Coronavirus-Hit Hospital Stocks Gain On Senate Stimulus Help

On Wednesday Mar 25, the Senate passed a $2-trillion of rescue package to aid the hard hit American economy following the COVID-19 outbreak.

The stimulus measure received an overwhelming bipartisan vote and will offer assistance to hospitals, businesses, and state and local governments that are suffering the coronavirus breakout. The House is scheduled to vote on the bill this Friday morning.

The emergency relief includes a $130-billion financial aid to hospitals, which will provide reimbursement to cover health care expenses and lost revenues due to the COVID-19 outbreak. The bill represents advances for hospitals in meeting the upcoming Medicare payments and postponement of a scheduled cut in Medicaid payments pertaining to certain hospitals.

The grant is aimed to provide hospitals with resources to care for patients. Following this update, the hospital stocks soared. Companies, namely HCA Healthcare, Inc. (NYSE:HCA) , Tenet Healthcare Corporation (NYSE:THC) , Universal Health Services, Inc. (NYSE:UHS) , Community Health Systems, Inc. (NYSE:CYH) among others gained 6.74%, 19.6%, 12.53% and 18.9%, respectively.

The hospital industry supported the measure for providing emergency funds, boosting payments and suspending some funding cuts. But “more will need to be done to deal with the unprecedented challenge of this virus,” per a statement by Rick Pollack, head of the American Hospital Association.

The bailout incentive comes as a breather for the hospital industry that recently urged Congress for a $100-billion worth emergency funding. Pollack said that the need for the funding arose as hospitals and health systems are having trouble meeting their payrolls, getting protective gear and paying for cleaning supplies because their revenues from elective surgeries took a hit after they were directed by the state and federal directives to halt elective and nonessential medical procedures in a bid to brace for COVID-19 pandemic.

Hospitals have been suffering from a double whammy with revenue loss on one hand and exorbitant costs for staffing, supplies and preparation for the expected surge in Covid-19 patients on the other. This financial boost will help the hospitals (already reeling under heavy-debt burdens) to pull through this crisis, which otherwise would have succumbed as they ensure more cash outflow than inflow.

The situation for the hospital industry looks all the more grim as even hospitals in areas where Covid-19 infections haven’t spiked are feeling the economic pressure.

Like other sectors, the hospital space is too not immune to the onslaught of the coronavirus horror. As a consequence, the Zacks Medical Hospital industry comprising some of the leading players in the United States has declined 44.5% this year so far. Meanwhile, the Zacks Healthcare Sector and the S&P 500 composite have decreased 21% and 23.8%, respectively, year to date.

Among the stocks stated above, Community Health carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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