Hospital stocks jump after health care ruling

Associated Press Modified: June 28, 2012 at 3:30 pm •  Published: June 28, 2012
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WASHINGTON (AP) — Hospital stocks rose sharply Thursday after the Supreme Court guaranteed them millions more paying customers by upholding the core of President Barack Obama's health care overhaul.

Some insurance company stocks fell in choppy trading as investors fretted about the costs of rules included in the law.

"For the hospitals, it means that they get payment and they get more potential customers," said JJ Kinahan, chief derivatives strategist for TD Ameritrade. Insurers "have to be less selective of their clients, which is bad for them," he said.

The stock of Hospital Corp. of America, the largest private hospital chain in the United States, closed up 11 percent. Community Health Systems rose 8 percent, Health Management Associates 9 percent.

Quest Diagnostics, which runs laboratories, and Laboratory Corp. of America both gained about 3 percent.

The ruling will add 32 million Americans to the rolls of the insured, vastly expanding the pool of health care consumers, said Jeffrey Loo, a stock analyst with S&P Capital IQ, a research group.

Under the current system, about one-fourth of the care provided by hospitals is never paid for, either because debts go bad or because the patient is uninsured, Loo said. He said the law will cut the portion of care that is not paid for in half.

However, Gary Taylor, a financial analyst for Citi Investment Research, warned clients that hospital stocks could "erase all their gains" from the court decision if Mitt Romney is elected president this fall. He has pledged to repeal the law.

Many insurance companies fell sharply after the ruling was announced. They bounced around while reporters and analysts dissected the court's ruling, and they later recovered some of the losses.

UnitedHealth Group, the biggest insurer, closed up half of a percentage point. It had been down as much as 7 percent after the ruling. WellPoint plunged 8 percent, Aetna and Cigna nearly 3 percent.

UnitedHealth escaped the fate of other insurers because it depends less on individual and small-group policies for its revenue. UnitedHealth also has an information technology business and a pharmacy benefits business and is the biggest provider of Medicare Advantage plans for the elderly.

By comparison, WellPoint draws more of its revenue from insurance on individuals and small groups. The health overhaul is seen as more damaging to those businesses because of the costs they would incur to cover more people.

Because of the volatility around the time the decision was reported, trading was halted for five health care stocks, a spokeswoman for the New York Stock Exchange said: HCA, Community Health Systems, Tenet Healthcare, WellPoint and Health Management Associates. She said all five stocks returned to normal trading shortly after the halts. She would not say how many stocks are halted on a typical trading day.

Under market rules, trading of a stock is halted for five minutes if its price swings more than 10 percent in a five-minute period.

Some analysts expressed surprise at the quick sell-off in insurance stocks. After all, those insurance companies will also gain millions of premium-paying customers.



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