Monday, April 27, 2009

An Update on Healthways

Underwelmed by all the repetitive media cacophony over the dire Swine Flu news*, the Disease Management Care Blog detoured on over to the latest Healthways earnings call transcript to see what insights it could glean about the industry. As previously noted, Healthways is one of the few publically traded disease management-only companies. If it is doing well, it bodes well for the rest of the industry.

It seems there was good news, resulting in just over a dollar or 11% increase in the share price.

What made the increase remarkable was that it occurred despite Healthways having lost money, thanks to having to settle a $40 million suit - thanks to some past sins by its predecessor company. Investors apparently forgave the total 1st quarter loss of $14.8 million because, in the background, there was real revenue growth. The number of persons Healthways serves (or 'covered lives' in health insurance parlance) reached an impressive 35.8 million (up by 3 million). It signed nine new insurer contracts and renewed or extended another 9 contracts. Excluding the legal settlement mentioned above, Healthways achieved revenue of $0.02 per share. That ain't bad, given the specter of rising unemployment and fewer people being able to afford health insurance. What's more, there were more persons participating in its Silver Sneakers programs, and it looks like there will be business in Australia and Germany. Cash flow seems healthy and Healthways is making capital investments in IT.

The insights?

Once again, while disease management and population-based care programs continue to come under intense scrutiny in Washington D.C., the debate seems to be over in the commerical helath insurance markets. They continue to see value in what companies like Healthways brings to the well-being of enrollees. Ever more insurers are buying into this.

While the earnings call mentioned the loss of the Minnesota Blue Cross Blue Shield business, note that that wasn't due to its abandonment of disease management. Rather, that insurance plan still values the concept, because the only difference is that it's been brought in-house. It will take at least a year to see how successful that strategy is, assuming Minnesota is willing to share its experience with the DMCB.

In addition, Healthways is clearly positioning itself as a one stop shop solution that crosses the spectrum of care for popultions with wellness, prevention and chronic illness programs. This ain't your old disease management stuff anymore.

Last but not least, Healthways is well aware of the Patient Centered Medical Home. Here's a telling quote from Ben Leedle during the call:

And we’ll continue to hear more and more about the medical home which I think has lots of different supporters with lots of different definitions. I think the general construct there is there needs to be a whole lot more coordination for the consumer in and around how to navigate the resources that already exist and to take advantage of new ones like what our company brings in the area of wellness and prevention. And to put those resources at the helm of the captain of the ship, which in a lot of these models is the primary care physician. We know a little something about how to help get that done.


*The DMCB thinks it will only be a matter of time until someone blames the emergence of a new influenza A variant on global warming. You may want to be skeptical if it comes up.

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