Area health-care stocks rise after bill passes

Nothing can provide a tonic to a stock market faster than the resolution of uncertainty. That's what area health-care stocks got in the wake of Sunday's House of Representatives vote on sweeping health-care legislation.

Hospital, pharmaceutical, and insurance stocks all rose yesterday, with five locally-based or locally-influential companies reporting their best results in a year, amid heavy trading.

Those companies included Universal Healthcare Services Inc., the King of Prussia hospital company, and Aetna Inc., the Connecticut health insurer that is a major regional provider of policies.

Aetna closed at $34.64 with close to double the normal amount of shares traded. Universal Healthcare rose to its 12-month high of $36.71 before closing at $36.59.

"The market doesn't like ambiguity," said Chris Curran, a spokesman for Cigna Corp., the Philadelphia-based health insurance company, one of the nation's largest.

While Cigna didn't break any records yesterday, its share price rose to $37.28, up 20 cents, more than double its 52-week low of $16.70.

Cigna mainly serves large corporations. But it recently entered the small group and individual markets most likely to be affected by the legislation. At the same time, because it has just entered those markets, its exposure is fairly low if the legislation turns out to be problematic.

"We're not impacted to the extent that others are, but we're opened up to the opportunities," Curran said, noting that the company does not have a large Medicare business. Changes to Medicare funding are part of the bill.

"You've got some uncertainty here lifted," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

President Obama is expected to sign the $940 billion legislation today. With the legislation in hand, companies may feel more comfortable making strategic bets.

But, Ablin noted, other industries will face higher costs to pay for wider coverage. "As a result of this bill, health care is a beneficiary at the expense of every other sector."

Other local companies that saw year-high prices yesterday were AmerisourceBergen Corp., the Chesterbrook drug wholesale company, and biopharmaceutical companies Cephalon Inc. in Frazer, and ViroPharma Inc. in Exton.

Trading at nearly four times normal volume were shares of Tenet Healthcare Corp., the Dallas company that runs Hahnemann University Hospital. Closing price: $6.27, up from $5.57.

Pfizer Inc. and Merck & Co. Inc. also had good days, while Johnson & Johnson closed down, but only by a penny, to $65.10 a share.

After yesterday's initial upward bounce, investors can expect volatility, said Robert Fields, a professor of health policy at Drexel University.

He compared the current news with what happened between January 2003 and January 2006 after Medicare Part D, the prescription drug plan, was passed for seniors.

"That had a wild ride of ups and downs," he said, as insurers decided whether to participate.

These days, the overhaul is a tide lifting most boats, but time will tell, he said "which ones will be seaworthy."