HEDGEYE 1
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HEDGEYE 2
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LEGAL
HEDGEYE 3
HEALTHCARE POSITION MONITOR
DATA SOURCE: FACTSET
Sentiment Investment Ideas - Longs Trade Trend Tail Sentiment Investment Ideas - Shorts Trade Trend Tail
Score1LONG Score1
SHORT
6 ATHN athenahealth, Inc. 93 ZBH Zimmer Biomet Holdings, Inc. --- 90 AHS AMN Healthcare Services, Inc. --- 62 MD MEDNAX, Inc. 45 HOLX Hologic, Inc.
24 MDRX Allscripts Healthcare Solutions, Inc. ---
Sentiment Long Bench Sentiment Short Bench
Score1LONG Score1
SHORT
35 CSLT Castlight Health, Inc. Class B --- --- --- n/a CPHD Cepheid --- --- ---76 EVH Evolent Health Inc Class A --- --- --- 94 MDSO Medidata Solutions, Inc. --- --- ---82 CERN Cerner Corporation --- --- --- 89 ILMN Illumina, Inc. --- --- ---
81 WOOF VCA Inc. --- --- ---72 ICLR ICON Plc --- --- ---69 CYH Community Health Systems, Inc. --- --- ---61 Q Quintiles Transnational Holdings, Inc. --- --- ---56 CRL Charles River Laboratories International, Inc. --- --- ---45 DVA DaVita HealthCare Partners Inc. --- --- ---38 LPNT LifePoint Health, Inc. --- --- ---29 QSII Quality Systems, Inc. --- --- ---24 LH Laboratory Corporation of America Holdings --- --- ---19 HCA HCA Holdings, Inc. --- --- ---17 PRXL PAREXEL International Corporation --- --- ---1 DGX Quest Diagnostics Incorporated --- --- ---1 CPSI Computer Programs and Systems, Inc. --- --- ---
TRACKER UPDATE
HEDGEYE 5
ATHN | CAGR MEDICAL PRACTICES
DATA SOURCE: HEDGEYE TRACKER
0%
5%
10%
15%
20%
25%
30%
35%
CA
GR
# of medical practices on athenaNet
HEDGEYE 6
ATHN | MEDICAL PRACTICE ATTRITION
DATA SOURCE: HEDGEYE TRACKER
-6
-4
-2
0
2
4
6
8
10
12
Pra
cti
ce
Pe
r D
ay
Won Lost Net
HEDGEYE 7
SEEING MORE HOSPITALS...
7 Hospitals 264 Beds 3 Inpatient 4 Clinics
4 FQHC 75 Docs
> 10% Take Rate
12 Urgent Care ~32 Docs
HEDGEYE 8
ATHN | TRACKER MODEL
DATA SOURCE: COMPANY FILINGS AND HEDGEYE TRACKER
Correlation = 0.93
425
-211
1 75
-290
3,006
-2 Std Error 2,338
+2 Std Error 3,603
-1,000
-500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500 Variance Net Collector Adds Model - Tracker
HEDGEYE 9
ATHN | 1Q16 DOC ADD COMPOSITION
2,497
20 50
500
300
700
1,333
219
625
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Beth Israel TeamPraxis Ascension NYP Trinity Small-GroupNew
Same-store Attrition Total
Ne
t C
olle
cto
r D
oc
Ad
ds
~3,100 Gross
HEDGEYE 10
ATHN | BALANCED SCORECARD
DATA SOURCE: COMPANY FILINGS
97% 98%
64%
93% 91%
130%
89%
81%
99% 100%
82%
95%
130%
115%
91.00% 88%
0%
20%
40%
60%
80%
100%
120%
140%
Financial Score Balanced Scorecard
Ascension Health
Trinity Health
HEDGEYE 11
ATHN | SHORT INTEREST
DATA SOURCE: FACTSET
10%
15%
20%
25%
30%
35%
40% SI % Float Average +1 Std Dev -1 Std Dev
HEDGEYE 12
ATHN | HISTORICAL EV/EBITDA
DATA SOURCE: FACTSET
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
40.0x
45.0x
50.0x
55.0x
NT
M E
V/E
BIT
DA
EV/EBITDA NTM Average +1 Std Dev -1 Std Dev
CONFIRMING ATTRITION
HEDGEYE 14
CAN MDRX DEFEND THEIR TURF?
DATA SOURCE: GOOGLE IMAGES, COMPANY WEBSITE, HEDGEYE FIELD NOTES
Inpatient Ambulatory Population Health
EMR
Practice Management
Revenue Cycle
HEDGEYE 15
CERN ANNOUNCED DEAL AT HIMSS...
DATA SOURCE: GOOGLE IMAGES, COMPANY WEBSITE, HEDGEYE FIELD NOTES
Inpatient Ambulatory Population Health
EMR
Practice Management
Revenue Cycle
HEDGEYE 16
RISK AT ASCENSION HEALTH • Ascension Health, the
largest non-profit health system in the United States (+6,000 physicians) signed an agreement with athenahealth in 2013 to implement their practice management /rev cycle offering
• Part of the deal included a hunting license to cross-sell their ambulatory EHR offering to the member health systems
DATA SOURCE: COMPANY FILINGS AND GOOGLE IMAGES
Press Release
Press Release
Press Release
ATHN replaced Touchworks for 300 Employed Physicians
ATHN replaced Allscripts Payerpath and PM for 200
Providers… Uses Touchworks and Followmyhealth
Uses Touchworks and Followmyhealth Patient Portal
HEDGEYE 17
LOSS TO ATHENAHEALTH
DATA SOURCE: HEALTHSYSTEMCIO.COM
HEDGEYE 18
GOING LIVE ON EPIC MID-YEAR 2016 483 BED HOSPITAL
HEDGEYE 19
“LOSING MARKET SHARE RAPIDLY”
DATA SOURCE: GLASSDOOR.COM
HEDGEYE 20
MDRX | BOOKINGS ESTIMATE
DATA SOURCE: COMPANY FILINGS
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
To
tal
Bo
ok
ing
s Y
oY
%
HEDGEYE 21
MDRX | WILD CARD...
CONFIRMING ATTRITION
HEDGEYE 23
ZBH | KNEE GROWTH YOY %
DATA SOURCE: COMPANY FILINGS
JNJ 1Q16 +8%
SYK 1Q16 +9%
ZBH 1Q16:E -0.7%
(10.0%)
(5.0%)
-
5.0%
10.0%
15.0%
Yo
Y %
US
/Am
eri
ca
s K
ne
e G
row
th
Johnson & Johnson Stryker Zimmer-Biomet
HEDGEYE 24
ZBH | HISTORICAL VALUATION
DATA SOURCE: FACTSET
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
20.0x
NT
M P
/E
P/E NTM Average
+1 Std Dev -1 Std Dev
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
NT
M E
V/E
BIT
DA
EV/EBITDA NTM Average
+1 Std Dev -1 Std Dev
HEDGEYE 25
PENT-UP DEMAND NEWLY INSURED
SOCIETY OF ACTUARIES ANALYSIS OF KS CLAIMS DATA
DATA SOURCE: HTTPS://WWW.SOA.ORG/RESEARCH/RESEARCH-PROJECTS/HEALTH/2015-PENT-UP-DEMAND-HEALTH.ASPX
6.2x
2.5x 2.4x
1.9x 1.7x 1.5x
1.0x 0.9x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
KneeReplacement
Surgery
Lower BackPain Surgery
UpperEndoscopy
MRI/MRA CT Gallstone KneeArthroscopy
Dermatology
Re
lati
ve
Use
Newly Enrolled Relative Use
HEDGEYE 26
TOTAL ACA ENROLLMENT VS JOLTS
DATA SOURCE: CMS, KAISER AND BLS
0
50
100
150
200
250
300
350
400
450
500
0
5
10
15
20
25
30
JOLT
S (th
ou
san
ds)
AC
A E
nro
llme
nt
(mill
ion
s)
Exchange Enrollment* Medicaid Enrollment** Cumulative HC Job Openings
*Includes a mix of pre-effectuated and effectuated enrollment for 2014/2015 period. February 2016 is pre-effectuated only reflecting OE3. **Cumulative enrollees for expansion states relative to baseline enrollment year
HEDGEYE 27
MEDICAID PER ENROLLEE SPENDING
DATA SOURCE: US TREASURY, CMS
$360.00
$370.00
$380.00
$390.00
$400.00
$410.00
$420.00
$430.00
$440.00 Per Enrollee Spending Per Month (3MAV)
Per Enrollee Spending Baseline July-Sep 2013
HEDGEYE 28
$350
$400
$450
$500
$550
$600
$650
$700
$750
$800
$850 Per Enrollee Spending Per Month Baseline (3-mo Average)
Newly Insured (3-mo Average)
Average Per Enrollee Spend Newly Insured Medicaid
NEWLY INSURED MEDICAID SPEND
DATA SOURCE: CMS AND US TREASURY
Newly Insured Under Medicaid Spend +49% More Than Existing Population
HEDGEYE 29
PEAK HC JOB OPENINGS?
DATA SOURCE: BLS
+2.9x Std Deviation
ACA Impact
400
500
600
700
800
900
1,000
1,100HC Job Openings Average +1 Std Dev -1 Std Dev
HEDGEYE 30
2/2914 0.11%
2/29/15 36.83%
2/29/16 -20.77%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0% JOLTS: HC Job Openings Rolling 3-Mo YoY % ROC
HEALTHCARE JOLTS SLOWING
DATA SOURCE: BLS
MATERNITY TRACKER
HEDGEYE 32
MD | MATERNITY TRACKER UPDATE
DATA SOURCE: HEDGEYE TRACKER
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%Total MD - 1M y/y % Total MD - 3M y/y % United States 3M y/y%
HEDGEYE 33
MD | SAME-UNIT VOLUME MODEL
DATA SOURCE: COMPANY FILINGS AND BLS
(3.0%)
(2.0%)
(1.0%)
-
1.0%
2.0%
3.0%
-2.0x
-1.5x
-1.0x
-0.5x
0.0x
0.5x
1.0x
1.5x
2.0x
Ad
juste
d S
am
e U
nit V
olu
me
Yo
Y %
Z
-Sc
ore
Z-Score Model MD: Adjusted Same-Unit Volume YoY %
Correlation = 0.64
HEDGEYE 34
MATERNITY TRACKER BY COMPANY
DATA SOURCE: CDC, HEDGEYE
3Q15 Oct-15 Nov-15 Dec-15 4Q15 Jan-16 Feb-16 Mar-16 1Q16 Apr-16 (P)Maternity Tracker/CDC Regression (yr/y -1.1% -1.6% 1.4% -6.0% -2.1% -5.2% 0.0% -4.4% -3.2% -3.1%MD - Maternity Tracker (wtd, yr/yr) -1.2% -1.3% 2.0% -7.3% -2.2% -6.1% -0.5% -5.1% -3.9% -2.9%HCA - Maternity Tracker (wtd, yr/yr) 0.1% -0.4% 3.0% -7.0% -1.4% -5.2% -0.4% -4.7% -3.4% -2.5%THC - Maternity Tracker (wtd, yr/yr) -0.8% -1.1% 2.2% -7.3% -2.1% -6.1% -0.9% -5.2% -4.1% -2.4%CYH - Maternity Tracker (wtd, yr/yr) -0.9% -1.7% 3.1% -6.5% -1.7% -5.1% 1.4% -3.9% -2.5% -2.5%LPNT - Maternity Tracker (wtd, yr/yr) -1.7% -0.3% 0.6% -2.3% -0.7% -3.7% -3.9% -2.8% -3.4% -1.0%AHS - Maternity Tracker (wtd, yr/yr) -1.8% -2.3% 0.8% -5.9% -2.5% -4.9% 0.4% -4.7% -3.1% -3.2%
THOUGHTS INTO THE PRINT
HEDGEYE 36
AHS | ORGANIC GROWTH MODEL
DATA SOURCE: COMPANY FILINGS AND BLS
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0% Combined Model AHS: Total Organic Growth YoY %
Correlation = 0.93
HEDGEYE 37
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
-15.0%
-5.0%
5.0%
15.0%
25.0%
35.0%
45.0%
HC
A S
S A
dm
ission
sYoY
%
JOLT
S
YoY
%
JOLTS: Health Care and Social Assistance - Job Openings y/y growth %
HCA SS Admissions (y/y growth %)
HCA | ADMISSIONS VS JOLTS
DATA SOURCE: BLS AND COMPANY FILINGS
Correlation = 0.82
HEDGEYE 38
HOLX | FACILITY PENETRATION BY MSA
DATA SOURCE: HEDGEYE TRACKER
BEGINNING OF THE END?
HEDGEYE 40
ILMN | NGS TEST BY GENE COUNT
DATA SOURCE: GTR