The Health Care M&A Monthly: Supreme Court Opines On ACA

Affirms Most Of ACA, With Some Changes To Medicaid

The long-awaiting decision from the Supreme Court finally came, and other than the fact that most of the provisions of the Affordable Care Act (ACA) were upheld, the decision was actually a bit of a ho-hum with regard to its impact on the health care M&A market, at least in the short-term.  That said, in the days following the decision there was a flurry of announced transactions across all areas of health care, with nearly two-dozen deals alone coming during what supposed to be the laid back July 4th holiday week.  Well, the bankers and lawyers did need a little mid-summer income boost, didn’t they?

Investors had mostly prepared for the worst, especially with hospital companies, because if the individual mandate had been overturned, as was the intent of the original lawsuits challenging the constitutionality of ACA, then the influx of new customers would be no more.  The same could be said of the expansion of the Medicaid program but we still have not met anyone who is thrilled with Medicaid patients and the fees received from Medicaid.  But we digress.  What is apparent when you filter through the opinions of the left and the right is that the real winners with health care “reform,” such as it will be, will be those who can control costs, provide the same care or service at a lower cost, or provide better care with better outcomes without increasing costs (and better yet, at a lower cost).  As someone should have said in the last election cycle, “it’s all about costs.”

Yes, in the short-term hospital companies and pharmaceutical companies will be better off with the expansion in the number of people with health insurance, but at what cost (here we go again)?  One of the biggest tragedies of ACA, other than for the Medicaid managed care companies, is the expansion of the Medicaid system, a system with exploding costs even without the expansion of enrollees.  At least the financially fraudulent CLASS Act had already been removed from ACA after people finally realized it was a Ponzi scheme intended to fund other parts of ACA and was never financially viable.  Next time, Nancy Pelosi should read the law she is about to pass before she votes on it. Then, someone just might understand what is really in the 1,200 page document before voting it into law. But that is asking too much of our elected leaders.

With the individual mandate now cemented into law as a tax, starting in 2014 hospitals should start to see patient days, revenues and profits increase.  And this is what the market thought as well, as the shares of the publicly traded hospital companies took a nice jump after the SCOTUS decision.  But when you look at hospital companies as the highest-cost provider in the health care food chain, does it really make sense they will perform well financially when pressure will be mounting to cut their costs?..............Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today