Hospital groups on Senate health bill: Start over

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Hospital trade groups had one message to the small group of Senate Republicans who released their health bill after two months of closed-door meetings: “Go back to the drawing board.”

While U.S. hospital and other healthcare stocks rallied Thursday, with a sense of relief that the spending reductions contained in the plan weren’t as deep, or fast, as investors anticipated, the biggest hospital associations in the country lambasted the proposal. The Better Care Reconciliation Act, which would replace Obamacare, puts the health of millions of poor, elderly, disabled and chronically ill patients at risk, said Rick Pollack, chief executive officer of the American Hospital Association.

“We urge the Senate to go back to the drawing board and develop legislation that continues to provide coverage to all Americans who currently have it,” he said in an emailed statement.

After years of criticizing Obamacare for being too expensive and not delivering for patients, Republicans are now trying to devise a replacement. Massive cuts in spending and insurance subsidies in a bill passed last month by the House had raised concerns that hospitals would bear the brunt of reductions. While the Senate version would spread reductions in Medicaid over a longer period of time, industry groups said it fails to satisfy the needs of both patients and health-care companies.

The bill “does not sufficiently meet those principles which are so important to those Americans our community hospitals serve and our employees who care for those patients every day,” Chip Kahn, CEO of the Federation of American Hospitals, a trade group for for-profit hospital companies, said in a statement. “Now is the time for the Senate to hit reset and make key improvements to this legislation.”

Advocacy groups also lashed out at the bill. It would roll back requirements for health insurers to cover certain treatments, which might leave cancer patients without access to expensive, life-saving measures, according to a statement from the American Cancer Society Action Network. Mothers and families might have to purchase additional coverage for pregnancies, said the March of Dimes, a foundation fighting against birth defects and infant mortality.

The BI North America Hospitals Valuation Peers index closed up 4.4 percent, paring earlier gains of as much as 6.1 percent after four GOP senators said they opposed their colleagues’ plan. The S&P 500 Health Care Index rose 1.1 percent to the highest since 1989, and large drugmakers all gained.

The bill is “a positive near-term catalyst for hospitals,” said Sheryl Skolnick, an analyst with Mizuho Securities, in a note to clients. “It ain’t done, and it’s less worse, in the short run—likely less worse than even the Street expected.”

Under the bill, both for-profit and not-for-profit hospitals would be hurt by reduced demand and higher rates of free care, with the most impact coming from Medicaid cuts that phase in after 2020, Daniel Steingart, a vice president at Moody’s, said in an emailed statement.

Investors saw a reprieve in the fact that there was no mention of drug pricing in the Senate bill, sending the Standard & Poor’s 500 Pharmaceuticals Index up 1 percent.

“We didn’t see anything onerous or threatening to the industry,” said John Schroer, sector head of health care at the Allianz SE unit. “This temporarily eliminates a bit of this cloud,” he said. “That gives investors some level of certainty and comfort.”

“As this process moves forward, we will work with policymakers to ensure there is a competitive market that provides patients with access to affordable health care options and fosters the continued development of new innovative medicines,” Pharmaceutical Research & Manufacturers of America, the biggest drugmaker trade group, said in a statement.

Bloomberg News