Bank Of America: Affordable Care Act Keeps Benefiting Hospital Results
The recent ramp-up in the Affordable Care Act, commonly referred to as Obamacare, benefits is boosting hospital admissions and lowering the number of "self-pay" patients and associated bad debt, an analyst said Monday.
Top pick for Bank of America's Kevin Fischbeck is Community Health Systems (NYSE: CYH), which he said stands to gain the most from recent federal reforms to the nation's health care payment system.
Fischbeck also likes HCA Holdings Inc (NYSE: HCA) because of its cost control, cash flow and ability to make further capital investments.
But with ACA reform benefits ramping up, all five hospitals followed by Fischbeck saw improved volumes and payment mix in the third quarter.
Community Health's self-pay admissions fell to 6.3 percent on a same-store comparison, down 230 basis points from the second quarter. In Medicaid expansion states, self-payers at the hospital chain fell 70 percent from a year earlier.
LifePoint Hospitals, Inc. (NASDAQ: LPNT) self payers declined 40 percent in the recent quarter from a year earlier, while Tenet Healthcare Corp (NYSE: THC) saw a 59 percent decline and Universal Health Services, Inc. (NYSE: UHS) saw a 12 percent reduction.
Universal Health figures that 34 percent to 40 percent of improved results from its acute care business stems from ACA with a like amount of gain from an improved economy, and 15 percent to 20 percent from added services.
Hospital admissions, which plummeted in the first quarter of 2013, have been on a steady rise throughout the current year. Outpatient volume grew an average of 6 percent in October, although inpatient admission growth slowed to 2.6 percent, from 3.6 percent in September, according to Fischbeck.
"Our thesis continues to be focused on the benefits of Obamacare" relative to payer mix, Fischbeck said. "Acceleration in volume trends would represent an upside."
HCA gained 2.8 percent in recent trading Monday; LifePoint picked up 2.4 percent. Universal Health was up nearly 2 percent, Community Health up 1.3 percent and Tenet Healthcare gained 0.7 percent.
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