Hospital stocks tumble after Obama targets Medicare
CHICAGO (Reuters) - Shares of hospital operators slumped early Monday after President Barack Obama over the weekend proposed cutting an additional $313 billion from programs such as Medicare help pay for healthcare reform.
"The bulk of cuts are to the hospital industry and are more severe than what we were expecting," Leerink Swann analyst Jason Gurda said in a note to clients.
"We expect strong opposition from the industry to these cuts, although some of them are likely to be included in any final reform legislation, in our view," he wrote.
Among the proposals, Obama's plan would save $110 billion by reducing annual Medicare payment increases and $106 billion by reducing subsidies to hospitals to care for uninsured patients.
The cuts, which would be phased in over 10 years, are on top of the $634 billion the president proposed in his budget.
"This proposal should not come as any surprise, as the healthcare provider stocks already reflect large cuts that would be needed to pay for an aggressive healthcare agenda," said Oppenheimer analyst Michael Wiederhorn.
"Hospitals are likely to be called on to finance a larger burden of reform due to the substantial benefits that they would gain from reform," he said.
Shares of Tenet Healthcare Corp (THC.N) were down 1.63 percent at $3.01 in morning trading on the New York Stock Exchange after an initial dip of 8 percent.
Shares of Universal Health Services (UHS.N) were down 1.97 percent at $51.35. Health Management Associates (HMA.N) fell 5.06 percent to $4.88, and LifePoint Hospitals Inc (LPNT.O) fell 1.64 percent to $27.01.
(Reporting by Susan Kelly)
