Awesome Post my friend...
It's all a poker play in a way. The flippers who think RNVA should fold believe the CEO is bluffing with a weak pair of deuces. The longs think Seamus and thus we, as longs, have a good hand.
Why would anyone want to buy a small rural hospital that's been closed twice or an operational rural hospital that's operating at a million dollar plus loss? I can think of four big reasons. First, they can be gained cheaply. Secondly, and most importantly, they think they can run them at a profit whereas their predecessors could not. Otherwise why do it? That's what it all hinges on. Thirdly, if they can do it with these two hospitals, they can learn, repeat and improve the business model with new acquisitions. That was hinted at with Lagan's "sky is the limit" comment in his most recent interview. Lastly, I think this is their last, all in, play (gotta keep the poker references going). If they can't pull this off they lose the pot.
So how does a declining company aquire these hospitals? Sell your soul by utilizing the last means available: finance them via what are effectively corporate loan sharks. While the sharks may not send Crazy Jimmy to break your legs for payment, they will dilute your stock. But the company is surviving this to stay in the game and get the chance to implement their business plan.
Also like poker, the CEO doesn't really show his whole hand. He never really details how he plans to turn these hospitals around. He hints a lot and talks vaguely about synergies. I do wish he were more forthcoming in this regard and really spelled it out. However, if you scour the details of the company's filings and PRs, you can make some very educated guesses as to how that can happen.
For instance, the one functioning lab they've consolidated down to (which is in itself a cost cutting measure) was just this year accredited for a much larger array of diagnostics. This means most of the hospital's lab work can be done in house (though not literally as they would have to send the samples for testing to their Riviera Beach lab). Big cost savings there. Here are some quotes from the Jan 17th release that are so soon forgotten.
" its flagship Laboratory, EPIC Reference Labs, Inc. (EPIC) has successfully met the Laboratory Accreditation Program Standards for Accreditation from the College of American Pathologists (CAP)....
...the laboratory has secured a number of in-network contracts with payers over the past two years and has 13 contracts in place with various payers including a national contract with United Healthcare. It also is registered with Medicaid in 26 states."
Another synergy is if they can implement their own proprietary electronic health records software and revenue cycle management services. Part of their previous business model was hocking those very same services to hospitals and medical practices (unsuccessfully, true). The point of those services is to reduce costs through efficiencies and to enhance payment collections. Hospitals pay a lot for these specialized data management systems on an ongoing basis and RNVA already supposedly has it.
I would even guess that these two RNVA products (testing labs and records software), and their failure to sell widely in a large healthcare market with entrenched big players, is what hatched this plan to buy their own dang hospitals in the first place. It's efficiency via vertical integration and the opportunity to utilize the products and services they've already built through no small effort or cost.
As for all this being a big bluff, I just can't see it. If it is, it's elaborate on a Bernie Madoff scale with much less to gain from it. It's not like RNVA is some startup selling a pie in the sky innovative new idea for a product they say will disrupt entire markets, or a drug that may be FDA approved if they can only get a handle on the side effect of patients spontaneously combusting.
It's a business that provides needed products and services. It is no small task just to run a multi physician practice, not to mention a hospital. They're in their ninth month of treating patients at the Oneida hospital. Jamestown is in operation. The doors are open, the lights are on, and they're both staffed with medical professionals and support staff. The licensing and certifications of these facilities are in compliance. You can't bluff all that.
There are some very knowledgeable people commenting on share structure, dilution, debt and the machinations of the OTC market. Like any social media platform/board most of what's posted here is annoying chatter. But some of it is very informative, entertaining and even friendly on both sides. That I both appreciate and enjoy.
Do I think this hand is a royal flush? Nope! If it were a guaranteed winner I'd sink all my money into it and that's just silly. I don't think it's even a straight. I do however think we may have a full house and that's a hand worth betting on. I'd like to see that river card, but until then I think I'll raise by adding some more. Don't bet your kid's lunch money on it. As for me, I will try to learn from what might be a bad beat, or celebrate what I hope is winning hand.
Good luck to all.
Now back to my thimble collection.
AI
