Universal American Corp. (UAM)

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Universal American Corporation (UAM)

Citi Global Healthcare Conference Call

February 26, 2013 2:15 pm ET

Executives

Richard A. Barasch – Chairman and Chief Executive Officer

Analysts

Carl McDonald – Citigroup Global Markets

Presentation

Carl McDonald – Citigroup Global Markets

Next upon the agenda Mr. Barasch, the CEO of Universal American.

Richard A. Barasch

Excuse me I’m fighting with cold and just for Carl, I’ll answer to that right way. I’m happy to be here. I guess the format is I will speak for a few minutes and then we’ll be happy to answer any question Carl has except for anything under the 45-day notice.

Healthcare is obviously in the news, it’s a big issue in the political arena, it’s a huge issue in the fiscal arena and without going through everything on this slide, I am on slide six for anybody who is with me on the web. We are in a revolution in healthcare. There is the Affordable Care Act, which is being implemented as we speak, particularly the exchanges for ’14. But what I feel and I think a lot of us see in the healthcare business is a revolution happening underneath in cost largely driven by transparency. The availability of data and the availability of data to help companies like ours figure out the most efficient low cost and highest quality things to do with our members is becoming more and more prevalent.

In the punch line of slide six, is the companies that know how to control costs, improve quality of healthcare and deliver value, and I should add another word to that in a minute measurably are going to do very well in this environment that will divide the world between companies that are cost and companies that are going to be in the business of helping to control cost, and the later are going to do very well.

As you know there are bumps in the road and I joke obviously about the 45-day notice. It’s very serious; it’s an issue that we’re going to have to deal along with further in our Medicare Advantage. But if you kind of look at that just on a long-term basis, Medicare Advantage is in fact proving its value. And even with a couple of bumps in the road, I’m still actually very confident that overtime Medicare Advantage will be one of, if not the dominant delivery system in Medicare.

So this is what we do, we work in collaboration with healthcare providers to help them materially manage risk in order to achieve very importantly measurably better quality and lower cost. We’ve done this very successfully in Houston for many years. We've extended this model out to our ACO’s which is the business that we’re quite excited about. I think there is a lot of potential for us. We want to engage with the people we serve. It’s very important that people take control of their own healthcare, have healthcare decisions in the case of Medicare until less paying on a positive even in Medicare Advantage, but in the under age businesses particularly as the exchanges come in, the notion of engaging people to have something more to do with the cost and quality of their care is going to happen over the next several years.

We employ enabling technology and that word enabling is there for a reason. Technology is great, getting data is great, but they are true with these data tools that will enable you to provide better care and case management on the ground healthcare is hand to hand combat, one-on-one and we use the technology to figure out who you want to do your most amount of work with and then we have to employ human beings, nurses to actually get the work done.

And then finally get centers. So we are in a system, the fee-for-service system historically has been payers battling with providers. We think that model is going to end at some point when in the model will transform to aligning incentives between the ultimate payers and the providers of healthcare.

So we have three businesses, Medicare Advantage, which those of you have been following us know a quite a bit of about, I am sure Carl is going to handle much questions. The new business that we have just started has been middle of last year, but accelerating into this year's Accountable Care Organization very simply what these are, government and the ACA created a very interesting and simple challenge for providers. They basically said, if you guys can figure out a way to reduce cost and maintain quality, we’ll split the same with you. So that’s an example of aligning incentives.

Part of the issue though is many providers can’t do this on their own. They don’t have the technology, they don’t have the experience. The die hard habits are hard to change. So where we come in, we are able to do is through many years of having done this, we actually can teach providers and provide the capital for providers to do this. So it’s worked out quite well. We signed up 31 ACAs with more than 300,000 members, come in 2,000 docs. It tells ABD how the profitability, this is going to work. We saw some revenue recognition issues that we have to work our way through but this is the business that we feel very excited about.

Read the rest of this transcript for free on seekingalpha.com