By Melanie Evans, Anna Wilde Mathews and Melinda Beck
Hospital and insurance companies that have benefited from the
Affordable Care Act's expansion of Medicaid coverage saw a sharp
fall in their stock prices on fears a Trump administration could
roll back that expansion.
President-elect Donald Trump has pledged to "repeal and replace"
the Affordable Care Act, which extended publicly subsidized health
insurance to millions through the expansion of Medicaid and through
state exchanges for private insurance.
Hospitals and some insurers benefited from an influx of newly
insured patients under the law. Hospitals saw patient volume growth
and fewer unpaid bills.
Shares of HCA Holdings Inc., the nation's largest hospital
company, were down 12% Wednesday afternoon from the prior day's
close. Tenet Healthcare Corp. was down 23%. Troubled hospital
operator Community Health Systems Inc. was down more than 20%.
Universal Health Services Inc., which operates acute-care and
behavioral health hospitals, was down about 6.2%.
Shares in Molina Healthcare Inc., a large insurer of Medicaid
patients, fell more than 14%.
Molina Chief Executive J. Mario Molina said he is optimistic
that the Trump administration will actually expand Medicaid
further, with a large role for managed-care companies. Republicans
will be looking to cut costs without making the unpopular move of
yanking coverage away from people, he said, and Republican
governors may be more open to expanding Medicaid with the greater
freedom that a Trump administration might grant them.
"Health-care reform is in place, it is going to be modified,
it's going to move forward," he said. "We're going to see Obamacare
2.0, maybe they will call it Trumpcare, or Ryancare." He suggested
that the law's exchanges might also survive but change -- perhaps
with reduced subsidies and more flexibility for insurers.
Some analysts downgraded HCA, on the risk that Medicaid
expansion would be reversed and uncertainty about what an
alternative may be. "We have no idea what will replace it," said
Sheryl Skolnick, an analyst with Mizuho Securities USA, who
downgraded the company to neutral from buy. RBC Capital Markets
analyst Frank Morgan wrote on Wednesday it is "not clear at all"
how the incoming president would replace a law that extended
insurance to millions.
In a statement, HCA said the company has "a long history of
working with America's leaders in Washington and across the nation
to ensure access to quality health care for as many people as
possible, and we will continue to do that."
Many analysts think it is unlikely all of the ACA's effects
would be truly undone, but believe the lack of clarity will likely
pressure the industry. "A Trump victory just increases uncertainty,
which the market doesn't like," said Thomas Carroll, an analyst
with Stifel Financial Corp.
The near-term "impact and shock of the result will weigh on
stocks across our coverage until we get greater clarity on agenda
and details" around Mr. Trump's health-care policies, wrote Ralph
Giacobbe, a Citi analyst. Writes analyst Ana Gupte of Leerink, "The
unthinkable has happened."
Though Mr. Trump has committed to repeal the health law, he has
been vague about how he would do so and what would replace it. Like
other Republicans, he has endorsed policy ideas including selling
health plans across state lines and increasing use of
health-savings accounts.
In a statement, the American Hospital Association said the
hospitals that make up its membership are "a trusted source of
information for legislators on the complex issues related to health
care." It said the trade group looks forward to working with the
Trump administration and Congress.
In a statement, America's Health Insurance Plans, the main
lobbying group for the industry, said it would "work across the
aisle -- with every policy maker and the new administration -- to
find solutions that deliver affordable coverage and high-quality
care for everyone."
The insurance industry's experience with the ACA has been a
mixed bag, with upsides and downsides. If Mr. Trump somehow did
away with the law's expansion of Medicaid, insurers could lose new
enrollees they have gained and the prospect of further growth in
that business from states that hadn't yet expanded their
programs.
Hospitals, too, won and lost under the law. The primary gain
came from fewer uninsured patients. The law also introduced changes
to how Medicare and Medicaid pay hospitals, doctors, nursing homes
and other providers. Medicare offered new incentives for hospitals
to meet goals for quality and cost under the ACA, some of which are
mandatory. Results of the initiatives have been mixed.
The law also cut hospital Medicare payment rates and other
funding to offset the costs of treating the uninsured. An outright
repeal of the law would erase those cuts, which markets perhaps
underappreciate, said Chris Rigg, an analyst with Susquehanna
Financial Group.
Chas Roades, chief research officer of the Advisory Board Co., a
consulting firm, said he thinks it is unlikely these funding cuts
will be restored. Whether Congress repeals the Affordable Care Act
or starves it through the budget reconciliation process, providers
"could be left with all of the downsides and none of the upsides of
Obamacare," Mr. Roades said, because ending the payment cuts in the
legislation would leave too big of a budget gap, while the payment
incentives could be sharply curtailed.
Trump's own goals and plans are unclear. "No one saw this coming
-- they don't really have a health policy team, as far as we can
tell. It's not clear how much daylight there is between what Trump
will do and what the Ryan plan focuses on," said Mr. Roades.
Write to Melanie Evans at Melanie.Evans@wsj.com, Anna Wilde
Mathews at anna.mathews@wsj.com and Melinda Beck at
HealthJournal@wsj.com
(END) Dow Jones Newswires
November 09, 2016 15:41 ET (20:41 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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