Ahead of the Bell: Health Care Reform

NEW YORK (AP) -- Health care service companies, including pharmacy benefits managers, could rise this week as investors grow skeptical about health care reform, an analyst said Monday.

"Legislative gridlock, sparked by mixed White House messages, contentious town hall meetings, and partisan politics, should push health care services multiples higher near-term as investors increasingly discount the probability for broad-based health care reform," Jefferies & Co. analyst Arthur Henderson said in a note to clients.

Henderson said pharmacy benefits manager Express Scripts Inc. is his top pick in the sector, ahead of larger rival Medco Health Solutions. He also recommended home nursing providers like Amedisys Inc. and LHC Group Inc., and dialysis providers like DaVita Inc.

The analyst said the Obama administration is likely to make one more push for major reform, which could increase stock volatility. It will be good news for Amedisys, LHC and DaVita if there is no public option in a final health care reform bill because a public option could squeeze funding and Medicare reimbursement, Henderson wrote.