Hospital stocks advance even as ACA repeal vote looms
Investor jitters over a looming vote on the latest Obamacare repeal-and-replace bill eased Wednesday and healthcare stocks regained some of ground they lost during a sell-off Tuesday.
Three of the nation's largest hospital chains—HCA, LifePoint Health and Universal Health Services—had each posted 1% gains in share prices Wednesday as of 2 p.m. ET.
Tenet Healthcare Corp. and Community Health Systems were flat for the day at 2 p.m. And Envision Healthcare, the nation's largest physician-staffing provider to hospitals, had gained back 3% as of 2 p.m. It suffered a 10% decline Tuesday on the new repeal effort and surprising departure of its physician-staffing chief.
A spokesman for Senate Majority Leader Mitch McConnell said Wednesday that McConnell plans to bring the so-called Graham-Cassidy bill forward for a floor vote next week. The bill was unveiled last week by Sens. Lindsey Graham (R-S.C.), and Bill Cassidy (R-La.) and still awaits a review by the nonpartisan Congressional Budget Office.
The bill would turn the Affordable Care Act into a block grant program for states, giving governors and state lawmakers more power to set parameters for what kind of insurance coverage should be offered.
Under the bill, nearly $1.2 trillion in ACA subsidies would be split with the states through 2026. States would be free to do away with many of the consumer protections currently embedded in the ACA. The bill would also end Medicaid expansion in 2020.
While affirming Tenet's B rating as a bond default risk Wednesday, Fitch Ratings said that any ACA repeal or replacement bill that results in more uninsured would be damaging to hospitals.
More uninsured, Fitch said, "will result in a weaker payor mix for acute care hospitals, which would pressure margins unless offset by cost-saving measures or higher reimbursement through a rollback of the fees and payment cuts required by the ACA."
The markets for hospital bonds were business as usual Tuesday and Wednesday, with no discernible increases in interest rates resulting from the walk-up to a Graham-Cassidy vote, said Pierre Bogacz, managing partner of healthcare financial advisor HFA Partners in Tampa.
Unlike the equity markets, which have many individual investors moving in and out of stocks, the hospital bond markets are dominated by institutional investors who invest in bonds that will provide relatively safe yields for 20 to 30 years, Bogacz said.
Interest rates on 30-year, tax-exempt hospital bonds remained stable at between 3.5% for low-risk issuers to 5% for higher-risk ones even during ACA repeal efforts earlier this year.
"These issues are gobbled up by institutional investors that mostly buy and hold," Bogacz said.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.