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OUTA: NHI Bill Falls Well Short Of Universal Healthcare Goals

OUTA, the Organisation Undoing Tax Abuse, advocates for universal healthcare but criticizes South Africa's National Health Insurance (NHI) Bill. Executive Director Stefanie Fick warns of the gap between NHI ideals and implementation realities, citing funding and management shortcomings. Concerns include strain on finances, corruption risks, and potential skill drain. With the Bill signed before elections, OUTA questions motives and urges collaboration with industry experts for a viable healthcare model. Vigilant against misuse of public funds, OUTA stands prepared for legal action if necessary.

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From the Organisation Undoing Tax Abuse (OUTA)

The Organisation Undoing Tax Abuse (OUTA) says that it fully supports the constitutional right of all South Africans to proper healthcare but warned that Government is creating false hope by signing the NHI Bill into law just two weeks before the National Elections.

"There is a big disconnect between the dream of the sort of universal healthcare envisioned in the NHI Bill, and the reality of implementing it. Our country is in crisis on so many levels. For a universal healthcare system to work, you need enough funding and proper management, something that is sorely lacking at this stage of the country's history," says Adv Stefanie Fick, Executive Director of OUTA's Accountability Division.

"We have analysed the NHI bill, and while we acknowledge the good intention to create a better healthcare system for all the people of our country, we have several concerns, the biggest ones being funding and management," she adds.

OUTA says that the law in its current form will put undue strain on the fiscus. "There simply isn't enough money for what is envisioned by the NHI Bill. It should also be noted that there is a national healthcare system in place at the moment, but it has been badly managed and hollowed out by corruption. What will stop this from happening with the NHI? One just needs to look at Eskom, Prasa, Transnet or the SABC – to just name a few entities – to know that government does not have the capacity to efficiently run a national health system of this magnitude," says Fick.

Adv Fick says South Africans, who are still reeling from the impact of the Covid-pandemic, should also not forget the corruption with money meant for equalising the health care system during the pandemic. "We haven't forgotten the Digital Vibes scandal or PPE corruption. In Gauteng, we are also still waiting to see justice for Babita Deokaran, who was murdered after exposing massive corruption within the Gauteng health department and specifically at Tembisa Hospital. Can we trust Government when a much bigger healthcare budget comes into play?"

According to Fick, OUTA finds it concerning that the Bill is signed into law shortly before the national elections. "Is this just an electioneering ploy?" she asks. "Various role players in the healthcare system have voiced their concerns – from professional bodies representing medical professionals to medical aids, academics, civil society, and economists, but it is apparently just ignored. Why the rush with signing the Bill into law?"

Fick said OUTA is also concerned about the potential exodus of critical medical skills, further complicating the long-term success of the scheme. The South African Medical Association (SAMA), the Board of Healthcare Funders (BHF) and the Hospital Association of South Africa (HASA), have all expressed their commitment to universal health coverage, but previously pointed out that the current NHI legislation suffers from fundamental problems, including a lack of input or participation from the industry during the process. (See article here)

"These bodies represent thousands of medical doctors in both the public and private sector, and it is worth noting their concerns about the practical implementation of a functional health system. They are – after all – the ones who will be responsible for treating millions of South Africans. Who will do the work if the doctors and nursing staff choose to leave? And can we afford to lose more professional people who will shrink our tax base even further?"

OUTA urges the president to return to the drawing board and work with the various industry experts to design a workable universal health care model. "Government still hasn't learnt that simply legislating new policy won't magically make it work – just like with AARTO and e-tolls. You need the correct systems, enough finances and efficient governance for NHI to work, and unfortunately government's history in this regard is not convincing. We also need many other things to get the country's economy back on track – like proper infrastructure, job creation and electricity. And what good will the NHI do while thousands of people in the country have no access to clean drinking water?"

OUTA says it will continue to monitor developments in the NHI space. "We remain vigilant and committed to upholding accountability with public money. While litigation is always an option if needed, we are aware of collective efforts from various organisations who are ready to address all the issues around the NHI Law through legal action."

Accounting Can Learn From Skilled Trades Workforce: Universal Technical Institute's CFO Troy Anderson

The perception of skilled trades — mechanics, heating, ventilation, industrial maintenance and welding — has changed dramatically in recent years. As the traditional college experience faces perception and cost issues, learning a high-demand skill that can provide sustainable career opportunities has become increasingly attractive to young professionals.

Much like accounting's labor issues, the demand for labor in many of the skilled trades and healthcare sectors continues to increase alongside this diminishing value of the traditional higher education model. For Troy Anderson, CFO of the Universal Technical Institute, this crossroads of increasing demand for trades has resulted in "a bit of a moment" for his industry, as he and his leadership call it.

Troy Anderson

Optional Caption

Permission granted by Troy Anderson

CFO, Universal Technical Institute, Inc.

First CFO Position: 2012

Notable Previous Employers:

Xerox

Nextel/Sprint Nextel

MCI Communications

Bell Atlantic (now Verizon)

Coopers & Lybrand (now PricewaterhouseCoopers)

This interview has been edited for brevity and clarity.

ADAM ZAKI: It's clear the accounting industry talent pipeline needs some change. Based on your experience as a trained accountant and CFO, what can be learned from the skilled trades' approach to work that can help remedy some of accounting's issues?

TROY ANDERSON: It's an interesting question. First, I think it's important to highlight there are also significant shortages in the trades that we focus on, particularly skilled labor in transportation, energy and healthcare. Across both of our divisions that encompass these fields, we're seeing incredibly large gaps between demand and the supply of technicians working in those fields and students coming in to work within them.

Frankly, our issues are just like the ones in accounting. I'm not sure if we've found the solution to talent problems, or if there is one out there yet. I know there is some talk about the 150-hour requirements, and I've read things in articles that you've previously written, and what I can gather is we must continue to demonstrate the benefits of these careers. Whether it's a skilled trade or finance, by continuing to focus on offering employee flexibility when possible.

I strongly believe it's incumbent upon employers and leadership to continue looking at ways to motivate people to enter their respective fields and create an environment where people want to be there and be successful.

You mentioned the 150-hour rule. What are your thoughts on scaling this back while maintaining the same standards? Have any of the trades you offer programs around gone through a similar process?

ANDERSON: Yes. In our nursing program and some areas of our healthcare programs, we have seen similar discussions take place regarding addressing talent shortages by lowering standards. However, the accrediting bodies — the nursing boards for example — resist this, and they still restrict the amount of programs available and the number of seats in the program because they are concerned about the quality of care and the quality of education the workers are receiving while they're heading for those careers.

As for myself, I am a product of the pre-150-hour era. I spent six years in public accounting, and both of my sons have accounting degrees. One pursued his CPA and the other did not, although the one who didn't still met his 150-hour requirement. Both are doing quite well, and after watching them go through the process I can imagine there will be people who are trailing into the end of their 150-hour requirements right now that might not feel so good about change to the requirement, so I think there needs to be a structured transition period if any changes are made.

There's a perception that traditional higher education is losing its value. Are you talking about this when discussing plans for the future with your fellow executives, and how do you plan on increasing the value students get from your programs, long term?

ANDERSON: Yes, we are talking about this a lot right now. We like to say we are having a bit of a moment in our industry right now when it comes to our viewpoint. For several years, it was frowned upon for a high school student to consider anything other than a four-year degree. Many young people were told to go get a four-year degree and it will all work out.

And for a while, that created a lot of headwinds for what we do.

"I can imagine there will be people who are trailing into the end of their 150-hour requirements right now that might not feel so good about change to the requirement, so I think there needs to be a structured transition period if any changes are made."

Troy Anderson

CFO, Universal Technical Institute

But now, I think the tide has turned a bit with student loan forgiveness by providing a lot of visibility to the level of debt traditional degrees can cost people. This, combined with the demand for skilled trades and healthcare being as strong as it is, has created a strong opportunity lately for us and our programs to get a lot of visibility and recognition.

We believe some of our strongest value comes from our employment community relationships that allow our students to qualify for jobs. We have thousands of employer relationships. Our enhanced manufacturer programs are a great example of this. Companies like BMW, Porsche, Harley Davidson, Mercedes, and more have a strong understanding of what we do and they know that we will provide highly qualified people to their premium brands who need those skills.

A large part of your bottom line relies on the funding of student loans. Given the politics and costs around debt forgiveness nowadays, how would you respond if the process of obtaining a student loan became much more rigorous?

ANDERSON: Certainly, if you look at our business model, 65 to 75% of our revenue is through the Department of Education. Things such as Pell Grants, subsidized loans, direct loans and parental loans are all a part of this. It's also worth noting that 15% of our business is also through veteran affairs programs. We have a fairly large ex-military population among our student body.

The remainder of our funding is from private loans of cash-paid programs, or credits we extend to students. If there were changes to how these things all worked, it would be a significant change for us given its significance to our revenue stream.

When we talk to students about financing, we take the same approach as a community college or traditional four-year school would. We also heavily emphasize that many of these employers that we have partnerships with have pretty great tuition reimbursement programs. It's very much in our student's power to decide whether or not they want to go to school for free. They must bear the risk upfront and obtain the initial financing for tuition, but they can go into it knowing that there's a possibility their future employer can reimburse them for the cost of their education.

"When I joined in 2019 the company had begun a transformation, looking at the front of the business by rationalizing cost structure after many years of revenue decline, decline in profitability, and ultimately losing money."

Troy Anderson

CFO, Universal Technical Institute

These programs that we offer that bring together our partners and students have requirements for membership that have tuition reimbursement in their guidelines. This, combined with the amount of debt our students are taking on being substantially lower than traditional student debt, allows us to maintain a positive outlook on our revenue stream moving forward while also creating opportunities for our students to build financially sound futures.

Your share price is up around 150% in one year. What do you credit the most to this?

ANDERSON: It's a lot of things coming together that we've been working on. When I joined in 2019 the company had begun a transformation, looking at the front of the business by rationalizing cost structure after many years of revenue decline, decline in profitability, and ultimately losing money. I came into this job on the front end of that transformation.

We received capital from a large strategic investor, and have been deploying that capital by building new campuses. We also raised capital through an equity raise too, subsequently some debt as well. We deployed that capital on our new campuses too. We also acquired two new schools, which gave us a broader portfolio of programs, including an aviation program and further expansions into healthcare programs, which is now about a third of our business.

A lot of that stock price increase has been between the last six and nine months. We just completed our fiscal second quarter and we've had over 12% YoY growth as another positive indicator of our recent success. We're yielding the results of all our culminated efforts lately, and it's been great to see.

Zacks Industry Outlook Highlights HCA Healthcare, Tenet Healthcare, Universal Health Services, Acadia Healthcare And Community Health Systems

For Immediate Release

Chicago, IL – May 29, 2024 – Today, Zacks Equity Research discusses HCA Healthcare, Inc. HCA, Tenet Healthcare Corp. THC, Universal Health Services, Inc. UHS, Acadia Healthcare Co., Inc. ACHC and Community Health Systems, Inc. CYH.

Industry: Hospitals

Link: https://www.Zacks.Com/commentary/2279398/5-hospital-stocks-set-to-gain-from-robust-industry-trends

The near-term prospects of the Zacks Medical-Hospital industry will be shaped by various factors, including rising patient volumes, resumption of elective procedures, and technological and cybersecurity advancements. While increasing salaries and moderate staffing constraints will play a deterrent, the effects of it would be largely offset by higher revenue per admission. Consolidation activities are making a strong comeback in the hospital space.

Capacity expansions are expected to be prevalent as hospital companies aim to capture greater market share in a fragmented industry. Investments in technological upgrades will likely provide a competitive edge. Companies like HCA Healthcare, Inc., Tenet Healthcare Corp., Universal Health Services, Inc., Acadia Healthcare Co., Inc. And Community Health Systems, Inc. Will capitalize on these trends.

Industry Overview

The Zacks Medical-Hospital industry comprises for-profit hospital companies that provide healthcare through different types of hospitals, such as acute care, rehabilitation and psychiatric. These hospital entities are engaged in internal medicine, general surgery, cardiology, oncology, neurosurgery, orthopedics and obstetrics, telehealth services, mental health care and diagnostic and emergency services.

Revenues of these companies depend on inpatient occupancy levels, medical and ancillary services ordered by physicians and provided to patients, and the volume of outpatient procedures. These hospital companies receive payments for patient services from the government under the Medicare program, Medicaid or similar programs, managed care plans (including plans offered through the American Health Benefit Exchanges), private insurers and directly from patients.

4 Key Trends Shaping the Industry

Increasing Patient Volumes: The resumption of deferred elective procedures post-pandemic has boosted patient volumes, admissions and utilization in recent quarters. According to the U.S. Census Bureau's revised report, the 65+ age group is expected to grow rapidly, driven by the large baby boom generation. This demographic's share of the population is forecasted to increase from 17.3% in 2022 to 20.6% by 2030 and 22.8% by 2050, supported by scientific and healthcare advancements. This is expected to drive up demand for hospital services. While concerns persist for patients regarding medical inflation, rising coverage costs and financial constraints, factors like the Affordable Care Act and other safety nets may offer some relief, aiding patient volume growth.

Story continues

Countering Higher Expenses: The increase in patient volumes and utilization, coupled with growing costs for hospital supplies, salaries, wages and benefits amid inflationary pressures, is expected to escalate operating expenses for hospitals. Although there are some signs of improvement, staffing challenges continue to be a concern. To mitigate these issues, companies are strategically working on improving labor productivity and incorporating new technologies to optimize costs and boost efficiency. Growing revenue per admission will support its margins. Additionally, renegotiating contracts with suppliers and vendors will aid their cost management efforts and enhance operational efficiency.

Embracing the Digital Frontier: The ransomware attack on UnitedHealth Group's unit, Change Healthcare, in February 2024 highlights the critical need for continuous technological and cybersecurity advancements in the healthcare space. Hospital companies are increasingly integrating artificial intelligence (AI) and automation alongside real-time analytics to enhance care delivery. AI is improving clinical workflow management and medical diagnoses, leading to reduced patient wait times and treatment costs. The adoption of telehealth and telemedicine, which surged during the COVID-19 pandemic, is expected to maintain its growth momentum.

Resurgence inM&A Activity: Following a significant drop during the COVID-19 pandemic, merger-and-acquisition (M&A) activity within hospitals and health systems is on the rise. The fragmented industry is likely to see a surge in M&A deals and partnership agreements over the coming quarters, which are expected to aid capacity expansionary efforts. A Deloitte report indicates that 86% of surveyed health system executives anticipate M&A to play a crucial role in their 2024 strategic plans. Business consolidation, new technology partnerships and evolving business models to improve patient experience are expected to significantly boost profitability for hospital operators.

Zacks Industry Rank Indicates Bullish Trends

The group's Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, signals bullish near-term prospects. The Zacks Medical-Hospital industry, which is housed within the broader Zacks Medical sector, currently carries a Zacks Industry Rank #31, which places it in the top 12% of nearly 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry's positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group's earnings growth potential. As a matter of fact, the industry's earnings estimates for 2024 have climbed 7.3% in the past year.

Before we present the stocks that you may want to monitor, let's take a look at the industry's recent stock market performance and valuation picture.

Industry Outperforms Sector but Lags S&P 500

The Zacks Medical-Hospital industry has fared better than its broader sector over the past year but lagged the Zacks S&P 500 composite. During this period, the stocks in this industry have gained 23.3% compared with the Zacks Medical sector's 6.2% growth. The S&P 500 index jumped 26.1% during this time.

Industry's Current Valuation

On the basis of the trailing 12-month EV/EBITDA (Enterprise Value/ Earnings Before Interest Tax Depreciation and Amortization) ratio, which is commonly used for valuing hospital stocks, the industry trades at 8.37X compared with the S&P 500's 14.65X and the sector's 13.42X.

Over the past five years, the industry has traded as high as 9.55X and as low as 5.57X, with a median of 7.84X.

5 Stocks Worth Your Attention

Tenet Healthcare Corporation: The company delivers a broad range of healthcare services, mainly through general hospitals and associated healthcare units. Increasing patient volumes are driving substantial revenue growth in both the Ambulatory Care and Hospital segments. The Ambulatory Care unit, particularly strengthened by the strong performance of its USPI division, plays a significant role in this success. Strategic tuck-in acquisitions further boost the company's overall performance, while contractual rate increases in the Conifer unit enhance financial results. Additionally, the company proactively divests non-core assets to improve profitability.

The Zacks Consensus Estimate for THC's 2024 bottom line is pegged at $8.42 per share, which indicates 20.6% year-over-year growth. Tenet Healthcare beat earnings estimates in all the past four quarters, the average surprise being 56.5%. The consensus mark for 2024 revenues is pegged at $20.3 billion. Shares of the company have gained 86.5% over the past year. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

HCA Healthcare: The company operates general and acute care hospitals and related facilities. With growing patient volumes and admissions, HCA is well-positioned for growth. Its expansion into telemedicine is projected to boost revenues and diversify its portfolio. Also, its Managed Medicare operations are poised to drive its performance. Through strategic acquisitions and a focus on enhancing shareholder value via dividend hikes and share buybacks, HCA is scaling its business and prioritizing investor returns, respectively.

The Zacks Consensus Estimate for one of the biggest for-profit publicly traded hospitals' 2024 EPS indicates 9.6% year-over-year growth. HCA Healthcare beat earnings estimates thrice in the past four quarters and missed once, the average surprise being 5.6%. The consensus mark for 2024 revenues signals a 6.9% increase from a year ago. Shares of the company have jumped 20.5% over the past year. It currently has a Zacks Rank #3 (Hold).

Universal Health Services: The company manages acute care facilities, outpatient centers and behavioral health care units, specializing in areas such as autism, eating disorders, substance use disorder and military-related issues through its Patriot Support Program. The company is experiencing growth due to increasing patient days and a comprehensive care network. The expansion of licensed beds in acute care hospitals and strategic joint ventures in the behavioral health portfolio is expected to drive further growth.

The Zacks Consensus Estimate for Universal Health's 2024 bottom line indicates 29.4% year-over-year growth. UHS beat earnings estimates in all the past four quarters, the average surprise being 8.1%. The consensus mark for its 2024 revenues signals an 8.4% increase from a year ago. Shares of the company have gained 37.8% in the past year. It has a Zacks Rank #3 at present.

Acadia Healthcare: The company provides behavioral healthcare services in the United States and Puerto Rico. Its performance is bolstered by increasing patient volumes, rising admissions, and the expansion of service lines into new states. ACHC expects to add more than 400 beds to existing facilities in 2024 and inaugurate a maximum of 14 CTCs this year. The company's commitment to expanding its capabilities is evident through its active pursuit of joint ventures with reputable healthcare systems.

The Zacks Consensus Estimate for ACHC's 2024 bottom line indicates 2.6% year-over-year growth. The consensus mark for 2024 revenues signals a 9.3% increase from a year ago. ACHC beat on earnings in each of the last four quarters, the average surprise being 6.4%. It has a Zacks Rank #3 at present. Although shares of the company fell 8.4% in the past year, its improving operations are expected to support a future rebound.

Community Health Systems: The company is a leading operator of general acute care hospitals and outpatient facilities across the United States. Its strong performance is driven by rising patient volumes and improved occupancy rates. With a strategic emphasis on telehealth, CYH is well-positioned for long-term growth. The company seeks acquisitions in hospitals where it can add value by expanding specialty medical services and achieving economies of scale. Additionally, it actively divests non-core assets to enhance profitability, same-store metrics, and cash flow.

The Zacks Consensus Estimate for CYH's 2024 bottom line indicates a 77% improvement from a year ago. Over the past four quarters, it beat earnings estimates twice and missed on other occasions. The consensus mark for its 2024 revenues is pegged at $12.5 billion. Shares of the company have gained 16.6% in the past year. It has a Zacks Rank #3 at present.

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