Transcript: Thursday, October 3, 2013

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib, brought to you in part by —

(COMMERCIAL AD)

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Wary on Washington. Fire
and brimstone comments magnified the tensions over the gridlock surrounding
the government shutdown and a looming possible default of U.S. debt. And
that sends investors running for cover.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Dancing on the ceiling.
So, what does happen if the U.S. doesn`t raise its debt limit and defaults?
We`ll look at the ramifications.

HERERA: And innovative ways in how hospitals and drugstores are
looking to improve health care. We`ll talk to the president of Tenet
Healthcare and the president of CVS Minute Clinic.

All that and more on this very busy Thursday, October 3rd.

Good evening, everybody. I`m Sue Herera, filling in tonight for Tyler
Mathisen.

GHARIB: And I`m Susie Gharib. Good evening, everybody, from me as
well.

High anxiety in Washington and on Wall Street today. Forget the
government shut down. Today, it was about the looming debt crisis.
Apocalyptic words coming from the U.S. Treasury today, saying a default on
the nation`s debt could be, quote, “catastrophic” — a scenario the
Treasury says will be worse than the financial crisis and Great Recession
that we`re still emerging from.

That pushed the markets sharply lower at the open. By midday, there
was slight relief after a “New York Times” report saying House Speaker John
Boehner would not allow the U.S. to default. Boehner spokesman then said,
the speaker has, quote, “always maintained the U.S. will not default.”
That brought stocks back momentarily.

But, now, if that weren`t all enough, mayhem outside the U.S. Capitol,
after police shot and killed a woman who tried to ram her car through
security barricades at the White House and then exchanged gunfire with the
police.

All in all, it looked like it ended like this after the market closed.
The Dow fell 136 points closing just below the psychologically important
15,000 threshold. The NASDAQ lost 40, the S&P off 15 points.

HERERA: Unless Congress settles the debt ceiling crisis within the
next two weeks, the U.S. Treasury says it will reach its borrowing limit on
October 17th. So, what then?

Steve Liesman takes a look.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Good evening.

Markets turned their attention today beyond the government shutdown to
what happens if the debt ceiling is breached and the government can no
longer borrow?

Here`s what we know — in that event, government spending has to equal
revenue, plus the cash on hand. What that likely means is government
spending will fall by about a third or $108 billion decline in government
spending in the first month. That means a contraction of the economy. The
economy will be smaller because there will be less government spending.

What economists believe is probable on that event is a recession, as
the lack of government spending plunges the economy from growth to
contraction.

The dollar could plunge, the stock market could plunge along with it,
and interest rates are seen higher in that event.

What they are worried about, what is possible here, is a global
recession as the knock-on affect of a weaker U.S. economy is felt in
countries around the world and a potential massive disruption in financial
markets.

The Treasury Department today issuing a report, warning of
catastrophic consequences in the event the debt ceiling is breached and
they`re saying there could be a financial crisis and a recession that could
rival or even be worse than the 2008 financial crisis. So, markets looking
beyond the government shutdown to the debt ceiling breach, which would
happen about October 17th according to current estimates, and they don`t
like what they see.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

GHARIB: But let`s not forget that there is a partial government shut
down in the third day and furlough of 800,000 federal workers, and it`s now
impact private sector jobs. One major defense contractor, United
Technologies, announcing plans to furlough thousands of employees if the
shutdown drags into next week. And it might not be alone.

Dominic Chu has more.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The
government shutdown just got very real for many in the private sector.
Aerospace and defense contractor United Technologies released a statement
saying that it expects to furlough around 2,000 workers on Monday, October
7th.

The affected employees are located in Connecticut, Florida and
Alabama, at the company`s Sikorsky Aircraft Division which makes the well-
known Black Hawk Helicopter.

Connecticut based United Technologies is the state`s single largest
employer. If the current shutdown continues into next month, it could
furlough a total of over 5,000 employees affecting all parts of the
company.

(on camera): The issue has to do with a lack of inspectors from the
Defense Contract Management Agency or DCMA. The inspectors are deemed non-
essential federal employees but without them, United Technologies can`t
manufacture aircraft.

(voice-over): And United Technologies isn`t the only company affected
by or voicing concerns over the government shutdown. Earlier today, the
president told a crowd in Maryland that the shutdown is leading to further
uncertainty with business leaders with ties to D.C.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Companies worry that
their businesses are going to be disrupted, because obviously, particularly
in an area like Maryland, Virginia, where there are a lot of federal
workers, you don`t know how that`s going to impact the economy.

CHU: Plane-maker Boeing said that a lack of U.S. aviation officials
that certify planes could delay jetliner deliveries.

British-based defense contractor BAE Systems says pay and benefits for
U.S. employees won`t change for at least this week, but that they continue
to monitor the possible need for furloughs going forward.

One thing seems pretty certain, though, the longer the shutdown lasts,
the more furloughs we could see.

Dominic Chu, NIGHTLY BUSINESS REPORT, in New York.

(END VIDEOTAPE)

HERERA: And joining us now to talk more about what`s happening in
Washington and what the implications mean for debt ceiling talks is Andrew
Friedman. He`s the principal at the Washington Update.

Welcome. It`s a pleasure to have you here.

ANDREW FRIEDMAN, THE WASHINGTON UPDATE, PRINCIPAL: Thank you.

HERERA: Were you all encourage — at all encouraged by this speaker`s
indication that he would not let the United States default? I mean, does
that give you the indication that there is some movement and there is some
progress on the Hill?

FRIEDMAN: I don`t know that it means there is any progress, but I am
hardened by it nonetheless. And I`ve been saying I don`t think that we
will see a default here.

The House of Representatives is an unusual place. The speaker
entirely controls what sort of legislation is introduced in front of the
House. Normally, the speaker does not introduce legislation unless the
majority of his party wants that legislation introduced. That`s why he`s
been going ahead and having these Obamacare caveats, what`s been introduced
so far.

But I think what the subtext of what happened today was he was saying,
look, if we really get to the point where we`re on the cusp of defaulting
on the debt, I`ll introduce legislation that raises the debt limit and if
necessary, we`ll pass that with all the Democrats and some moderate
Republicans supporting it and that will alleviate the problem.

GHARIB: Andrew, I wonder what you think of this. Some people have
been saying today that all of this very sharp language about catastrophic,
the potential catastrophic consequences, if there is a default, that this
could become the worst recession. It`s all part of a strategy to get the
markets to sell off because that would trigger the Congress to take action
and close up the deal on this.

Do you buy into that?

FRIEDMAN: Well, I don`t know if it`s that specific but I think the
president is absolutely ratcheting up the rhetoric.

Look, I think the Republicans feel a bit cornered now. They demanded
changes to Obamacare. That`s a non-starter with the Democrats. There`s
plenty of things that can be negotiated but that is not one of them.

And so, for the president to say, look, there is a problem here and
you have to deal with it or we`re going to have a catastrophic problem
throws it back into Boehner`s court. What does Boehner`s office indicate?
Don`t worry, we`ll take care of it, we`re not going to let anybody default
on the debt.

So, I think it`s absolutely a case that the president is ratcheting up
the consequences, putting pressure on Boehner and Boehner is trying to hold
off those consequences.

HERERA: But what about the crisis of confidence that Main Street
seems to be entering into? About the fact that once again, we`re being
taken to the brink — regardless of what party you`re talking about — the
fact that it seems that they are willing to take the U.S. economy all the
way to the fiscal cliff once again and that Main Street is starting to
suffer from that.

FRIEDMAN: There is no question. I mean, Main Street has been
suffering all along. Just go back to the fiscal cliff. You were right to
allude to it. That was a midnight deal and that only passed Congress
because Boehner, in fact, introduced legislation that was passed by the
Democrats and a few of the Republicans. The bulk of Republicans didn`t
want it.

I think that there is a brinkmanship going on here and I think it
relates to the fact that the Republicans feel, in the House at least, that
going into an election year, they don`t have to worry about the general
election because their districts are largely Republicans. They have to
worry about the primaries. They don`t want to be challenged by someone
further on the right and so everybody that`s a Republican in the House is
trying to protect his plank in that way.

HERERA: Thank you, Andrew. Appreciate it very much.

FRIEDMAN: Thank you.

GHARIB: The U.S. is expected to become the world`s largest producer
of oil and natural gas this year. According to “The Wall Street Journal,”
the U.S. may have over taken Russian output. The U.S. Energy Information
Administration says in July, we produced the equivalent of 22 million
barrels of oil, natural gas and other fuels every single day.

HERERA: Without all that homegrown energy being produced, one U.S.
economy is trying to break the nation`s addiction to oil, especially
imported foreign oil and they`re doing that by changing what we`re putting
in our gas tanks. The future of refining may include natural gas, bio mass
and even solid waste.

Jackie DeAngelis has the story.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Turning natural gas, bio mass and waste into gasoline for cars and
eventually jets — it sounds like a novel concept but it`s actually been
explored for years.

Now, several companies, including Primus Green Energy, are trying to
take the technology a step further to make that dream a reality.

(on camera): Here at Primus` demo facility in New Jersey, the company
is showcasing its technology and the practical applications of it for
potential investors. They raised $61 million to date but they need roughly
$200 million more to break ground on the first commercial facility that
they are planning sometime next year.

YOM-TOV SAMIA, GREEN ENERGY CEO: We believe that alternative energy
as well as renewable energy, both of them are very important to Israel, to
United States or to any country who would like to have energy independence.

DEANGELIS (voice-over): What sets Primus apart, the company says it`s
chemical process for turning nat gas to gasoline is more efficient and can
reach a larger scale than that competition, and that`s a great recipe for
profitability.

ROBERT JOHNSEN, PRIMUS GREEN ENERGY, CEO: Our current estimates of
our operating costs, our all-in costs, are $1.65 per gallon.

DEANGELIS: But what about longevity of the business model? It
assumes that regular gas prices stay at these levels and that nat gas
doesn`t see any significant increase.

JOHNSEN: The natural gas prices have to go into the double digits for
us to be uneconomic, given the current estimate of gasoline prices. So
what would have to happen is both natural gas prices shooting up and
gasoline prices staying constant for us to be in danger.

DEANGELIS: With respect to scale, Primus` commercial facility will
eventually be able to produce roughly 25 million to 28 million gallons of
gas a year, not a ton in the scheme of things. So, it`s going to take time
and also money to make this initiative a reality. But if they can do it,
it could be game-changing.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.

(END VIDEOTAPE)

GHARIB: And a little later in the program, why are drugstore chains
spreading the world about the Affordable Health Care Act? What`s in it for
them?

Also, the CEO of Tenet Healthcare on what the new health rules mean
for hospitals.

But, first, a look at how the international markets fared today.

(MUSIC)

HERERA: Twitter late today making public it`s documents for it`s
initial public offering.

Kayla Tausche joins us with more.

So, highly anticipated by Wall Street.

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Highly
anticipated and they do it in the way that they`ve been wanted to do, that
is by a tweet. A tweet late this afternoon announced that Twitter would be
filling its S1.

It only gave us a taste of what the social network would be offering
when it goes public in about a month`s time. It`s going to raise about $1
billion offered by seven banks and has 218 million users and it cited
events like Hurricane Sandy and reelection of Barack Obama as seminal
moments in Twitter`s history.

Now, its revenues were a little light, $253 million at the six months
end of June and it did post a net loss for that period. A lot of investors
are going to want to know how much money Twitter is actually making, how
profitable it can be and how highly it`s actually evaluated. Some say that
it could be valued as high as $15 billion when it does go public in about a
month — guys.

HERERA: Wow. Kayla, thank you so much — Kayla Tausche.

GHARIB: The world`s largest wine-maker Constellation Brands trades at
an all-time high today and that`s where we begin tonight`s “Market Focus.”

The alcohol giant posting a 35 percent rise in earnings from a year
ago, and thanks to stronger beer sales. In June, Constellation brought
Grupo Modelo`s U.S. beer business from Anheuser-Busch InBev. Shares rose
more than 3 percent today to $60.16.

Shares of Eli Lily tumbled today. The drugmaker warned that it`s
hitting its full year 2014 revenue target might be challenging. It blamed
it on slower growth in emerging markets and the devaluation of the Japanese
yen. Lilly also plans to buy back $5 billion of its stock. The stock
today dropped about 3 1/2 percent to $48.80.

HERERA: Shares of electric car company Tesla fell for a second day,
following a video of a car fire that`s circulating on the Internet. The
video shows the company`s Model S Roadster bursting into flames. The
company says a metal object directly hit one of the car`s battery packs.
Shares fell 4 percent today to close at $173.31.

And shares of the world`s largest apparel company, PVH Corporation,
rose today on news that it will sell nearly all of its G.H. Bass and
Company shoe units to clothing maker G-III apparel for $50 million. PVH,
which owns the Calvin Klein and Tommy Hilfiger brands rose 4 percent to
$122.65. G-III gained nearly 3 percent to $55.45, which is a new high.

From hospitals to drugstores, what the big chains are doing to get
your new health insurance business. That`s straight ahead.

But, first, a look at commodities, treasuries and currencies.

(MUSIC)

GHARIB: It`s day three since the new health exchanges came online.
There are still some delays and glitches with the Web sites. But one big
company is getting a shot in the arm. This is Tenet Healthcare. The stock
of this big hospital operator jumped 5.5 percent today and is up about 15
percent this week, following the deal to buy Vanguard Health Systems.
Investors are encouraged that Tenet has a winning strategy to deal with the
new healthcare laws.

Joining us now, we`re happy to have Tenet CEO, Trevor Fetter.

Mr. Fetter, so nice to have you on the program.

TREVOR FETTER, TENET CEO: Very nice to be here. Thanks for inviting
me.

GHARIB: So, for all the drama and uncertainty about the Affordable
Care Act that`s going on in Washington, you`re still going ahead and
behaving as this act is going to become law. What is your strategy?

FETTER: Well, the strategy is actually rather straightforward. It`s
very important in this environment to deliver greater value to our
customers, and that comes in the form of increasing levels of clinical
quality and lower costs.

Affordable Care Act or not, we would have pursued that. Some of the
things we`re doing a little bit differently are preparing ourselves to be
positioned very effectively for the increasing numbers of people who have
health insurance.

GHARIB: And you have been signing up on contracts with a lot of these
insurance exchanges that you will be part of their networks for uninsured
Americans.

From what`s been going on this week so far, how`s it going?

FETTER: Well, actually, that`s an effort that we`ve been undertaking
for nearly a year now. We were enthusiastic early on about the potentials
for these exchanges. We thought it would be consumer-friendly transparent
way that people would begin to buy insurance for their health, just much in
the way as they buy many other things over the Internet or in marketplaces.

And so, we actively engaged with insurance companies beginning, you
know, virtually a year ago so that we would be in network in the insurance
programs that are being offered on exchanged.

Now, I`m very pleased in about 80 percent of our markets, we`re in
some of the most competitively priced insurance plans that are offered in
the exchanges.

GHARIB: The other part of your strategy as I see is that you`ve been
also buying up a lot of hospitals. The Vanguard Health deal is just the
last one that adds something like 26 hospitals. You know, some would argue
that in this new landscape, having these huge hospital systems might not be
the best way to keep costs down and keep quality of health care up.

You know, tell us what your plan is here. Is bigger better, I guess
I`m asking you?

FETTER: Yes, bigger is definitely better. This has been a very
fragmented cottage industry for a very long time and when you`re a bigger
system and we`re one of the largest in the United States, we`re able to
take the technology that we use to improve clinical quality and apply it
across a bigger platform. We`re able to drive efficiencies in the
administrative parts of health care, which as you know are very
significant. We can drive efficiencies in the supply chain, in the revenue
cycle and other areas that either don`t affect patient care or they enhance
the quality of the patient`s experience in our hospital.

So, I would argue very strongly that bigger is better and it`s about
time that this industry has begun to consolidate.

GHARIB: You know, last night, we had the CEO of the Cleveland Clinic
on, and he said because of a drop off in revenues because of the way
healthcare is changing, that they`re going to have to cut, you know, more
than $300 million in their costs, possible layoffs. Is Tenet at some point
going to have to do the same thing?

FETTER: Well, we`ve been cutting the cost relentlessly for, you know,
the past nine years. In fact, our cost performance has been among the best
in the industry. I did see that interview last night, and I think part of
the point that Toby was trying to make is that this industry for three
years now has been dealing with fairly significant cuts in Medicare, much
of which was designed to pay for the Affordable Care Act, or at least
contribute our fair share to the Affordable Care Act. And hospitals are
going to be under relentless pressure for the foreseeable future and, once
again, you know, scale helps you deal with that.

GHARIB: All right. Well, good luck to you. Thank you so much for
coming on the program. We really appreciate it.

FETTER: Thanks for having me on.

GHARIB: Trevor Fetter, he is the CEO of Tenet Healthcare.

Sue?

HERERA: Susie, when Medicare Part D launched seven years ago,
pharmacies saw a big boost in business from newly insured enrollees. And
if the initial interest in the Affordable Care Act`s new health insurance
exchanges lead to high enrollment, it could mean a whole new source of
revenue for those retailers, as they help spread the word.

Bertha Coombs has more.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
The major drugstore chains want to be more than your corner pharmacy.
They`ve come to play a central role during flu season and now aim to do the
same for the millions of Americans who gained health coverage through the
Affordable Care Act.

ROSS MUKEN, ISI GROUP ANALYST: I think in general, their ability to
play more parts of Obamacare is key.

COOMBS: Walgreens, CVS and Rite Aid all signed with the Department of
Health and Human Services to help educate customers about enrolling for
health insurance under so-called Obamacare. Analysts say a new wave of
insured patients could result in a big bump in profits from the change core
business of filling prescriptions.

MUKEN: The way they`re going to do that is by helping encourage
people who are currently uninsured to enroll for the exchanges and hope
that that ultimately turns into higher script utilization in stores.

COOMBS: But for Walgreens and CVS, the new opportunity for expansion
may lie just beyond the pharmacist counter with their in-store clinics. So
far, the clinics haven`t been a profit driver, but that could change in
2014 as Obamacare coverage begins and millions of newly insured will seek
care during the likely peak of cold and flu season.

LES FUNTLEYDER, “INVESTING IN HEALTH CARE” AUTHOR: When a number of
people come into the system, it tends to stress the provider network,
meaning there are only a finite number of primary care physicians to care
for all these people.

COOMBS: For those who enroll in lower cost health insurance plans,
the clinics could become an attractive alternative to doctor`s offices for
routine health screenings and visits.

FUNTLEYDER: They tend to be a little bit less expensive. And so, if
a clinic happens to be in your network, especially if you`re under one of
the higher deductible plans, your first stop may be a clinic at a pharmacy.

COOMBS (on camera): But still, the drugstores could face some pretty
tough sales comparisons in the fourth quarter. Last year saw very strong
start to flu season. A weaker start this year could pose some headwinds
for their shares.

For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs, in Fort Lee, New
Jersey.

(END VIDEOTAPE)

GHARIB: CVS Caremark is eager to get your business not just to buy
toothpaste but to help you stay healthy. It`s set up walk-in medical
clinics in more than 700 of its stores. They are called Minute Clinic.
The company plans to double the number of clinics over the next four years.

Joining us now, Dr. Andy Sussman. He`s president of Minute Clinic and
associate chief medical officer of CVS Caremark.

Thanks so much for coming on the program, Dr. Sussman.

ANDREW SUSSMAN, CVS CAREMARK PRESIDENT & ASSOC. MEDICAL OFFICER:
Thank you for having me.

GHARIB: Well, you`re really counting on getting business from all of
these Americans who don`t currently have insurance. I mean, how much
business are you expecting to get coming to your Minute Clinics?

SUSSMAN: Well, Minute Clinic and all of our primary care systems face
a significant shortage of primary care physicians. We expect that to reach
45,000 doctors in 2020. If you take that the population has a growing
problem with chronic disease and an aging population, we really now enter a
period where we`re bringing millions of additional patients into the system
with the Affordable Care Act, and the simple fact is we do not have enough
physicians to provide all of that care.

That`s where our nurse practitioners at Minute Clinic can support the
primary care physician medical home around the country. We`ve been rapidly
expanding our clinics. We have 740 clinics now in CVS pharmacies in 27
states. We`ve added 300 clinics in the last three years and expect to get
to 1,500 clinics in 2017.

We provide care on a walk-in basis seven days a week and our nurse
practitioners use evidence based guidelines to take care of patients. And
this allows access to care at a time when we need it.

HERERA: Do you have anyway of quantifying, though, how much impact
the Affordable Care Act will have on the new number of people that are
going to be able to access these clinics? I mean, maybe in the past if
they didn`t have insurance, they didn`t want to fork out, whatever it was,
$25 for the flu shot. Now, they`ll able to do that.

SUSSMAN: Yes, we accept coverage from 200 health plans around the
country and we`re participating in the exchanges and providing access to
patients. And, as you know, many patients have high deductible plans and
our low prices can help to provide access to those patients.

It`s a little early to determine exactly how many patients that will
affect, but we believe it will be a significant increase.

GHARIB: We know a lot of the innovation is coming to health care, but
to what extent do you think people are programmed to think that when I`m
sick, I`m going to go to my doctor or an emergency room, and the idea of
going to a Minute Clinic in a pharmacy or drugstore chain doesn`t seem
quite right? What do you think?

SUSSMAN: Well, many patients are really looking — functioning as
consumers and what they`re looking for is value, low cost, easy access and
good quality. And at Minute Clinic, they can walk in and be seen without
appoint. Our prices are low. Our RAND-sponsored (ph) study found our
prices 40 percent to 80 percent lower than alternative sites of care and
very high quality. We used evidence-based guidelines.

And, of course, after we see a patient, we send a note over to their
physician. So, we can help support the primary care shortage. Patients
are increasingly aware that they have alternatives of where to be seen and
our care is very high patient satisfaction because of the value that we`re
creating.

HERERA: What about penetration? I know you have a large number of
stores, but is there one part of the United States where you think your
penetration is greater? And where is the growth area for you as you
continue to expand?

SUSSMAN: Yes, we`re adding clinics all over the country. Actually,
this week, we just added Hawaii and Louisiana. And beyond that, we`re
forming affiliations with health systems, as well. We have affiliations
with 30 major health systems all over the country, because everywhere there
is a need for high-quality, accessible low cost care.

HERERA: All right. Thanks, Dr. Sussman. We have to run. Thank you
so much. Appreciate it.

SUSSMAN: Thank you.

HERERA: That`s it for NIGHTLY BUSINESS REPORT for tonight, I`m Sue
Herrera.

GHARIB: And I`m Susie Gharib. Have a great evening. We`ll see you
tomorrow night.

END

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