Hospitals Hoping for Increased Insurance Coverage As Economy Falters

by: Mike Havrilla

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The combination of a bad economy and rising unemployment is contributing to unpaid bills and operating losses at U.S hospital companies such as Tenet Healthcare (NYSE:THC), which missed analyst estimates last week by 3-cents with an adjusted 6-cent per share loss and lowered its full-year and 2009 guidance for EBITDA. Tenet's allowance for doubtful accounts increased 5.8% to $163M at hospitals run by the company for over a year.

With Tenet trading at all-time lows, several insiders were buying a combined 160,000 shares on the open market last week at prices ranging from $2.49-$2.71, while the stock closed the week at $2.26 ($1.1B market cap) with a loss of about 48% in market value in just five days.

Hospital companies are hoping for some relief from President-elect Obama's plan to provide health insurance coverage to the uninsured, lowering the expense of bad debts and shifting more people away from seeking emergency room care for ailments which could be treated through primary care physicians or medical clinics.

The accompanying table presents statistics and the top five rated companies in the ETFI Global Hospital Index, which includes hospital companies such as Tenet, inpatient rehab companies such as HealthSouth (NYSE:HLS), dialysis providers such as DaVita (NYSE:DVA) & Fresenius (NYSE:FMS), and hospice providers such as Odyssey Healthcare (ODSY). The index excludes all companies involved in home healthcare, outpatient medical services, and senior living centers.