UPDATE 3-Healthcare investors bet on hospitals after Obama win
* Future of healthcare reform more certain post-election * Investors expect hospital financials to improve * Regulations may put even greater cost burden on insurers (Adds details on hospitals, medical devices) By Caroline Humer Nov 7 (Reuters) - U.S. investors took a fresh look at the winners and losers of healthcare reform after President Barack Obama's re-election, betting hospitals will get a boost in the coming years, while insurers and medical device makers may face higher costs. Republican presidential challenger Mitt Romney had vowed to repeal Obama's healthcare reform law, and Republican leaders in some states had held off preparing for its implementation in the hope of sweeping Republican victories. Obama's win on Tuesday night takes the prospect of repeal off the table, even if some aspects of his 2010 Affordable Care Act are delayed or changed. "Overall, it's positive for hospitals and the managed care names. Now there's certainty that we'll have the expansion, but beyond that, it's a mixed bag," said Tim Nelson, an analyst with Nuveen Asset Management. Shares of HCA Holdings Inc, the largest for-profit hospital chain in the United States, rose 9.5 percent to $33.86 on Wednesday. Tenet Healthcare Corp gained 9.4 percent to $27.31, and Community Health Systems was up 5.9 percent to $30.38. Health insurers with large employer-based businesses sank on concerns about the law's limits on their profits and new requirements for providing full coverage of preventive health services. UnitedHealth Group dropped 3.9 percent to $54.19, Aetna fell 3.6 percent to $42.97 and WellPoint Inc slipped 4.9 percent to $58.21. Obama's healthcare law is expected to be mostly in place by the end of 2014. It aims to expand insurance coverage to about 30 million Americans over the next decade through the government's Medicaid program for the poor and a new state-based set of exchanges for buying private insurance. Providers like hospitals and doctors, medical device makers, drug manufacturers, prescription benefits companies and health insurers are all affected by the law. Investors see the greatest potential benefit going to hospitals, which have been burdened with high debt loads from covering medical care for the uninsured. As more of these patients receive health coverage, hospitals will pay less out of their own pockets. "Their bad debts will not be as big starting in 2014 as millions of more people become insured. They'll either be covered by Medicaid or purchase insurance through state exchanges, and will receive government subsidies," said Michael Liss, a portfolio manager for American Century Investments. FISCAL CLIFF MAY PRE-EMPT CHANGES But the rally in hospital shares could be short-lived, based on expectations that their revenue will be under pressure from government spending cuts. Health services are a prime target in reducing the nation's deficit and figure prominently in the $600 billion fiscal cliff of spending cuts and tax rises that could occur in January. "The reality of it is it's a wash," Jefferies & Co analyst Brian Tanquilut said. Mark Thierer, chief executive of pharmacy benefits manager Catamaran Corp, said efforts to rein in the deficit next year could delay provisions of the health law, beneficial or otherwise. "I'm expecting some change in terms of how the Affordable Care Act might be rolled out, the timing as well as the form," he said in an interview. Shares of Humana Inc., which has a large managed care business administering the government's Medicare health plan for the elderly, fell 7.4 percent to $70.53. Under healthcare reform, these types of Medicare plans could receive less funding from the government. "There's a little bit of disappointment that you're not going to see any easing of the regulations on the insurance industry that are going to be put into place under the Affordable Care Act," Leerink Swann analyst Jason Gurda said. Healthcare reform is, however, expected to help insurers that cater to the poor through Medicaid as more states expand eligibility to more residents. Shares of Centene Corp., for instance, rose 9.7 percent to $43.73. Investors in medical device makers are bracing for the law's 2.3 percent tax on sales, although the timeline for introducing it may change. "There's some talk of delaying it three to six months because the regulations are not out from the IRS yet," said Jeff Jonas, portfolio manager for Gabelli Health and Wellness Trust Mutual Fund. Shares of Medtronic Inc. fell 2.7 percent to $41.64, St. Jude Medical fell 3.5 percent to $37.35 and Becton Dickinson & Co shares fell 3 percent to $76.02, outpacing the 1.1 percent decline in the Arca Pharmaceutical Index. (Reporting By Caroline Humer, Ransdall Pierson, Debra Sherman and Susan Kelly; Editing by Michele Gershberg, Leslie Adler)
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