J.P. 摩根-美股-医疗保健行业-2020年医疗设施与管理式医疗展望-2019.12.20-111页.pdf

1North America Equity ResearchDecember 20,2019Healthcare Facilities&Managed Care Gary Taylor AC212-622-J.P.Morgan Securities LLCH E A L T H C A R E F A C I L I T I E S&M A N A G E D C A R EBullish 2020 OutlookDiversified HMOs|Govn HMOs|Acute Care|Sub-Acute|Outpatient|Outsourced ServicesAnthony Makdessi212-622-J.P.Morgan Securities LLCSee the end pages of this presentation for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Client Conference callFriday December 20,201910am Eastern TimeContact us for dial-in details.Michael Ha212-622-J.P.Morgan Securities LLC*Corrected Version We have corrected slides 20,66,74 and 82.*2Table of ContentsSource:J.P.MorganPage 3Our Coverage UniversePage 6Portfolio Manager Summary:2020 OutlookPage 8 Positioning&Top PicksPage 13 Price Target ChangesPage 14JPM Healthcare Conference PreviewPage 162020 Issues&ThemesPage 50Recent Healthcare Facilities&Managed Care FundamentalsPage 60Company Overviews&ModelsPage 91Managed Care Market Model3Our Coverage UniverseSource:J.P.Morgan12/18/2019JPMEPS GrowthP/EEV/EBITDACompany/SubsectorTickerPriceTargetMkt CapRatingC19EC20EC21EC19EC20EC21EC19EC20EC21EAcute Care HospitalsCommunity HealthCYH$3.04na$347UW(2%)19%(5%)-8.5x8.5x8.3xHCAHCA$144.08$186$50,068OW13%12%11%13.8x12.3x11.2x9.1x8.6x8.1xTenet HealthcareTHC$37.98$31$3,988UW45%(10%)3%14.2x15.8x15.4x8.1x8.1x8.0 xTotal Market Cap$54,402Median:5%9%(1%)14.0 x14.1x13.3x8.5x8.5x8.1xSub-Acute CareAcadia HealthcareACHC$33.33$35$2,928N(15%)7%9%16.8x15.8x14.6x10.3x9.8x9.2xUniversal Health ServicesUHS$141.65$164$12,515N5%5%5%14.4x13.7x13.0 x9.1x8.8x8.6xTotal Market Cap$15,444Median:(5%)6%7%15.6x14.8x13.8x9.7x9.3x8.9xOutpatient CareDavita IncDVA$73.45$75$9,835N57%3%24%13.9x13.4x10.8x7.8x8.7x8.1xOutsourced ServicesMednax IncMD$28.40$33$2,341N(34%)(12%)35%12.2x13.9x10.3x10.1x11.2x9.5xManaged Care-DiversifiedAnthemANTM$293.18$391$76,227OW22%16%15%15.1x13.0 x11.3x11.7x10.1x9.2xCignaCI$198.20$282$74,979OW18%9%11%11.7x10.7x9.7x10.4x10.0 x9.6xHumanaHUM$367.55$437$49,472OW22%5%15%20.7x19.7x17.1x14.2x12.3x10.9xUnited HealthUNH$292.90$361$282,063OW16%9%16%19.6x18.1x15.5x15.0 x13.6x12.3xTotal Market Cap$482,741Median:20%9%15%17.4x15.5x13.4x12.9x11.2x10.3xManaged Care-MedicaidCenteneCNC$60.35na$25,344NR32%8%8%13.6x12.6x11.7x9.5x8.4x7.8xMolinaMOH$133.39$152$8,484OW7%5%8%11.6x11.0 x10.2x7.9x7.2x6.9xWellcareWCG$321.43na$16,344NR45%7%12%20.2x18.8x16.8x14.4x12.2x11.0 xTotal Market Cap$50,172Median:32%7%8%13.6x12.6x11.7x9.5x8.4x7.8x4Coverage Universe Market Capitalization($616b)Our Coverage Universe Market Cap Skews Toward MCOsSource:J.P.Morgan,Bloomberg(12/18/19)Our 2019 top picks from December 2018515%26%27%(20%)(10%)0%10%20%30%40%50%2010201120122013201420152016201720182019YTDPayorsProvidersS&P500The Obamacare Decade in Review:Payors vs ProvidersSource:J.P.Morgan,Bloomberg(12/18/19)Compounded returns for the decade reinforce our secular callNotable Events 2010-2019CumCAGRPayors703%23%Providers108%8%Hospitals 90%7%SPX186%11%XLV255%14%6Portfolio Manager SummaryManaged Care&Provider Stocks Underperformed the Market in 20191)The possibility of progressive Democratic healthcare reform along the lines of“Medicare for All”spooked the market in April when Senator Sanders opined that private health insurance“should not exist.”The stocks tumbled in the spring,recovered by summer,tumbled again in October when Senator Warren peaked in the Democratic national polling,then recovered again in November/December as her polling slipped.2)Post 2Q19 reporting,investors became concerned regarding managed care medical loss ratios(MLRs)as several companies missed consensus expectations;fear grew that medical costs might be poised to accelerate to a degree that would threaten earnings(this did not prove to be the case at least through 3Q19 reporting and 2020 guidance).Source:J.P.Morgan2019 MCO Mkt Weight Stock Performance2019 Provider Mkt Weight Stock Performance7Portfolio Manager SummarySource:J.P.MorganWe Expect Managed Care&Provider Stocks to Outperform the Market in 20201)Both managed care and provider stocks typically underperform the market in election years and outperform in years following an election it is our view that the historical underperformance cycle was accelerated into 2019 and the outperformance cycle will also be accelerated,into 2020.2)In our view,managed care and provider valuations are likely to improve in every plausible scenario except a very progressive Democrat winning the presidency with control of the House&Senate.With respect to“Medicare for All,”if most Democrats and all Republicans oppose,how can it ever pass?We are very skeptical that even a“public option”health plan could pass the Senate without a 60-vote super-majority that appears improbable even by 2022.On the other hand,over the longer term,a possibly bipartisan reduction of the Medicare eligibility age could further expand the private Medicare Advantage market.3)A“goldilocks”fundamental scenario could prevail in which a modest sustainable rebound of healthcare consumption improves the fundamental outlook for healthcare providers without threatening the MLRs and margins of managed care given foreseeable trend and prudent underwriting and pricing.Risks to our Sector Outlook1)Recession:managed care&provider stocks underperform in recessions despite defensive EPS.Within managed care,Medicare fundamentals are the least economically sensitive.In the next recession we believe commercial group margins could perform better than historical trend,at the expense of individual(HIX)margins.2)Political:We believe both managed care and healthcare provider valuations would deteriorate if a very progressive Democrat wins the partys nomination and plummet if such candidate wins the election with majority control of both the House and Senate.8Portfolio Manager SummarySource:J.P.Morgan2020 Positioning&Top PicksIn terms of managed care line of business exposure for 2020 we still favor Medicare over Medicaid over group commercial over individual(HIX).In terms of provider line of business exposure for 2020 we still favor hospital fundamentals over physician staffing over behavioral over dialysis.1)We still favor Medicare fundamentals and HUM(the simplest story in healthcare)as a top pick(JPM Analyst Focus List).We believe there is potential Medicare enrollment and margin upside in 2020+the possible repeal of the health insurance industry tax for 2021/2022(which could boost 2021 consensus EPS by HSD).Humana Inc.$367.55,Overweight,Dec 2020 price target=$437.2)We also favor UNH(pursuing two holy grails)for 2020 when we expect generalist investor sentiment to improve and again target UNH given its scale,diversification,consistent execution,and Medicare&duals enrollment momentum.We believe 2020 guidance is likely to creep higher throughout the year,and UNHs 2021 commercial enrollment outlook is likely to improve yty.Unitedhealth Group Inc.$292.90,Overweight,Dec 2020 price target=$361.3)Within the provider universe we favor HCA(the best house in the neighborhood)as a stock where stabilizing utilization,improving market share,“in-flight capital deployment”and below-target leverage may propel a revaluation of the stock toward its deep-value P/E ratio(currently 11.1x 2021E).HCA Inc.$144.08,Overweight,Dec 2020 price target=$186.920192020YTDBy Year-EndBy Year-EndCommentsForward Fundamental OutlookAverage/WeakerAverage/WeakerAverage/WeakerHIF return weighs on 2020 guidance,recession risks in 2020Concerns-Outlook(1)MLR ConcernsHighMediumMedium/Low2Q19 concerns ameliorated by 3Q19 trends and 2020 guidance(2)Political OverhangHighMediumMedium/LowDems cant agree,how can they pass anything?Investment Risk-Outlook(1)Investor SentimentLowImprovementImprovementBinary Election impact,but more paths to improvement vs deterioration(2)ValuationLowImprovementImprovementUnknowns become more known(3)Alpha GenerationNegativePositiveAt Least ModestPossible material alpha generation ex-fully discounted recessionPortfolio Manager SummarySource:J.P.MorganWe see a path to better 2020 stock performance for managed care.This array of factors led to material 2019 under-performanceThis array of factors led to a sharp rebound in 4Q19This array of factors may lead to materially better 2020 performance10Portfolio Manager SummaryManaged Care Equal-Weight Stock Performance(Forward P/E)“Growth”has materially outperformed“value”over the last 5 yearsMethodology:Top(“Growth”)and bottom(“Value”)quartile tickers chosen based on forward P/E at the beginning of each year with top and bottom quartile group stock price performance(full year)calculated on an equal market capitalization weighted basisGrowthValueCNC17.6x CI11.4xWCG 16.1x AET11.1xGrowthValueHUM 20.2x AET13.4xWCG 17.xANTM 12.7xGrowthValueWCG 21.9x ANTM 12.5xHUM 19.xCNC12.xGrowthValueMOH 24.4x CI17.6xWCG 23.1x ANTM 17.4xGrowthValueWCG 17.6x MOH 12.7xUNH17.xCI11.5x(1)(1)As of 2019 YTDSource:J.P.Morgan,Bloomberg(12/18/19)11GrowthValueTDOC 39.7x UHS7.7xAMED 16.1x HCA7.7xCHE13.6x MD7.7xLHCG 13.3x QHC7.1xCSU13.2x CCRN 7.1xSGRY 12.9x THC6.8xIQV12.8x RCM5.7xCRL10.7x GEN3.5xGrowthValueTDOC 95.9x CSU8.5xCHE14.3x UHS7.9xSGRY 13.1x QHC7.8xIQV12.6x PINC 7.4xCRL12.xHCA7.4xLHCG 11.6x THC7.1xARA10.9x ENSG 7.1xASGN 10.8x RCM6.4xPortfolio Manager SummaryHealthcare Providers Equal-Weight Stock Performance(Forward EV/EBITDA)GrowthValueCSU14.7x EHC7.8xSCAI13.3x GEN7.5xACHC 12.7x THC7.3xBKD11.6x LPNT 7.1xCRL11.5x ENSG 6.9xSGRY 10.8x HCA6.8xWBA 10.4x CYH6.6xCHE10.4x AIRM 6.2xMD10.3x KND3.9xGrowthValueGEN19.7x EHC8.7xCSU14.7x SEM8.1xBKD12.5x HCA7.6xTMH11.7x THC7.3xEVHC 10.8x LPNT 7.2xMD10.8x CYH7.2xCCRN 10.4x AIRM 7.2xGrowthValueCSU12.3x EHC8.1xIQV11.3x PINC 7.99xCHE10.7x AMN 7.96xGEN10.4x CYH7.5xAFAM 10.1x UHS7.4xMD10.xTHC7.1xLHCG 9.9xENSG 6.8xDGX9.9xHCA6.7xCRL9.6xLPNT 6.1xAMED 9.2xKND3.8x“Growth”has materially outperformed“value”over the last 5 yearsMethodology:Top(“Growth”)and bottom(“Value”)quartile tickers chosen based on Forward EV/EBITDA at the beginning of each year with top and bottom quartile group stock price performance(full year)calculated on an equal market capitalization weighted basis(1)(1)As of 2019 YTDSource:J.P.Morgan,Bloomberg(12/18/19)12Portfolio Manager SummarySource:J.P.Morgan The sector offers investment opportunities across the spectrum of investment stylesInvestment StyleValue(18x 2020 P/E)Anthem Inc(ANTM,OW)UnitedHealth Group Inc(UNH,OW)Cigna Corp(CI,OW)Humana Inc(HUM,OW)Centene Corp(CNC,NR)WellCare Health Plans Inc(WCG,NR)HCA Healthcare Corp(HCA,OW)Universal Health Services Inc(UHS,N)CVS Health Corp(CVS,OW,Lisa Gill)Walgreens Boots Alliance Inc(WBA,N,Lisa Gill)Molina Healthcare Inc(MOH,OW)Select Medical Holdings Corp(SEM,Uncovered)Encompass Health Corp(EHC,Uncovered)Tenet Healthcare Corp(THC,UW)AMN Healthcare Services Inc(AMN,Uncovered)Ensign Group Inc(ENSG,Uncovered)Acadia Healthcare Co Inc(ACHC,N)LHC Group Inc(LHCG,Uncovered)DaVita Inc(DVA,N)Amedisys Inc(AMED,Uncovered)MEDNAX Inc(MD,N)Chemed Corp(CHE,Uncovered)Premier Inc(PINC,N,Lisa Gill)Teladoc Health Inc(TDOC,OW,Lisa Gill)R1 RCM Inc(RCM,Uncovered)Magellan Health Inc(MGLN,Uncovered)Cross Country Healthcare Inc(CCRN,Uncovered)(1)P/E based on JPMe for Coverage Companies and Consensus Estimates used for Uncovered companies(2)Market Cap as of 12/18/19Large(=$10b)Mid($2b-$10b)Small($10b)Mkt Cap($m)RatingCurrent PricePrior TargetNew Target PriceReturn to Target2019 P/E2020 P/E2021 P/ETarget 21P/EEV/EBITDAGrowthQualityRiskROICLeverageUNH$282,063OW$292.90$276$36123%19.6x18.1x15.5x19.1x6%(5%)0%8%(1%)ANTM$76,227OW$293.18$322$39133%15.1x13.0 x11.3x15.1x(1%)(5%)(8%)0%(2%)CI$74,979OW$198.20$225$28242%11.7x10.7x9.7x13.8x(4%)0%(15%)0%(5%)HCA$50,068OW$144.08$157$18629%13.8x12.3x11.2x14.4x9.5x(10%)(10%)0%7%(7%)HUM$25,344OW$367.55$322$43719%20.7x19.7x17.1x20.4x10%0%(4%)9%0%CNC$25,344NR$60.35na13.6x12.6x11.7xWCG$16,344NR$321.43na20.2x18.8x16.8xUHS$12,515N$141.65$159$16416%14.4x13.7x13.0 x15.1x9.6x(15%)0%0%0%0%Relative Index=SP500$3,19119.5x17.7x16.0 xMid-Cap($2-10b)DVA$9,835N$73.45$65$752%13.9x13.4x10.8x11.1x8.2x(10%)0%(30%)1%(2%)MOH$8,484OW$133.39$150$15214%11.6x11.0 x10.2x11.6x(11%)(25%)(8%)7%(1%)THC$3,988UW$37.98$23$31(18%)14.2x15.8x15.4x12.6x7.7x(10%)(13%)0%0%(10%)ACHC$2,928N$33.33$35$356%16.8x15.8x14.6x15.4x9.5x(8%)0%0%0%(6%)MD$2,341N$28.40$26$3314%12.2x13.9x10.3x11.8x9.6x(30%)0%0%2%(10%)Relative Index=SP400$2,04620.0 x17.8x16.1xSmall Cap(3.0 x for providers&debt/cap35%for payors)-higher leverage implies greater volatility(higher beta and cost of capital)&less opportunity for repo,investments and acquisitons142020 J.P.Morgan Healthcare Conference PreviewSource:J.P.MorganMonday(Jan 13)Tuesday(Jan 14)Wednesday(Jan 15)Thursday(Jan 16)Centene(CNC)Cigna Corp(CI)Community Health Systems(CYH)AdaptHealth(AHCO)Universal Health Services(UHS)Amedisys Inc(AMED)AMN Healthcare Services(AMN)Humana(HUM)Tenet Healthcare(THC)Seema Verma(CMS)KeynoteMolina Healthcare(MOH)Encompass Health Corp(EHC)LHC Group(LHCG)TivityHealth(TVTY)Surgery Partners(SGRY)JP Morgan Healthcare Conference San FranciscoJanuary 13-16,2020 Notable absences:UNH(historically has not attended due to proximity to earnings),HCA,ANTM,ACHC,MD,DVA(there were no last-minute changes,all declined earlier in the fall).Managed Care Last year Cigna supplemented its high-level financial guidance(already provided for 2020)with enrollment details at JPM.CNC&HUM have already provided detailed 2020 financial guidance,and TVTY has provided high-level 2020 revenue guidance.MOH has not yet guided and generally has not done so at JPM.Facilities/Services Generally have moved away from providing guidance at the JPM conference.THC has already blessed 2020 consensus EBITDA.SEM and EHC provided 2019 guidance at JPM.SGRY has already provided preliminary guidance on adjusted EBITDA&SS revenue growth rates for 2020.AMED&LHCG have not guided and generally have not done so at the conference.15Featured Research ReportsSource:J.P.Morgan These reports highlight our recent proprietary research in the sectorThrough 9 months,national MLR trends have improved/declined less than 16bp for each of commercial group,MA and MDCD,only HIX has deteriorated materially YTD.(link)3Q19 Statutory Filing ReviewTrends weaken materially sequentially following unusually strong October results.(link)November Hospital Survey2020 benefits increased 3%yty despite the HIF return with at least modest pressure on 2020 MA margins.Only HUM materially reduced benefits for 2020.(link)2020 MA Benefits AnalysisWe called the 2Q19 MCO sell-off overdone and presented our case for under-appreciated&improved“normalized”2Q19 MLRs.(link)Fall 2019 OutlookWe re-examined the size of the MDCR-MDCD dual eligi