By Josh Nathan-Kazis

Healthcare investors are on a hair-trigger. As Senate Republicans hash out the future of the spending bill the House of Representatives passed in May, with hundreds of billions of dollars in federal spending on Medicaid hanging in the balance, it doesn't take much to spark a selloff.

That is what happened early Monday. Hospital stocks plunged at the open, apparently responding to a new push to shape the legislation from the White House and tentative comments from one hospital executive.

As of 10 a.m., shares of Tenet Healthcare were down 6.4%, HCA Healthcare shares had fallen 6%, and stock in Universal Health Services slid 9.3%.

All three of the stocks rebounded as trading progressed, but remained down on the day. Shortly before the close, Tenet was off by 3.7%, HCA had fallen 3%, and Universal Health had slid 5.4%. The S&P 500 was up by 0.3%.

The selloff, based on the faintest whisps of news about the fate of the budget negotiations, shows just how anxious the bill has left Wall Street investors. While there was no major update on Monday morning, the stakes are high, particularly for hospital companies that treat Medicaid patients. Investors are on alert for bad news.

"There's still a lot of uncertainty as to how the reconciliation bill will ultimately play out," said Jared Holz, a healthcare equity strategist at Muzho. "Investors know that."

The House version of the spending bill would increase the number of uninsured people in the U.S. by 10.9 million, according to the Congressional Budget Office. The healthcare policy group KFF estimates that it would reduce federal spending on Medicaid by $793 billion.

A substantial chunk of those federal payments ultimately go to the hospital companies, so the cuts would amount to a major blow for them.

How steep the cuts will be in the final bill is now the subject of fervent lobbying and negotiations within the Senate. Those negotiations got even more complicated last week, when former Trump ally Elon Musk publicly trashed the bill.

At an investor conference on Monday morning, Universal Health CFO Steve Filton said that there's "a lot of lobbying being collectively done by the hospital industry in general" on the bill, "in terms of sort of firming up the language, and trying to ensure that existing programs, and programs that have been submitted and awaiting approval, are included in the grandfathering provisions."

Filton said that the industry hopes that whatever the Senate passes will be better for the provider companies than what the House passed. "The industry is hopeful that the terms and the language in the House bill, at a minimum, are sort of the floor of what would be included in either a Senate bill or a reconciled bill, ultimately," he said.

The comments offer a glimpse at the fervent efforts on Capitol Hill, and the uncertainty of the moment for the hospital companies.

A handful of Republican senators, including Josh Hawley of Missouri and Susan Collins of Maine, have opposed the Medicaid cuts. On Friday, President Donald Trump issued a memorandum that took aim at a Medicaid funding mechanism called a "state directed payment." The new budget bill aims to curb those payments, which have been increasingly under fire from conservative policy analysts.

In a note on Monday, Raymond James healthcare policy analyst Chris Meekins wrote that the memo was likely an attempt to influence negotiations over the bill, and that the White House might have heard that senators were considering removing language around the state- directed payments from the bill.

Analysts said that the Monday selloff was likely overdone. Leerink Partners analyst Whit Mayo said in a research note that the weakness across the hospitals sector was a buying opportunity.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

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June 09, 2025 15:58 ET (19:58 GMT)

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