Stocks of big hospital operators soared on the day after President Barack Obama's re-election. Investors acted on expectations that hospitals will gain business under his sweeping health care overhaul, known as Obamacare. On Nov. 7, shares of HCA Holdings, the largest U.S. hospital chain, jumped 9 percent.
But hospital stocks have since surrendered most of those gains. Investor concerns about the possibility that lawmakers will fail to prevent the package of spending cuts and tax increases known as the "fiscal cliff" have weighed on the entire market.
So what's the long-term outlook?
The election results provided certainty that Obamacare will not be repealed, although tweaks are likely as Congress and the White House try to cut the federal deficit. Financial analyst Steve Brozak of WBB Securities says that publicly traded hospitals are well positioned to benefit over the long term from the president's healthcare overhaul.
The key reason is that as the program is implemented, roughly 30 million Americans will gain access to insurance through the expansion of the Medicaid program and state-run health exchanges. That will drive many new patients to hospitals. It also means fewer uninsured people will show up at emergency rooms and be treated for free. Publicly traded hospitals also will have more access to capital, Brozak predicts. That will help them expand services and upgrade technology, including switching to electronic health records, which will help improve their profitability.Associated Press