RBC a buyer of hospital stocks on White House memo selloff

RBC Capital analyst Ben Hendrix is a buyer of acute care hospital stocks on Monday’s pullback, including HCA Healthcare (HCA), Tenet Healthcare (THC), Community Health (CYH), and Ardent Health (ARDT). The firm says hospital stocks are trading lower on a presidential memo released Friday highlighting Medicaid supplemental payment programs and apparently drawing concern over potential cuts to state-directed payments. While “optically hawkish,” the memo is consistent with grandfathering of existing state-directed payment programs as provided in the current language of the budget bill, the analyst tells investors in a research note. As such, RBC sees little to suggest the memo represents an incremental headwind to hospital earnings. The pullback of RBC’s top hospital pick Tenet “represents an incrementally attractive entry point,” contends the firm. RBC says the company’s lesser overall exposure to Medicaid director development program versus the broader group will serve as an accelerated growth avenue when compared to peers.