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Biotech / Medical : Oxford Health Plan (OXHP)
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To: Worswick who wrote (1679)6/25/1998 7:51:00 PM
From: Mang Cheng  Read Replies (1) of 2068
 
"S&P Maintains Recommendations in HMO Sector"

By Robert Gold, S&P Equity Analyst

NEW YORK, Jun. 25 (Standard & Poor's) -
Congressional leaders are in a race to enact some
form of managed care legislation after the tobacco
bill's demise. Politics suggest that some form of
consumer protection bill will be passed by end of 1998,
although extreme steps such as greater HMO
malpractice liability are not anticipated. We see the
passage of some federal mandates, including the
elimination of provider gag clauses and a revision to
strict "gatekeeper" rules and more flexible benefit
options. The liability issue would have been the most
potentially damaging.

We still expect strong industry revenue growth in
coming quarters. The rise will reflect enrollment gains,
augmented by commercial rate hikes of about 5%. We
see rates climbing upwards of 6% in 1999.

The margin outlook is aided by medical cost inflation in
the 4% range, while generally lower selling, general
and administrative costs reflect the impact of mergers
completed since early 1997. While the 20%-plus
advance so far in 1998 for the HMO group has
stretched valuations somewhat, we still recommend
investors accumulate Wellpoint Hlth Networks
(WLP), United Healthcare (UNH), and Humana Inc
(HUM). Mid Atlantic Medical Svcs (MME) remains
an avoid.

25-Jun-1998 15:30:54 (01276722)

Mang
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