AMN, DVA, DXCM, THC | Post Earnings Overview | 3Q19 Results Excite Alongside Favorable Quad Outlook

DVA | We originally added DVA to our active shorts on December 7, 2018 at $58 per share.  Commercial mix shift has had less of an impact on revenue and cost per treatment than we expected through 3Q19. Despite wage pressures hitting Health Care Services in 2019, the impact at DVA has been well controlled.  The result is our short call now relies more heavily on policy headwinds, such as AB290, and the spread of similar initiatives across the United States that we expect will put pressure on commercial rates. Unfortunately for our short, these headwinds won't become more apparent until later in 2020. While we believe further upside may be unlikely from here, we no longer have a clear downside catalyst and we are moving DVA to the short bench.

DXCM | Dexcom reported a blow out 3Q19 revenue number.  Our claims data regression had forecast revenue of $295M for 2Q19 compared to the reported $266A, or ~30M lower.  For 3Q19, the trend was reversed with the company reporting significant upside versus our estimate.  The estimate for 4Q19 won't be available until there is more data available beyond what we have through October . 

For both management and our claims data to be correct, DXCM would need to be taking share from Abbott.  Alternatively, the claims data could be garbage and the physicians we've spoken to about peak penetration all quacks. 

Since we are not prepared to walk away from our work, we instead added additional detail to our claims data in order to take a deeper and more detailed look at the underlying trend.  Beyond service date, CPT code, and claim ID, we added fields for rendering physician NPI, patient ID (coded and anonymous), and billing entity NPI.  With the additional data we map out new physicians, new patients, same physician patient growth, repeat patient trends, and practice level and geography level detail as well.  We also plan to use the data to target physicians for phone interviews regarding their CGM use.  

THC & SGRY | Addition of Total Knee Replacement to the Ambulatory Surgery Center Covered Procedure List, combined with payment reforms that adequately cover reimbursement of the device and changes to the annual payment update, are the best policy news the ASC industry has seen in decades.

Medicare will pay $9,600 for a TKA in an ASC, versus $12,000 in a Hospital Outpatient Department. Medicare paid for 511,000 procedures in 2017 of which about 1/3, our field research indicates, would migrate to the ASC setting.

The policy change, long overdue and strongly opposed by the hospital associations, will benefit THC's USPI unit and perhaps accelerate SGRY's turn-around.

Also, be sure to catch Health Care Sector Head, Tom Tobin, on Today's Macro Show @ 9 AM ET!