Hospital Stocks Down on Rumored Medicare Cuts

The nine leading hospital company stocks are looking pretty bearish on their daily charts.

Reports and rumors in Washington late last week that the three large hospital associations are about to agree to give Congress and the Obama administration $150 billion in cost concessions over the next 10 years obviously have not been good for the hospital companies.

In addition, Sen. Max Baucus (D-MT) is looking for cuts in Medicare payments to hospitals and physicians.

And how many hospitals can run on California’s IOUs? Not only California, but most states are having budget problems because of Medicaid.

Then there are the confusing signals coming out of Washington about the prospects for the health insurance market reform legislation that’s going through Congress or is not going anywhere.

While last week it looked like the Democrats’ public option health plan, which I call a Government HMO (GHMO), was dead on arrival. Over the weekend, a couple of prominent Democrats promised that it is alive and kicking. I’ve seen talk that the public option would get only 38 votes in the Senate, but who knows?

The GHMO would solve hospital companies’ problems with uncompensated care and the 6 million to 8 million uninsured American citizens who aren’t eligible for existing government programs and can’t afford to buy any kind of health insurance because they’re permanently unemployable and chronically ill. But it wouldn’t solve the hospitals’ problems with 12 to 15 million uninsured illegal immigrants because they still would have to give them care without getting paid.

That unemployment rose last month to 9.5%, a 26-year high, also hurt hospital stocks, which almost always suffer during recessions.

On these charts, CYH, HMA, LPNT, THC and UHS are showing bearish signals.

On these charts, HLS, KND, MDTH and PHC are showing mixed signals. Click on the charts to see galleries of charts.

Disclosure: I don’t have positions in any of these stocks.

Comments

[User 441444:]

Buy on the rumor, sell on the news!

Jul 06 09:44 AM

[Donald Johnson:]

The question remains, which rumors?

Jul 06 09:55 AM

[User 441444:]

When I made the initial reply, I was wearing my "trader's hat." The intraday margins in HCP are impressive, and there's always the safety net of time -- as long as you're not in margins. The margin plays make HCP fairly predictable as a sector in the short term. And, again, the intraday spreads are impressive.

I actually fear the possibility of medicare reductions and limitations on tests, etc., but at the same time I think the need to relegate and outsource is going to be important for physicians' practices -- if nationalized health care coverage goes into play, I'm assuming no more surgi-suites and in-house CAT scans, etc. The hospital providers should take up the slack to keep physicians' practices maximizing profits.

If nationalized health care is not forthcoming, the computerized recordkeeping and other advances will trim the overhead of the HCPs as a sector (I don't think it's dependent upon nationalized health care coverage -- it's inevitable as a standalone), which will keep the sector hopping. "It's all good," I guess you could say.

But still, there's so much activity that one can't help but look at the sector with one's "trader's hat" on!

So I guess the short answer is, "It doesn't matter what the rumor IS; it's sufficient that the rumor exists."

=(;^>)




On Jul 06 09:55 AM Donald Johnson wrote:

> The question remains, which rumors?

Jul 06 11:00 AM

[User 441444:]

PS - I really think you hit the nail on the head by bringing up the issue of undocumented folks. Here in Houston, it's a huge burden on the health care provider system -- they take the brunt of that, as opposed to the physicians' practices. This is a big grey area in the Obama plan.


On Jul 06 11:00 AM User 441444 wrote:

> When I made the initial reply, I was wearing my "trader's hat." The
> intraday margins in HCP are impressive, and there's always the safety
> net of time -- as long as you're not in margins. The margin plays
> make HCP fairly predictable as a sector in the short term. And, again,
> the intraday spreads are impressive.
>
> I actually fear the possibility of medicare reductions and limitations
> on tests, etc., but at the same time I think the need to relegate
> and outsource is going to be important for physicians' practices
> -- if nationalized health care coverage goes into play, I'm assuming
> no more surgi-suites and in-house CAT scans, etc. The hospital providers
> should take up the slack to keep physicians' practices maximizing
> profits.
>
> If nationalized health care is not forthcoming, the computerized
> recordkeeping and other advances will trim the overhead of the HCPs
> as a sector (I don't think it's dependent upon nationalized health
> care coverage -- it's inevitable as a standalone), which will keep
> the sector hopping. "It's all good," I guess you could say.
>
> But still, there's so much activity that one can't help but look
> at the sector with one's "trader's hat" on!
>
> So I guess the short answer is, "It doesn't matter what the rumor
> IS; it's sufficient that the rumor exists."
>
> =(;^>)
>
>

Jul 06 11:22 AM

[Dmclaugh:]

I've been trying to locate a resource that shows the breakdown of the 45 million or so uninsured (eg, how many are young 'invincibles' that can afford insurance but they don't buy because they're young, etc. . You mention that 12 to 15 million uninsured illegal immigrants. Where were you able to get this data?

Jul 06 12:45 PM

[Donald Johnson:]

Search my blog for "uninsured"

www.businessword.com/i.../

www.businessword.com/i.../

www.businessword.com/i.../

I think Census undercounts illegal immigrants and under counts uninsured illegals and their uninsured dependents, many of whom are American-born citizens. My last link offers a link to Census reports.

Hope this helps.

Jul 06 02:02 PM

[ozzy:]

It will be interesting to see if the doctor partnership issue will be addressed. It is in the 1000 page bill which has yet to be changed(despite the talk from BHO). If it stays in it will be an issue for those providers in that camp. Medcath is exposed here as most of their operations have significant physician ownership. Being the general partner they will have to buy out their partners per their operating agreements. Obviously, this will be a cash drain for them

Aug 19 03:35 PM

[medallionstock:]

Great article. I came across an article on Yahoo Finance discussing Medical REITs and how they stand to benefit from the recent Obama administration legislations: Take a look at Yahoo Finance:
finance.yahoo.com/news...

Sep 23 11:04 AM