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Hospital stocks saw hefty gains in 2012 despite ACA jitters


By Beth Kutscher
Posted: January 2, 2013 - 3:00 pm ET
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Hospital stocks ended 2012 posting big gains despite a year that was filled with uncertainty regarding the Patient Protection and Affordable Care Act.

When the closing bell rang Dec. 31, HCA, Nashville, the largest investor-owned chain, was trading 37% higher than it was on the last trading day of 2011. Community Health Systems, Brentwood, Tenn., added more than 77% to its market capitalization.

And Tenet Healthcare Corp., Dallas, saw gains of 58% over the same period.

The boost came despite a tumultuous—but ultimately fruitful—year that saw the U.S. Supreme Court uphold key provisions of the healthcare law, and the re-election of President Barack Obama to cement its future.

And despite weak patient volume, investor-owned systems managed to cut costs, boost outpatient revenue and reap gains from strategic acquisitions to satisfy investors.

Over the same period, the Dow Jones Industrial Average was up 7.25% and the S&P 500, 13.4%.

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Hospital stocks' gains were health insurers' loss as investors digested the upcoming risk from having to insure even the sickest individuals. However, like hospital operators, insurers sought acquisitions of managed-care organizations to diversify their offerings.

United Healthcare ended 2012 trading up 8.6% over the last trading day of 2011, while WellPoint lost 6.3% and Cigna gained 2.7%.

Companies in the health IT space stood to benefit from incentives that encouraged provider investment in electronic health records and other technologies. However, the sector's performance was mixed as it also grappled with the threat of spending cuts.

Cerner Corp. ended the year trading up 26.5% over its 2011 closing price, while Athenahealth's share price closed the year with a gain of 49%. AllScripts Healthcare Solutions, in contrast, lost 9.5%

MedAssets, which provides revenue-cycle management services, gained 81.3% while HMS Holdings Corp., which makes cost containment software for government and other payers, lost 18.9%.


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