Healthcare Updates
by Tim Meyer (MF Attila)

McLean, VA (April 14, 1997) -- It is good to be back after a couple week hiatus during The Motley Fool reorganization. Let's get right to the news.

OUR POLITICAL HEALTH

As reported in the February 9, 1997, edition of This Week in Health Care, the Rhode Island Attorney General, Jeffrey Pine, took out an ad in The Wall Street Journal looking for a firm to examine the worth of the Roger Williams Medical Center in Providence, Rhode Island, which COLUMBIA/HCA HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %> wants to purchase. Well, it appears Mr. Pine is still looking to select a consultant to assist with his review of the proposed purchase. His office is trying to examine whether the $41 million sales price accurately reflects the hospital's value. The Rhode Island Department of Health has stated it will not begin its review of the application until Mr. Pine finishes his review. I don't know how many responses Mr. Pine received in reply to his ad (maybe the Journal can find out and let us all know - otherwise some might think advertising in the Journal doesn't work). I also don't know how long Mr. Pine thinks it will take to complete his review and report, once he picks his helper.

About seven months after signing an executive order creating a commission to improve the quality of health plans, President Clinton named the members. At the announcement, he said, "Their task will be focused and urgent: to find ways to ensure quality, and to ensure that the rights of consumers in health care are protected." Their "urgent" recommendations are due in a year.

Budget negotiators were back at it last week. The Clinton administration offered to cut Medicare spending by another $18 billion over five years by further reducing payments to providers. The figure includes further reductions of $8.6 billion from hospital payments and $2.9 billion from doctors' payments. The Wall Street Journal reported "the two sides discussed proposals to raise the out-of-pocket costs for affluent Medicare beneficiaries, but nothing was settled." Since just reducing payments to providers seems to be the fix of choice, I wonder if anyone has done a study to determine at what price level providers will begin to pull out of Medicare? I hope so.

Business Wire had the results of a survey in the state of Tennessee indicating 98.9% of those polled believe they have a legal right to choose their own health care providers, rather than having their insurance companies choose for them. 77.2% said they were uncomfortable with insurance companies choosing their doctors for them. I doubt the results would be much different in other states. It was not mentioned whether those polled were asked if they were willing to pay more for more choice. Basically, it comes down to whoever writes the checks, picks.

HEALTHCARE STOCKS IN THE NEWS

Some thoughts on the Columbia/HCA federal investigation. I find it peculiar that it has been almost a month since more than 100 agents from a host of federal agencies took truckloads of billing and medical records from Columbia hospitals and doctors' offices in El Paso, Texas, and no one has informed the company of the exact nature of the investigation.

Health Care Financing Administration (HCFA) Administrator Bruce Vladeck has found time to talk about Columbia with The New York Times over the past several months. Vladeck told the Times, "A specific review is going on of upcoding at Columbia hospitals."

The company issued a statement March 31, saying "Columbia takes very seriously... the statement in the media attributed to Bruce Vladeck ... We hope to meet with Mr. Vladeck to discuss any concerns HCFA might have." As far as I can tell, Mr. Vladeck has yet to meet with Columbia.

Officials also had time to talk to Rep. Fortney "Pete" Stark (D., Calif.) who is as anti-Columbia/HCA as they come. Rep. Stark told The Wall Street Journal that a high-ranking official told him that the probe was broader than the El Paso sweep.

Two (bottom-feeding) law firms have wasted no time in commencing class action law suits against Columbia "on behalf of the purchasers" of Columbia common stock. In the notices issued by the firms, both discussed Medicare billing practices as reasons for the suit. One firm went so far as to claim damages were "caused by a pervasive and on-going cause of illegal conduct designed and intended to artificially inflate the company's billings to Medicare...."

Let's see, the company hasn't been informed of the nature of the federal investigation and no charges have been filed, but at least one law firm has filed suit against Columbia for illegal activities (what ever happened to innocent until proven guilty, or at least charged?). Is it any wonder an awful lot of people think we need tort reform? Since the raid on March 19, Columbia's stock is down $11 3/4 and for the past week it was down $1 5/8 closing on Monday at $31 3/8.

TENET HEALTHCARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: THC)") else Response.Write("(NYSE: THC)") end if %> and MEDPARTNERS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDM)") else Response.Write("(NYSE: MDM)") end if %> announced the signing of a letter of intent to form a health care network encompassing Los Angeles and Orange counties, including 33 hospitals and more than 4,000 physicians in Southern California. Financial terms weren't disclosed. Tenet will acquire MedPartners' 99-bed Pioneer Hospital in Artesia, California, and the 100,000 HMO members currently served by Pioneer will be served by Tenet's area hospitals under a 10-year, full risk capitated arrangement. For the week, Tenet finished down $3 1/4 closing Monday at $23 3/4, while MedPartners was down $1 3/4, closing at $20 3/8.

EARNINGS REPORTS

HBO & COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HBOC)") else Response.Write("(Nasdaq: HBOC)") end if %> reported first quarter net income of $35.7 million, or $0.38 a share, on revenues of $219.9 million, compared to 1996 first quarter net income of $21.9 million, or $0.24 a share, on revenues of $172.5 million. For the week, HBO was up $6 7/8 closing Monday at $56 1/8.

ABBOTT LABORATORIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABT)") else Response.Write("(NYSE: ABT)") end if %> reported first quarter net income of $535 million, or $0.69 a share, on revenues of $30 billion, compared to 1996 first quarter net income of $480 million, or $0.61 a share, on revenues of $2.7 billion. For the week, Abbott was down 5/8 closing Monday at $55.

TENET HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: THC)") else Response.Write("(NYSE: THC)") end if %> reported third quarter net income of $118.3 million, or $0.39 a share, on revenues of $2.2 billion, compared to 1996 third quarter net income of $98.1 million, or $0.33 a share, on revenues of $2.0 billion. For the week, Tenet was down $3 1/4 closing Monday at $22 3/4.

That will wrap it up for this week. I hope that tax day doesn't make any of you too ill. Please share any comments/suggestions on how to improve this feature via e-mail (MF [email protected]). In the meantime, here is hoping your investments are healthy!

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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