Managed Care Facilities Booked 60% Through 2010; Wage Inflation At 2% Versus 4% To 6%: Private Health Care Facilities Hitting On Several Cylinders According To RBC Capital Markets Managing Director

• On 3:49 pm EDT, Wednesday September 30, 2009

67 WALL STREET, New York - September 30, 2009 - The Wall Street Transcript has just published its Medical Real Estate: Healthcare REITs, Long-Term Care Facilities and Hospitals Report offering a timely review of the sector to serious investors and industry executives. This 45 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Investor Perception of Medical Facilities Publicly Traded Securities -- Shift from Inpatient to Outpatient Care -- Economic Implications of Health Care Reform -- Medical REITs Growth -- Public Markets Reaction to Obamacare Proposals -- Sustainability of Dividend Yields In Different Health Care Legislation Scenarios -- Ability to Access Debt Capital -- Implication of Aging Population -- Profits of Outpatient Versus Inpatient Care -- Health Care Delivery Costs -- Leaseback Arrangements -- Skilled Nursing Costs -- Growth of Seniors Housing -- Geographical Analysis for Profits in Medical Real Estate -- Advantages to Investing in Licensed Hospitals -- Access to Equity Underwriting -- Economics of a Fragmented Industry -- Consolidation Opportunities -- Debt Refinancing Strategies -- Mergers and Acquisitions in the Medical Facilities Industry

Companies include: LifePoint Hospitals (LPNT); Community Health Systems (CYH); Psychiatric Solutions (PSYS) and Tenet (THC); Medical Properties Trust (MPW); Healthcare Realty Trust (HR); LTC Properties (LTC); Health Care REIT (HCN); National Health Investors (NHI); HCP Inc. (HCP); Alexandria (ARE); BioMed (BMR); Senior Housing Properties Trust (SNH); Omega Healthcare Investors (OHI); Ventas (VTR); Emeritus (ESC); Brookdale (BKO); Fannie Mae (FNM); US Physical Therapy (USPH); AmSurg (AMSG)

In the following brief excerpt from just one of the 9 interviews in the 45 page report, a "Best on the Street" equity analyst discusses the outlook for the sector and for investors.

Frank G. Morgan, CFA, joined RBC Capital Markets as a Managing Director in November 2008. Based in Nashville, Tenn., Mr. Morgan's current research universe is dedicated to facility-based health care services, including acute care hospitals and senior living services, including skilled nursing and assisted living, and a range of specialty service providers, including institutional pharmacies, hospice care, long-term acute care, rehabilitation and behavioral health services. Mr. Morgan has earned recognition as a master stock picker in The Wall Street Journal's "Best on the Street Analysts Survey" and was named by Forbes.com and Zacks Investment Research as a Blue-Chip Analyst in the medical care sector. Mr. Morgan was named to the Nashville Business Journal's "Healthcare 100" list for five years. His views on health care have been quoted in The Wall Street Journal, Modern Healthcare, Business Week, Forbes, The New York Times, the Financial Times and many other financial publications. He has appeared on national TV and radio programs, including CNBC, Bloomberg Television and Radio, Market Place, as well as National Public Radio's Mornings Edition and All Things Considered. Mr. Morgan has 23 years' experience in equity research and investment banking, primarily in health care services. Prior to joining RBC Capital Markets, he was a Managing Director and Senior Analyst at Jefferies & Company, Inc, and was a Partner and Senior Analyst with J.C. Bradford & Co., where he covered facility-based health care services. He previously served as a member of the Alabama State Healthcare Planning and Development Council Certificate of Need review board as well as the State Health Coordinating Council. He holds a B.S. in microbiology and an MBA from the University of Alabama.

TWST: What's impacting operating costs and revenues most these days?

Mr. Morgan: On the revenue side for hospitals, pricing has been consistently strong while volumes once again had been relatively weak. In addition to seeing better commercial and managed care rates, acuity or case mix has also been on the rise. So that's also helped the overall pricing. There has been growing concern about the outlook for commercial rates, but so far they've hung in there very nicely. Over the past several years, it appears that commercial payers have been looking to lock in longer-term, multi-year contracts - that's what's helping pricing hold up so well. When you talk to providers, they have over 60% of their managed care book locked in through 2010. So that's why I say managed care pricing and commercial pricing actually have very good visibility. As for the cost side, by far labor costs have been the biggest source of earnings upside so far in the year, and the focus has been really twofold - both on wage inflation as well as productivity. As the economy has slowed and volumes softened, providers have tightened up productivity. The infamous nursing shortage has all of a sudden disappeared and as a result wage inflation has moderated. We are seeing zero to 2% annual wage inflation versus 4% to 6% just a few years ago. Also the very expensive agency labor has been virtually eliminated from some companies. And then supply costs, probably secondarily, would be another area where there has been some positive effects made as well.

TWST: Any other types of things you see companies doing to tighten their belts?

Mr. Morgan: That's about it. The only other item on the expense line is bad-debt expense - they are working hard on that. They are trying to do a better job at qualifying uninsured patients for some type of reimbursement, and they are trying to collect co-pays and deductibles upfront from insured patients. But still, where you're seeing the most tangible improvement so far has really been on that labor side, particularly in the last couple of quarters.

TWST: Does the bad-debt expense worsen in a recessionary environment like this?

Mr. Morgan: Certainly, bad-debt expense has been an area that has seen a lot of attention with the increase in the number of uninsured Americans. I think, for the most part, hospitals have finally got processes in place to try to control it as much as they can. There are really two sources of bad debt: there are people who don't have insurance - in this case what you try to do is qualify those patients for some form of payment or collect what you can from them, what they can pay - the other source would be insured patients who have copayments or deductibles. Hospitals are making sure they actually pay their copays and deductibles. In this case these are patients who have insurance but historically a large percentage of those have failed to pay their copays and deductibles. There is a lot more focus on that area as well.

A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services from Psychiatric Solutions, Inc. in the past 12 months. RBC Capital Markets is currently providing Psychiatric Solutions, Inc. with non-securities services. RBC Capital Markets has provided Psychiatric Solutions, Inc. with investment banking services in the past 12 months. RBC Capital Markets has provided Psychiatric Solutions, Inc. with non-securities services in the past 12 months. RBC Capital Markets Corp. makes a market in the securities of LifePoint Hospitals, Inc., Psychiatric Solutions, Inc. and may act as principal with regard to sales or purchases of this security. A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than investment banking services from Psychiatric Solutions, Inc. during the past 12 months. During this time, a member company of RBC Capital Markets or one of its affiliates provided non-securities services to Psychiatric Solutions, Inc.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 45 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

For Information on subscribing to The Wall Street Transcript, please call 800/246-7673

Buzz up!