Initiation of Research Coverage for Six Healthcare Delivery Companies

Wednesday, November 22, 2017

William Blair & Company Analyst Matt Larew initiated coverage of the healthcare delivery industry with research coverage of six leading healthcare providers. Amedisys, Inc. (AMED $55.01), HealthSouth Corporation (HLS $47.88), and LHC Group, Inc. (LHCG $67.65) are best-in-class providers of post-acute-care services. LifePoint Health, Inc. (LPNT $43.70) is a rural hospital provider with leading quality scores. HCA Healthcare, Inc. (HCA $75.24) and Tenet Healthcare Corporation (THC $13.24) represent two leading hospital operators in urban markets.

In his report initiating coverage, Larew said, “We are entering the most significant decade of growth in the Medicare population in the program’s existence, which should provide a sustainable tailwind to the demand for healthcare services. However, Medicare rates are significantly below commercial rates, so providers with lower relative levels of Medicare business today are likely to encounter a sustainable pricing headwind. We favor companies that already have high exposure to Medicare payment and benefit from the tailwind and largely escape the headwind. In addition, while companies in this space offer services across the country, from a competitive standpoint healthcare delivery is distinctly local. In many cases for-profit entities compete for patients with both larger organizations and local healthcare providers. We believe quality superiority can help evaluate management focus and execution and serve as an indicator of long-term market share gain and positioning for the shift to value-based payment.”

In conjunction with the report, Larew noted results from William Blair’s survey of 75 individuals working in healthcare, “Our Healthcare 2020 survey cohort calls for volume growth to improve roughly 50 basis points in 2018 compared with the current trend. Longer term, our cohort is bullish on home health and calls for accelerating payer mix shift to Medicare and payment structure away from fee-for-service through 2020.”

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