After ruling, hospital stocks soar and medical insurer stocks plunge [The Kansas City Star, Mo.]

June 29--Like members of the U.S. Supreme Court, Wall Street reached a split decision on health care reform Thursday.

Hospital stocks soared, and some medical insurance stocks plunged while others joined the hospital bump. The ruling left many other health care stocks largely undisturbed.

Moreover, analysts weren't sure that the market's first impressions will last.

It was a wild day that saw most stocks tumble hard on early economic concerns and then recover most of those losses before day's end. The Dow Jones industrial average, down 177 points early, finished only 24.75 points lower at 12,602.26.

Shares of North Kansas City-based Cerner Corp. followed the broad market's trend despite the company's business of providing software information systems to hospitals. Shares fell in the morning but finished 37 cents higher at $78.03.

Many health care stocks clearly were moving with the ruling.

Quest Diagnostics Inc., which runs medical test labs and other operations in Lenexa, saw its shares climb by 2.8 percent Thursday.

HCA Holdings Inc., which operates HCA Midwest Health Systems in the Kansas City area, led hospital stocks upward with a 10.8 percent gain.

Analysts generally argued that reform means more Americans will have health insurance and hospitals will see fewer unpaid bills. But they weren't ready for the ruling.

"No one in the hospital land really expected the entire law to be upheld," said Sheryl Skolnick, a health-care analyst at CRT Capital Markets. "They expected something in the muddy middle. And with surprise, you get big swings."

Maybe not, thought Jonn Wullscheleger, a portfolio manager at Mitchell Capital Management Inc. in Leawood. Health care reform, even as affirmed by the court, has a lot of moving parts. "We're a little confused as to why the hospitals are going up. I understand why the insurers are going down," he said.

Health care reform pays its bills in part by levying fees on insurers. It also hits them with restrictions on setting prices on policies that makes it hard to charge higher-risk customers a lot more than low-risk customers.

Still, the stock losses for companies that provide employer and individual insurance plans didn't make sense to Aditya Kapoor, an equity analyst at Waddell & Reed Financial Inc. in Overland Park. "These losses will work their way out," Kapoor said. "The world doesn't change a lot for them with this ruling."

Insurers Humana Inc. and United Healthcare Inc. both recovered their losses before the day was over.

The ruling boosted shares of health insurance companies that focus on Medicaid plans funded by the government. The ruling lets expansion of Medicaid proceed, helping to drive shares of Molina Healthcare Inc. 8.6 percent higher.

Drug companies had supported the president's plan, which mostly stayed away from drug prices. Analyst Matthew Roden, with UBS Securities LLC, said increased drug sales to newly insured patients probably will be limited.

Generics will cut into those sales' benefits, said Dave Anderson, a portfolio manager at Financial Counselors Inc. in Kansas City. Many newly insured will be under a government umbrella one way or another and unlikely to get high-priced brands.

The Associated Press and Bloomberg News contributed to this report.

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