those two groups dragged down the industry's overall stock performance the previous two years. Of the three segments, only providers gave investors a lift in 1993 and 1994. In 1994, provider stocks rose 10%; in 1993, they were up 4.5%, WDI reported.
Among providers, the largest number of stellar performers came in the physician practice management and outpatient areas. Top achievers were PhyCor, Nashville, Tenn., up 184%; Physician Reliance Network, Dallas, up 106%; Renal Treatment Centers, Berwyn, Pa., up 102%; MedPartners, Birmingham, Ala., up 94%; InPhyNet, Fort Lauderdale, Fla., up 92%; and American Oncology Resources, Houston, up 74%.
Two hospital chains also posted especially strong gains in their stock prices. At OrNda HealthCorp, Nashville, shares rose 86% in 1995. Universal Health Services, King of Prussia, Pa., was right behind with an 81% jump in its stock price.