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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: peter michaelson who wrote (38235)	6/9/2010 2:38:12 AM
From: E_K_S	Respond to of 78663

Hi Peter - RE: MPW & Prime Healthcare Based on a limited Google search, Prime seems like an aggressive fast growing Health Management company. They have grown from acquiring one hospital in 2004 to owning and operating 13 hospitals and a medical group as of November, 2009. I saw that a recent lawsuit was settled (out of court) regarding some of their "alleged" billing practices. The California Department of Managed Health Care, which oversees HMOs, filed a lawsuit against Prime Healthcare in 2008, after receiving complaints from patients and providers over bills for emergency services. It appears that Prime was just trying to recover their costs for services performed in their emergency rooms and billed the users the additional fees not paid by the HMO and or those w/o health insurance. Prime Healthcare settles Calif. lawsuit modernhealthcare.com "...Prime Healthcare said in a statement that although it believes it would have ultimately won the case at trial, it decided to settle to avoid further costs. Prime Healthcare “looks forward to working with the department to ensure that HMOS live up to their legal obligations,” according to the statement...." ------------------------------------------------------------------- Two of their 13 hospitals are ranked in the Top 100 facilities for 2009. marketwatch.com April 3, 2010 Two of Prime Healthcare's Hospitals are Named Top 100 Hospitals by Thomson Reuters for 2009 "...Thomson Reuters announced today that Desert Valley Hospital and Montclair Hospital Medical Center are among the winners of its prestigious Top 100 Hospitals(R) in the Nation award...." Therefore, management must be doing something right specifically at Desert Valley (since the incident in 2005 that you referenced) to receive these awards in 2009. You do point out an "alleged" character flaw (reporting to work while under the influence of alcohol) of Reddy the CEO of Prime Healthcare. But realize that this allegation is by two former nurses during litigation. Reddy has an impressive resume and holds a MBA & MHA. Perhaps his current management style brings with him some of his early Indian culture & background. 38% of MPW's revenues coming from Prime Healthcare is not a big concern to me. However, I would like to see the proceeds from the secondary offering be placed with other health management operators. I think this points out how inefficient some of our smaller hospitals are (even many of the midsized hospital groups). Companies such as Prime Healthcare are tasked to manage the transition of inefficient community hospitals into efficient (including using the latest electronic medical record systems) profitable organizations. MPW and their shareholders benefit from successful health management operators. You need an aggressive management team so you are assured you generate your FCF from the facility fees. You do raise a possible "red flag" for Prime Healthcare. Their financial soundness is relevant to MPW. However, I am not too concerned with this one operator but it is worth making a note to any future discussion in MPW's 8K or 10K. Thanks for the heads up. EKS