Mike Jones was one of those concerned attendees. Jones is a principal with Gould Turner Group, a Nashville-based architecture firm that does a lot of healthcare work, but not as much as it used to. Jones said Gould Turner used to have two clients Province Healthcare Co. and Triad Hospitals that were gobbled up by other for-profit hospital chains, LifePoint Hospitals in 2005 and Community Health Systems in 2007, respectively. We currently are working with 10 for-profit companies, and they all appear to be re-evaluating the expansion needs of their hospitals and focusing more on the operations side, he added in an e-mail.
Perhaps it was appropriate that this years panel included Ken Weakley of Credit Suisse. In his opening remarks, Weakley described himself as the Dr. Kevorkian of healthcare services analysts. In October 2002, Weakley published two research reports questioning the high Medicare outlier payments made to Tenet Healthcare Corp., now based in Dallas. Those reports, along with the accusation that two heart surgeons performed unnecessary procedures at a former Tenet hospital in California, presaged a steep decline in Tenets fortunes.
Weakleys message was nearly as gloomy for the hospital industry as a whole. He said that hospitals have been hammered by a couple of long-term trends. The percentage of healthcare spending devoted to hospitals has declined from 40% to 30% over the past 20 years and admissions per 1,000 persons have been declining for 25 years thanks to new technologies and utilization-control efforts. And those trends arent about to change.
Wayne Smith, the councils chairman and also Communitys chairman, president and chief executive officer, could only quip in response, Thank you, Ken. Thats such a positive, upbeat message; I dont know what to say.
Weakley added later that another big problem for hospitals is that political pressure keeps the industry from doing the consolidation that it needs. When hospitals close, he said, Politicians scream. So you get a lot of changes in ownership, but no consolidation. Weakley also offered the contrarian view that healthcare needs less government involvement, not more, and that while the adjustment would be painful for consumers, its necessary in the long run. The problem, he said, is high and still-escalating costs, but the political focus is on a symptom of that problem: the uninsured.
The most cynical view of what the 2008 election may bring for healthcare belonged to Weakley, too. When its in a politicians best interest to bury you, they will, he said. When its in their best interest to help you, they will. You have to read the tea leaves. Sen. Hillary Rodham Clinton (D-N.Y.) would hammer healthcare if she were elected president, while Sen. Barack Obama (D-Ill.) would do the least amount of tinkering, Weakley predicted. A single-payer system wont fly in the U.S., he added.
Weakley wasnt the only one peddling doom and gloom. Matthew Ripperger, an analyst with Citigroup, noted that employer-based health coverage eroded over the past several years despite a growing economy and tight labor markets. What will happen to employer-based coverage with the economy slowing and possibly heading into a recession, he asked rhetorically. Ripperger disagreed with Weakley on Clinton, however, saying that her proposal shows that she has learned from the failure of healthcare reform in 1994.
Adam Feinstein of Lehman Bros. said he believes that the U.S. economy is already in a recession, but added that he thinks healthcare will weather the recession better than other sectors. Healthcare stocks have been close to flat even as the broader market has been getting pounded, Feinstein said.
Frank Morgan of Jefferies & Co. was relatively upbeat, saying that he doesnt see anything that will cause major changes in the fortunes of healthcare companies in 2008. Morgan even noted that long-term acute-care hospitals, hit hard by Medicare payment changes in recent years, have at least found the bottom, as most of the companies in this sector have changed CEOs.
That last idea seemed to be a sobering thought for many of the executives in the room.
Vince Galloro, based in Chicago, covers investor-owned hospitals. He can be reached at [email protected].
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