By Maria Armental
Hospital shares jumped Friday after two operators reported a
better-than-expected impact from health-care reform.
Executives from Universal Health Services Inc. (UHS) and
LifePoint Hospitals Inc. (LPNT) noted the early benefits during
their companies' earnings reports this week, according to
transcripts of the companies' conference calls. Specifically, they
cited the positive impact of Medicaid expansion driving down
self-pay patients.
"Increases in Medicaid membership and health-insurance exchange
participation contributed measurably to our results in the
quarter," said William F. Carpenter, LifePoint's chairman and chief
executive.
Shares of LifePoint added 6.3% Friday, while Universal Health
rose 6.1%.
The gains Friday extended to others in the industry, including
HCA Holdings Inc. (HCA), shares of which gained 5.8%. HCA reports
earnings April 29. Elsewhere, Community Health Systems Inc. (CYH)
increased 6.6% and Tenet Healthcare Corp. (THC) rose 9.1%.
Under the Affordable Care Act, the hospital industry accepted
big cutbacks in government payments in return for the revenue that
would come from tens of millions of patients who would gain
insurance.
Steve G. Filton, chief financial officer at Universal Health
Services, which reported its earnings Thursday, said it was
difficult to quantify the impact of the health-care reform on the
company's earnings but "we certainly feel like there was a benefit
from reform in the quarter."
Meanwhile, Lifepoint Hospitals, which reported earnings Friday
morning, anticipated it would "meet or potentially exceed the high
end of our reform expectations," said Leif M. Murphy, the company's
chief financial officer and executive vice president.
"At the end of last year," Mr. Murphy said, "we estimated that
4% to 5% of our 2014 EBITDA would come from the impact of
health-care reforms. Our experience in the first quarter suggests
that we will be at the high end of that estimate."
Ann Hynes, of Mizuho Securities USA Inc., noted, in a report
released Friday, that LifePoint would benefit from drawing 46% to
48% of its revenue from states that are expanding Medicaid this
year.
In Universal Health's case, Ms. Hynes said early healthcare
reform should also drive down uncompensated care.
"We view this as an encouraging sign particularly given that the
company is maintaining prior reserve policies," Ms. Hynes said,
adding reform guidance may prove to be overly conservative.
Chris Rigg, an analyst with Susquehanna Financial Group, noted,
in a report, that expectations for the hospital group were low
ahead of the first-quarter reports.
Write to Maria Armental at maria.armental@wsj.com
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