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What Quorum Health Stands To Lose If The GOP Health Reform Bill Passes

Wayne Duggan

The entire U.S. healthcare industry has a lot riding on President Trump’s healthcare reform plan. However, Quorum Health Corp (NYSE: QHC) may have a lot more riding on the plan than others, according to Height Securities analyst Shrey Verma.

A major part of Quorum’s turnaround efforts has involved divesting hospitals that weren't performing well. But that strategy has left Quorum’s overall performance heavily tied to a handful of hospitals. In fact, Height estimates that almost 100 percent of Quorum’s income comes from just eight hospitals.

“We find that four out of QHC’s top eight hospitals cornered healthy market shares in their respective regional area markets in 2014, and almost all eight hospitals recorded greater cost efficiency compared to geographical near-competetors,” Verma wrote.

Unfortunately, the high-level performance of the majority of these hospitals is closely tied to the Medicaid program, which will likely be modified by Trump and Congress.

“With the exception of two hospitals, we find that QHC’s top hospitals have significant exposure to the Medicaid program such that changes envisaged under the House-passed American Health Care Act (AHCA) could strain payment streams from Medicaid,” Verma wrote.

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Trump’s recently-unveiled budget proposal cuts Medicaid funding by $800 billion.

Verma pointed out that half of Quorum’s top eight hospitals are located in counties that are set to get their premium tax credit reduced under the new plan as well.

Not only could the healthcare reform bill impact the performance of Quorum’s top hospitals, the uncertainty could hinder its efforts to continue to sell-off assets. Quorum had planned to generate $200 million from the sale of 14 hospitals, a goal which Verma says may be unrealistic given the current environment.

Quorum shares are already down 52.4 percent so far in 2017.

Latest Ratings for QHC

Date Firm Action From To
Jun 2017 Morgan Stanley Initiates Coverage On Underweight
Apr 2017 Deutsche Bank Initiates Coverage On Hold
Aug 2016 UBS Downgrades Neutral Sell

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