Hospital Stocks Booming Post-SCOTUS Announcement

Tenet Healthcare and Community Health Systems led the initial surge, both heading north of 8 per cent gains. The sector is extremely volatile in trading following the SCOTUS decision to uphold the individual mandate, which creates a captive market for these companies.

Here is a sector snapshot:

  • HCA Holdings (HCA): +8.0%
  • Health Management Associates (HMA): +7.4%
  • Tenet Healthcare (THC): +4.7%
  • Universal Health Services (UHS): +3.7%
  • LifePoint Hospitals (LPNT): +4.5%

Goldman’s take, from yesterday:
If the Supreme Court were to uphold the ACA, it would benefit hospitals like Tenet Healthcare and LifePoint Hospitals.
Although payments for procedures would be substantively lower than currently received from managed care providers like Cigna, all procedures would be paid for in some form by the government.
Health insurers, however, are tumbling — many being “Medicaid-linked” stocks. JP Morgan predicted this could happen yesterday. Here they are referring to a scenario where the whole healthcare act was ruled unconstitutional, but the logic still applies given the court’s narrow reading on Medicaid, which there is concern will now see a decrease in enrollment:
“Although they have the option, we doubt the states will continue with plans for expansion given that nearly all of the costs would have been picked up by the government,” JP Morgan’s Justin Lake says. “It is important to note that Medicaid take up rates are somewhat dependent on the individual mandate being upheld. The Urban Institute estimates that 2.5 million fewer people would enroll in Medicaid should the individual mandate get struck down.”

From the SCOTUSblog, who is covering the decision live:
In Plain English: The Affordable Care Act, including its individual mandate that virtually all Americans buy health insurance, is constitutional. There were not five votes to uphold it on the ground that Congress could use its power to regulate commerce between the states to require everyone to buy health insurance. However, five Justices agreed that the penalty that someone must pay if he refuses to buy insurance is a kind of tax that Congress can impose using its taxing power. That is all that matters. Because the mandate survives, the Court did not need to decide what other parts of the statute were constitutional, except for a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. On that question, the Court held that the provision is constitutional as long as states would only lose new funds if they didn’t comply with the new requirements, rather than all of their funding.SEE ALSO: The Ultimate Guide To How Wall Street Is Preparing For Today’s Historic Supreme Court Ruling

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