Glenn Wagner was elected to the first-team of All-American Municipal Analysts in the Hospital, Health Care, Nursing Homes, and Life Care Facilities sector.

Carroll Cunningham of the Vanguard Group and Kathy Amo of First Boston Corp. were the second team analysts in the sector.

Wagner moved from Mabon, Nugen & Co. to Morgan Stanley & Co. in the spring.

He said, "They are dramatically different types of operations, in terms of size and scope, with Morgan Stanley having a much larger new issue presence and stronger secondary market desk."

Morgan Stanley has beefed up its public finance team in the hospital area with the addition of several investment bankers.

Wagner explained that Morgan Stanley also has increased its underwritings in the sector.

He also enjoys the challenges of providing liquidity and investment advice across the entire spectrum of health care credits, instead of only the high yield sector that he focused on at Mabon.

While health care volume was off a bit during the first half of 1991, Wagner expects to see an increase in new issue activity as the deadline for the Internal Revenue Service's reimbursement restriction nears in September.

"Investors have responded well to the changes in credit quality," Wager said. "They are more selective in recognition that the sector is more difficult to generalize."

He expects the shakeout in credit quality to continue in the health care sector because of greater competitive pressures and declining reimbursements for services.

"Investors need to consistently monitor their holdings to maximize performance," Wagner said.

He recommends health care bonds from issuers that have stabilized or are improving.

"Ride the credit wave in until the health care bond has improved enough" that it is reflected in the price, Wagner said.

Currently, he is building up a health care database, similar to the one he developed at Mabon, to help investors identify these hospital credits. Additionally, he is "spending time getting up to speed on the hospitals that trade most frequently."

Monitoring national trends is important in Wagner's analysis because about half of the typical hospital's revenues are determined by federal programs.

Keeping abreast of the changes occurring on a state-by-state basis also is fundamental to his analysis.

Wagner noted as an example that New Jersey is revamping its reimbursement programs for hospitals, replacing the old reimbursement fund for indigent care with a new health care trust fund.

Basically, th eold safety net was removed, Wagner explained, and it is being replaced with a fund with a new name.

Another critical credit concern is Medicare's changes in how hospitals are reimbursed for capital costs.

Changes at the national and state levels combine to produce competitive pressures on hospitals.

In turn, Wagner expects the pressure on the hospitals to access the public markets will rise by the mind 1990s.

Although the shakeout is expected to continue, Wagner only sees one possible small default that is likely in health care: a hospital located in Jackson Park, outside of Chicago.

On the improving side, Wagner likes Cape Cod Hospital in Massachusetts, Hinsdale Hospital in Illinois, and even the "infamous" St. Luke's Hospital in Phoenix appears to be on track.

While health care management now realizes that bankruptcy is to avoided at all costs, Wagner expects to see more bankruptcy activity in the health care sector, albeit on a limited basis.

Also, he anticipates that takeover activity also may increase in the health care sector.

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