(Bloomberg) -- HCA Healthcare Inc., Tenet Healthcare Corp. and Community Health Systems Inc. shares slid Friday after Raymond James downgraded its ratings on the hospital chains, saying that an upcoming expiration of insurance subsidies could weigh on earnings into 2026.
Analyst John Ransom said there is a risk that enhanced subsidies — provided to those getting health insurance through individual marketplace — will be allowed to expire in 2025 under the incoming presidential administration. That will in turn, reduce the number of patients with insurance in 2026. Growing investor concerns about other risks to hospital funding, such as state-directed payments and Medicaid reimbursements, are also likely to weigh on the stock.
“There is potential downside risk to 2026 numbers should the aforementioned risks materialize,” Ransom wrote in a Friday note to clients, downgrading HCA to market perform from outperform, Tenet to outperform from strong buy and Community Health Systems to underperform from market perform.
HCA, the largest publicly-traded hospital chain in the US, fell as much as 3.7% — extending its slump for the ninth day. Tenet also extended losses, dropping as much as 4.5% while Community Health tumbled as much as 7.2%. The S&P Composite 1500 Health Care Facilities index also slumped for the ninth-straight session as the index heads for its longest losing streak since 2012.
Separately, Leerink Partners analyst Whit Mayo sees hospitals facing a 4-7% Ebitda headwind in 2026 from the loss of the enhanced subsidies on the exchanges.
“This places approximately $1 billion of earnings at risk for HCA,” Mayo wrote in a note to clients Friday. “The stocks, in our view, are pricing in a material probability subsidies are gone.”
Shares of health-care providers have been under pressure since former US President Donald Trump won the 2024 election. The broader health-care sector has also seen shakeups after Trump’s nominations of Robert F. Kennedy Jr. and celebrity doctor Mehmet Oz to top health positions in his administration.
With an incoming administration that’s “not shy to shake things up and very focused on reducing government spending, hospitals are at risk over the near-term,” according to Jared Holz, a health care specialist at Mizuho.
--With assistance from John Tozzi and Katrina Compoli.
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