Monday, Nov. 03, 2008

Health Care

Obama has said that he would like to make health care affordable for many of the 47 million Americans who are not currently insured. On the face of it, that would seem like a bad thing for the industry, because lower costs for payers means lower profits for providers. And indeed, large health insurers like UnitedHealthcare and Aetna, as well as many of the drug companies, might suffer under the Obama plan. But Stanford Group thinks an Obama presidency would help at least one sector of the health-care industry: hospitals. That's because the uninsured are one of many hospitals' biggest costs. So more insured people is a win for hospitals.

Pick: No company should benefit more from Obama's effort to get more people insured than Community Health Systems (ticker: CYH), which is the largest publicly traded hospital company in the country. What's more, many of the hospitals that Community Health administers specialize in emergency care. And emergency rooms are often where uninsured people wind up being treated. Some analysts are concerned about Community Health's ability to pay off its debt at a time when more people will be out of work and thus probably uninsured. But while the company has $6 billion in debt, it also has $9 billion in assets. Gary Lieberman, the health-care analyst at Stanford Research Group, rates Community Health's shares, which recently traded for $20.50, a buy. "Community Health Systems and indeed any hospital with an emergency room would benefit greatly if Obama could get more people health insurance," says Lieberman. "The question is whether he can make it happen."