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Hospital stocks rally Senate health bill

June 24, 2017

Hospital stock prices jumped on Thursday as investors reacted to the Senate’s proposal for repealing and replacing the Affordable Care Act.

Shares of Tenet Healthcare Corp. were up 7%, or $1.22, to $18.90 on the day. Community Health Systems’ shares rose 5% to $9.27.

Shares in HCA, the nation’s largest investor-owned hospital chain, were up 2% to $86.14. And Universal Health Services and LifePoint Health advanced 2% and 3%, respectively.

Health insurers also saw their stocks advance on the news. Centene’s shares climbed 4%, Anthem’s 1% and Humana closed the day flat after being up about 2% most of the day.

Investors rightly perceive that the Senate version of the Affordable Care Act replacement bill, known as the Better Care Reconciliation Act of 2017 is more favorable to hospitals over the short-term than the House’s American Health Care Act, Mizuho healthcare analyst Sheryl Skolnick said in a report Thursday.

But the Senate bill is worse long-term, potentially far worse, when cuts in Medicaid hit in seven years rather than the three-year timeline that the House had proposed, Skolnick wrote.

She estimated that after seven years, Medicaid cuts under the Senate plan would be even deeper than the $800 billion envisioned by the House.

“Thoughtful investors will realize, based on our volume analysis, that the expansion of Medicaid coverage was one of the few sources of volume growth since 2013 for the industry,” Skolnick wrote. “So while the extra year of life for Medicaid helps the hospitals (and managed-care organizations with Medicaid contracts) in the near-term, the bigger cuts over time hurt more.”

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