Managed Health Benefits is a mental health cost containment company specializing in psychiatric and substance abuse claim review services, fraud and case management. The company has been conducting business on a national basis since 1993 and provides a variety of services for companies such as Chubb Life - America, The Guardian Life Insurance Company, John Alden Life Insurance Company, Relia Star Financial Corp., First UNUM, Commercial Life Insurance Company, and Trustmark Insurance Company.
Managed Health Benefits performs psychiatric and substance abuse bill review on inpatient, residential and partial programs, post discharge and prior to payment. Specifically, MHB identifies and documents savings through a line-by-line review of each bill. These reviews examine all or any portion of the following: 1) medical necessity, 2) appropriateness of charges; 3) double billing, 4) documentation, 5) staff credentials, 6) reasonable and customary, and 7) pre-certification information compared to the admission history in the medical record.
MHB has proprietary fraud triggers used to evaluate treatment and billing patterns found in inpatient mental health and substance abuse facilities. These triggers are the basis of reviews conducted of facility's treatment programs to establish whether these are, in fact, patterns of abuse. MHB produces detailed reports documenting evidence of overcharging which payers may use to pursue legal settlements or refunds.
MHB's reviews for Special Investigation Units focused on targeted facilities has resulted in savings of 75%.
Inpatient Psychiatric Utilization Review.
MHB's inpatient psychiatric and substance abuse utilization review and case management program is focused upon reaching clinically sound treatment plans. Professionals discuss the patient's history, treatment plan and anticipated outcome.
Outpatient Psychiatric Management.
MHB conducts focused outpatient reviews that reduce over-utilization while ensuring that treatment is clinically appropriate.
Disability Case Management.
MHB reviews both short and long-term psychiatric and substance abuse disability claims to verify the legitimacy of the disability.
Brief Fundamental Analysis
|Upon review of
Chart A, we compared AVIT against five other peer
companies, namely, Ballard Medical Products (BMP), Meridian Diagnostics (KITS),
Utah Medical Product, Inc. (UTMD), Tyco International LTD (TYC) and Diagnostic
Products Corp. (DP).|
Our only comparison within chart A pertains to PE estimates during the next two fiscal years. During fiscal 97 it is estimated that AVIT will earn .08 during 97 and .18 during 98 yielding a 12.5 and 6 PE estimate based upon the current share valuation of AVIT common shares ($1.00 share price).
Upon close examination of our peer companies, namely, BMP - PE est 21 and 17, respectively, KITS - PEest 36 and 28, UTMD - PE est 13 and 12, TYC - PE est 19 and 16 and DP - PE est 18 and 16, when averaged, yields a PE est for the current fiscal at 21x and 18x for the following year.
If AVIT were to trade at comparable PE valuations of its peers then AVIT would trade at $1.65 based upon fiscal 97 and $3.24 based upon fiscal 98.
Upon review of Chart 1 when we developed a model based upon growth rate of AVIT and calculating a share price based upon half its rate of growth during the next few years. Our share valuation equalled $1.65 and $3.78, respectively.
From our brief analysis, it appears that AVIT has little down side risk from current levels. The numbers that we derived from our calculation indicate that during the next 24 months AVIT could trade 280% above the current levels - if, of course, all estimates are met. Of Course, if expectations are exceeded, share valuation could appreciate even more so.
During May and June of 1996, AVIT successfully raised $1.4 million dollars via sale of common shares. Of course, this was an extremely bullish development for the company. The financial market place obviously feels quite positive on the company's prospects.
The company also has a sizable line of credit and if all redeemable purchase warrants that are currently trading (AVITW) were to be exercised an additional $19 million conceivably could be raised. These warrants are registered and expire during November, 1996.
It is obviously a no-brainer that they will be extended and possibly the exercise price could be lowered. (Note: Management holds an additional approximately 3 million options and warrants exercisable at various prices. So in essence, additional money could be raised).
The availability of additional working during the next few years bodes well for AVIT for future internal growth as well as synergistic acquisitions.
At present, AVIT trades at an estimated PSR of 1.4x 1996 est. revenues ending September 30, 1996. If we were to value AVIT with a PSR of 3 (most believe this value indicates fair value), then our share price could approach $2.00/share. Obviously, 1997 est. revenues indicates an even more attractive value based upon revenue estimates of $8 million, a PSR value of .87 surfaces. Again, upside potential in our opinion exists for AVIT.
In summation, the company has ample cash and plenty of cash raising potential, AVIT's PE and PSR indicate limited downside risk, while at the same time indicating attractive upside potential during the next 24 months. The management is qualified and dedicated to grow AVIT and in our opinion, AVIT is relatively unknown and under followed. All bodes well for calculated upside potential.
If we examine revenue growth from 1995 to 1998E on a per year, growth has been consistently impressive, that is, 43%, 56% and 30%. Our overall growth rate equals around 43%.
Based upon a share price of $1.00 and earnings of .08 based upon 1997 and .18 for 1998, we are able to calculate an estimated PE of 12.5x and 6x, respectively.
If we were to assume that AVIT were to trade at half the growth rate and based upon AVIT's current earnings estimate of .08 and .18, respectively, then a share price of $1.68 and $3.78 would result, respectively.
Concerning the earnings turnaround anticipated during fiscal 97, we can see a (.23) for fiscal 96 to a positive .08 for fiscal 97, this resulting in a dramatic 3,000% increase. By any measure, an impressive directional change.
BACK TO ANALYSIS
BACK TO ANALYSIS
- The health care industry faces a number of challenges, but continues to possess above average long term growth potential.
- The Diagnostics Industry is about $5 billion in size worldwide.
- According to the US Department of Health and Human Services, the nation's health care outlays have risen at a rate of about 9.1% annually in the 10 years through 1994, compared with 6% annual growth in the overall US economy.
- Stocks of medical device manufacturers have also exhibited a robust showing, with the S & P Medical Product and Supplies Index up more than 50%, year to year, as of the end of August 1995. The introduction of new high-tech products, expansion into foreign markets, and a more favorable regulatory climate have also benefitted this group.
- The worldwide market for medical devices was pegged at about $93 billion in 1993.
- Based on government sources, per capita consumption of health technology is $118 in the US, $53 in Europe and substantially lower in most other areas throughout the world.
- Foreign demand for US made medical goods is expected to grow significantly over the next five years: from $9.2 billion in 1994 to $10 billion in 1995 and $18 billion by 2,000.
- Estimates for the market potential of home HIV tests range from $200 million to $800 million.
- Mental health and substance abuse equal $90 billion/year.
Geared towards "risk tolerant investors". Dramatic growth potential exists during the next 24 months.
AVIT is considered speculative and all risk adverse accounts should fully understand all the adversities of investing in micro-mine caps.
- Conservative Accounts might consider a mini portfolio of 1/4 AVIT, 1/4 KITS, 1/4 TYC, 1/4 DP.
- More speculative accounts might consider: 1/4 AVIT, 1/4 BMP, 1/4 KITS, 1/4 UTMD.
- Most speculative accounts might consider: 1/2 AVIT, 1/4 BMP, 1/4 UTMD.
AVITAR TECHNOLOGIES, INC., has a core medical product mix from Wound Dressings and Medical Surgical Specialties to Skin Barrier Products. Our Accu-sorb Saliva Collector component can be used with diagnostic testing kits or in laboratory procedures for a wide range of testing applications.* The collector is made of our proprietary Hydrophilic Foam component and Special Collection Tube component, which provides a device that is efficacious, easy to use and cost effective.
Remove saliva tester from tube. Place dry foam collector in mouth. Gently squeeze the foam collector between your teeth, using a chewing motion for three to four minutes.
|Remove device from mouth and place in the tube to return to technician|
Unscrew cap from tube and pull foam collector approximately 1/3 of the way of the tube.
|Squeeze top of the tube closed between the thumb and index finger of one hand.|
|With the other hand squeeze from the top of the tube in a downward motion without releasing the foam. This will extract saliva from the foam to the bottom of the tube.|
|Recap tube and stand in an upright position so that the collected saliva is not reabsorbed into the foam.|