Here's where investing gets tricky.
I'm pretty confident that Triad Hospitals
While reported revenue increased nearly 17%, revenue on a same-facility basis was up 7% as adjusted admissions decreased 0.3%. In other less-good news, provisions for doubtful accounts were up nearly 24% and constituted 9.7% of revenue, up from 9.2% last year. Adjusting out the hospital's special discount policy for self-payers, doubtful accounts accounted for 12.8% of revenue. That's a punishing level of bad debt.
I do believe there's a case to be made that this is a hospital company worth watching. The company has a joint-venture strategy that sets it apart from other operators and seems to have a reputation for being physician-friendly. Not only does that give the company the opportunity to buy interest in hospitals that might otherwise not come available, but it might also shield Triad from some of the acrimony that is apparently coming out of cost-cutting efforts at rivals such as HCA
What's more, while current returns and growth aren't so hot, I do believe there is an opportunity for performance metrics to get better as the company improves operations at existing hospitals and shuffles underperformers out of its portfolio of holdings.
On the other hand, even the more optimistic adjusted and pro forma admissions statistics don't look tremendously strong, and that bad-debt expense is a weight around the company's neck. And in some cases, it really does sound like a Catch-22 -- health insurance companies like UnitedHealth
I'm sure that this company and stock will be an attractive buy again someday, but I'm just not keen on taking the risks of being early to the story. I'd much rather spend my time looking at the device and drug manufacturers; they're under pricing pressure, too, but at least they know they'll get paid.
For more medical missives:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).