What may be the "worst of all possible worlds" for hospital stocks could be in the making.
With Donald Trump performing surprisingly strong in swing states, a Republican sweep of the White House and both chambers of Congress is a distinct possibility.
That's bad news for hospital stocks, Mizuho analyst Sheryl Skolnick wrote in a note.
Why? Although Republicans promise to eliminate the Affordable Care Act, what they really are likely to do is remove the coverage that consumers receive, money that ends up flowing to health care providers. What will stay in place, however, are the fees and taxes hospitals and others are paying to helping cover the program's costs. She noted that $155 billion in pay-for cuts to hospital reimbursements and a host of regulations, taxes and fees on managed care have already been reflected in past years' earnings. Over the next 10 years those pay-fors are expected to raise $1 trillion.
So, the most likely scenario under a Republican sweep "is the worst of all possible worlds for hospitals," she wrote.
"If ACA remains in place, you will see some relief in the hospital names," Lovell said by phone. "They have been beaten down this year because of concerns of ACA going away."
The full calculus of how a Trump or Clinton win will affect healthcare stocks was laid out in Alicia McElhaney's story Tuesday.