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Can Hospital Stocks Keep Climbing Under Obamacare?

By Dan Caplinger - Sep 21, 2013 at 3:05PM

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HCA, Community Health, HMA, and Tenet Healthcare have all soared over the past year, but can those gains last?

Hospital stocks have soared in the past year, as investors prepare for the coming implementation of the Affordable Care Act. But will Obamacare's actual arrival deliver the strong results that investors expect?

In the following video with Dan Caplinger, the Fool's director of investment planning and author of the special free report "Everything You Need to Know About Obamacare," Motley Fool health-care bureau chief Max Macaluso discusses hospital stocks and the potential impact the Affordable Care Act could have on them. As Dan notes, HCA Holdings (HCA -1.00%) and other hospital stocks have posted impressive gains. Much of the optimism centers on expectations that a greater number of insured patients will lead to smaller bad-debt losses for hospitals, improving their bottom lines.

But as Dan and Max discuss, some other factors are helping as well. Tenet Healthcare (THC -0.55%) announced in June that it will buy out Vanguard Health (NYSE: VHS) in a $4.3 billion merger, as Tenet hopes to broaden its coverage area and take advantage of potential cost savings and other operating efficiency gains. Community Health Systems (CYH -6.95%) followed up in July with its $3.9 billion offer for Health Management Associates (NYSE: HMA). At the same time, though, some threats loom for hospitals. Max and Dan discuss those potential downsides and give their views on whether hospital stocks have further to run.

Editor's note: In the video, Dan refers to earlier rumors of a Community Health/HMA deal that preceded the actual buyout offer. He and the Motley Fool regret any misunderstanding.

Fool contributor Dan Caplinger, Max Macaluso, Ph.D., and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Community Health Systems, Inc. Stock Quote
Community Health Systems, Inc.
CYH
$3.48 (-6.95%) $0.26
HCA Healthcare, Inc. Stock Quote
HCA Healthcare, Inc.
HCA
$216.70 (-1.00%) $-2.19
Tenet Healthcare Corp. Stock Quote
Tenet Healthcare Corp.
THC
$66.61 (-0.55%) $0.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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