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Analyst: VP debate may stir health care volatility

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Thursday’s vice presidential debate is expected to deliver another dose of volatility to the stocks of health care service providers like hospitals, nursing homes and home health companies, according to a Jefferies analyst.

Any perceived gain for Republican presidential candidate Mitt Romney and running mate Paul Ryan may be seen as a risk that the Patient Protection and Affordable Care Act (PPACA) could be repealed, analyst Brian Tanquilut said in a research note.

The health care overhaul aims to cover millions of uninsured people starting in 2014, when the state-federal Medicaid program expands and people begin to receive tax credits to help them buy private coverage. Romney has said he will start repealing the law if he’s elected.

The overhaul’s coverage expansions will significantly reduce the uninsured population treated by hospitals and other health services providers, Tanquilut noted, adding the stocks of some of those companies have slipped as Romney made gains recently in pre-election voter polls.

The analyst also said that Thursday’s debate will likely center on vice presidential candidate Paul Ryan’s plan for Medicare, the federal program that covers the elderly and disabled. Ryan proposes to cap growth in Medicare spending by giving patients a defined contribution that helps them purchase coverage, and it adopt cuts to the program legislated by the overhaul.

That creates a potential combination of decreased provider pricing leverage over insurers and rate cuts that will likely raise the perceived risk faced by health care service providers. Tanquilut said in an e-mail he thinks companies with Medicare-heavy businesses like hospital operators, nursing homes or long-term care locations will see the most volatility.

Publicly traded companies that match that description include hospital chains like HCA Holdings Inc. and Kindred Healthcare Inc., which runs long-term care hospitals and nursing and rehabilitation centers.

Shares of HCA fell 6 cents to $30.67 in Wednesday morning trading, while Kindred stock climbed 4 cents to $11.26. Broader trading indexes were mixed.


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