Healthways A Market Downturn and Results

Implications: Healthways reported lower than expected earnings in its current quarter and analysts are pointing to a tightening in the healthcare markets and the fact that Healthways products are expensive. Does this really make sense?

Analysis: Lets look at the logic that says that in a tighter health care market where margins are squeezed, companies will be less likely to invest in wellness and disease management programs. 

Ben R. Leedle, Jr, CEO of Healthways said "We recognize the significant challenges our existing and potential customers face in this uncertain economic environment and with increasing costs of health care,"

Does the premise that plans are less likely to spend on these services during this time really make sense? If wellness and care management worked, payors would be more inclined to implement even more of these programs in an effort to squeeze every last cent out of their medical expenses as long as they had a return on investment.  And that gets to the major point to be considered.  Its not the price that Healthways charges that should be considered the problem in a downturn.  It is the belief or should I say disbelief that they can generate a return large enough to offset the outlay in purchasing their product.

Its interesting to note that Jeffries Analyst Arthur Henderson "recommends that the company invest in more home nurses and more face-to-face interaction to build greater trust with patients. The company currently has call centers for patients."

While this may in fact work, it will actually be even more costly, so Mr. Henderson is in fact agreeing with my premise.  The issue with DM in its current form for many clients is that a call center based approach is like trying to move a 5 lb brick with 4 lbs of force. It just won't do it, a more intensive approach is required.