Healthcare analyst Tom Tobin and Health Policy analyst Emily Evans reviewed their best stock ideas, major healthcare themes and more.  


Tenet Healthcare Corp (THC), AMN Healthcare Services, Inc. (AMN) and Anthem Inc (ANTM): Our labor data accurately forecast increased utilization of health care services. The accelerating labor trend of 12% in July v. 9% in June means not only higher same store adjusted admissions at THC and HCA but it also higher medical costs at ANTM. That creeping realization got a little boost last week from JPM's regular hospital survey that suggested a similar conclusion. We prefer to rely on labor data than surveys so we will revisit our algorithm, how and why it effectively predicts changes to medical care utilization.

Healthequity Inc (HQY): Recession hits HQY on multiple fronts. Lower market yields for U.S. Treasuries finally appear to be impacting CD rates that continue to come in. As we’ve modeled custodial yields, the impact between the yield curve and CD rates is indirect but real, and we think the benefits of the ladder are quickly becoming a headwind into 2020.  Second, yield on investment balances are largely driven by S&P 500 returns. Third, we continue to see account balance spend down as a real risk of utilization typically accelerates into a recession. Lastly, employment growth should negatively impact membership on a same account basis, and perhaps even on a new account basis. There is a rationale for corporate plan sponsors to look for cost savings in a HDHP-HSA solution, but we think that is more likely after all the negative stuff happens first.

Davita Inc (DVA): We took a look at the extraordinary decline in per treatment costs in 2Q19 for signs it was associated with the deceleration in de novo center openings. We understand new centers are typically “seeded” with commercially insured patients to absorb overhead and labor costs as capacity utilization grows over time. Based on our analysis, it does not look like management's recent shift to slower de novo activity has been a big driver of the per treatment cost trend.

Myriad Genetics, Inc. (MYGN): The Myriad dust-up last week pre-stages some work we have been doing on genetic laboratory tests. Billing and coding of genetic tests remains a significant challenge for the industry and payers and MYGN's experience with Laboratory Benefit Managers is probably not going to be transitory or unique.