* 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 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
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
"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
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
(Reporting By Caroline Humer, Ransdall Pierson, Debra Sherman
and Susan Kelly; Editing by Michele Gershberg, Leslie Adler)