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March 27, 2017

Hospital stocks shoot up after GOP health bill fails—but uncertainty remains

Daily Briefing

    Hospital stocks climbed sharply Friday after House Speaker Paul Ryan withdrew the American Health Care Act (AHCA), but uncertainty still reigned as stakeholders tried to understand what the GOP bill's failure meant for the future of the ACA.

    House cancels vote on ACA repeal

    Early Friday, Mizuho Securities Director of Research Sheryl Skolnick had predicted that hospital stocks would rally if the AHCA failed to pass. That prediction turned out to be accurate, Modern Healthcare reports. As markets closed in New York on Friday, the BI North America Hospitals Competitive Peer Group Index was up 5.4 percent—even as the Dow Jones Industrial Average fell slightly and the S&P 500 was flat.

    In particular:

    • Community Health Systems was up 9.7 percent;
    • HCA Holdings was up 3 percent;
    • LifePoint Health was up 3 percent;
    • Tenet Healthcare was up 7.4 percent; and
    • Universal Health Services was up 3 percent.

    Some insurers experienced boosts as well, with Centene shares up 5.2 percent and Molina Healthcare up 4.6 percent.

    Before Ryan pulled the AHCA, the American Hospital Association and other groups representing health care providers had said the bill would be bad for the industry. According to the Congressional Budget Office, the AHCA would have reduced the number of insured U.S. residents by 14 million next year and 24 million by 2026. Skolnick said, "This was bad legislation, with very damaging potential impact on hospitals, patients, and doctors, and would have done little to restore competitive markets or rational pricing."

    What's next for hospitals

    Some hospital and health system executives said the failure of the AHCA was a positive development.

    For instance, Beth Israel Deaconess Care Organization CEO Jeffrey Hulburt said the decision to pull the bill was "great news for Massachusetts," adding that "the AHCA threatened to reverse the gains we've made in the shift toward a value-based model of care that rewards providers for the quality of care they provide."

    However, in a statement, Scripps Health CEO Chris Van Gorder said the status quo was not "an attractive option." He said that future health care reform efforts should give "health care providers a seat at the table to hammer out the details since we are the ones who better understand the downstream impact of health reform legislation."

    Bruce Siegel, CEO of America's Essential Hospitals, echoed those sentiments, saying the decision to pull the bill gave stakeholders "time now to do this and do it right."

    Insurers face uncertainty about White House's approach to the ACA

    After Ryan called off Friday's vote on the AHCA, health insurance executives said their industry faced significant uncertainty. According to the Wall Street Journal, insurance companies will have to grapple with the instability of many of the Affordable Care Act's (ACA) exchange markets—as well as a fluid regulatory environment.

    For instance, Anthem has said if policymakers do not take additional steps to stabilize the individual insurance market it will consider pulling back the exchanges. Humana is already planning to do so because its enrollment for this year is not likely to generate profits, the Wall Street Journal reports. 

    Mario Molina, CEO of Molina Healthcare, said the ACA exchanges could see double-digit premium increases next year. He said Molina was also considering pulling back if Republicans did not resolve several issues important to insurers, such as uncertainty about whether Republicans will fund cost-sharing subsidies for low-income individuals and how forcefully the Trump administration will enforce the individual mandate.

    However, according to the Wall Street Journal, "the Trump administration has sent mixed signals" about how it plans to proceed. For instance, the administration has said it may take steps to stabilize the market, but the Internal Revenue Service also announced steps to reduce enforcement of the individual mandate.

    According to Modern Healthcare, experts expect that HHS Secretary Tom Price will try to weaken the ACA's essential benefits requirements, which mandate insurers cover maternity care, mental health services, and other benefits. Larry Levitt, SVP at the Kaiser Family Foundation, said the administration "[doesn't] have unlimited authority to repeal the essential health benefits, but certainly have authority to define them differently" (Gooch, Becker's Hospital Review, 3/24; Barkholz, Modern Healthcare, 3/24; Tracer/Greifeld, Bloomberg, 3/24; Japsen, Forbes, 3/24; Mathews/Evans, Wall Street Journal, 3/24; Meyer, Modern Healthcare, 3/24).

    Navigating the first 100 days of the Trump administration


    Since Donald Trump won the presidential election in November, health care reform has since quickly risen to the top of the GOP's policy agenda—and heath care executives are grappling with a new sense of uncertainty.

    While many unknowns will remain across the next few months and potentially even years, the first 100 days of the Trump administration will provide significant insight into the direction of reform efforts. Read our briefing to learn what five key issues you should watch.

    Download the briefing

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