Investors have been bullish on hospitals since the passage of the Affordable Care Act, with the promise that greater insurance coverage would lead to less debt for uncompensated care.
If the Supreme Court invalidates Obamacare subsidies for millions of Americans on the federal health exchange, analysts say health-system profits could take a hit—even as the sector is currently dominated by merger and acquisition speculation.
Yet experts also say that, given the nature of health-care funding from the government, it may not be as big a blow as some might expect.
"Although hospitals have been benefiting from the Affordable Care Act, it's been much more weighted to Medicaid expansion," said Megan Neuberger, managing director and corporate health care credit analyst at Fitch Ratings.
Neuberger and most analysts say the expansion Medicaid coverage to low income adults has been a bigger factor helping hospitals reduce treatment for patients who can't pay. At least from a creditworthiness perspective, a high court ruling against the federal exchange subsidies won't be a big negative when it comes to fundamentals, Neuberger added.
"At this point, for vast majority of hospitals and health systems, the proportion of patients they are seeing that are health exchange enrollees is just not enough to move the needle from an earnings perspective, one way or the other," she said.
One thing that would register on earnings, however, is merger activity—and big health-care companies are in an acquisitive mood. On Saturday, Anthem made a third offer to purchase Cigna, upping its bid to nearly $54 billion on an enterprise basis, while Aetna made a takeover offer for Humana, according to The Wall Street Journal.
Deals, either consummated or speculated, may compete with Obamacare for influence over health care's fundamentals.