Healthcare Updates by Tim Meyer (MF Attila) McLEAN, VA (March 2, 1997) -- OUR POLITICAL HEALTH More details of the President Clinton's new Medicare budget plan have been reported. The American Medical News reports the proposal will substitute a single conversion factor ($36.63 in 1998) for Medicare Part B physician payments in lieu of the three current conversion factors (surgical, primary care, and other). It also calls for repeal of several physician-friendly provisions from the new fraud laws enacted last year as part of health insurance reform. We previously reported that the plan contained $7.2 billion in savings from doctors. In fact, the physician services savings are $7.8 billion, but the plan also contains an increase of $600 million for chiropractic and nurse practitioner services which nets to $7.2 billion. If the single conversion factor proposal is enacted, the primary care conversion factor would receive a normal inflation update next January (about 2.4%), while surgery's conversion factor would fall by 10.6% and payments for other services would rise by 8.2%. If you live in California and want to know how much of your health plan's revenue and premium dollars are spent on health care, check out the California Medical Associations annual report at http://www.cmanet.org. (If you are a curious Fool, you don't have to live in California to check it out). You will find information on all health plans offered in California. Reuters Medical News carried a story that Health Care Financing Administration Administrator Bruce Vladeck's replacement will be Nancy-Ann Min who is currently the associate director for Health and Personnel at the Office of Management and Budget and has previously served as commissioner of Tennessee's Department of Human Services. There was no mention of a.) whether or not she supports using Medicare funds to pay New York hospitals not to train doctors b.) whether Tennessee will become the second state in that pilot program, or c.) whether or not she has ever seen piglets feed (see last week's report if you don't understand). HEALTHCARE STOCKS IN THE NEWS PHYSICIAN CORP. OF AMERICA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCAM)") else Response.Write("(Nasdaq: PCAM)") end if %> had more bad news this week. Florida insurance regulators obtained a court order requiring the company to demonstrate why its PCA Property & Casualty Insurance unit shouldn't be placed in receivership. An independent actu"arial, helvetica" firm earlier reported that the insurance unit faced a projected deficit of $128.3 million at the end of 1996. The unit handles the company's workers compensation risk business and while that accounts for about 10% of Physician Corp.'s revenue, it is expected to generate pretax losses of $225 - $250 million in 1996. This latest bit of news makes the proposed merger with SIERRA HEALTH SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SIE)") else Response.Write("(NYSE: SIE)") end if %> more precarious although a Sierra spokeswoman said the company had not made any final decision on what it will do. For the week, Physician Corp. was down 11/16 closing on Friday at $4 3/8, while Sierra Health was down 1/2 closing at $26 3/8. CIGNA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CI)") else Response.Write("(NYSE: CI)") end if %> and HEALTHSOURCE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HS)") else Response.Write("(NYSE: HS)") end if %> announced a definitive agreement under which Cigna will tender $21.75 per share in cash for all outstanding shares of Healthsource, or a total of about $1.45 billion. In addition Cigna would pay about $250 million of Healthsource long-term debt making the total deal worth about $1.7 billion. Healthsource has approximately 1.1 million members in HMOs and the combination will give Cigna HMO operations a total of 5.2 million members. For the week, Cigna was down 6 1/4 closing at $152 7/8, while Healthsource was up 4 1/2 closing at $20 7/8. EARNINGS REPORTS HEALTHSOUTH CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRC)") else Response.Write("(NYSE: HRC)") end if %> reported fourth quarter net income (excluding non-recurring expenses of $7 million) of $69 million, or 41 cents a share (beating estimates of 40 cents), on revenues of $642.8 million compared to 1995's fourth quarter net income of $51 million, or 31 cents a share, on revenues of $533.1 million. For the year, the company reported net income (excluding non-recurring expenses of $ 28 million) of $249 million, or $1.49 a share (beating estimates of $1.47), on revenues of $2.4 billion, compared to 1995's net income of $163 million, or $1.08 a share, on revenues of $2.0 billion. For the week, HEALTHSOUTH finished down 1 3/4 closing Friday at $401/4. SABRATEK CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBTK)") else Response.Write("(Nasdaq: SBTK)") end if %> reported fourth quarter net income of $482,000, or 5 cents a share (beating estimates of 3 cents), on revenues of $$6.1 million, compared to 1995's fourth quarter net loss of $1.6 million, or 24 cents a share, on revenues of $1.4 million. For the year, the company had a net loss of $858,000 (including a non-recurring charge of $1.6 million), or 12 cents per share, on revenues of $17.7 million compared to 1995's net loss of $6.0 million, or 90 cents a share, on revenues of $4.0 million. Without the non-recurring charge, for the year the company would have had a net income of $770,000, or 11 cents a share (beating estimates of 7 cents). For the week, Sabratek finished up 1 1/2 closing at $23 3/8. HEALTHSOURCE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HS)") else Response.Write("(NYSE: HS)") end if %> reported a fourth quarter net loss of $22.6 million (including a non-recurring charge of $40.4 million), or 35 cents a share, on revenues of $438.3 million, compared to 1995's fourth quarter net income of $15.8 million, or 22 cents a share, on revenues of $343.6 million. Without the non-recurring charge, the company would have reported a net income of 5 cents a share well below estimates of 9 cents. For the year, the company reported a net loss of $3.9 million (including non-recurring charges of $53.4 million), or 8 cents a share, on revenues of $1.7 billion, compared to 1995's net income of $56.2 million, or 81 cents a share, on revenues of $1.2 billion. Without the non-recurring charges, the company would have reported for the year a net income of 45 cents a share, below estimates of 49 cents. For the week, Healthsource was up 4 1/2 closing at $20 7/8, on the news of its acquisition by Cigna, discussed above. PRIME MEDICAL SERVICES, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PMSI)") else Response.Write("(Nasdaq: PMSI)") end if %> reported fourth quarter net income of $3.4 million, or 17 cents a share (meeting estimates), on revenues of $22.2 million, compared to 1995's fourth quarter net income of $2.1 million, or 13 cents a share, on revenues of $7.6 million. For the year, the company reported net income before non-recurring charges of $12.5 million, or 67 cents a share (compared to estimates of 65 cents), on revenues of $72.4 million, compared to 1995's net income of $7.2 million, or 46 cents a share, on revenues of $23.2 million. Accounting for the non-recurring charges of $3.53 million, net income for the year was $8.96 million, or 48 cents a share. For the week, Prime was unchanged closing at $11 1/8. PHARMACIA & UPJOHN, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PNU)") else Response.Write("(NYSE: PNU)") end if %> announced fourth quarter net income (before non-recurring items of $42 million) of $268 million, or 51 cents a share (meeting estimates), on revenues of $1.9 billion, compared to last year's fourth quarter net income (before non-recurring items) of $256 million, or 48 cents a share, on revenues of $1.8 billion. Including the non-recurring items, net income was $226 million, or 43 cents a share. For the year, the company reported net income (before non-recurring items) of $998 million, or $1.90 a share (meeting estimates), on revenues of $7.2 billion, compared to 1995's net income (before non-recurring items) of $940 million, or $1.79 a share, on revenues of $6.9 billion. Including the non-recurring items, net income for the year was $562 million, or $1.07 a share. For the week, the company was down 1/2 closing at $37. COVENTRY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CVTY)") else Response.Write("(Nasdaq: CVTY)") end if %> reported a fourth quarter net loss (including pretax charges of $41 million and a pretax gain of $4.9 million) of $52.1 million, or $1.58 a share, on revenues of $289.6 million, compared to last year's fourth quarter net loss of $13.5 million, or 42 cents a share, on revenues of $222.7 million. Net loss before items was $21.3 million, or 65 cents a share, well off estimates of earnings of 4 cents a share. For the year, the company reported a net loss of $61.3 million, or $1.86 a share, on revenues of $1.1 billion, compared to 1995's net income of $18,000 on revenues of $852.4 million. For the week, Coventry finished down 15/16, closing at $7 5/16 on Friday. 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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