Healthcare Updates by Tim Meyer (MF Attila) McLEAN, VA (Feb 16, 1997) - OUR POLITICAL HEALTH The president's Council of Economic Advisers released its annual economic report this week. The report discussed solvency problems faced by Medicare and Medicaid. As the Wall Street Journal noted, "... like the president, the advisers didn't offer solutions but called for a bipartisan search for remedies." Isn't bipartisanship grand? I sure hope they come up with a remedy before the patient is terminal. The problem is, some folks aren't going to like the cure. Health Care Financing Administration Administrator Bruce Vladek testifying before Congress last week called for repeal of the provision in the Kassebaum-Kennedy health insurance reform bill that made it a felony to hide financial assets to qualify for Medicaid coverage in nursing homes. He also said, "the federal government would not take any steps to encourage states to enforce the provision" because of "widespread fears among the elderly." Does this mean it's OK to hide assets to qualify for Medicaid? Is this part of a bipartisan remedy? Call me a puzzled Fool. The Clinton administration warned 350 managed care plans that serve Medicare patients not to arbitrarily limit hospital stays for women undergoing mastectomies. The president has endorsed legislation requiring private managed care plans to pay for a 48-hour hospital stay, unless the patients choose to leave earlier. The warning to Medicare plans did not suggest any particular length of stay -- saying instead that women and their doctors should decide. The Head Health Fool, MF Uptrend, passed on the following. 2,000 doctors who own an HMO (Long Island based HMO MDNY) are joining the Office and Professional Employees International Union. The doctors hope joining a union will help encourage union health plans with thousands of members to sign up with their fledgling, 20,000 member HMO. In addition, they hope the AFL-CIO's lobbying will help push their concerns on issues like restrictions HMOs place on what doctors can tell patients about expensive procedures. HEALTHCARE STOCKS IN THE NEWS AMISYS MANAGED CARE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMCS)") else Response.Write("(Nasdaq: AMCS)") end if %> announced it has signed a definitive agreement to be acquired by HBO & COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HBOC)") else Response.Write("(Nasdaq: HBOC)") end if %>. The acquisition, which is subject to regulatory and AMISYS shareholder approval, is scheduled to close during the second quarter of 1997. Terms of the acquisition call for ANISYS shareholders to receive 0.35 of a share of HBOC common stock for each share of AMISYS common stock. AMISYS also reported earnings this week which is covered below in Earnings Reports. For the week, AMISYS finished up 7 1/4 closing Friday at $22 5/8, while HBO finished up 4 7/8 closing at $67 3/4. VENCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VC)") else Response.Write("(NYSE: VC)") end if %> signed a definitive agreement to acquire THERATX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THTX)") else Response.Write("(Nasdaq: THTX)") end if %> at a price of $17.10 a share for all of TheraTx's 20.7 million shares. Under the agreement, TheraTx will become a unit of Vencor. The cash tender offer, which is expected to begin on Feb. 14, is subject to Vencor receiving at least a majority of TheraTx Inc.'s diluted shares as well as the necessary regulatory approvals. For the week, Vencor finished up 3 5/8 closing at $36 1/8, while TheraTx was up 3 3/8 closing at $16 1/2. HEALTHSOUTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRC)") else Response.Write("(NYSE: HRC)") end if %> received antitrust approval of its acquisition of HEALTH IMAGES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HII)") else Response.Write("(NYSE: HII)") end if %> with the expiration of the Hart-Scott-Rodino Act waiting period. The merger is subject to Health Images shareholders approval and will be voted on March 3. For the week, HealthSouth finished up 2 3/8 closing on Friday at $43 1/8, while Health Images was up 1 1/8 closing at $19. The Securities and Exchange Commission temporarily suspended trading of TWENTY FIRST CENTURY HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TFCH)") else Response.Write("(Nasdaq: TFCH)") end if %> for two weeks until Feb 24 at 11:59 p.m. EDT. The suspension was ordered because of questions raised about information disseminated by the company. The Commissioner of the California Department of Corporations announced state approval for the acquisition of FHP INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FHPC)") else Response.Write("(Nasdaq: FHPC)") end if %> by PACIFICARE HEALTHSYSTEM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PHSYA, PHSYB)") else Response.Write("(Nasdaq: PHSYA, PHSYB)") end if %>. For the week, FHP was up 1 11/16 closing at $37 3/8, while PacifiCare A shares were up 4 1/4 closing at $79 and the B shares were up 5 3/4, closing at $83 3/4. HORIZON/CMS HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HHC)") else Response.Write("(NYSE: HHC)") end if %> tentatively agreed to pay between $17 million and $20 million to settle a class-action shareholder lawsuit but isn't required to admit any of the plaintiff's claims. The plaintiffs said Horizon/CMS artificially inflated its stock price through misleading statements about its financial results and the operations of certain acquired companies. last month the company paid $5.8 million to settle Medicare and Medicaid billing-fraud charges. For the week, Horizon/CMS was up 1 3/8 closing Friday at $14 1/4. I ran across a couple of interesting Web sites you might want to check out. Microsoft has developed a healthcare Solutions Buyers Guide, available on the Microsoft health-care Web site at http://www.microsoft.com/industry/health. A study conducted by Ernst & Young LLP, "The Role of the Internet in Health Care: Current State," is available on the health Care Cybervision site at http://www.hccybervision.com. EARNINGS REPORTS HUMANA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HUM)") else Response.Write("(NYSE: HUM)") end if %> reported fourth quarter net income (excluding special charges) of $32 million, or 19 cents a share (below estimates 21 cents), on revenues of $1,783 million, compared with last year's fourth quarter net income of $49 million, or 30 cents per share, on revenues of $1,460 million. Accounting for the special charges, This year's fourth quarter net income was 22 million, or 13 cents a share. For the year, net income (excluding special charges) was $152 million, or 93 cents per share (below estimates of 96 cents), on revenues of $6,677 million, compared to 1995 net income of $190 million, or $1.17 per share, on revenues of $4,605 million. Accounting for the special charges, 1996 net income was $12 million, or 7 cents a share. The company attributed the decline in net income to an increase in medical and administrative costs. Humana's medical loss ratio for the fourth quarter was 82.8% compared to 81.5% in 1995 and the administrative cost ratio for the fourth quarter was 15.8% up from 14.9% in 1995. The stock finished the week up 1 7/8 closing Friday at $20. AMISYS MANAGED CARE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMCS)") else Response.Write("(Nasdaq: AMCS)") end if %> announced fourth quarter net income of $1.7 million, or 20 cents a share (compared to estimates of 16 cents), on revenues of $14.3 million, compared to last year's fourth quarter net income of $853,000, or 14 cents a share, on revenues of $8.6 million. For the year, net income was $4.7 million, or 57 cents a share, on revenues of $46.4 million, compared to 1995 net income of $1.7 million, or 28 cents a share, on revenues of $31.8 million. For the week, the stock was 7 1/4 closing at $22 5/8 (see story above). COLUMBIA/HCA HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %> reported fourth quarter net income of $414 million, or 61 cents a share (meeting estimates), on revenues of $5.14 billion, compared to last year's fourth quarter net income of $354 million, or 53 cents a share, on revenues of $4.58 billion. For the year, net income (before items) was $1.51 billion, or $2.22 a share, on revenues of $19.91 billion, compared to 1995 net income of $1.3 billion, or $1.93 a share. A charge of $235 million reduced 1995 final net income to $961 million, or $1.43 a share. For the week, the company finished up 2 1/4 closing at $43 1/4. UNITED HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNH)") else Response.Write("(NYSE: UNH)") end if %> reported fourth quarter net income of $95.1 million, or 47 cents a share (below estimates of 48 cents), on revenues of $2.68 billion, compared to last year's fourth quarter net income of $12.9 million, or 3 cents a share (without one time costs, earnings would have been 57 cents per share), on revenues of $2.19 billion. For the year, net income was $356 million, or $1.76 a share (including extraordinary costs - excluding costs, net income would have been $392 million or $1.96 a share versus estimates of $1.97), on revenues of $10.1 billion, compared to 1995 net income of $286 million, or $1.57 a share (including restructuring costs - excluding these costs, net earnings would have been $382.9 million, or $2.12 a share), on revenues of $5.7 billion. United's medical loss ratio for the fourth quarter was 84.0% up from 81.6% for the same period last year. For the week, the company finished up 7 5/8 closing at $54 3/8. That wraps it up for another week. Please share any comments/suggestions on how to improve this feature via e-mail (MF Attila). In the meantime, here is hoping your investments are healthy!

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