Hospitals Have More To Fear Than Obamacare Failing

Includes: AET, GE, IHF, SIEGY, UNH
by: Dana Blankenhorn

Most talk involving health care investments (IHF) revolve around the Supreme Court and "ObamaCare."

The conventional wisdom is that a decision upholding the law would be bullish for hospitals, while a decision against them would be bullish for insurers. Managed care companies like UnitedHealth (UNH), Aetna (AET) and Coventry Health (CVH), which I suggested last week you avoid, seem especially prized by the pros.

In fact, the court's deliberation may not be the big news here. The bigger news may be a change in medical ethics, an effort launched by the American Board of Internal Medicine Foundation and Consumer Reports.

As the American Medical Association notes in an editorial about the recommendations:

To reduce unnecessary tests and procedures, physicians will need to play a leading role-their decisions account for about 80% of health care expenditures.

Some 45 changes are recommended, and all are bearish for imaging centers, hospitals, and their suppliers.

Each of nine medical societies, representing 374,000 doctors, gave five specific recommendations on what doctors should not feel compelled to do.

Here are my paraphrases for some of them:

  • Don't be so fast to do imaging for bad backs.

  • Don't do MRIs for patients who faint unless you have evidence of seizures or neurological trouble.

  • Don't routinely hand out antibiotics for patients with breathing trouble.

  • Don't do extensive tests on heart patients unless they're in high-risk groups (like diabetics) or show symptoms in a physical exam.

  • Don't give cancer patients false hope

I highlight these because each has been part of my or my family's medical history. Chances are they're part of your family medical history too.

Doctors defend extensive testing by blaming lawyers, saying they fear lawsuits for failing to do all they are capable of. This effort shows that many doctors recognize that their behavior also plays a role in unnecessary costs.

It needs to be emphasized these are only recommendations. But if fully implemented, either by choice or under pressure from insurers and regulators, they could have profound impacts on the utilization of hospitals and especially imaging centers.

The biggest losers may be the companies making imaging equipment like General Electric (GE) and Siemens (SI). But those companies are so large, and have so many other medical products, including health record systems that support these best practices, that the bottom-line impact from these changes would probably be minimal.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.