WALL STREET: Sees Rosy Future for Health Care Industry
While the health care industry "appears to be in disarray," HMOs, hospital management companies and pharmaceutical firms have all enjoyed substantial gains on Wall Street this year, the Los Angeles Times reports. After watching its stock prices tumble in recent years, mainly as a result of Medicare cutbacks in 1997, the hospital industry has been aided by increased insurer payments to hospitals and relaxed Medicare rules in the past year (Flanigan, 8/6). Also, this fall, Congress will likely boost Medicare fees to hospitals for the second time in two years. "Things are looking substantially better today than they were even a year ago ... earnings trends have not been this good in years," PaineWebber analyst Andrew Gitkin said. He noted that health care stocks have also risen because investors have fled risky Internet stocks (Galewitz, AP/Kansas City Star, 8/4). The presidential election may also be a boon for the industry as a whole, because both candidates favor greater spending on health care initiatives. In addition, the aging U.S. population will translate into more growth for the health care industry. "The baby boomers are hitting 55 now, and 40% of health expenditures occur after age 55," Jeffrey Barbakow, chair of Tenet Healthcare, said. However, future development of the health care industry offers many challenges, such as cost containment, quality arguments and potential drug pricing regulations. Still, Wall Street investors view medicine as "one of [America's] most productive industries," and experts predict a rosy future (Los Angeles Times, 8/6). According to John Merriwether, a spokesperson for Health Management Associates, "The uncertainty surrounding the industry the last couple of years has quieted down" (AP/Kansas City Star, 8/4).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.