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TheStreet Open House

Analyst Sees Hospital Stocks Continuing To Rise

By LINDA A. JOHNSON

TRENTON, N.J. (AP) â¿¿ A Jefferies analyst recommended buying hospital stocks on Monday, saying their rally this year should continue as many uninsured patients get coverage due to the Affordable Care Act.

Jefferies analyst Brian Tanquilut noted that stocks of publicly traded hospitals already have risen this year by 32 percent as a group.

"We continue to believe that 'reform' will end up having a net positive impact for most hospitals as bad debt for the group should decline notably as a result of insurance coverage expansion," he wrote in a report to investors.

Bad debt, meaning bills patients cannot or will not pay, has long been a problem for hospitals. It tends to increase during periods of high unemployment, as people lose job-related health insurance.

Under the Obama administration's health care overhaul, roughly 30 million uninsured Americans are expected to gain coverage either through new health care marketplaces, called exchanges, or through expansion of Medicaid, the state-federal program that provides health care to the poor and disabled.

In two additional reports, Tanquilut changed his ratings from 'Hold' to 'Buy' for two big hospital chains â¿¿ Community Health Systems, with 135 hospitals and more than 20,000 beds in 29 states, and Health Management Associates, which has 70 hospitals with about 10,500 beds, mainly in rural areas in the South.

The analyst also nearly doubled his 12-month price targets for both those systems. He raised Health Management Associates from $7.50 per share to $14.50, and Community Health from $29 per share to $56.

The other two hospital chains cited in the report are HCA Holdings Inc., rated as a 'Buy' with a $37.92 price target, and Tenet Healthcare Corp., also rated a 'Buy' with a $44.22 price target.

Shares of all four companies barely budged Monday. HCA fell 14 cents to $37.78 per share, Community Health dipped 9 cents to $44.34, Tenet declined 1 cent to $44.21 and Health Management edged up 7 cents to $12.33.

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