Sector Wrap: Hospital operators climb

Hospital stocks rise on proposed Medicare payment changes; HCA, Tenet, others hit annual highs

Associated Press

NEW YORK (AP) -- Shares of hospital operators rose Monday after the Centers for Medicare and Medicaid Services proposed changes to its payment rates to hospitals.

The agency that runs Medicare and Medicaid posted the proposed changes on its website Friday. If adopted, the changes would take effect for the fiscal year starting Oct. 1. Robert W. Baird & Co. analyst Whit Mayo said the updated rates are more favorable than he expected, which should increase earnings for hospitals.

Mayo said HCA Holdings Inc. and Tenet Healthcare Corp. will benefit the most from the proposed rules. He upgraded Tenet shares to "Outperform" from "Neutral," and raised his price target to $51 per share from $44. Mayo also has "Outperform" ratings on shares of HCA, Community Health Systems Inc., and Universal Health Services Inc.

On Monday, shares of Tenet rose $2.68, or 6.5 percent, to $43.84. HCA stock picked up $2.12, or 5.5 percent, to $40.37, and Universal Health Services added 69 cents to $65.47. Shares of HCA and Universal Health Services both reached annual highs during the day.

Mayo maintained "Neutral" ratings on shares of Health Management Associates Inc., LifePoint Hospitals Inc., and Vanguard Health Systems Inc. Health Management shares gained 35 cents, or 3.1 percent, to $11.55, while LifePoint shares advanced $2.31, or 5.1 percent, to $47.62 and Vanguard stock climbed 66 cents, or 4.7 percent, to $14.65. LifePoint shares also reached a 52-week high during Monday's trading session.

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