Hospital stocks tumbled a little harder than the equity markets Wednesday on the Federal Reserve's expected decision to raise benchmark interest rates one-quarter of 1%.
The drop was led by Universal Health Services, the nation's largest provider of behavioral care. The behavioral and acute-care hospital chain Wednesday was downgraded by Raymond James after Rep. Chuck Grassley (R-Iowa) sent the company a letter asking for an update of a federal investigation of behavioral health admissions that includes Universal.
That was the subject of an investigative story by BuzzFeed last week that quoted patients and former employees saying that Universal admitted patients longer than necessary, especially those where the threat of suicide existed.
Universal denies those allegations, saying that physicians make those calls, not the company, and that insurers approve stays all along the process.
"UHS has cooperated with the investigation led by the Department of Justice and the office of the inspector general," the company said in a statement.
Universal's shares Wednesday fell $7.44, or 7%, to $101.55. Those shares were trading at $126 before the BuzzFeed story was published a week ago.
The Fed's decision to raise interest rates for the first time in almost a year – though a very small increase - hit other hospital stocks as well.
Hospitals, both investor-owned and not-for-profit, rely heavily on debt to finance growth. The Fed rate has hovered near historic lows of between .25% and .5% for months, making it inexpensive to borrow money.
Fed Chair Janet Yellen remarked that inflation was nearing the money board's 2% target, suggesting to the markets that perhaps another two to three rate hikes could be coming in 2017.
The Dow Jones Industrial Average dipped less than 1% Wednesday on the news.
Dallas-based Tenet Healthcare saw its shares Wednesday slip 4%, or 65 cents, to $14.38. HCA Holdings, the nation's largest investor-owned hospital company, experienced a dip of 88 cents, or 1%, to $73.07.
Shares of rehabilitation chain HealthSouth also declined. It gave back 1%, or 45 cents, Wednesday to $41.19.