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Health Care Set for Shake-Ups

Sweeping health care reform -- a major goal of the new Democratic-controlled Congress -- could bring relief to hospital companies but hurt managed care giants.

Big companies in both groups could attract buyers looking to capitalize on looming changes in the meantime.

In recent years, hospital companies like giant HCA have suffered dearly as a result of mounting bad debts from the uninsured. In contrast, managed care players such as UnitedHealth (UNH - Get Report) have capitalized on opportunities created by the same uninsured crisis. Specifically, they have rolled out consumer-driven health plans aimed at providing affordable -- if limited -- health care coverage to those who cannot pay for richer, more traditional benefits.

Hospitals have seen their unpaid bills, worsened by high deductibles and co-payments, keep climbing as a result. Meanwhile, health insurers have flourished with help from explosive growth in their consumer-driven offerings.

Now, however, top Democrats have started calling for new programs that promise fuller health care coverage for all Americans. They are pushing for rich benefits rather than the skinnier packages favored by Republicans and heavily promoted by major health insurers.

That kind of coverage would be good for hospitals and bad for consumer-oriented HMOs. Still, most experts foresee more routine developments in 2007 -- such as ongoing industry consolidation -- before revolutionary changes can take place.

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