Hospital Stocks Tank Amid New Talks to Repeal the ACA

Hospital stocks tank amid reports that House Republicans are again looking at ways to repeal Obamacare repeal. The sudden drop follows days of hospital stocks in the green, rallying on the news that the Republican’s proposed American Health Care Act (AHCA) bill was yanked from consideration. The GOP’s plan was largely opposed on the expectation that the number of Americans without health insurance would dramatically increases, directly impacting hospital losses.

Tenet Healthcare was down 5% in early afternoon trading, while Community Health Systems shares dropped more than 7% at one point Tuesday. Overall, hospital operator stocks closed the day down.

According to one analyst, hospital-related companies are at risk because of innovation and shrinking margins. The potential revival of the Republicans’ healthcare bill adds more risk:

Volumes in hospital land have been coming down,” Mizuho’s Sheryl Skolnick warned Monday on CNBC’s “Closing Bell.” And even with the Affordable Care Act, or Obamacare, remaining intact, hospital stocks such as Tenet and its peers could start to drop, she said.

Innovation is allowing an increasing number of physicians to make decisions for their patients based on data and analytics, Skolnick said — a conversation that can happen over video chat. Innovation shifts such as this are slowing hospital growth rates, including emergency rooms visits, she explained.

That could spell a problem for the part of [a hospital’s] business, where you’ve deployed the most capital, and that’s the outpatient hospital bed.

The AHCA’s demise was likely welcomed by hospitals and other care providers. Such organizations were some of the big winners under the ACA as more and more patients became insured and started to enter the care delivery system. While they may have been sicker than expected, that was more of a thorn in insurers’ side as hospitals are still trying to find their footing in a new value-based payment world. So while still in a fee-for-service model, many hospitals were open to the idea of more patients potentially equaling more revenue.

U.S. hospitals, which have been steadily declining, won’t be saved by by the demise of the AHCA. In 1997 there were more than 6,000 hospitals registered with the Centers for Medicare and Medicaid Services (CMS). In 2016 there are fewer than 5,000. Additionally, hospital use is falling due to increasing expenses and disappearing beds.

In addition, most hospitals are hiring more employees in order to implement and support expensive health IT system. A recent Health Affairs blog post, with the help of Bureau of Labor Statistics data, showed an 11% increase in hospital jobs in the 10 year period from 2007 to 2017.

Rising expenses, declining admissions and the rise of telehealth creates a difficult financial situation for a growing number of hospitals. What’s certain is that improving the stability of individual health insurance markets, which is central to the AHCA, will not improve hospital financials.

Leave a Reply

Your email address will not be published. Required fields are marked *