Morningstar Advisor - August/September 2010 - 42

Morningstar Conversation

Health and Human Services. The core bill is 2,500 pages long, and there’s 1,400 places where it says “the secretary shall.” This language leaves a tremendous scope for bureaucratic interpretation. So, the details are yet to come, and when you don’t have any friends anywhere to be found, it puts you in a very perilous position.
Andy Acker: This was really more of

It’s much easier to whack an industry and say you’re going to get 10% less today than you did yesterday than see pensioners riot in the streets and have it on CNN.
Kris Jenner

a health-care expansion than a health-care reform. We’re going to have 30 million more customers coming into the system through insurance by 2014, and that’s good. The flip side, at least in the near term, is that in order to make the budget work we got the stick before the carrot. So many of the new industry fees, taxes, and regulations come up first. That’s affecting the pharmaceutical companies now. We’re going to see a bit more of that impact next year. People thought that once we had certainty on health-care reform that we would see a rally. We haven’t really seen that yet, mostly because we’re getting this negative impact in the near term. I agree with Kris about health-care IT. One company that we think has a large opportunity is Athena Health ATHN. It has a solution that helps physicians deal with the very complex procedures to get payments for the procedures that they do. Athena also has an electronic medical-record system, which the new guidelines give big incentives to doctors to start adopting. I come from a long line of physicians. What they really want to do is practice medicine, but as insurance regulations become more complex, they spend more of their time dealing with paperwork. Electronic records will help automate a physician’s practice.
Jenner: Andy, why do you think that we

There were three goals of health-care reform. One was to provide insurance for the uninsured. The second was to improve the quality of health care. And the third was to achieve goals one and two while at the same time having lower health-care expenditures. I would say that this legislation really addresses goal number one, which is to have some 30 million Americans who were not insured to be insured. Our expectation is that down the road costs are going to accelerate. Somewhere in the latter part of this decade, I predict that we will have something like Health-Care Reform II that will be highly focused on cost. As for what groups are in the crosshairs of this legislation versus those that are likely to benefit, investors should think about volume— more medical stuff, more physician visits, more health-care consumption. At the one end of the spectrum might be the hospitals. The

hospital group, with its services to the uninsured and its so-called bad debt, is the only group that I know of that will be paid for doing something that they are doing for free today. Another beneficiary will be IT areas within the health-care system. The electronic technology within health care is a decade behind the financial-services industry. There’s definitely going to be some winners in the hard wiring of the health-care system. One that we’re playing is Cerner CERN. But at the same time, there’s going to be tremendous cost pressures. So, at the other end of the spectrum is the medical-insurance industry: They have no friends anywhere. None, whatsoever. During this time of colossal change, they have no constituency. And that’s a bad place to be, because this bill was written hurriedly. There are many elements in there that have to be interpreted by

have not gotten the rally that we thought we would? I think it has to do with what’s happening in Europe with the austerity programs and price controls, but I want to get your point of view on it.

42 Morningstar Advisor August/September 2010



Morningstar Advisor - August/September 2010

Table of Contents for the Digital Edition of Morningstar Advisor - August/September 2010

Morningstar Advisor - August/September 2010
Contents
New on MorningstarAdvisor.com
Contributors
Letter From the Editor
What Aspects of Health-Care Reform Will Most Affect Your Clients?
Bonds, Chicago Style
Investment Briefs
Which Risk Are You Managing?
Eye on the Prize
Advisors Can’t Rely on Fidelity Alone
Health Care Gets Back to Business
An Opportune Time to Bet the Pharm
Reform’s Impact on Other Health-Care Industries
Top Takeover Targets in Biotech
After Reform, Narrow-Moat Firms Have Strong Prospects in Diagnostics
Health-Care Investing Alive and Well
Quest for Knowledge
Four Picks for the Present
How to Make Your Bond Portfolio Inflation-Resistant
Weeding Through the Energy Patch
Uncertainty and Value in Basic Materials
Stock Market Doom-Busters
Hunting Down European Debt-Dodgers
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks With Wide Moats
VA Sales Slip a Bit in First Quarter
New at Morningstar
Star Wars, the Sequel
Morningstar Advisor - August/September 2010 - Morningstar Advisor - August/September 2010
Morningstar Advisor - August/September 2010 - Cover2
Morningstar Advisor - August/September 2010 - 1
Morningstar Advisor - August/September 2010 - 2
Morningstar Advisor - August/September 2010 - Contents
Morningstar Advisor - August/September 2010 - 4
Morningstar Advisor - August/September 2010 - 5
Morningstar Advisor - August/September 2010 - New on MorningstarAdvisor.com
Morningstar Advisor - August/September 2010 - 7
Morningstar Advisor - August/September 2010 - Contributors
Morningstar Advisor - August/September 2010 - Letter From the Editor
Morningstar Advisor - August/September 2010 - What Aspects of Health-Care Reform Will Most Affect Your Clients?
Morningstar Advisor - August/September 2010 - 11
Morningstar Advisor - August/September 2010 - Bonds, Chicago Style
Morningstar Advisor - August/September 2010 - 13
Morningstar Advisor - August/September 2010 - Investment Briefs
Morningstar Advisor - August/September 2010 - 15
Morningstar Advisor - August/September 2010 - Which Risk Are You Managing?
Morningstar Advisor - August/September 2010 - 17
Morningstar Advisor - August/September 2010 - 18
Morningstar Advisor - August/September 2010 - Eye on the Prize
Morningstar Advisor - August/September 2010 - 20
Morningstar Advisor - August/September 2010 - 21
Morningstar Advisor - August/September 2010 - Advisors Can’t Rely on Fidelity Alone
Morningstar Advisor - August/September 2010 - 23
Morningstar Advisor - August/September 2010 - 24
Morningstar Advisor - August/September 2010 - 25
Morningstar Advisor - August/September 2010 - 26
Morningstar Advisor - August/September 2010 - Health Care Gets Back to Business
Morningstar Advisor - August/September 2010 - An Opportune Time to Bet the Pharm
Morningstar Advisor - August/September 2010 - 29
Morningstar Advisor - August/September 2010 - Reform’s Impact on Other Health-Care Industries
Morningstar Advisor - August/September 2010 - 31
Morningstar Advisor - August/September 2010 - 32
Morningstar Advisor - August/September 2010 - Top Takeover Targets in Biotech
Morningstar Advisor - August/September 2010 - 34
Morningstar Advisor - August/September 2010 - 35
Morningstar Advisor - August/September 2010 - After Reform, Narrow-Moat Firms Have Strong Prospects in Diagnostics
Morningstar Advisor - August/September 2010 - 37
Morningstar Advisor - August/September 2010 - 38
Morningstar Advisor - August/September 2010 - 39
Morningstar Advisor - August/September 2010 - 40
Morningstar Advisor - August/September 2010 - Health-Care Investing Alive and Well
Morningstar Advisor - August/September 2010 - 42
Morningstar Advisor - August/September 2010 - 43
Morningstar Advisor - August/September 2010 - 44
Morningstar Advisor - August/September 2010 - 45
Morningstar Advisor - August/September 2010 - 46
Morningstar Advisor - August/September 2010 - 47
Morningstar Advisor - August/September 2010 - 48
Morningstar Advisor - August/September 2010 - Quest for Knowledge
Morningstar Advisor - August/September 2010 - 50
Morningstar Advisor - August/September 2010 - 51
Morningstar Advisor - August/September 2010 - Four Picks for the Present
Morningstar Advisor - August/September 2010 - 53
Morningstar Advisor - August/September 2010 - How to Make Your Bond Portfolio Inflation-Resistant
Morningstar Advisor - August/September 2010 - 55
Morningstar Advisor - August/September 2010 - 56
Morningstar Advisor - August/September 2010 - 57
Morningstar Advisor - August/September 2010 - Weeding Through the Energy Patch
Morningstar Advisor - August/September 2010 - 59
Morningstar Advisor - August/September 2010 - 60
Morningstar Advisor - August/September 2010 - Uncertainty and Value in Basic Materials
Morningstar Advisor - August/September 2010 - 62
Morningstar Advisor - August/September 2010 - 63
Morningstar Advisor - August/September 2010 - Stock Market Doom-Busters
Morningstar Advisor - August/September 2010 - 65
Morningstar Advisor - August/September 2010 - Hunting Down European Debt-Dodgers
Morningstar Advisor - August/September 2010 - 67
Morningstar Advisor - August/September 2010 - Mutual Fund Analyst Picks
Morningstar Advisor - August/September 2010 - 69
Morningstar Advisor - August/September 2010 - 70
Morningstar Advisor - August/September 2010 - 71
Morningstar Advisor - August/September 2010 - 50 Most Popular Equity ETFs
Morningstar Advisor - August/September 2010 - 73
Morningstar Advisor - August/September 2010 - Undervalued Stocks With Wide Moats
Morningstar Advisor - August/September 2010 - 75
Morningstar Advisor - August/September 2010 - VA Sales Slip a Bit in First Quarter
Morningstar Advisor - August/September 2010 - 77
Morningstar Advisor - August/September 2010 - 78
Morningstar Advisor - August/September 2010 - New at Morningstar
Morningstar Advisor - August/September 2010 - Star Wars, the Sequel
Morningstar Advisor - August/September 2010 - Cover3
Morningstar Advisor - August/September 2010 - Cover4
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