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Obama healthcare plan boon for hospitals: Moody's

WASHINGTON (Reuters) - President-elect Barack Obama’s plan to extend health care to uninsured Americans will provide a boon to hospitals, along with medical centers and hospital equipment makers, according to Moody’s Investors Service.

Ashley Wright, a clinical supervisor, sets up monitoring equipment in the trauma center at Tulane University Hospital in New Orleans February 14, 2006. REUTERS/Lee Celano

“Moody’s estimates that the annual cost of the plan could be on the order of $100 billion to $200 billion, inclusive of participant contributions, on top of current annual government spending of about $800 billion,” the rating agency said in a report this week.

“The expected spending could positively affect the top-line growth of many health care providers,” the rating agency added, noting that the agenda of Obama’s Democratic party includes increasing research funding and providing $10 billion over five years to health care providers to build up electronic-information systems.

The agency added that for-profit and non-profit hospitals alike could benefit from the plan, which was a cornerstone of Obama’s campaign. He was elected president on Tuesday and will be sworn in in January.

The plan will raise some revenue by taxing larger employers that do not offer health coverage, Moody’s said.

Because the plan would increase the number of insured patients and the amount of reimbursements for care, hospitals could benefit directly and indirectly, Moody’s also said.

“The improvement would be direct, through reimbursements, as well as indirect, if more people seek primary-care treatment in a more-appropriate setting such as a physician’s office or a clinic, for example, rather than in an emergency room,” Moody’s said. “This would free capacity and reduce pressure at hospital (emergency rooms), many of which are operating well-above capacity.”

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But the agency said there may be some negative effects on hospitals and insurers, as well.

The plan’s mandate to coordinate care better through improved information technology and provisions to tie payments for Medicare, the federal health care program for the elderly, to performance may impose greater costs.

“Also, hospitals could find themselves in tougher contract negotiations with insurers that may experience tighter margins under the Obama plan. Lower rates of reimbursement growth could, in turn, put new pressure on hospital margins,” the agency said.

The president-elect’s plan may take years to implement as the country tries to untangle its current economic snarl that includes a growing deficit, Moody’s warned.

Reporting by Lisa Lambert; Editing by Andrea Ricci