Hospital stocks temper after rise spurred by AHCA demise
- Healthcare stocks went up after the news broke on Friday that the American Health Care Act (AHCA), the GOP bill to repeal the ACA, was being pulled.
- That uptick was short for many. Some, like Community Health Systems, closed on Tuesday lower than close of business on Friday while others, like LifePoint, Tenet Healthcare and HCA, closed on Tuesday higher than what their stock was trading at on Friday. In all cases, there was a sharp increase in their stock at the open of business on Monday and then varying degrees of decline.
- "Tenet and CHS in particular were likely to rise on the news...because the [AHCA] defeat would buy time for them to reduce debt, while investors shorting the stocks, or expecting shares price to drop, would have to buy back shares on their bets," Sheryl Skolnick, director of research at Mizuho Securities, told Modern Healthcare.
The AHCA's demise was likely welcomed by hospitals and other care providers. Such organizations were some of the big winners under the ACA as more and more patients became insured and started to enter the care delivery system. While they may have been sicker than expected, that was more of a thorn in insurers' side as hospitals are still trying to find their footing in a new value-based payment world. So while still in a fee-for-service model, many hospitals were open to the idea of more patients potentially equaling more revenue.
But the AHCA's demise can't save U.S. hospitals, which have been steadily declining. In 1997, the American Hospital Association identified 6,100 registered hospitals. In the following years, the number of hospitals has been steadily biting the dust from 5,759 in 2004 to 5,723 in 2014. The American Hospital Association (AHA) currently identifies 5,564 registered hospitals (using data from the 2015 AHA Annual Survey).
In addition, ever so slightly, hospital utilization is declining in the face of rising expenses and disappearing beds. In 2015, AHA data showed from 2010-2013:
- Hospital admissions are declining (36.9 million to 35.4 million). The AHA's 2017 figure is currently 35 million;
- The number of hospital beds in the U.S. are declining (941,995 to 914,513). The AHA's 2017 figure is currently 897,961; and
- Outpatient visits are increasing (750 million to 787 million).
Expenses, according to the AHA, are currently $936 billion for all U.S. registered hospitals, up from $859.4 billion in 2013. More than a half of hospitals (52%) in the U.S. last year lost money on operations, Cleveland Clinic CEO Toby Cosgrove said in Washington, D.C. this month around the same time news broke that the organization – while turning a profit in 2016 – suffered a 71% decrease in its operating income. This news comes amidst a month filled with poor hospital news from Banner Health, Community Health Systems, MD Anderson and Catholic Health Initiatives who either suffered losses of some kind, let employees go or both.
Hospitals are also hiring more employees in a decade where many systems had to make expensive health IT purchasing decisions. A recent Health Affairs blog using Bureau of Labor Statistics data showed a 11% growth for hospital healthcare jobs from 2007 to 2017.
Rising expenses and slight declining admissions and availability of beds – as well as alternative care settings competing for the one-and-done visit low acuity patients – makes for an unfortunate financial situation for some hospitals. So, while the AHCA is gone, it will take more than the improving the stability of individual health insurance markets to shore up many hospital's financials.
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