Thursday, October 9, 2008

It's Times Like This That Transform Industries

This is not a pretty picture. In the last three months, Healthways’ stock price has gone from just over $25 a share to about $9. The Disease Management Care Blog checked the various finance ‘HWAY’ message boards and blogs and couldn’t find any special insight into what’s going on. Everyone’s stock prices are down and maybe HWAY is just suffering along with the rest.

So what is going on? Of course, Healthways' customers - the health insurers - are stressed and their stock prices have tumbled also. Not only have the investments holding up their reserves and surpluses taken a hit, business-purchasers will be in no mood to put up with future premium increases – which will further stress the bottom line. Health insurers and self insured employers may be forced to offer low-premium/bare bones benefit products stripped of wellness or prevention. On the chronic condition side, expect the Medical Directors, Chief Actuaries and CFOs to have some tough discussions on whether their contracts with disease management companies actually improve the medical loss ratio. Finally, the DMCB has also raised questions about the business model and the need to adapt to changing expectations.

But the Disease Management Care Blog is still bullish on the industry and especially the concept. Disease management remains a policy favorite at many levels in Federal and State government and employers are unlikely to simply walk away from their health care activism. What’s more, there aren’t many other patient-friendly ideas out there that increase quality and temper costs. Expect 'disease management' to remain one of the go-to solutions in the short and long term.

With a P/E ratio of 8, the DMCB doesn’t think Healthways is going to vaporize. Instead, it is looking for something else is going to happen. There is a Healthways Earnings Conference Call on Thursday Oct 16 at 5 PM EST and the DMCB will try to be there (or at least read the transcript) and be on the alert for hints.

It’s times like this that force industries to transform. It not only makes grist for the blogging mill, it’s ultimately good for healthcare consumers.

image from the Motley Fool.

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