Senate Republicans' health bill boosts hospital and health-care stocks — but will the gains last? – MarketWatch

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Shares of hospital-system operators rallied as much as 8% on Thursday following the release of the Senate Republican health bill, which appears more favorable to their interests than the House-passed bill.

Health-insurer and drug stocks also rose in afternoon trading, and health-care ETFs were on pace for their biggest weekly gains in months.

Though hospitals could benefit from the health-law changes in the short term, longer-term cuts — including to Medicaid — could still be expected to hurt hospitals, health-care analysts said.

The Senate health bill “tries to phase in the pain” of changes to the Affordable Care Act, such as Medicaid spending cuts, said Spencer Perlman, director of health-care research at Veda Partners, who described the Senate draft as having “the same architecture” as the House bill but “nicer furnishings.”

Still, because the benefit for hospitals would obtain only in the short term, it is probably overdone, he said.

Read: Stock market climbs as health-care shares extend rally

Hospitals have benefited from the higher rates of insured people that resulted from the Affordable Care Act, since unpaid hospital bills saddle the companies with debt.

“Clearly, the Senate bill is viewed as less disruptive than the House bill to the number of people currently receiving insurance,” said Stefanie Miller, senior analyst at Height Securities.

See: House passes bill to repeal and replace Obamacare

But “the initial reaction may have oversimplified how different this bill is,” she said, predicting that stocks that have risen on the news may be “rebalancing” in the coming days.

“Lots less worse short term; lots more worse long term,” said Mizuho Securities analyst Sheryl Skolnick in summing up the bill.

Though Medicaid cuts begin later and are spread out more, “cuts will apparently be even deeper than the $800 [billion–plus] in the House bill,” she said.

Tenet Healthcare Corporation shares THC, +7.55% jumped 8%, Community Health Systems Inc. CYH, +6.29% skyrocketed 8.2%, HCA Healthcare Inc. shares HCA, +2.91% rose 3.6% and Universal Health Services Inc. shares UHS, +2.59% lifted 2.6%, compared with a 1.6% rise in the Health Care Select Sector SPDR XLV, +1.22% .

Health-insurer stocks also were on the rise Thursday, with UnitedHealth Group shares UNH, +0.91% up 1.4%, Aetna Inc.’s stock AET, +0.84% rising 1.1%, Humana Inc. shares HUM, +0.56% seeing a 1.3% lift and Anthem Inc. shares ANTM, +0.90% up 0.9%, compared with a 0.2% rise in the S&P 500 SPX, +0.20% .

Drug stocks also advanced in Tuesday trading, with the SPDR S&P Pharmaceutical ETF XPH, +1.57% rising 1.7% and the SPDR S&P Biotech ETF XBI, +0.93% up 1.6%.

Drug makers’ shares have been looking up all week, with a 3.6% gain Monday, a 1.1% gain Tuesday and a 4.7% gain so far on Wednesday, after an executive-order draft from the White House was reported as being favorable to the industry.

Read more: Drug stocks surge on report that President Trump plans to ease industry regulations

Drug shares could also be rising on Thursday because the Senate health bill has given investors confidence that Republicans might soon move on to achieve another legislative priority, tax reform, Miller said.

Shares of the Health Care Select Sector SPDR XLV, +1.22% have risen 8.7% over the last three months, compared with a 3.9% rise in the S&P 500 SPX, +0.20% .

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