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Metropolitan Health Networks Inc. Message Board

  • botonist86 botonist86 Jun 30, 2008 5:59 PM Flag

    Just listened to the conference call


    The deal was NOT as good as I originally thought. Earley sold the stock of the HMO, so the entire balance sheet was sold to Humana, meaning that ALL of the restricted cash was sold to Humana. Based on what the stuttering EARLEY indicated, the sale will be essentially cash neutral.

    Humana, in additional to the lives in the business, it will be receiving about $14 million in cash from the balance sheet of the HMO and then Humana will pay MDF about $14 million. The HMO lives will be added to the PSN lives. So, essentially MDF paid all of the start-up costs of the HMO ($30+ million pre-tax) to buy 7300 non-profitable PSN businesses.

    MDF will not be adding any new cash, but all of the cash that it has will become unrestricted.

    Based on the total balance sheet MDF sold $4 TO $5 million in book value for $14 million. Based on that, MDF should have an equity gain of $9 or $10 million (out of the $30+ million spent)

    The way Earley sounded, there will be significant write-offs with the restructuring of the business and the converted HMO lives will not be as profitable as the historic PSN lines. Earley "hopes" that some day they will be as profitable.

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    • Rooky, look I have been here for quite some time. When Early came on I was extremely critical and would fight with Bobwins constantly. Then one day I decided to see what Early could do and I shut up for over a year. I figured I was stuck with him I would give him a chance. Why can’t I be supportive of MDF and the shareholder value by wanting a new leader? Like in college football, if you can’t get it done in a specific time period it is time for some new leadership. Early had his shot, he could not make it work. A monkey can manage the PSN business since it cash flows and self runs. He had his shot and blew $35 million dollars. Now let’s bring in a new guy who can spend the next tranche of money and see if he can do better. When a baseball team does not perform after spending huge dollars on big name athletes the first person to go is the manager. Because I want the stock to go up makes me a bad guy? Early had his shot, period the end. We are $35m less and starting from square one. Now is the best time to bring in new blood before Early gets us into a new deal and lose MDF another $35m

    • "so if we are not happy with mgmt and think they should be replaced to increase shareholder value it is personal obsession?"

      I just so happen to know it is personal, and that's why I refute
      and rebuke your sometimes slanderous claims.

      Why don't you explain to everyone here which one of the experienced CEO's MDF should have hired from these prominent healthcare insurers,
      HUM, WCG, HUM, and WCG? They ALL happen to off about 5% today alone and well over 50% in the last year.
      The way I see it, if Mike Earley were managing any one of them, he could have probably done a better job instead of the other way around.

      Skibum, you seem to know a little about this industry, so why don't you try being a little more constructive and supportive. You're doing way more harm than good, and that's why I feel a need to point out the error of your ways.


    • so if we are not happy with mgmt and think they should be replaced to increase shareholder value it is personal obsession?

    • botonist, you mean to tell me skibum doesn't have an obvious personal obsession and hatred for Mike Earley? And it's pretty obvious to me that you do too.

      You may have more experience in working for corporate America than I have, but I have founded and managed companies that have had as many as 120 employees and grossed 10M in revs.
      I know how to succeed and I know how to fail, and that goes for stocks too.

      I'm still a winner with regards to MDF and you've obviously been a loser. What more can I say.


    • No, its for neither pumpers nor constant complainers. Why just sit around and reiterate the same stupid **** day after day though? Doesn't make any sense.

      When you get a bad burger at a restaraunt do you stand outside and hand out flyers for the next 2 years?

    • lets not forget that the stock was at .10 when they began to build the pharmacy business. The stock ran up to $4 until the pharmacy sucked the cash out of the company and the value out of the stock. Hmmm see the trend? Stock drops, they build a HMO business and run the price up only to have that business suck the cash and value of the stock price

    • constant complaining? Oh I get it this board is for only pumpers and honest people cant voice there opinion if it affects you. Lets hide the facts from others

    • "And $0.02 on the dollar is only good if you get more than $0.02 on the dollar in return, taking into consideration the cost of capital... just buying it does not make you a genius or even a good business person... so what were you trying to prove and to whom?"

      botonist, are you paranoid or what? First off I paid .03 on the dollar for the medical portfolio I just bought, and the rule of thumb in the debt buying industry is you need to recover three times what you pay for the debt over 2 to 3 years. As an fyi, I bought mostly judgement debt here in Virginia and my state is "creditor" state whereas Florida is more of a "debtor" state. I'm only trying to explain this to you to point out how little you really know. And as for me understanding financials,
      MDF's balance sheet is stronger than 95% of all public companies in existence today. Do you understand that? Do you understand how important this is? I guess not.

      So I look for the positives, and that's served me well in my own business and other business's I own like MDF. Botonist, if you're thing is to look for the negatives I'd suggest you either go short or simply get out, and that's the smartest advice I can give you.


    • Finally, someone who gets it (about the transaction). botonist (not saying that I agree with his others post but for this post I think he is accurate)

      I'll mention this first that I'm still long and strong. Now talking about the transaction:

      It's not $2000 per HMO member. As botonist pointed out, HUM is buying MDF's HMO business including the restricted cash that is allocated to MDF HMO by MDF (the HMO balance sheet including the liability) for $14M.

      The market is smart most of the time (and somewhat efficient). We've talked before that MDF PSN is worth about $1.8M and here we are. We said before that the HMO is probably negative (remember those who think MDF HMO member is worth $8,000 or $10,000 per member, now they know better from this transaction). In reality probably the HMO is really negative as they spend $30M to build the business and they probably will not receive too much 'net' money (as HUM use MDF own cash to pay part of the $14M purchase price)

      The way I see it, if the transaction consumated, MDF is paying $30M (the startup cost) to add 7000 PSN members. which is not ideal/cheap but better than nothing (or continue bleeding cash if they keep owning the HMO).

      All in all, though I'm sad to see that the HMO business isn't successful for MDF, I think it is a good decision to cut the HMO if they can't get it profitable. as it has been 36 months and the breakeven point seems to be a moving target. I was just hoping that the purchase price could have been more than $14M
      Not sure what will happen to the 2 prong strategy. will be interesting to hear the next earning result and earning call. and where do they want to go from here... and if they can continue to grow their PSN business.. let's say 5-6% per year (net of member attrition).. I am hoping they will be able to achieve that from the relationship with careplus and humana in this new newer markets..

      Maybe they lose the battle (and admit defeat on HMO by selling out) but hopefully they will win the war (MDF as a whole and back to just PSN business). It take a lot of guts and heart to admit that things are not working and let's not be stubborn and figure out a way on how to move on from here and then make the best from it.

      Sometime cutting your loss is necessary and a responsible thing to do (given the circumstances). but I hope next time they learn from this HMO experience and will be more careful in terms of starting a new business line and responding correctly to the progress of that business.

      I'm getting a bit philosophical here, as I've been owning and following MDF from a long time ago and definitely sad to see the HMO business is done for MDF.

      All the best to you all,

      PS: also (now that the HMO will be out of the picture), it will be interesting on what they will use their cash for in the near future. maybe they can follow CNU path of acquiring other profitable PSN, provided the price is right and that it will be accretive, or buy back stock at $1.8 per share using cash that will be generated by operation next 12 months or so.