Checking into hospitals

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Although the cost of going to the doctor continues to rise, one way to offset the hole that’s in your pocket might be to invest in hospital stocks.
The Affordable Care Act’s individual mandate requires everyone to get health insurance, which means that as of Jan. 1, 2014, hospitals will be paid for care that they previously might have had to write off. “Reform is definitely good for the hospitals,” says Brian Tanquilut, who covers health-care stocks at Jefferies. About 10 million U.S. consumers will remain uninsured after the mandate kicks in, but the reduction in bad debt still is “a pretty big dent” in the prospects for a hospital’s earnings, he says.
Looking at inpatient volumes is one of the best ways to evaluate a hospital stock, he says. Thus, he favors HCA Holdings (NYSE: HCA; Price: $36.99), which he says is one of the most stable companies in the industry. HCA’s inpatient volume increased by 7.9 percent during the first 9 months of 2012, according to the company’s most recent filing. Tanquilut also likes Mednax (NYSE: MD; Price: $85.94) and Team Health Holdings (NYSE: TMH; Price: $33.13), which employ the doctors who work at hospitals.