What happened

After President Trump signed legislation boosting Medicaid funding, shares of HCA Healthcare (HCA -4.36%) rallied 22.6% on Thursday.

So what

HCA Healthcare is one of the country's biggest healthcare companies, treating patients through 184 hospitals and 123 freestanding surgery centers in 21 states. The company reported revenue of $13.5 billion in Q4 2019. 

Hospital workers stand near an entrance to a hospital.

Image source: Getty Images.

Hospital operators are expected to see significant increases in demand because of admissions resulting from COVID-19, which can cause life-threatening respiratory complications.

As of Thursday afternoon, there were 236,420 confirmed cases worldwide, including 11,274 in the United States. A report from the Centers for Disease Control and Prevention (CDC) issued on Wednesday indicated that over 20% of 2,449 cases identified between Feb. 12 through March 16 required hospitalization.

As part of a broader financial relief package designed to address challenges arising from the spread of COVID-19 in the U.S., President Trump signed a bill into law on Wednesday that provides clarity into reimbursement for healthcare required by COVID-19 patients. The bill boosts the federal government's Medicaid matching funds by 6.2%. It also requires private health plans, Medicare, Medicaid, Medicare Advantage, and other public insurance plans to cover COVID-19 testing and visits to hospitals or physicians' offices at no cost to patients. It also makes $1 billion available to reimburse providers for testing uninsured individuals. 

Now what

Clarity into costs is important because there's significant uncertainty regarding the strain COVID-19 may put on hospital systems. In addition to potentially incurring significant unreimbursed expenses, hospital revenue is taking a hit because of delays to elective procedures, which contribute significantly to profitability. If COVID-19 cases continue climbing, Wednesday's legislation may be only the first step toward ensuring HCA Healthcare and its competitors remain financially viable throughout this crisis.