Republican Sweep Poised to Agitate ACA-Vulnerable Health Care Services Stocks

A sweep by the GOP has radical implications for the Affordable Care Act, the legislation that has fueled growth among health care services companies under the Obama administration because of its expansion of insurance coverage.

From a stock perspective, players like Community Health Services (CYH)  , HCA Holdings (HCA)   and HealthSouth (HLS)   , among several others, are not anticipated to respond well to policy changes under a Trump administration. At the same time, behavioral names like Universal Health Services (UHS) and Acadia Healthcare (ACHC)  may be at an advantage given the bipartisan support of mental health reform. 

While specialty pharma and biotech companies see a "relief rally" in the public markets with President-Elect Donald Trump waiting in the wings, the "GOP Triple Play" is the the worst possible outcome for health care services stocks, according to Sheryl Skolnic of Mizuho, who described her coverage universe as "deep in the red."

What the health care legislation will look like under a President Donald Trump remains massively uncertain, as the extent to which we'll see the "repeal and replace" of the ACA has been ill-defined at this point. Adding to uncertainty is the potential conversion to a Medicaid structure based upon block grants, which isn't expected to support insurance coverage expansion under the existing policy and could pressure rates for providers. 

In other words, a number of ACA-dependent programs are now under threat, including bundling, long-term acute care hospitals criteria, and accountable care organizations, or groups of doctors, hospitals and other health care providers, noted Skolnick. 

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