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Tickers in this Article: CVH, THC, HNT, MHS, ABC, HUM
Whether the nation's healthcare system is being reformed or not, some of the major names in the sector posted some seriously impressive results last quarter. More of the same may be on the way, not despite a healthcare overhaul from Capitol Hill, but because of it.

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Healthcare Provider Results
If it were only one company reporting surprising results, it wouldn't be that exciting. But when all four recently-reporting healthcare providers sing a similar song, it means you should pay attention.

Let's do this in one fell swoop. Humana (NYSE:HUM), Coventry (NYSE:CVH), Health Net (NYSE:HNT) and Tenet Healthcare (NYSE:THC) all topped estimates last quarter. The only loser in the group was Tenet; it lost a penny per share, but the market was planning on a 2 cent per-share loss.

That's not to imply things were great, because they weren't. Coventry's bottom line still fell 17% on an 18% rise in revenue, while Human acknowledged had it not been for an explosion in its Medicare Advantage program, earnings wouldn't have improved anywhere near as much as the 65% jump they made. Health Net was really the only name in the bunch that didn't need to add a footnote to last quarter's numbers.

Nevertheless, if I had to grade the group's performance, I'd have to give them a C+, or maybe even a B-. Not bad.

Generic Drug Wholesaler Results
Though AmerisourceBergen Corporation (NYSE:ABC) and MedcoHealth Solutions Inc. (MHS) are both classified as drug wholesalers, the description doesn't do the companies justice. Each has interest in medical supplies, pharmacy managements and related services. On the flipside, their pharmaceutical divisions are a big piece of their overall pie.

More importantly, each company posted compelling results last quarter. Medco's third-quarter profit was up 13.5%, to 69 cents per share. Had it not been for a one-time charge, the total would have been 75 cents per share, topping estimates of 72 cents. AmerisourceBergen's earnings were up by about the same percentage to 44 cents per share, topping estimates of 40 cents.

That's encouraging, but the numbers don't fully explain the underlying trend - a trend that's probably going to carry both companies to their newly-raised outlooks for next year.

Medco's generic drug sales rose to record levels last quarter, and is now more than two-thirds of its drug business. AmerisourceBergen also specifically cited an unusually strong increase in generic drug sales as a key driver for earnings growth.

Pretty good results overall from the providers, and a couple of aces from the drug and supplier group. Taking the clues at face value, it seems the sector - or at least certain segments of it - isn't in the dire straits a lot of investors think it is.

Impact of Healthcare Reform
OK, let's open this can of worms. It's not wrong to be concerned about the impact the latest version of the healthcare form bill - slated for debate later this week - is going to have on the industry's stocks. On the other hand, the more the bill gets revised (and even if the Republican version gets traction), the more meaningless it's becoming.

The last page count I saw for the Democrat's version of the bill was just under 2000. The concern is that the bill is 2000 pages worth of burden on the healthcare industry's companies and/or 2000 pages worth of a shift in control of healthcare delivery from private hands to the government.

I'm not going to get into that debate but I will, however, add another possible outcome - that the bill is 2000 pages of potential complexity and loopholes for companies like Humana and Medco to work around and use to their advantage, rather than letting it stifle their enterprises.

The Bottom Line
It's not that I mistrust the government; it's just that I have more faith in the lawyers working for Humana than I do in the congressman writing the reform bill. The fact that Humana offset losses from employer healthcare plans by boosting profits through its Medicare Advantage plan illustrates the point relatively well - compensated greed usually finds a way.

As for the specifics of most versions of the bill, I'm confident generic drugs will benefit under all of them. In fact, the most recent Pelosi version requires the secretary of the HHS to negotiate lower drug prices. I have to assume that's great news for the generic drug industry, which as we saw above is already doing quite well. (To learn more, see Investing In Medical Equipment Companies.)

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