GE: Are Hospital Equipment Makers in the ER?

On Friday I did a sidebar story on what might be ailing General Electric's healthcare business. (Disclosure: CNBC is owned by NBC Universal, which is a unit of GE (GE)).

It was responsible for a penny of the earnings miss. On "Squawk Box" that morningCEO Jeff Immelt said the longer-than-expected closure of a manufacturing plant was partially to blame.

Then, later on the conference call, officials said toward the end of the quarter orders from community hospitals fell 18 percent. That translated, they said, into $100 million of lost revenue.

JPMorgan Chase medical device analyst Mike Weinstein tipped me off that the GE healthcare weakness was having an immediate ripple effect on a whole basket of stocks in companies that also make big-ticket items for hospitals. (GE makes expensive equipment like CT scanners.)

What made the story even more interesting is that it could be traced back to the spreading credit crisis. Not-for-profit hospitals suddenly have to pay a much higher interest rate on their debt financing and so they're chopping their capital expenditures.

According to Dr. Christopher Olivia, who runs a six-hospital system in western Pennsylvania, many municipal and religious-based facilities have seen their rates triple or more almost overnight.

But in a research note to clients this morning Miller-Tabak healthcare analyst Les Funtleyder is incredulous. He says, "While it is obvious we are in the midst of a negative credit cycle which should impact med tech to some degree, this should have been discounted already and we find it surprising the GE would be the canary in the coal mine on this."

Funtleyder adds, "We are skeptical about the reduction in capital spending until we see the actual reduction."

But JPMorgan's Weinstein tells me the downturn is still out in front of the companies whose stocks got taken down Friday on the GE report. He believes that for most of them the hospital capex cuts could be more of a second quarter than first quarter issue.

We'll know soon enough.