Ryan Heslop Short Community Health Systems: Sohn New York Conference

We're posting up notes from the Sohn New York Investment Conference.  Next up is Ryan Heslop of Firefly Value Partners who presented a short of Community Health Systems (CYH).


Ryan Heslop's Sohn New York Presentation

•    Short Community Health Systems (CYH): levered rollup of rural hospitals

o    Company will file for bankruptcy and equity will be worthless
o    CYH grew from 8,000 to 30,000 beds through acquisitions since 2000’s. Paid 600k per bed
o    Net debt grew to $16 billion from less than $2 billion since 2005
o    Management compensated on revenue and EBITDA. Ignores debt
o    Admissions have been declining. Patients are choosing to go to urban hospitals. Trend towards outpatients
o    Rising unit costs
o    Declining profitability per bed
o    Slashed capex by 50% per bed over 10 years. Under-investing in new technologies which fuels patient declines
o    CYH charging more and gauging out of network patients and uninsured. Top in the industry in gauging. Desperate for cash
o    Over 4 years has sold 1/3 of hospitals. Paid top dollar buying them at 600k. On sale has received 250k per bed and might be getting worse
o    Debt per bed has increased to over 700k per bed
o    Company doesn’t generate any cash. Including items the company categorizes as one-time costs they are burning a few hundred million a year.


Be sure to check out the rest of the Sohn New York conference presentations.

Glenview Capital Adds To FMC & Tenet Stakes, Trims Flextronics & Community Health Stakes

Larry Robbins' hedge fund firm Glenview Capital has made numerous portfolio adjustments recently.  Below are the details of the various SEC filings they've made.

Increases FMC Position

Glenview has filed a 13G with the SEC on shares of FMC Corporation (FMC).  Per the filing, Glenview now owns 5.01% of the company with over 6.69 million shares.

This is up from the 4.8 million shares they owned at the end of the second quarter.  The filing was made due to activity on October 12th.

Per Google Finance, FMC is "a diversified chemical company. The Company serves agricultural, consumer and industrial markets with solutions, applications and products around the world. The Company operates in three business segments: FMC Agricultural Solutions, FMC Health and Nutrition, and FMC Lithium. The Company's FMC Agricultural Solutions segment develops, markets and sells three classes of crop protection chemicals, which include insecticides, herbicides and fungicides. The FMC Health and Nutrition segment focuses on food, pharmaceutical ingredients, nutraceuticals, personal care and similar markets. The pharmaceutical additives are used for binding, encapsulation and disintegrant applications. The Company's FMC Lithium segment manufactures lithium products."


Reduces Flextronics Exposure

Second, the hedge fund has also filed a Form 4 with the SEC regarding its position in Flextronics (FLX).  Per the filing, Glenview sold 20 million shares at $11.1 on October 22nd.  After this transaction, they still own 55.13 million shares.

Per Google Finance, Flextronics is "a Singapore-based provider of global supply chain solutions. The Company designs, builds, ships and serves packaged electronic products for its original equipment manufacturers (OEMs) in various groups. The Company offers a range of design and engineering services that relate to manufacturing (including enclosures, metals, plastic injection molding, precision plastics, machining, and mechanicals), system integration and assembly and test services, materials procurement, inventory management, logistics and after-sales services (including product repair, warranty services, re-manufacturing and maintenance), supply chain management software solutions and component product offerings (including rigid and flexible printed circuit boards and power adapters and chargers)."


Trims Community Health Systems Stake

Third, Larry Robbins' hedge fund has filed a Form 4 with the SEC indicating they've reduced their stake in Community Health Systems (CYH).  Per the filing, Glenview sold 279,074 shares on October 22nd at weighted average prices of $27.7284 and $26.8947 with about a third of the sales occurring at $30.08.

After these sales, Glenview still owns 11.81 million shares of CYH.

Per Google Finance, Community Health Systems is "a hospital company and an operator of acute care hospitals in communities across the United States. The Company provides healthcare services through the hospitals that it owns and operates in non-urban and selected urban markets throughout the United States. It operates in two operating segments: hospital operations and home care agencies operations. Its hospital operations include the Company's acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services. Its home care agencies operations provide in-home outpatient care. Services provided through its hospitals and affiliated businesses include general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services. It provides a range of hospital healthcare services and other outpatient services to patients in the communities in which the Company is located.."


Adds to Tenet Healthcare Position

Last, Glenview also increased its holdings of Tenet Healthcare (THC).  Per a Form 4 filed with the SEC, Glenview acquired 500,000 shares total on October 22nd at weighted average prices of $28.8656 and $29.8034.  After these buys, Glenview now owns over 16.99 million shares of THC.  As we've detailed previously, Glenview has previously been out buying THC in October.

Per Google Finance, Tenet Healthcare is "a healthcare services company. The Company operates regionally focused, integrated healthcare delivery networks in large urban and suburban markets. As of December 31, 2014, it operated 80 hospitals, 210 outpatient centers, six health plans and Conifer Health Solutions, LLC (Conifer), which provides healthcare business process services in the areas of revenue cycle management, value-based care and patient communications. It provides operational management for revenue cycle functions, including patient access, health information management, revenue integrity and patient financial services. It also offers communications and engagement solutions to optimize the relationship between providers and patients. Conifer operates a management services business that supports value-based performance through clinical integration, financial risk management and population health management. It has two operating segments: Hospital Operations and other, and Conifer.."

Glenview Capital Updates Community Health Systems Stake

Larry Robbins' hedge fund Glenview Capital has filed an amended 13G and 13D with the SEC regarding their positions in Community Health Systems (CYH) and Health Management Associates (former ticker HMA).

On January 27th, CYH announced it had completed its acquisition of HMA.  As such, Glenview received over 2.6 million shares of CYH in exchange for its 37.7 million shares of HMA at an exchange rate of 0.06942 CYH shares per each share of HMA owned (and adjusted for cash received in lieu of the fractional shares).

As a result of this transaction, Glenview now owns over 12 million shares of CYH, or 10.67% of the company.

Glenview has bet big on hospitals and profited handsomely from their wagers as a whole.  For more portfolio activity from this hedge fund, click here.

Glenview's Larry Robbins on Healthcare, For-Profit Hospital Stocks

At the Robin Hood Investors Conference late last week, Glenview Capital's Larry Robbins also made a rare media appearance on CNBC and talked about the Affordable Care Act, his healthcare investments, and other topics.

He articulated that the key focus on more Americans gaining healthcare is who is getting insurance versus how many.  He feels that people who actively use health services are the ones signing up first, which benefits hospitals (and he thinks managed care will have some issues).

On for-profit hospitals versus not-for-profit: "Regardless of what the competitive environment is, they (for-profit)  have fared better in the past and they will in the future."

On why he wanted Health Management Associates (HMA) to merge with Community Health (CYH):  "Consolidation is important, scale is important."

Touching on general market valuation, he noted that his portfolio is trading at lower multiples since that's what they've focused on.  But if you turn to the overall market, historically with low interest rates, the market trades at a higher multiple until real inflation goes above 4% he says.

Video 1 on the Affordable Care Act & healthcare in general:


Video 2 on for-profit hospitals (HMA, CYH, THC, HCA etc):


Video 3 on market valuation:

Glenview Capital Boosts Stake in Community Health Systems

Larry Robbins' hedge fund firm Glenview Capital recently filed a 13G with the SEC regarding shares of Community Health Systems (CYH).  Per the filing, Glenview has disclosed a 8.39% ownership stake in CYH with 7,649,773 shares.

This marks a 368% increase in the number of shares they owned since the end of September.  The new disclosure was required due to portfolio activity on November 13th.

Per Google Finance, Community Health Systems is "an operator of hospitals in the United States. The Company provides healthcare services through the hospitals that it owns and operates in non-urban and selected urban markets throughout the United States."

Hospitals have been a big portfolio theme for Glenview as they also own large stakes in Tenet Healthcare (THC), HCA (HCA), and Lifepoint (LPNT).  Tenet has been the biggest wager of the basket and we've highlighted how Glenview has been buying THC as well.