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Cornell University

; M.B.A.,

University of Chicago.

Prior to joining

Merrill Lynch

in September 1997, Goodman covered the health services industry at

Goldman Sachs


Donaldson Lufkin & Jenrette.

Goodman also worked as a member of the health care investment banking group at

Thomson McKinnon Securities

and was director of strategic planning at

Samaritan Health Services.

She is a member of the

National Health Policy Forum Private Markets Technical Advisory Group.

Industry Outlook and Style

Goodman likes to sleep at night. That's why she prefers to recommend companies with predictable earnings. But predictability isn't always easy to find in the managed care field: With rising medical costs impacting premiums and increasing consumer disappointment over a perceived lack of quality services, the group faces a challenging environment. Goodman's advice to investors: Be selective.

Who are these "select" companies? Goodman gives Merrill's highest rating, intermediate and long-term buy, to

UnitedHealth Group



Wellpoint Health Networks





. All three have strong balance sheets. In addition, they focus on the commercial market, which makes them better-positioned than those managed care names with significant Medicare exposure. (Merrill has had an investment banking relationship with Wellpoint in the last three years.)

Goodman makes UnitedHealth her top pick because the insurer consistently prices its products accurately, she says. The company also has proved to be an innovator in the delivery of quality care. Says Goodman, "They are trying to identify the patients with disease conditions that are susceptible to better management, and through better management, create better outcomes, which also reduces costs." Goodman cites two United innovations: First, its highly praised care-coordination program gives patients and physicians more control over health decisions than do traditional HMOs. Second, its physician-profiling initiative seeks to improve the quality of care by providing the physicians in its network with easily accessed, up-to-date information on the most recent developments in their fields.

Wellpoint, another favorite, also focuses on new product development. According to Goodman, Wellpoint is "interested in delivering value to customers, not just ratcheting down the cost of health care." The company offers customized hybrid health plans and such specialty products as benefits for prescription drugs; dental, vision and mental health care; and life and disability insurance. It has a strong market position in California and a record of consistent earnings performance. In her Aug. 2 report, the Merrill analyst raised her price objective to $100.

As for Cigna, "they underpromise but overdeliver" laughs Goodman. Cigna's strength is its excellent management. The company may not be in the forefront of innovation, she concedes, but its conservative business mix (predominantly self-insured) makes it the company least exposed to increased medical risk.

Among smaller-cap names, Goodman likes

Trigon Healthcare


. Rating it an intermediate-term accumulate and long-term buy, Goodman says that


"is to Virginia what Wellpoint is to California."

Humana is a classic example of a managed care name that has not done well. (Goodman has had a neutral call on Humana since 1998, when its deal with United failed.) First, the company overestimated its ability to maintain a low cost structure: It underpriced its products, digging a pricing hole that Goodman thinks could be difficult to climb out of. Second, Humana is overly dependent on Medicare, a significant negative in the current market place, because government reimbursements have not kept pace with escalating health care costs in recent years.

The outcome of the November presidential and congressional elections also could strongly affect the long-term outlook for managed care stocks. "If the Democrats win both the presidential and congressional races, it would not be a good environment for this group," says Goodman. In her view, the passage of a strong patient bill of rights would increase health care costs. Higher costs would in turn force employers either to drop or limit coverage or to shift significant costs to employees. Either way, the ranks of the uninsured would balloon.

Institutional investors in's

Analyst Rankings -- Equity 2000

commend Goodman for her accessibility and ability to "understand quality and differentiate between the good and bad companies." They also say that she is exceptionally objective. (See our related


Stock Pick

Favorite stock for next 12 months:

UnitedHealth Group


"UnitedHealth has multiple avenues available to it for high-quality growth. They have an exceptional management team in place, and we expect the company's earnings performance and quality of earnings to be if not


best, among the best in the group."

Rate Their Stock Picks:

Which stock do you like best?

Goodman and Arnold: UnitedHealth Group

France: Cigna

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