Stocks of hospital and medical equipment rose on Thursday after the United State’s Supreme Court’s ruling to uphold federal subsidies as part of the Affordable Care Act.
Stocks of health care immediately and enthusiastically responded to the decision of Chief Justice John Roberts. Hospital companies were first in the line with Hospital Corporation of America, Tenet Healthcare, and Community Health each soaring by around 10 per cent. Companies dealing in medical equipment such as Edwards Lifesciences and Intuitive Surgical rose sharply as well. Stocks of health insurance are also on the rise, albeit slightly.
Fred Weiss of Atlantic Trust Private Wealth Management said that given that health care insurance in America is intact for many, the leading beneficiary is hospitals. The reason behind this big win is that hospitals, instead of having to provide health care services for free, are in fact getting paid.
He further stated that there was an excess in volume of patients and this was great news for companies dealing in medical equipment because through medical visits , more people will get to know of medical conditions that they otherwise would not have known. In addition, patients will be more naturally willing to undergo expensive operations if the money for the same is not coming out of their own pockets.
On the specific business impact front, Tenet Healthcare seems to be the biggest beneficiary. According to forecasts by Wedbush Securities’ Sarah James, an estimated 6.8 per cent of the company’s earnings in 2016 before taxes, interest, amortization, and depreciation, will be generated by patients on partnership and federally run exchange subsidies. Sarah James expects that the same patients will account for 6 per cent of the 2016 EBITDA of the Hospital Corporation of America.