Height Capital Markets Picks Winners, Losers From Congressional Opioid Legislation

Opioid legislation recently passed in the House of Representatives includes a temporary lift on the ban on Medicaid funding for substance use disorder and the definition of eligible institutions for mental disease facilities, according to Height Capital Markets. 

The Thesis

The bill will temporarily repeal the IMD exclusion and require Medicaid issuers to rebate payments exceeding an 85-percent medical loss ratio, creating a "material tailwind" for inpatient behavioral health providers like Acadia Healthcare ACHC and a material headwind for managed care organizations levered to Medicaid like Centene Corp CNC, Molina Healthcare, Inc. MOH and WellCare Health Plans, Inc. WCG, the Height analysts said. 

This legislation will likely proceed at an expedited rate, according to Height Capital Markets.

"We expect the Senate will send final opioids legislation to President Donald Trump's desk this week, following the House's passage of H.R. 6 on Friday, Sept. 28 by a vote of 393-8. Included in the final legislation are policies that represent tailwinds for behavioral health providers and headwinds for Medicaid managed care issuers.”

According to data from the National Institute on Drug Abuse, between 8 and 12 percent of patients develop an opioid use disorder, accounting for 115 daily opioid overdoses in the U.S, Height said. 

Price Action

Centene was trading 0.69 percent at $145.78 at the time of publication Monday, while WellCare experienced a rise of 0.31 percent for a $321.49. share price. Acadia Healthcare Co. ACHA was up 0.82 percent at $20.93 at the time of publicatioon Monday, while Molina was down 0.22 percent at $148.41.

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