thomas tobin | managing director |...


DISCLAIMER Hedgeye Risk Management is a registered investment advisor, registered with the State of Connecticut. Hedgeye Risk Management is not a broker dealer and does not provide investment advice for individuals. This research does not constitute an offer to sell, or a solicitation of an offer to buy any security. This research is presented without regard to individual investment preferences or risk parameters; it is general information and does not constitute specific investment advice. This presentation is based on information from sources believed to be reliable. Hedgeye Risk Management is not responsible for errors, inaccuracies or omissions of information. The opinions and conclusions contained in this report are those of Hedgeye Risk Management, and are intended solely for the use of Hedgeye Risk Management’s clients and subscribers. In reaching these opinions and conclusions, Hedgeye Risk Management and its employees have relied upon research conducted by Hedgeye Risk Management’s employees, which is based upon sources considered credible and reliable within the industry. Hedgeye Risk Management is not responsible for the validity or authenticity of the information upon which it has relied.

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DISCLAIMER

Presenter

Presentation Notes

All Set


1. Idea Generation

• Relative and absolute performance

• Valuation, estimate, and sentiment trends and relevance

• Battleground stocks

• Market research

2. Fundamentals

• Detailed financial models

• Identify Key Drivers

• Filings, transcripts, unstructured data, proprietary algorithms

• Professional interviews, surveys

• Multiple and sentiment forecast regressions

3. Macro Integration with Macro Monitor Database

• Database of 4000+ (and growing) curated time series data

• Automatically calculates and sorts correlations and significance

• Analyze leading and lagging relationships across multiple durations

• Identify, update, track, and chart high frequency Key Drivers

OUR INVESTMENT PROCESS INTEGRATING FUNDAMENTALS AND MACRO RESEARCH

Macro

Fundamentals Anecdotes

Presenter

Presentation Notes

First I’’d like to touch on our process because it should help make the rest of this presentation more The basic three part process follows the diagram on the right side Where we follow a perpetual cycle of data collection and review, both macro and healthcare trends, with the goal of understanding the trend, outlook, and key drivers of the US medical Economy Pairing the macro with reported company fundamental trends we see flowing out of our companies We search for the right questions to ask, new ideas to test, and validation of our views from interviews we conduct with providers on the front lines. The process seems simple enough in concept. The biggest struggle not just finding data, but the time needed to collect, store, update, and quantify predicative relationships in a reliable and repeatable way.


HEALTHCARE THEMES

REGULATION / #ACATAPER • New enrollees from exchanges and Medicaid

expansion was a one-time stimulus to the medical economy.

• ACA reforms will continue to put pressure on healthcare inflation.

DEMOGRAPHIC DEFLATION • Commercially insured working population continues to

slow. The Commercially Insured US Medical Consumer has the highest revenue and margins.

• Medicare beneficiaries are growing but CMS policy will need to reduce real per beneficiary spending.

#CLEANSWEEP • Major healthcare issues including heath insurance

affordability, drug prices and Public Option • Shadow voters, Hillary’s 80%-90% Presidential odds,

downballot #cleansweep all impact policy trends

1

2

3

DEMOGRAPHICS

Aging Population, Medicare Mix Shift,

More w/Less, Incidence

REGULATORY

ACA / HDHP / CCJR Technology

Transparency

#ACATaper

Pent-Up Demand High Acuity

Normalization

LATE CYCLE

Healthcare is late to slow, and late to reaccelerate.

HEALTHCARE DEFLATION

DATA SOURCE: HEDGEYE


HEALTHCARE POSITION MONITOR Sentiment Investment Ideas - Longs Trade Trend Tail Sentiment Investment Ideas - Shorts Trade Trend Tail

Score1LONG Score1

SHORT

6 ATHN athenahealth, Inc. --- --- 89 CERN Cerner Corporation 6 EXAS Exact Sciences Corporation 81 HOLX Hologic, Inc.

59 AHS AMN Healthcare Services, Inc. 53 ZBH Zimmer Biomet Holdings, Inc. --- 41 HCA HCA Holdings, Inc.

33 MD MEDNAX, Inc.

22 QSII Quality Systems, Inc. --- ---

17 MDRX Allscripts Healthcare Solutions, Inc.

1 CPSI Computer Programs and Systems, Inc. --- ---

Sentiment Long Bench Sentiment Short Bench

Score1LONG Score1

SHORT

41 ILMN Illumina, Inc. --- --- --- 97 WOOF VCA Inc. --- --- ---56 EVH Evolent Health Inc Class A --- --- --- 79 LH Laboratory Corporation of America Holdings --- --- ---78 ABCO Advisory Board Company --- --- --- 71 ICLR ICON Plc --- --- ---

53 CRL Charles River Laboratories International, Inc. --- --- ---44 MDSO Medidata Solutions, Inc. --- --- ---36 LPNT LifePoint Health, Inc. --- --- ---24 PRXL PAREXEL International Corporation --- --- ---18 Q Quintiles Transnational Holdings, Inc. --- --- ---5 DGX Quest Diagnostics Incorporated --- --- ---1 CYH Community Health Systems, Inc. --- --- ---

DATA SOURCE: FACTSET

Presenter

Presentation Notes

DONE 10/16 – AF ----

© Hedgeye Risk Management LLC. All Rights Reserved.

INSURED MEDICAL CONSUMERS


INSURED POPULATION SLOWING

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Insu

red

Po

pu

lati

on

Yo

Y%

Medicare Employer Sponsored Insurance Medicaid Non-Group Incl Exchange

DATA SOURCE: KAISER, BLS, CMS, HEDGEYE ESTIMATES

Presenter

Presentation Notes

To introduce what you’ll see in today’s presentation we will be referring back to this chart which presents the model we built to track the number and payor class of insured medical consumers. And as we’ll see in the next few slides, why this is such an important data series to track and measure. The key is understanding that Healthcare utilization is significantly higher when comparing an uninsured population and an insured one, any where from 2X to 5X depending on the type of care.


3-FOLD INCREASE IN UTILIZATION OPERATING ROOM PROCEDURES INCREASE

1,135

3,216

2,378

6,384

8,693

3,268

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Uninsured Medicaid Private insurance Other Insurance Medicare United States

Rate of discharges per 100,000 persons

Presenter

Presentation Notes

Moving from NOT HAVING INSURANCE TO EITHER MEDICAID can increase medical consumption by 2-5X. In this chart we’re comparing operating room procedure utilization per 100,000 persons


MEDICAID AND NON-GROUP MEDICAID EXPANSION GREATER THAN EXCHANGES

5.98

1.48

4.55

3.45

0

2

4

6

8

10

12

2013-2015 Expansion States Delta 2013-2015 Non-Expansion StatesDelta

Ab

solu

te #

of

Insu

ree

s (M

illio

ns)

Medicaid Non-Group

16.61%

7.84%

51.29%

69.78%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2013-2015 Expansion States Delta 2013-2015 Non-Expansion StatesDelta

Medicaid 2013-2015 Delta as % of 2013 Baseline

Non-Group 2013-2015 Delta as % of 2013 Baseline

DATA SOURCE: KAISER

Presenter

Presentation Notes

When we ask where the population of insured medical consumers expanded most, its clear it was the Medicaid population in Expansion states. Not a surprising finding given the issues with the roll out of the Exchanges and disincentives for enrolling.


TOTAL GROWTH SIMILAR NON-EXPANSION STATES DID BETTER WITH EXCHANGES

2.08%

2.93%

3.05% 1.34%

0%

1%

2%

3%

4%

5%

6%

Expansion States Non-Expansion States2

013

-20

15 Y

oY

%

Non-Group Medicaid

DATA SOURCE: KAISER

0%

1%

2%

3%

4%

5%

6%

Non-Group Medicaid All Insurance

20

13-2

015

Yo

Y%

Expansion States Non-Expansion States

Presenter

Presentation Notes

However if we look at the Non-Group contribution which includes individually purchased Exchange Insurance, it is obvious that where a state DID NOT expand Medicaid, consumers went to the exchanges. In fact this buying pattern will likely dampen the generally bullish investor expectations that additional states, such as FL, TX, etc, expanding Medicaid. Any additional expansion from here is likely to have a minimal positive impact.


MEDICAID GROWTH BY STATE

-4%

-2%

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2%

4%

6%

8%

10%

Wa

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lan

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ork

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g

Ka

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No

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org

ia

2013-2015 Medicaid Expansion States Delta as % of 2013 Expansion States Total Insurance Baseline

2013-2015 Medicaid Non-Expansion States Delta as % of 2013 Non-Expansion Total Insurance Baseline

DATA SOURCE: KAISER

Presenter

Presentation Notes

When we rank Medicaid expansions as well, Expansion wasn’t consistent or consistently positive. Some NON-EXPANSION states outpaced in Medicaid growth seen in EXPANSION STATES


NON-GROUP GROWTH BY STATE

-4%

-2%

0%

2%

4%

6%

8%

10%

Ke

ntu

cky

Co

nn

ect

icu

t

Ca

lifo

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Dis

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ia

Ne

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sett

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exi

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No

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org

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Ma

ine

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rid

a

2013-2015 Non-Group Expansion States Delta as % of 2013 Expansion States Total Insurance Baseline

2013-2015 Non-Group Non-Expansion States Delta as % of 2013 Non-Expansion States Total Insurance Baseline

DATA SOURCE: KAISER

Presenter

Presentation Notes

The same variability is evident when we look at Non-group by state and expansion status. If you toggle back and forth between the last slide and this one, you will see a see saw between the left and right.


NON-EXPANSION STATES RANKED

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Flo

rid

a

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org

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Vir

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Wyo

min

g

2013-2015 Medicaid Non-Expansion States Delta as % of 2013 Non-Expansion Total Insurance Baseline

2013-2015 Non-Group Non-Expansion States Delta as % of 2013 Non-Expansion States Total Insurance Baseline

DATA SOURCE: KAISER

Presenter

Presentation Notes

The majority of non-expansion states saw total insured medical consumer contribution to growth in the mid to high single digits when we look at both Medicaid and Non-Group…


EXPANSION = MEDICAID + NON-GROUP

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

We

st V

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Co

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Mis

sou

ri

2013-2015 Medicaid Expansion States Delta as % of 2013 Expansion States Total Insurance Baseline

2013-2015 Non-Group Expansion States Delta as % of 2013 Expansion States Total Insurance Baseline

DATA SOURCE: KAISER

Presenter

Presentation Notes

Even when we consider the Expansion states as being Medicaid only, we can see the huge impact Non-Group and Exchange made in despite the Medicaid expansion, boosting total growth of the insured population by double digits


MEDICAID NOT THE ONLY DRIVER

-1%

0%

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To

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row

th 2

013

-20

15 Y

oY

%

DATA SOURCE: KAISER

Non-Expansion

Expansion

Presenter

Presentation Notes

Altogether then, the point is that the ACA hasn’t just been just a story about Medicaid and the failure of the Public Exchanges. Exceptional growth in insured medical consumers has been extraordinary across the majority of states, varied considerably across the country, for both for Expansion and non expansion states.


-50

0

50

100

150

200

250

0%

1%

2%

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4%

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6%

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9%

JOLT

S H

ea

lthca

re O

pe

nin

gs - Y

oY

# M

AV

T

ota

l In

sure

d P

op

ula

tio

n Y

oY

%

Total Insured Population - YoY% JOLTS Healthcare Openings - YoY# MAV

INSURED POP & HC JOB OPENINGS

DATA SOURCE: MEDICAID EXPENDITURE PANEL, KAISER, & MIPS

Presenter

Presentation Notes

Turning back to consumption, and with our insured population model in hand we can start to look at a number of interesting impacts directly and indirectly from fundamental company results as well as the indirect demand for Healthcare labor. If you’ve seen our work on HCA, AHS, and other companies, and our #ACATaper thesis generally, you’ll be familiar with the importance of this relationship. Healthcare remains a business with a very high and inflexible labor component. More volume means more staff in doctors offices and hospitals. In this chart we see a predictable output: the number of healthcare job openings increased alongside growth in the newly insured.


HC WORKFORCE “NEW NORMAL” HEALTHCARE WORKERS NEEDED PER 100,000 INSURED 53.6 51.8

2013 2016

Insurance Status Population

Percent with Expense

Utilization Population Percent with

Expense Utilization

Employer

155,697 88.0%

137,013

155,723 88.0%

137,036

Non-Group

13,816 88.0%

12,158

21,778 88.0%

19,165

Medicaid

54,919 85.0%

46,681

72,700 85.0%

61,795

Medicare

40,876 95.7%

39,119

47,670 95.7%

45,620

Other

6,295 88.0%

5,540

6,422 88.0%

5,652

Total Insured

271,604 88.6%

240,511

304,294 88.5%

269,268

Uninsured

41,795 54.9%

22,946

28,966 54.9%

15,902

Total

313,401 84.1%

263,457

333,260 85.6%

285,170

Healthcare Workers

14,554,900 14,554,900

15,754,494

15,754,494

Healthcare Workers per 100,000 Population

53.59

51.77

Healthcare Workers per 100,000 Units of Utilization 55.25 55.25

DATA SOURCE: MEPS, KAISER, BLS, HEDGEYE ESTIMATES

Presenter

Presentation Notes

How many people do we need? And how long will it take for these newly insured to get into the system? In this table we have quantified the incremental demand for new HC labor. First we looked at the number of HC workers needed per 100,000 in 2013 based on actual values. THEN, based on the 2013 utilization rate, we calculated a new and lower level for HC workers per 100,000 insured life. AGAIN labor should line up with medical consumption, so knowing where we are in the helathcare labor cycle, can tell us where we are in the consumption cycle. H:\Companies\AHS\20161019_AHS_Organic_Growth_Mode_TT_Forecast.xlsx


50.76

48

49

50

51

52

53

54

Healthcare Workers per 1,000 Insured Population - Actual Healthcare Workers per 1,000 Insured Population - Post ACA Estimate

THE “NEW NORMAL” FOR HC LABOR

Excess demand for Healthcare Employees converging Post-ACA level of 51.8

Post-ACA Pre-ACA

DATA SOURCE: MEDICAID EXPENDITURE PANEL, KAISER, BLS, HEDGEYE ESTIMATES

51.8

Presenter

Presentation Notes

Taking the NEW NORMAL in HC workers per 100,000 from the previous slide, we can see how the large and sudden expansion of insured medical consumers, stable for much of 2013, suddenly dropped to levels that look UNDERSTAFFED as the system was overwhelmed with volume beyond existing labor capacity. But look where we are as of September 2016, within 1% of the NEW NORMAL line. H:\Companies\AHS\20161019_AHS_Organic_Growth_Mode_TT_Forecast.xlsx


DEMAND FOR HC WORKERS FALLING

DATA SOURCE: MEDICAID EXPENDITURE PANEL, KAISER, & MIPS

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250

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100,000

200,000

300,000

400,000

500,000

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700,000Post ACA - Unfilled Healthcare Worker Demand JOLTS Healthcare Openings - YoY# 3MAV

Presenter

Presentation Notes

Convincingly then, as we see here, our POST ACA WORKER DEMAND METRIC TIES to HEALTHCARE JOB OPENINGS. If medical consumption was continuing to grow and accelerate, this chart would look very differently. H:\Companies\AHS\20161019_AHS_Organic_Growth_Mode_TT_Forecast.xlsx


HCA ADMISSIONS BY COUNTY FLORIDA AND TEXAS ACCOUNT FOR ~60% DISCHARGES

DATA SOURCE: AHD, HEDGEYE ESTIMATES

Presenter

Presentation Notes

But healthcare is a local market dominated by hyper local trends. We’ve recently begus using data from the Amercian Hospital Directory to map Discharge by zip code and county. Here is what the map looks like for HCA.


HCA GEOGRAPHY MATTERS MARKET SHARE FOLLOWS VOLUME

DATA SOURCE: AHD, HEDGEYE ESTIMATES

Presenter

Presentation Notes

We’ve also collected quality scores and market share by zip code and here we’ve mapped market share, which is high in Texas Florida and a handful of locations.


COVERAGE DRIVES ADMISSIONS


-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

HCA Weighted Total Health Insurance Coverage YoY% Equivalent Admissions YoY% growth %

Correlation=0.92

1Q16 +1.59%

2Q16 +2.36%

Presenter

Presentation Notes

HCA has same facility admissions growth is tied very tightly to the growth of insured medical consumers weighted to their geographic footprint.


HCA ADMISSIONS JOLTS FORECAST

0.72%

-1.13%

-2.96%

-3.12% -3.05%

-1.67%

-4%

-2%

0%

2%

4%

6%

8% HCA: SS Adjusted Admissions YoY % HCA: SS Admissions YoY% - Forecast HCA: SS Admissions YoY% - Consensus


Presenter

Presentation Notes

And given our analysis of the relationship between demand for Healthcare Labor, Insured Medical Consumers, the jump to Admissions is obvious. Based on our view that we are in the final months of the ACA contributing to growth, we believe both the demand for labor and admissions trends will revert to pre-ACA levels. HCA’s same store volume is highly correlated with JOLTS-HEALTHCARE, we expect declines in same store admissions through 2017.


AHS ORGANIC % VS LABOR DEMAND

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Exce

ss He

alth

care

Wo

rke

r De

ma

nd

T

ota

l O

rga

nic

Gro

wth

Yo

Y%

AHS: Total Organic Growth YoY % Excess Healthcare Worker Demand - 3M Lag


Presenter

Presentation Notes

The same impact is easily seen for AHS, the temp nurse staffing company.


AHS TRACKER


FTE Count Average 13wk Forecast

Presenter

Presentation Notes

With the additional corroborating data from our Tracker which is currently forecasting flat FTE volume for Q416


Declining Birth Rates: Where’s Baby? DATA SOURCE: UN POPULATION DIVISION


300,000

310,000

320,000

330,000

340,000

350,000

360,000

370,000

380,000

CDC - Births Maternity Tracker

MATERNITY DOWN IN 2016

DATA SOURCE: CDC, HEDGEYE ESTIMATES

Presenter

Presentation Notes

Maternity is both a driver of hospital admissions, at 25% of total inpatient volume generally, and a significant portion of consumption for the sub 65 population. Our Maternity Tracker has a very good history of overlapping with CDC birth data reported on a lag.


MATERNITY CONTINUES NEGATIVE

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

CDC - Births YoY% Maternity Tracker


Presenter

Presentation Notes

THe year over year growth rate is clearly negative in 2016


FACILITY WEIGHTED MATERNITY

3Q15 4Q15 1Q16 Apr-16 May-16 Jun-16 2Q16 Jul-16 Aug-16 Sep-16 (P) 3Q16

Maternity Tracker/CDC Regression (yr/yr) -1.0% -1.8% -2.5% -2.2% -0.5% -2.7% -1.8% -3.0% -4.2% -2.4% -3.2%

HCA - Maternity Tracker (wtd, yr/yr) -0.9% -1.6% -2.8% -1.7% 0.6% -3.0% -1.3% -2.9% -5.1% -3.3% -3.8%

THC - Maternity Tracker (wtd, yr/yr) 0.2% -1.0% -2.4% -1.4% 1.2% -2.4% -0.9% -3.0% -4.4% -2.1% -3.2%

CYH - Maternity Tracker (wtd, yr/yr) -0.6% -1.7% -3.3% -1.5% 0.7% -1.7% -0.8% -2.5% -4.3% -1.4% -2.8%

MD - Maternity Tracker (wtd, yr/yr) -0.7% -1.4% -1.8% -1.2% -0.4% -2.6% -1.4% -3.1% -4.5% -3.1% -3.6%

LPNT - Maternity Tracker (wtd, yr/yr) -1.5% -0.2% -2.6% -0.1% 0.1% 1.6% 0.5% 0.6% -1.5% -2.6% -1.2%

AHS - Maternity Tracker (wtd, yr/yr) -1.8% -1.9% -2.0% -2.0% -0.8% -2.8% -1.9% -3.3% -4.2% -2.7% -3.4%


Presenter

Presentation Notes

When we weight our STATE AND MONTH DATA we get through the Tracker, we can see growth has been weak, even against easy compares last year.


BIRTH RATES BY REGION

DATA SOURCE: HEDGEYE MATERNITY TRACKER

Nationally, birth rates declined -5.2% in August. With the exception of the Northeast Census region, the other three census regions saw a Y/Y Roc that was worse than the national average with the South showing a notable slowdown

Presenter

Presentation Notes

Our HOUSING TEAM created these charts which they see closely tied to deteriorating housing trends. Regionally, weakness is everywhere except the NORTHEAST


BIRTH RATES CONTINUED

DATA SOURCE: HEDGEYE MATERNITY TRACKER

On a state level, birth rates are declining across the country. The data for New York (in Gray) represents the minority, as just 7 of the contiguous United States exhibited a Positive Y/Y Roc in August.

Presenter

Presentation Notes

By state some key states that have been strong are weak as well.


HH FORMATION: MULTI YEAR LOW Less households have been formed in 2016, and the current YoY growth rate is far below both the 2011-Present Average, and the Rolling 12 Month Average.

DATA SOURCE: CENSUS BUREAU, HEDGEYE

Presenter

Presentation Notes

Corroborating the Maternity Tracker, again thanks to Housing for this chart, Household formation is hitting lows for the post recession period


GROWTH AT MULTI-YEAR LOWS The current YoY growth rate is far below both the 2011-Present Average, and the Rolling 12 Month Average.

DATA SOURCE: CENSUS BUREAU, HEDGEYE

Presenter

Presentation Notes

Household formation growth in 2016 has been weak compared to 2014 and 2015. A significant portion of household formation and housing demand is driven directly by maternity.


THE STORK IS COMING, CALL OUR AGENT In 2015, the NAR conducted this survey and targeted it towards potential home buyers. 15% of the surveyed population noted a baby on the way as their primary reason for purchasing a new home.

DATA SOURCE: NAR, HEDGEYE

Presenter

Presentation Notes

15% of new home purchases are driven by Maternity


HEDGEYE MATERNITY SURVEY Hedgeye conducted a survey of 5,000 women between the ages of 18 and 34 nationwide. Each participant was given six possible choices for the question: Are you planning to have children?

DATA SOURCE: 2016 HEDGEYE MATERNITY SURVEY

Presenter

Presentation Notes

To try and answer the question of WHY is MATERNITY SLOWING? We performed a survey of 5000 women between the ages of 18-34 Between the economy at 23% and ZIKA at 4%, it would seem there is a substantial population with major concerns


ZIKA IN THE UNITED STATES

DATA SOURCE: CENTER FOR DISEASE CONTROL (CDC)

Presenter

Presentation Notes

From the CDC, ZIKA has indeed arrived in the US. The broader concern for the GULF states particularly Florida, should be high.


ZIKA IN THE NEWS Search Trends peaked into the Olympics and have been flat to down subsequently.

Google Trends: “Zika”

DATA SOURCE: GOOGLE TRENDS, HEDGEYE

Presenter

Presentation Notes

Although contrary to the frightening CDC map, the interest broadly is well below peaks seen in late 2015


ZIKA: QUANTIFYING THE IMPACT The potential impact to births stemming from Zika concerns is not inconsequential at almost 16%.

DATA SOURCE: HEDGEYE MATERNITY SURVEY

Presenter

Presentation Notes

When we look at the potential impact from our survey, however, we need to keep an eye on Maternity Trends going forward. Delays 10 months ago could be showing up in trends today given the significant impact, 15.8%, which is could be flowing through hospital consumption today.


#ACATAPER


28+ MILLION NEWLY INSURED 60% MEDICAID EXPANSION / 40% EXCHANGE

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%Newly Insured YoY %

Exchange: Includes a mix of pre-effectuated and effectuated enrollment for 2014/2015 period. February 2016 is pre-effectuated only reflecting OE3. Medicaid: Cumulative enrollees for expansion states relative to baseline enrollment year

0

5

10

15

20

25

30

Mill

ion

s

Medicaid Enrollment Exchange Enrollment

DATA SOURCE: CMS


UNINSURED RATE ALL-TIME LOW SHARP DECLINE IN HOSPITAL BAD DEBT EXPENSE

14.8%

13.1%

13.5%

13.9%

14.6%

14.3%

14.6%

15.2%

14.7%

14.9%

16.6% 16.3%

15.7% 15.4%

13.3%

10.4%

9.1%

8%

9%

10%

11%

12%

13%

14%

15%

16%

17%

18% Uninsured Rate

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

16% Median Bad Debt Expense Ratio

Average

+1 Std Dev

-1 Std Dev

DATA SOURCE: COMPANY FILINGS, CMC & U.S.CENSUS


EXCHANGE ENROLLMENT SLOWING 8.7% GROWTH IN EFFECTUATED ENROLLMENT MARCH 2016

8.0

11.7

12.7

10.2 9.9

9.3

11.1

-

2

4

6

8

10

12

14 Pre-Effectuated Enrollment Effectuated Enrollment

Exchange Disenrollment

DATA SOURCE: CMS

Presenter

Presentation Notes

DONE 10/16 – AF ---- Updated 10/15 - AF All Set On the Public Exchange side, 45B in new medical spending money, with enrollment, at least as it has been reported by HHS, hitting primarily in the 2H of 2014 and carrying into early 2015. For now we’ll ignore the difference between effectuated enrollement and those that signed up but didn’t pay their premium.


PENT-UP DEMAND NEWLY INSURED

SOCIETY OF ACTUARIES ANALYSIS OF KS CLAIMS DATA

6.2x

2.5x 2.4x

1.9x 1.7x 1.5x

1.0x 0.9x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

KneeReplacement

Surgery

Lower BackPain Surgery

UpperEndoscopy

MRI/MRA CT Gallstone KneeArthroscopy

Dermatology

Re

lati

ve U

se

Newly Enrolled Relative Use

DATA SOURCE: https://www.soa.org/Research/Research-Projects/Health/2015-pent-up-demand-health.aspx

Presenter

Presentation Notes

Beyond the clear uptick in utilization that comes from moving from being UNINSURED to either MEDICAID or PRIVATE INSURANCE, we believe based on numerous inputs that ACA’s newly insured came into the system with SIGNIFICANT PENT UP DEMAND AND HIGHER THAN AVERAGE PER CAPITA CONSUMPTION.


HIGHER PREVALENCE OF DISEASE

-57%

-19%

-8%

8%

21%

26%

39%

44%

-80% -60% -40% -20% 0% 20% 40% 60%

Prevalence Rates of Specific Top Conditions, Exchange Compared to Off-Exchange

Congestive Heart Failure

Diabetes

Seizure Disorders and Convulsions

Asthma

Major Depressive Disorder

Drug Psychosis/Dependence

Cancer (Breast, Prostate, Other)

Completed Pregnancy

DATA SOURCE: TRUVEN ANALYTICS

Presenter

Presentation Notes

ALTHOUGH SOME OF THE INCREASE IN MEDICAL SPENDING SHOULD PROVE DURABLE AS THE PREVALENCE OF DISEASE IS HIGHER


$370

$380

$390

$400

$410

$420

$430

$440 Medicaid Per Enrollee (3-month Average) Pre-ACA Baseline

MEDICAID PER ENROLLEE SPEND ENROLLMENT AND SPENDING PAST PEAK

DATA SOURCE: CMS AND U.S. TREASURY

20,000

22,000

24,000

26,000

28,000

30,000

32,000

34,000

55,000,000

57,000,000

59,000,000

61,000,000

63,000,000

65,000,000

67,000,000

69,000,000

71,000,000

73,000,000

75,000,000

Jul-Sep 2013 Medicaid Enrollment Baseline

Total Medicaid Enrollment (incl. expansion states)

Grants to States for Medicaid (3MAV)


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

(Mill

ion

s)

Medicare Part A Medicare Part B

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

(Mill

ion

s)

Grants to States for Medicaid

FEDERAL GOVERNMENT OUTLAYS 2013-2015 FASTEST GROWTH IN MEDICAID EX-RECESSION

1999 – 2013 6.9% CAGR

2013 – 2016:E 11.2% CAGR

Recession Impact

1999 – 2016:E CAGR Medicare Part 4.6%

Medicare Part B 9.5%

DATA SOURCE: U.S. TREASURY

Presenter

Presentation Notes

DONE 10/16 – AF ---- UPDATED 10/15 - AF


HEALTHCARE GROWTH SLOWING EBITDA AND ADMISSION GROWTH TIED TO JOB OPENINGS

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6% Hospital Average SS Adjusted Admissions YoY %

JOLTS Hospital Admissions Model

Correlation = 0.52 Correlation = 0.85

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

-5%

0%

5%

10%

15%

20%

He

alth

care

Job

Op

en

ing

s Yo

Y %

S&

P 5

00

He

alt

hca

re E

BIT

DA

Yo

Y %

S&P 500 Healthcare Rolling 12-mo EBITDA YoY %

Healthcare Job Openings YoY %

DATA SOURCE: BLS, FACTSET AND COMPANY FILINGS

Presenter

Presentation Notes

DONE 10/16 – AF ----


SALES GROWTH CONTRIBUTION S&P 500 HEALTHCARE CORE AND M&A GROWTH

-0.5%

0.8% 1.0% 1.9%

6.6% 6.7%

8.0% 6.8%

3.7%

5.9% 6.6% 6.2% 6.4%

3.9%

6.0%

6.8%

6.4%

6.1% 5.5%

3.9%

4.2%

4.9%

3.6% 2.9%

2.2% 1.0%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Gro

wth

Co

ntr

ibu

tio

n

Core M&A


Presenter

Presentation Notes

DONE 10/16 – AF ---- Updated 10/16 - AF


350

450

550

650

750

850

950

1,050

1,150JOLTS - HC Job Openings Average

+1 Std Dev -1 Std Dev

HEALTHCARE JOB OPENINGS (JOLTS)

We have observed similar patterns across multiple metrics tied to medical consumption, enrollment, and employment suggesting that the Healthcare Economy is extended.

HEALTHCARE JOB OPENINGS EXTENDED...

-2.5x

-2.0x

-1.5x

-1.0x

-0.5x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

Z-S

core

HC JOLTS % of HC Employment

DATA SOURCE: BLS

Presenter

Presentation Notes

DONE 10/16 – AF ---- UPDATED 10/15 - AF


August 2014 23.60%

August 2016 3.36%

August 2015 23.64%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50% JOLTS: HC Job Openings Rolling 3-Mo YoY % 2-Yr Average

August 2014 22.84%

August 2015 0.08%

August 2016 -20.32%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%JOLTS: HC Job Openings Rolling 3-Mo YoY % ROC

HEALTHCARE JOB OPENINGS (JOLTS)

After peaking in December 2014, Healthcare Job Openings posted the slowest growth in approximately 2-years. We expect growth to slow further as we comp out of stimulus.

HEALTHCARE JOB OPENINGS SLOWING...

DATA SOURCE: BLS

Presenter

Presentation Notes

Data Updated 10/15 – AF AR Need to add Data Labels for current period, one year prior and two year prior-Done 10/16


HOSPITAL PRIVATE FIXED INVESTMENT HOSPITAL CAPEX COINCIDES WITH STIMULUS

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20% Hospital Real Private Fixed Investment 2-Yr CAGR %

Hospital Real Private Fixed Investment YoY %

$12,500

$14,500

$16,500

$18,500

$20,500

$22,500

$24,500

$26,500

$28,500

$30,500Real Private Fixed Investment Hospitals ($ millions 2009)

DATA SOURCE: BEA

Presenter

Presentation Notes

DONE 10/16 – AF ---- Updated 10/16 - AF


0%

1%

1%

2%

2%

3%

3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Em

plo

ym

en

t

Re

al P

CE

Real PCE Proprietary Hospitals 3-Yr CAGR %Average+1 Std Dev-1 Std DevHospital Employment 3-Yr CAGR %

REAL PCE PROPRIETARY HOSPITALS REAL PCE GROWTH ACCELERATED WITH NEWLY INSURED

Correlation = 0.57

y = 0.0097x - 291.04 R² = 0.9798

$50

$60

$70

$80

$90

$100

$110

$120

$130 Real PCE Proprietary Hospitals

Linear (Real PCE Proprietary Hospitals)

Slope = 0.09x

Slope = 0.67x

DATA SOURCE: BEA & BLS

Presenter

Presentation Notes

DONE 10/16 – AF ---- Updated AF – 10/16


0

100

200

300

400

500

600

Rolling 12-month Healthcare Employment Gains

Recession

Trough-Peak Employment

HEALTHCARE EMPLOYMENT GAINS

April 2000 - December 2001 19 Months

April 2014 - March 2016 23 Months

July 2006 – October 2007 15 Months

DATA SOURCE: BLS, NBER

Presenter

Presentation Notes

AR Update through September, and make sure shading matches correct period-Update 10/17


HOSPITAL EMPLOYMENT GAINS

-50

0

50

100

150

200

250Hospital Employment Rolling 12-mo

DATA SOURCE: BLS

Recession

Trough-Peak Employment

Presenter

Presentation Notes

AR Add Shading Peak-Trough and Recession bars-Updated 10/17


-3.0x

-2.0x

-1.0x

0.0x

1.0x

2.0x

3.0x

4.0x Rolling 12-mo Office of Physician Employment Gains Z-Score

PHYSICIAN EMPLOYMENT GAINS

.

Recession

3x Standard Deviation 10/1/2015

1/1/2014

DATA SOURCE: BLS, NBER

Presenter

Presentation Notes

AR Update through September, and make sure shading matches correct period-Updated 10/17


-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%Rate of Change YoY% Employment Health Care

HEALTHCARE EMPLOYMENT CONTINUES TO SLOW...

September -0.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%Employment - Health care and social assistance y/y growth %

September +2.9%

DATA SOURCE: BLS

Presenter

Presentation Notes

AR Update Through September and labels are added to chart on the right-Updated 10/17


GLOBAL HEALTHCARE M&A ACTIVITY

-

100

200

300

400

500

600

700

800

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Bill

ion

s

Health Services Health Technology

YTD $314 Billion

-35% YoY


Presenter

Presentation Notes

DONE 10/16 – AF ----


LEVERAGE AT 15-YEAR HIGH

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x Total Debt/EBITDA Average

0%

10%

20%

30%

40%

50%

60%

70%Net Debt/Total Capital Average

0%

50%

100%

150%

200%

250%

300%LT Debt/Total Equity Average

0%

10%

20%

30%

40%

50%

60%LT Debt/Total Assets Average

Slowing Growth + Leverage Causes

Falling Equity Prices


Presenter

Presentation Notes

DONE 10/16 – AF ----


LEVERAGE NEARING A PEAK? 500% DEBT INCREASE LAST 10-YEARS

0.5x

0.7x

0.9x

1.1x

1.3x

1.5x

1.7x

1.9x

2.1x Average

+1 Std Dev

-1 Std Dev

S&P 500 Healthcare Debt/EBITDA

$-

$100

$200

$300

$400

$500

$600 S&P 500 Healthcare Debt ($ billions)


Presenter

Presentation Notes

DONE 10/16 – AF ----


INSURED POPULATION SLOWING

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Insu

red

Po

pu

lati

on

Yo

Y%

Medicare Employer Sponsored Insurance Medicaid Non-Group Incl Exchange


Presenter

Presentation Notes

To introduce what you’ll see in today’s presentation we will be referring back to this chart which presents the model we built to track the number and payor class of insured medical consumers. And as we’ll see in the next few slides, why this is such an important data series to track and measure. The key is understanding that Healthcare utilization is significantly higher when comparing an uninsured population and an insured one, any where from 2X to 5X depending on the type of care.


#DEMOGRAPHICS


CENSUS POPULATION ESTIMATES “THE GRAYING OF AMERICA” IS OVERSTATED

-

20

40

60

80

100

120

140

Po

pu

lati

on

by A

ge

Co

ho

rts

(mill

ion

s)

0-18 19-44 45-64 65-84 85+

Actual Projected

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1960 1990 2000 2016 2025

Population Mix by Age Cohorts

0-18 19-44 45-64 65-84 85+

DATA SOURCE: U.S. CENSUS

Presenter

Presentation Notes

DONE 10/16 – AF ----


POPULATION GROWTH OVER TIME

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Ro

llin

g 5

-yr

Po

pu

lati

on

Gro

wth

0-18 19-44

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5% 45-64 65-84

#Boomers

#Millennials

Boomers Aging Into 19-44 Cohort

1987-2010

Millennial Growth Peaks 2022

1986-2019

Boomers Age Into Peak Consumption

Years... Fastest Increase in Medical

Consumption. Peaks 2001

Boomers Entering Retirement


Presenter

Presentation Notes

DONE 10/16 – AF ----


Amount of Savings Needed for Health Expenses for People Eligible for Medicare: Unlike the Last Few Years, the News Is Not Good, by Paul Fronstin, Dallas Salisbury, and Jack VanDerhei, EBRI (Click Here) • Medicare beneficiaries pay a share of their health expenses out-of-pocket because of program

deductibles and other cost sharing. In 2012, Medicare covered 60 percent of the cost of health care services for Medicare beneficiaries ages 65 and older, while out-of-pocket spending accounted for 13 percent, and private insurance covered 15 percent.

• In 2015, a 65-year-old man needs $68,000 in savings and a 65-year-old woman needs $89,000 if each

has a goal of having a 50 percent chance of having enough money saved to cover health care expenses in retirement. If either instead wants a 90 percent chance of having enough savings, $124,000 is needed for a man and $140,000 is needed for a woman. This analysis does not factor in the savings needed to cover long-term care expenses.

• Savings targets increased between 6 percent and 21 percent between 2014 and 2015. For a married

couple both with drug expenses at the 90th percentile throughout retirement who want a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings increased from $326,000 in 2014 to $392,000 in 2015.

$124K + NEEDED FOR 90% CHANCE

DATA SOURCE: EBRI

Presenter

Presentation Notes

DONE 10/16 – AF ----

https://www.ebri.org/pdf/notespdf/EBRI_Notes_10_Oct15_HlthSvgs_DB-DC.pdf?utm_source=Sailthru&utm_medium=email&utm_campaign=EARLY LOOK If You Dont Laugh Youll Cry2016-07-13T12:35:19+00:00nxk&utm_term=EARLY LOOK If You Dont Laugh Youll Cry2016-07-13T12:35:19+00:00nxk


-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

To

tal P

op

ula

tio

n G

row

th

0-18 19-44 45-64 65-84 85+

AGING POPULATION GROWTH

Projected

Medicare Grows, Commercial Shrinks


Presenter

Presentation Notes

DONE 10/16 – AF ----


-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

Po

pu

lati

on

Gro

wth

4

5-8

5+

45-64 65-84 85+

AGING POPULATION GROWTH

Projected


Presenter

Presentation Notes

DONE 10/16 – AF ----


DISTRIBUTION MEDICAL EXPENSES AGE 40-84 PEAK MEDICAL CONSUMPTION

7.80%

12.50%

31.00%

36.50%

12.10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Childhood Young adult Middle-agedadult

Senior years Old senior years

Distribution of Medical Expenses

$3,628 $4,422

$8,370

$15,857

$34,783

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

Childhood Young adult Middle-agedadult

Senior years Old senioryears

NCBI CMS

CMS Age Buckets: 0-18, 19-44, 45-64, 65-84, 85+ NCBI Age Buckets: 0-19, 20-39, 40-64, 65-84, 85+

DATA SOURCE: CMI & NCBI

Presenter

Presentation Notes

DONE 10/16 – AF ----


DISTRIBUTION MEDICAL EXPENSES Table 3

Age

Annual Per

Capita

Expenditure

Lifetime Per Capita

Expenditure (LEba)

Relative Lifetime

Expenditure (RLEba)

Annual Per

Capita

Expenditure

Lifetime Per Capita

Expenditure

0 3,432$ 316,579$ 100.0% 2,920$ 316,579$

20 1,448$ 291,745$ 92.2% 1,255$ 296,363$

40 2,601$ 252,082$ 79.6% 1,929$ 262,124$

65 10,245$ 153,944$ 48.6% 7,702$ 188,658$

85 17,071$ 38,400$ 12.1% 7,688$ 113,685$

Table 4

Relative Lifetime Per Capita Expendirue at Different Age Intervals, Life Table Cohort, and Survivors (Year 2000 Dollars)

Young Adult (20-39)

Middle-Aged Adult (40-64)

Senior Years (65-84)

Old Senior Years (85+)

Age-Specific Annual and Lifetime Per Capita Expenditure. Life Table Cohort, and Survivors

SurvivorsLife Table Cohort

Relative Lifetime Expenditure During

Childhood (0-19)

12.1%

6.4%

10.8%

23.2%

23.7%

35.9%

SurvivorsLife Table Cohort

7.8%

12.5%

31.0%

36.5%

DATA SOURCE: CMS & NCBI

Presenter

Presentation Notes

DONE 10/16 – AF ----


AGING AND MEDICAL SPEND

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

To

tal R

ea

l M

ed

ica

l S

pe

nd

Gro

wth

Co

ntr

ibu

tio

n

0-18 19-44 45-64 65-84 85+

Projected

DATA SOURCE: U.S. CENSUS, NCBI & CMS

Presenter

Presentation Notes

DONE 10/16 – AF ----


AGING AND MEDICAL SPEND

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

Re

al M

ed

ica

l S

pe

nd

45

-85

+ C

on

trib

uti

on

45-64 65-84 85+

Projected

DATA SOURCE: U.S. CENSUS, NCBI AND CMS

Presenter

Presentation Notes

DONE 10/16 – AF ----


DISTRIBUTION TOTAL MEDICAL SPEND NEGATIVE GROWTH IN LARGEST SPENDING COHORT

13.4%

22.6%

30.7%

24.9%

8.4%

0%

5%

10%

15%

20%

25%

30%

35%

0-18 19-44 45-64 65-84 85+

Mix

of

Re

al U

.S. M

ed

ica

l Sp

en

d

Distribution of U.S. Medical Spend

0.2%

0.8%

-0.2%

3.6%

1.3%

0.2%

0.6%

-0.3%

3.1%

2.4%

0.3% 0.4% 0.2%

1.9%

4.1%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

0-18 19-44 45-64 65-84 85+

2016-2021 2021-2026 2026-2031

DATA SOURCE: NCBI, BEA, U.S. CENSUS AND CMS

Presenter

Presentation Notes

DONE 10/16 – AF ----


MIX SHIFT TOWARD GOVERNMENT PAY HARD TO MAKE MONEY IN MEDICARE AND MEDICAID

0

10

20

30

40

50

60

70

-

50

100

150

200

250

Re

tirem

en

t Ag

e P

op

ula

tion

(millio

ns)

Wo

rkin

g A

ge

Po

pu

lati

on

(m

illio

ns)

Working Age Population (20-64) Retirement Age Population (65+)

Working Age Commercially Insured Plateaus

Retirement Age Government Pay Takes Off

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%Private Health Insurance Payment Rate as % of Medicare PaymentRate (%)

Medicaid Payment Rate as % of Medicare Payment Rate (%)

Hard to Make Money in Medicare and Medicaid

DATA SOURCE: U.S. CENSUS , CMS AND HEALTHAFFAIRS.COM

Presenter

Presentation Notes

DONE 10/16 – AF ----


PCE AND MIX OF MEDICAL SPEND COMMERCIALLY INSURED BUCKET SHRINKING

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

PC

E H

ea

lth

care

($

Bill

ion

s)

Population * Annual Medical Spend by Cohort

PCE Healthcare

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 - 19 20-39 40-64 65 - 84 85+

DATA SOURCE: BEA, U.S. CENSUS, NCBI AND CMS

Presenter

Presentation Notes

DONE 10/16 – AF ----


PROJECTED MEDICARE ENROLLMENT

While Medicare Enrollment increases, the real average per beneficiary cost is forecasted to remain essentially flat compared to 2009 peak. CMS forecasting decline in Part A expense, which is consistent with reform efforts.

REAL AVERAGE PER BENEFICIARY COST FLAT

0

10

20

30

40

50

60

70

80

En

rollm

en

t (m

illio

ns)


$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Re

al A

ve

rag

e p

er

Be

ne

fici

ary

Co

sts


DATA SOURCE: CMS

Presenter

Presentation Notes

Chart 1- Chart opens to a spreadsheet only through 2003 Chart 2- Chart goes blank when opened Put a text box on the left chart with the annual average growth in enrollment. Put a text box on the chart on the right with annual average rate of increase in Real per beneficiary spend. What is total real spending growth (enrollment + per capita)? Duplicate the right chart but use flat per beneficiary spending. What is the the deflator CMS actuary assumes?


CONCLUSIONS

COMMERCIAL INSURANCE DOLLARS SLOWING

MEDICARE POPULATION ACCELERATES, BUT… Margins in Medicare already trail privately insured reimbursements across many care areas. While the population is accelerating, it will displace higher margin business. The resulting mix will be of lower value per unit.

MEDICARE PER CAPITA SPENDING FORCED LOWER As limited federal spending grows slower than the Medicare population expands, real spending per beneficiary will fall, driving efforts to curb costs for providers.

1

2

3

The number and spending level in the most valuable part of the market is slowing. The annual contribution to growth from aging is too modest to offset the larger trend of population deceleration.


Presenter

Presentation Notes

DONE 10/16 – AF ----


#AFFORDABILITY

Presenter

Presentation Notes

See if the Kaiser Employment Survey Report is updated through 2016 and if additional data available to update charts


OLD FORMAT = $800/SQUARE FT NEW FORMAT = $1,300 SQ FT

-2%

0%

2%

4%

6%

8%

10%

12%

14%Healthcare InflationPersonal Consumption InflationAverage+1 Std Dev-1 Std Dev

LONG HISTORY OF EXCESS

400% HIGHER AFTER 50 YEARS Healthcare inflation has exceeded broader market inflation for over 50 years with the cumulative increase now 400% higher.

HEALTHCARE DISINFLATION 4 of the 6 years where Healthcare inflation has been lower than the broader market have occurred since 2008.

0

500

1,000

1,500

2,000

2,500Healthcare Price Index PCE Price Index

DATA SOURCE: BEA

Presenter

Presentation Notes

Right Chart-You said that something looks wrong with the grey line in the chart on the right, but I’m not sure what you meant. Can you check to see if I was using the right source? I labelled it in the spreadsheet behind the chart. Left Chart-All Set Two takeaways One Healthcare inflation has been going on for a very long time, trending in excess of the broader economy dating back to the 1970s. The second point is that its DIS IN FLATING at the same pace as the broader economy.


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2010 2011 2012 2013 2014 2015 Expect to offer in 2018

Percent of Employers Offering/Likely to Offer CDHP

All employers (10+ employees) All large employers (500+ employees) Jumbo employers (20,000+ employees)

GROWTH IN CDHP ACCELERATING

DATA SOURCE: 2014/2015 MERCER SURVEY OF HEALTH PLANS

Presenter

Presentation Notes

No Update


PREMIUM GROWTH EXCESSIVE

Excess inflation is paid for in large part by accelerating premiums. Aging accounts for a very small part of these dramatic increases.

EMPLOYEES PAY FOR EXCESS INFLATION

14% 14% 14% 16% 16% 16% 16% 16% 16% 16% 17%

19% 18% 18% 18% 18% 18% 18%

27% 26% 26% 28% 27% 28%

26% 27% 28% 27% 27% 30%

28% 28% 29% 29% 29% 30%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%Average Percentage of Premium Paid by Covered

Workers for Single and Family Coverage, 1999-2016

Single Coverage Family Coverage

$5,277

$4,955

$4,823

$4,565

$4,316

$4,129

$3,997

$3,515

$3,354

$3,281

$2,973

$2,713

$2,661

$2,412

$2,137

$1,787

$1,619

$1,543

$12,865

$12,591

$12,011

$11,786

$11,429

$10,944

$9,773

$9,860

$9,325

$8,824

$8,508

$8,167

$7,289

$6,657

$5,866

$5,274

$4,819

$4,247

$0 $5,000 $10,000 $15,000 $20,000

201620152014201320122011

2010200920082007200620052004200320022001

20001999

Average Annual Worker and Employer Contributions to Premiums and Total Premiums

for Family Coverage, 1999-2016

DATA SOURCE: KAISER/HRET SURVEY OF EMPLOYEE-SPONSORED HEALTH BENEFITS, 2004-2016

Presenter

Presentation Notes

All set Healthcare inflation has found its way into the cost of care and insurance premiums. Done


ENROLLEES VARY BY FIRM SIZE

16%

20%

28% 27%

31%

34% 36%

41%

3% 4% 5% 7% 8%

11% 12%

16%

7%

10% 12%*

14% 15%

18% 19%

23%

0%

10%

20%

30%

40%

50%

60%

2009 2010 2011 2012 2013 2014 2015 2016

% of Covered Workers Enrolled in a plan with a General Annual Deductible of $2,000 or more for

single Coverage By Firm Size, 2009-2016

All Small Firms (3-199Workers)

All Large Firms (200 orMore Workers)

All Firms

DATA SOURCE: KAISER FAMILY FOUNDATION

2% 3% 3% 3%

7% 8% 8% 9% 7%

9% 9% 2%

3% 4% 6%

6%

9% 11%

11% 14%

15%

19%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

% of Covered Workers Enrolled in an HDHP/HRA or an HAS-Qualified HDHP, 2006-2016

HDHP/HRAHSA-Qualified HDHP

4% 5%

8% 8%

13%

17% 19% 20%

24%

20%

29%

Presenter

Presentation Notes

All Set


DEDUCTIBLES NOW SIGNIFICANT

Growth in deductible prevalence, including HDHP, placing greater burden on employees.

55%

59% 59%

63%

70%

74% 72%

78%

80% 81%

83%

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Average General Annual Deductible for Single Coverage

% of Covered Workers with a General Annual Deductible for Single Coverage

DATA SOURCE: KAISER/HRET SURVEY OF EMPLOYEE-SPONSORED HEALTH BENEFITS, 2004-2016

Presenter

Presentation Notes

All Set With nearly everyone facing significant out of pocket expenses for medical care, we believe we the US Medical Economy is hitting the limits of healthcare inflation excess


COST SHIFTING

PPI includes co-pays and deductibles and ECI does not. A negative spread means employers are pushing cost sharing to their employees.

EMPLOYEES ABSORB THE MARGINAL COST

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%U

ne

mp

loym

en

t Ra

te

EC

I – P

PI G

row

th S

pre

ad

ECI-PPI Growth Spread Unemployment Rate

DATA SOURCE: BLS & BEA

Presenter

Presentation Notes

All set


EMPLOYEE PREMIUM SHARE +83%

Out-of-pocket worker contribution has increased 83% over the last decade (6.2% CAGR). Real personal income growth has averaged 2-3%.

PREMIUMS HAVE GROWN FASTER THAN WAGES

-6%

-4%

-2%

0%

2%

4%

6%

8%

10% Real Personal Income YoY%Average+1 Stdev-1 Stdev

$2,973 $5,277

$8,508

$12,865

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

2006 2016

Fa

mily

Co

ntr

ibu

tio

n

Worker Contribution Employer Contribution

61% Total Premium Increase

83% Worker Contribution Increase

$11,481

$18,142

DATA SOURCE: KAISER FAMILY FOUNDATION, BEA, HEDGEYE ESTIMATES

Presenter

Presentation Notes

All Set


INSURANCE VS MAJOR EXPENSES

Annual employee contribution to annual premium has grown to almost 10% of Household Income. Food makes up 12%, while shelter 18%. How much higher can in it go?

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2005 2015* 2024:E Food Transportation Shelter1Employee Sponsored Health Plans *Based on 2013 Median Household Income Rolled Forward by 2-years Inflation 2%

Data Source: Kaiser Family Foundation, St. Louis Federal Reserve and HRM Estimates

? 55%

Increase

Annual Employee Contribution1 to Family Health Insurance Premium

as a % of Median Household Income

Aggregate Household Expenditures as % of Median

Household Income

DATA SOURCE: KAISER FAMILY FOUNDATION, ST. LOUIS FEDERAL RESERVE AND HRM ESTIMATES

Presenter

Presentation Notes

And is now approaching what we pay for a food shelter and transportation


$-

$5,000

$10,000

$15,000

$20,000

$25,000

All Non-Elderly,

Non-PoorHouseholds

With OnlyPrivate

Coverage

One PersonHousehold

Multi-Person

Household

100% to250% FPL

250% to400% FPL

Over 400%FPL

Median Liquid and Net Financial Assets

Liquid Assets Net Financial Assets

TOUGH TO COVER THE DEDUCTIBLE LOW SAVINGS AND NO CASH ON HAND

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

All Non-Elderly, Non-

PoorHouseholdsWith Only

PrivateCoverage

One PersonHousehold

Multi-PersonHousehold

100% to250% FPL

250% to400% FPL

Over 400%FPL

Percent Households with Liquid Financial Assets Greater than Specified Deductibles

Mid Range Deductible: $1,200/$2,400

Higher Range Deductible: $2,500/$5,000


Presenter

Presentation Notes

According to Kaiser, the affordability is becoming very real.


PREMIUM GROWTH SLOWING

Growth in annual family insurance premium is slowing and long-term will ultimately reach parity with GDP (2-3%) and nominal household incomes.

ON TARGET FOR 10% OF MEDIAN HOUSEHOLD INCOME

0%

2%

4%

6%

8%

10%

12%

14%

16%

199

92

00

02

00

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

92

010

20

112

012

20

132

014

20

152

016

20

172

018

20

192

02

02

02

12

02

22

02

32

02

4

YoY % Growth in Annual Family Health Insurance Premium

Forecast

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

199

92

00

02

00

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

92

010

20

112

012

20

132

014

20

152

016

20

172

018

20

192

02

02

02

12

02

22

02

32

02

42

02

5

Annual Employee Family Health Insurance Contribution as a % of MedianHousehold Income

DATA SOURCE: KAISER FAMILY FOUNDATION, HEDGEYE ESTIMATES

Presenter

Presentation Notes

Peak Affordability? Slowing Premium growth and slowing family contribution? Looks like the market is approaching the peak. The regression lines suggest we are reaching slowing both in terms of premium growth and contribution WE ARE HEADING TO GDP LIKE LEVELS


DIFFICULT PAYING MEDICAL BILLS


47%

22%

26%

15%

53%

20%

37%

26%

14%

26%

Have a disability

No disability

Private insurance, high deductible*

Private insurance, low deductible

Uninsured

Insured

Less than $50,000

$50,000 - $99,999

$100,000 or more

Total adults ages 18-64

Reporting Problems Paying Medical Bills in Past Year (June 2016)

By Household Income

By Insurance Status

By Plan Deductible

By Disability Status

Median Household Income is $53,657

Presenter

Presentation Notes

If we look at the CBO expectations going forward, Medicare spending per capita is slowing from 300 basis points above GDP, to 10% of that, to 30 basis points above GDP. No Update


DIFFICULT PAYING MEDICAL BILLS

0%

5%

10%

15%

20%

25%

30%

35%

40%

Uninsured Public Private

Coverage Status

2011 2012 2013 2014 2015 (Jan-Jun)

0%

5%

10%

15%

20%

25%

30%

35%

40%

Poor Near-poor Not-poor

Financial Status

2011 2012 2013 2014 2015 (Jan-Jun)

Percentage of persons under age 65 who are in families having problems paying medical bills in past 12 months

Still Excessive

and Likely to Go Up from

Here

DATA SOURCE: CDC

Presenter

Presentation Notes

If we look at the CBO expectations going forward, Medicare spending per capita is slowing from 300 basis points above GDP, to 10% of that, to 30 basis points above GDP. No Update


EXCHANGE ECONOMIC DISINCENTIVE

$(2,000)

$(1,500)

$(1,000)

$(500)

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

138% - 175% 175% - 250% 250% - 325% 325% - 400% > 400%

Ave

rag

e C

ha

ng

e i

n W

elf

are

Silver Bronze

DATA SOURCE: http://www.nber.org/papers/w21565

Presenter

Presentation Notes

According to recent paper by Wharton Health Economist Mark Pauly and others, published in September, they quantified what they see as a huge economic disincentive to The cost of acquiring a subsidized plan, except for the extreme low end of the FPL scale is not a good deal. No Update


ACA PREDICTED TAKE-UP RATES


Presenter

Presentation Notes

As a result the authors estimate very low take up rates above 250% of the FPL and above, which happens to be the bulk of the uninsured population. No Update


ACA GREAT IF YOU’RE SUPER POOR

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100% - 150% 150% -200%

200% -250%

250% -300%

300% -400%

Ta

ke

-Up

Ra

te

% of FPL

Actual Predicted

*

*Exchange Up-Take likely higher because uninsured population includes those eligible for Medicaid in the

Number of potential eligible exchange enrollees determined using 2013 American Community Survey data on the Uninsured and Non-group populations prior to implementation of the health insurance exchanges. Analysis is limited to the 37 states relying on healthcare.gov in 2015.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

100% -150%

151% -200%

201 - 250% 251 -300% 301 - 400% 400%

% of Eligible Individuals Enrolled in Exchange Plans, by Income


Presenter

Presentation Notes

If we look at actual enrollment versus the prediction by Pauly etal, the model fits the results almost perfectly. No Update


ACA ENROLLMENT BY FPL

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

< 100% 100% -138%

100% -150%

150% -200%

200% -250%

250% -300%

300% -400%

# In

div

idu

als

(‘0

00

)

% of FPL

18-64 Yr Without Health Insurance

2013 Pre-ACA

Medicaid Eligible

2015

3.0%

38.0%

25.0%

15.0%

9.0% 8.0%

2.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0% Exchange Enrollment by FPL %

DATA SOURCE: http://www.nber.org/papers/w21565, hhs

Presenter

Presentation Notes

And with the smallest cohorts with positive economic incentive at the low end of FPL No Update

http://www.nber.org/papers/w21565


#POLICY


MEDICAID EXPANSION

NINETEEN STATES HAVE NOT EXPANDED MEDICAID

Includes high population states of Texas, Florida, Virginia, North Carolina and Georgia

= Expanded = Not Expanded

DATA SOURCE: CMS


MEDICAID EXPANSION

LITTLE HOPE FOR MUCH CHANGE TO MAP IN 2017 • Florida and Georgia will have open race for governor in 2018 • Texas’s current governor is up for re-election in 2018 • Possible legacy building in Florida • Pressure from insurers

MODIFIED EXPANSIONS • Strategy to address highest cost medical consumers especially for behavioral health and

SUD • Addressing key populations like homeless people recently released from prison • Triggers to slow or accelerate expansion to protect budget

INFLUENCE OF EXCHANGE POLICIES • Most successful insurers on ACA exchanges are experienced with Medicaid Managed Care • Bridge programs in Washington and Tennessee

1

2

3



ACA EXCHANGE ENROLLMENT

ANEMIC GROWTH • CBO estimates 12 million subsidized enrollees in 2017 – about same as Feb., 2016 • Unsubsidized enrollees estimated as 3 million in 2017 according to CBO • Off-exchange enrollment also status quo at 9 million enrollees • New projections well below previous 21 million enrollee estimate

PRIMARILY A LOWER INCOME BENEFIT • Most enrollees have incomes at 100-200 percent of poverty threshold • Enrollees likely to churn in and out of Medicaid • Insurers having most luck are in MCO business like MOH and CNC

FIXES NO FIX AT ALL • Administration and insurers attacking wrong problem • Ignores behavior of people living near poverty threshold • Not politically likely anyway

1

2

3




CBO ESTIMATES NOW WELL BELOW 21 MILLION EXPECTED

Most change is accounted for by lower un-subsidized enrollees (6 million v 3 million) but subsidized enrollees estimate now lower also (15 million v 12 million)

2016 2017 2018 2019 2020

Total Population Under 65 272 273 274 275 276

Employment-based Coverage 155 155 153 152 152

Medicaid and ChiP 68 67 67 67 67

Purchased Through Marketplace

Subsidized 10 12 15 16 15

Unsubsidized 2 3 3 4 4

Total Marketplace 12 15 18 20 19

Purchased Off-Exchange 9 9 8 8 8

Medicare 9 9 9 9 9

Other 5 5 5 5 5

Uninsured 27 26 26 27 27

DATA SOURCE: CONGRESSIONAL BUDGET OFFICE

ANEMIC GROWTH



VAST MAJORITY OF ENROLLEES ARE LOWER INCOME

Over 60 percent are > 100 % to < 200 % of FPL or between $24,300 and $48,600 for a family of four.

DATA SOURCE: HEALTHCARE.GOV

Percent of 2015 Qualifying Health Plan Selections by Household Income

< 100% of FPL

≥ 100% to ≤ 150% of FPL

> 150% to ≤ 200% of FPL

> 200% to ≤ 250% of FPL

> 250% to ≤ 300% of FPL

> 300% to ≤ 400% of FPL

> 400% of FPL

Unknown

PRIMARY LOW INCOME BENEFIT

MEDICARE COST CONTAINMENT


MEDICARE COST CONTAINMENT

ALTERNATIVE PAYMENT MODELS • No let up in bundled payments and other alternative payment models • APMs necessary for MACRA’s success • Election will likely perpetuate Obama policies • Mostly likely vehicle for drug cost containment

POST ACUTE REFORM • Reform under way but many would like to speed things up • Easiest source of budgetary offsets

MANAGED CARE • Medicare Advantage plans pay on average 5.6 percent less than Medicare FFS • Politically protected with broad bi-partisan support • Pushes utilization to lowest cost provider

1

2

3


AGAINST TREND


AGAINST TREND – SOME BRIGHT SPOTS

BEHAVIORAL HEALTH & SUBSTANCE ABUSE • Bi-partisan support – major feature of House Republicans and Clinton campaigns • Enforcement of parity • De-stigmatization of issue in public’s mind

TELEMEDICINE • Federal and state policy catching up to technology • Still some obstacles but hard to ignore low cost provider

AMBULATORY CARE • Shift of inpatient procedures to ambulatory setting like Total Knee Replacement • More in-home care

1

2

3



VALUATION, SENTIMENT AND PRICE


HEALTHCARE NTM EV/EBITDA EXTENDED ABSOLUTE / IN-LINE RELATIVE

4.8x

5.8x

6.8x

7.8x

8.8x

9.8x

10.8x

11.8x

12.8x

13.8x S&P 500 Healthcare EV/EBITDA

Average

+1 Std Dev

-1 Std Dev

0.8x

0.9x

1.0x

1.1x

1.2x

1.3x

1.4x

1.5xS&P 500 Healthcare / S&P 500EV/EBITDAAverage

+1 Std Dev


Presenter

Presentation Notes

DONE 10/16 – AF ----


LOW GROWTH GETS LOW MULTIPLES

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Sp

rea

d Y

oY

%

Insu

red

Po

pu

lati

on

Gro

wth

Yo

Y%

Total Insured Population Growth IHF/S&P 500 Spread Enterprise Value/EBIT YoY%

Correlation=0.83



INSURED POPULATION DRIVES PRICE

-60%

-40%

-20%

0%

20%

40%

60%

80%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Sp

rea

d Y

oY

%

Insu

red

Po

pu

lati

on

Gro

wth

Yo

Y%

Total Insured Population Growth IHF/S&P 500 Spread Price/Earnings YoY%

Correlation=0.80



-10%

-5%

0%

5%

10%

15%

20%

Axi

s T

itle

IHF EBIT YoY% SPX EBIT YoY%

GROWTH PREMIUM HAS PEAKED


June 2015 17.36%

August 2016 8.57%

Presenter

Presentation Notes

EBIT not Ebit


S&P 500 MORE ATTRACTIVE?

0%

2%

4%

6%

8%

10%

12%

14%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

SPX Revenue YoY% IHF Revenue YoY%



PROFITS SLOWING FOR PROVIDERS


-10%

-5%

0%

5%

10%

15%

20%

25%

30%

IHF/SPX EBIT Growth%


TOP-LINE DECELERATION VS S&P 500

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

IHF/SPX Revenue Growth%



HISTORICAL PERFORMANCE

We expect Healthcare to continue to underperform due to the factors we addressed previously and that we remain extended on a 3-yr absolute basis.

HEALTHCARE UNDERPERFORMANCE TO CONTINUE

-40%

-20%

0%

20%

40%

60%

80% Rolling 12-mo S&P 500 Healthcare

Average

+1 Std Dev

-1 Std Dev

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35% Rolling 36-mo Annualized S&P500 Healthcare

Average

+1 Std Dev

-1 Std DevHEDGEYE #ACATaper

HEDGEYE #ACATaper

More Downside Left To Go


Presenter

Presentation Notes

DONE 10/16 – AF ----


STYLE FACTOR PERFORMANCE (10/8/15)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1M 3M 6M YTD 1-YR

High Short Interest Low Short Interest

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1M 3M 6M YTD 1-YR

MCAP Bottom 25% MCAP Top 25%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1M 3M 6M YTD 1-YR

High Beta Low Beta

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1M 3M 6M YTD 1-YR

Top 25% Sales Growth

Bottom 25% Sales Growth


Presenter

Presentation Notes

DONE 10/16 – AF ----


$10

$15

$20

$25

$30

$35

$40

$45

$50

$55

$60 S&P 500 Healthcare EPS NTM $

S&P 500 Healthcare EPS LTM $

$350

$550

$750

$950

$1,150

$1,350

$1,550

$1,750

$1,950 S&P 500 Healthcare Sales NTM $

S&P 500 Healthcare Sales LTM $

ABSOLUTE SALES AND EPS ESTIMATES

Reasonable given level of M&A and Stimulus.... but likely to mean revert amid slowing growth. Rate of change significant with slope increase 2.0x for Sales and 2.8x for EPS (> Sales due to operating leverage).

CONSENSUS DEVIATING FROM LONG-TERM TREND

Slope = 0.5x

Slope = 1.4x

2.8x Increase

Slope = 17,478x

Slope = 35,417x

2.0x Increase


Presenter

Presentation Notes

DONE 10/16 – AF ----


CONSENSUS ESTIMATE REVISIONS 2017/2018 SALES ESTIMATES TRENDING LOWER

$740

$760

$780

$800

$820

$840

$860

$880

$900

$920

$940

$960

2017 Sales Per Share Estimates North American Health Services

Down Unchanged Up 2017 Sales Per Share

$840

$860

$880

$900

$920

$940

$960

$980

2018 Sales Per Share Estimates North American Health Services

Down Unchanged Up 2018 Sales Per Share


Presenter

Presentation Notes

DONE 10/16 – AF ----


BASE EFFECTS FOR EPS GROWTH COMPARES ARE DIFFICULT FOR #LATECYCLE CONSUMPTION-ORIENTED SECTORS SUCH AS CONSUMER DISCRETIONARY, HEALTH CARE AND, TO A LESSER EXTENT, TECH. ENERGY COMPARES ARE A LAYUP TO THE EXTENT CRUDE OIL PRICES CAN STAY AROUND/ABOVE CURRENT LEVELS.

DATA SOURCE: BLOOMBERG

-1.5%

9.2%

0.0%

-56.5%

2.7%

15.1%

-3.5%

6.3% 5.2% 10.2%

3.5%

-4.1%

14.2%

-2.1%

-57.5%

-8.6%

14.5%

-1.1%

-15.3%

2.5%

23.7%

0.8%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

YoY % Change in EPS by S&P 500 Sector (Annual Compares)

2Q15A 3Q15A

Presenter

Presentation Notes

DONE 10/16 – AF ----


BASE EFFECTS FOR REVENUE GROWTH CONSUMER DISCRETIONARY, HEALTH CARE, TECH AND TELECOM HAVE THE MOST DIFFICULT COMPARES ACROSS SECTORS, WHILE ENERGY, MATERIALS AND INDUSTRIALS HAVE EASY COMPARES.

-3.3%

2.1% 0.5%

-31.8%

1.6%

8.9%

-3.3%

-9.7%

3.1% 2.4%

-4.6% -3.7%

3.8% 0.5%

-34.4%

0.1%

9.4%

-6.1%

-13.7%

1.1%

11.8%

-2.0%

-40%

-30%

-20%

-10%

0%

10%

20%

YoY % Change in Sales by S&P 500 Sector (Annual Compares)

2Q15A 3Q15A

DATA SOURCE: BLOOMBERG


VALUATION MONITOR


Presenter

Presentation Notes

DONE 10/16 – AF ---- Updated 10/15-AR


HEALTHCARE NTM EV/SALES EXTENDED ABSOLUTE / IN-LINE RELATIVE

0.8x

0.9x

1.0x

1.1x

1.2x

1.3x

1.4x

1.5x S&P 500 Healthcare / S&P 500 EV/Sales

Average

+1 Std Dev

-1 Std Dev

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x S&P 500 Healthcare EV/Sales

Average

+1 Std Dev

-1 Std Dev


Presenter

Presentation Notes

DONE 10/16 – AF ----


HEALTHCARE NTM P/E IN-LINE ABSOLUTE / BELOW RELATIVE <- LEVERAGE HIGH

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x S&P 500 Healthcare P/E

Average

+1 Std Dev

-1 Std Dev

0.6x

0.7x

0.8x

0.9x

1.0x

1.1x

1.2x

1.3x S&P 500 Healthcare / S&P 500 P/EAverage+1 Std Dev-1 Std Dev


Presenter

Presentation Notes

DONE 10/16 – AF ----


PROVIDERS/SERVICES NTM EV/EBITDA IN-LINE ABSOLUTE / BELOW RELATIVE

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0xHealth Care Providers & Services Absolute EV/EBITDA

Average

+ 1 Stdev

- 1 Stdev

0.6x

0.7x

0.8x

0.9x

1.0x

1.1x

1.2x

1.3x Health Care Providers & Services Relative to S&P 500 HC EV/EBITDA

Average

+ 1 Stdev

- 1 Stdev



PROVIDERS/SERVICES NTM EV/SALES EXTENDED ABSOLUTE / IN-LINE RELATIVE

0.1x

0.2x

0.3x Health Care Providers & Services Relative to S&P 500 HC EV/Sales

Average

+ 1 Stdev

- 1 Stdev

0.1x

0.2x

0.3x

0.4x

0.5x

0.6x

0.7x Health Care Providers & Services Absolute EV/Sales

Average

+ 1 Stdev

- 1 Stdev



PROVIDERS/SERVICES NTM P/E IN-LINE ABSOLUTE / IN-LINE RELATIVE

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x Health Care Providers & Services Absolute P/E

Average

+ 1 Stdev

- 1 Stdev

0.6x

0.7x

0.8x

0.9x

1.0x

1.1x

1.2x

1.3x

1.4x Health Care Providers & Services Relative to S&P 500 HC P/E

Average

+ 1 Stdev

- 1 Stdev



Q&A

[email protected]


FOR MORE INFORMATION CONTACT:

[email protected] 203.562.6500

thomas tobin | managing director |...

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