Wednesday marked the last full day of this year's J.P. Morgan Healthcare Conference in San Francisco. Many of the prominent hospital chains, insurers, pharmaceutical companies, devicemakers and technology firms had already made their pitches to investors, but several large players took the stage.
J.P. Morgan Healthcare Conference: Day 3 notebook
Last fall, Universal Health Services, a for-profit operator of acute-care and behavioral-health facilities, acquired Cygnet Health Care for $335 million. Cygnet operates inpatient behavioral-health hospitals throughout the United Kingdom. UHS CEO Alan Miller said at the time that the transaction gave the King of Prussia, Pa.-based company entry into a new market. But there's more to it.
UHS Chief Financial Officer Steve Filton said it has become more difficult to acquire multi-facility behavioral-health companies in the U.S. because UHS has such a large footprint. Consequently, the company may run into antitrust issues with the Federal Trade Commission. The U.K. purchase gives UHS a new opportunity, but it also helps the company avoid potential regulatory pitfalls.
UHS' revenue is essentially split between its acute-care and behavioral-health businesses. However, behavioral health contributes much more to the bottom line, Filton said.
One of the most dramatic business storylines last summer was the back-and-forth merger battle between Kindred Healthcare and Gentiva Health Services. The two post-acute care providers ultimately agreed to a $1.8 billion merger deal in October.
Kindred President and Chief Operating Officer Ben Breier, who will take over as Kindred's CEO this March, said the company has created an “integration management office” to oversee the melding of the two companies, composed of Kindred executives and consultants.
Originally, Kindred predicted that it would save $35 million in the first year of the merger and $70 million in year two. It now expects to exceed those estimates. “We're very bullish on what we're seeing on the cost side,” Breier said.
Health insurer Health Net told investors it has retained most of its members who bought insurance on an Obamacare exchange. The preliminary figures look especially positive in California, where Health Net nabbed 18% of the total exchange population last year and 30% of exchange enrollees in Southern California.
“We anticipate continued growth in the exchanges,” Health Net CEO Jay Gellert said.
In other financial speculations, Health Net said it's likely the federal government will make changes to its draft request for Tricare proposals, the military insurance program. The Defense Health Agency proposed consolidating the three Tricare regions into two, which would ultimately be bad news for one of the incumbent insurers. But Gellert said he is “not convinced the original draft is what will ultimately happen.”
Health Net is one of three publicly traded insurers that has a Tricare contract. Tricare brings in about $450 million of revenue for Health Net, or less than 5% of its total revenue.
Kevin Lobo, CEO of Stryker Corp., a global manufacturer of medical devices, said Wednesday the company's revenue for 2014 is projected to be $9.7 billion, a 7.3% increase from the year prior. The company appears to be benefiting from its recent acquisition of Mako Surgical Corp., which makes robotic-assisted surgery devices.
Lobo added that every year since 1979, when Stryker went public, the company has grown its revenue. Given that steady cashflow, it's worth remembering that the CMS' Open Payments database is still alive and well. Modern Healthcare reporter Jaimy Lee reported on the website data, which tracks payments that device and pharmaceutical companies make to physicians and teaching hospitals. (Investigative news outlet ProPublica has also monitored Open Payments closely.)
The database shows that Stryker paid out $8.4 million to providers in 2013.
One of the youngest initial public offerings at the conference was Connecture. The Brookfield, Wis.-based company went public a month ago. Connecture provides back-end technology to payers and other companies that want to create an exchange for consumers to purchase health insurance. For example, Connecture is the contractor for Medicare.gov, the primary shopping site for Medicare beneficiaries. It competes with other exchange firms like Benefitfocus, Bloom Health and Liazon. But CEO Doug Schneider said Connecture is different because it allows payers to manage all business lines—individual, employer, Medicare and other products like dental—in “one enabling platform.” Connecture's emergence further signals that the industry is betting heavily on the success of private exchanges.
TeamHealth, EmCare and other large firms grab most of the attention in the physician outsourcing space. However, Sunrise, Fla.-based Mednax is quietly looking to expand its brand. Mednax, which posted almost $1.8 billion in revenue in the first nine months of 2014, works with hospitals to provide neonatal and anesthesiology services. The company has routinely acquired small pediatric and anesthesiology practices across the country, and now is looking to add a third, as yet unnamed, specialty, CEO Dr. Roger Medel said. An announcement disclosing which specialty the company intends to pursue will likely come later this year, Mendel said.
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