A leading healthcare analyst sees no future in the for-profit hospital industry. Jeff Villwock has spent the past 18 years following stocks in the hospital management space, twice landing on The Wall Street Journal's "All-Star Analyst Team" and once securing the title as top analyst in the bunch. He has seen the hospital sector survive -- and even thrive -- under both political parties throughout his long career. With Democrats now wielding enough power to revamp the nation's entire healthcare system, however, he has decided to focus on a safer line of work -- building a medical school in St. Kitts. "I think there will still be a for-profit hospital industry," says Villwock, who serves as a managing partner at Atlanta-based Genesis Capital. "I just don't think it will make a lot of money. And I think that's going to force people like me, who like to play in the for-profit healthcare business, to look for other opportunities." With Democrats poised to win control of both the White House and Congress, Villwock issued perhaps the scariest report of his career last month. In a nutshell, he painted the Baby Boom -- whose members will start hitting Medicare age in less than three years -- as a giant bust for the hospital sector. While Villwock foresees a seasonal rise in hospital stocks between now and next spring, which could boost his current investments in Health Management Associates ( HMA) and Community Health Systems ( CYH), he warns of shrinking profits and dwindling equity value after that time.
Community Health Systems may close its $7.6 billion acquisition of Health Management Associates, but with the uncertainties of a new healthcare law and the merger partners' own legal problems, it needed good timing to put reasonable financing in place.