The future is brighter for hospitals—if the market reaction to the U.S. Supreme Court ruling on healthcare reform is any indication—as investors placed their bets on higher volumes of patients and fewer who are unable to pay.
Publicly traded systems such as HCA, Nashville; Community Health Systems, Franklin, Tenn.; and Tenet Healthcare Corp, Dallas, saw their shares shoot up an average of 8% to 9% as investors digested the court's decision, which left key elements of the law intact, including the individual mandate.
“The biggest fear if the law was overturned was that you wouldn't get the benefit of a reduction in uncompensated care,” but cost and reimbursement pressure would remain, said Michael Waterhouse, an analyst at Morningstar.
Frank Morgan, an analyst with RBC Capital Markets, similarly noted that benefits including an incremental increase in patient volume and less bad-debt expense will “more than offset” financial drawbacks, such as reductions to Medicare's annual marketbasket updates.
While providers were generally happy with the ruling, uncertainty remains for hospitals, which could still feel the impact of the decision's most surprising element—a ruling that Congress cannot penalize states that do not expand their Medicaid programs. “It really creates a scenario where we might not reach full universal coverage throughout the U.S.,” said Richard Close, an analyst at Avondale Partners.