People who work on the business side of healthcare often wish that companies would think about healthcare more often, or even concede that they are in “the healthcare business.” I suppose part of this is the law of the instrument, which even if not said by Mark Twain, sounds like Mark Twain: “To a man with a hammer, everything looks like a nail.”
Healthcare businesses often think of non-healthcare co’s as being in the business of healthcare because their own professional lives revolve around healthcare. They see healthcare nails everywhere. In their defense, healthcare is often a top three expense, and because large companies almost always self-insure their medical costs, they pay the bills and collect copays from employees, and effectively rent the network from a company like Cigna or UHC. But with medical trend at 2-3x CPI, and healthcare at 18% of GDP in the US and not slowing down, companies often look at this as something outside their control. In all but rare cases, companies can’t seem to offer better than CPI trend over 3+ years or costs lower than what actuarial cost curves would suggest. That’s one reason it’s a frustration but largely left outside strategy discussions or capital allocation projects.
So it’s rare when a non-healthcare company mentions healthcare to investors. The Cheesecake Factory is more interested in the cost of dairy, uses of cash, wage regulations, customer experience, how many stores to open, the macro environment, and morale; however, for a small win for the “in the business of healthcare” crowd, they actually specifically mentioned healthcare costs in their recent earnings announcement. Healthcare costs drove .03 per share worth of “de-leverage” as they put it. In English that means an unexpected cost increase. This amounts to $1,400,000, .23% of sales, or $50-70 per employee per quarter. That’s not huge and wasn’t mentioned further in the Q&A section but it was mentioned. That’s a start. If any company, such as the Berkshire-Amazon-JPMorgan (BAM) joint venture cracks the code and is validated by an ethical and fair third party, we’ll see more releases and questions on healthcare, as it will be something that impacts costs in a big way, and therefore share price.