Wal-Mart Stores, Inc. (WMT), Tenet Healthcare Corp (THC): Three Surprising Repercussions of Obamacare

Page 1 of 2

Ever since the Supreme Court upheld the Patient Protection and Affordable Care Act (nearly in its entirety) last June, we’ve been examining nearly every facet of the transformative health reform law.

Known also as Obamacare, the PPACA offers a lot of promise to improve the transparency of the health care system, expedite the process of obtaining health insurance, and greatly expanding the number of individuals who have health insurance. As we’ve also conjectured, it has some potential downfalls, which may include failing to reduce insurance premium prices and placing a larger burden on the middle class.

As the implementation date grows nearer for Obamacare, a set of surprising new repercussions that few saw coming are beginning to rear their head. While not devastating, the following possibilities do have the potential to negatively impact your health care, the health of your portfolio, and the economy as a whole.

1. Hospitals are cutting back on capital expenditures.
The hospital sector has been revered as the biggest winner of all under the new health care reform — and it’s not hard to understand why. The two largest hospital operators in the U.S., HCA Holdings Inc (NYSE:HCA) and Tenet Healthcare Corp (NYSE:THC), both lost a significant sum of their revenue to doubtful accounts last year by treating patients who were unable to pay their bill. For HCA Holdings Inc (NYSE:HCA), this figure totaled close to $3.8 billion, while it was a more subdued $785 million for Tenet Healthcare Corp (NYSE:THC). The individual mandate portion of the PPACA, which requires everyone to carry health insurance, should go a long way to eliminating a good chunk of this doubtful provision.

Tenet Healthcare Corp (NYSE:THC)

However, leading up to the implementation of Obamacare, hospitals have a lot of questions to face. Specifically, what happens if uninsured people aren’t given the proper training on how to purchase health insurance through the new state-run exchanges, or what happens if the state-run exchanges have technical glitches? The answer to that question is that doubtful accounts may fall by a much smaller sum than expected.

One of my hypotheses until now had been that Obamacare’s positive effect on reducing doubtful provisions could allow hospital operators to purchase state-of-the-art equipment that would improve patient care and provide differentiation from other hospitals (i.e., a comparative advantage). We actually may be seeing the opposite of this occurring, with hospitals holstering their spending until a few quarters after the implementation of the PPACA to get a better sense of how many people actually purchased health insurance versus those who are simply choosing to take the end-of-the-year penalty.

This, I proposed earlier this week, could be the reasoning behind weaker sales of the Intuitive Surgical, Inc. (NASDAQ:ISRG)‘s da Vinci robotic surgical system. The robotic soft tissue surgical device tends to be costlier than standard laparoscopic procedures, but can reduce hospital stays compared to traditional surgery, possibly making it a cheaper overall option for some people. The device itself, though, costs well beyond $1.5 million, which is a cost that many hospitals would rather not endure with so many question marks still surrounding Obamacare. All told, Intuitive sold just 143 of its devices in the U.S. this quarter compared to 150 last year.

2. Insurance companies are being stingier with their approved procedures/medications.
In contrast to the hospital sector, few industries were expected to be hit harder from Obamacare than the insurance industry.

A year ago, the insurance sector was viewed as a rather opaque marketplace where insurers could raise their premiums at will to cover the costs of medical care. Under the new Obamacare, insurers will be required to spend at least 80% of their premium collected on medical care for their members or return the difference. The obvious beneficiary here should be the plan members, who will either receive much needed medical care or get reimbursed.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!