Investors betting on HCA Holdings Inc. and its hospital-company brethren needn’t worry about patient admissions or earnings. To see where the stocks may go, just watch President Barack Obama’s poll numbers.
The CHART OF THE DAY shows shares of for-profit hospital chains have closely tracked the ups and downs of Obama’s re-election chances the past two months, as measured by Intrade.com. As Obama’s odds jumped 8.3 percent in that time, Nashville, Tennessee-based HCA, the biggest hospital company, gained 3.6 percent in New York trading. A Bloomberg Industries index of the top seven chains rose 7.3 percent.
The industry’s fate is tied to the Affordable Care Act, Obama’s 2010 law designed to expand insurance to 32 million people, said Sheryl Skolnick, a CRT Capital Group analyst from Stamford, Connecticut. While the law cuts funding to hospitals, it also will ease the cost of caring for patients who can’t pay their bills. Obama’s opponent in the Nov. 6 election, Republican Mitt Romney, has vowed to repeal the measure.
With polls showing a close race, hospital shares are stuck in a “twitchy market,” Skolnick said in an Oct. 17 note to clients. “In the absence of a strong current fundamental and positive view, the hospital stocks likely get whipped around depending on whether the trade is ‘Reform On’ or ‘Reform Off.’”
That’s likely to continue even after the election is decided, Skolnick said. Her conversations with investors suggest hospital shares may fall 10 percent or more if Obama loses, she said. Health insurers, which face new taxes and regulations under the health law, may lose 10 percent if the president wins, Skolnick said.