Healthcare services stocks will remain volatile as reform measures proceed through Congress and the economy struggles, industry analyst Leerink Swan said in a research note.
As the industry's remake moves through the legislative process and calls grow to cut the federal deficit, the impacts will vary through the sector, analyst Jason Gurda wrote.
"As investors react to these issues, which have potentially far-reaching consequences, we believe most healthcare service stocks are likely to remain highly volatile and more attractive as 'trading' positions than long-term 'buy-and-hold' positions," the note said.
Managed care providers likely will get hit once the legislation finds its final form, Gurda wrote, while pressured consumers will move out of commercial managed care and into Medicaid and even cancel their insurance.
At the same time, the heavy deficit spending and pressures to balance the budget will cut reimbursements for Medicaid and Medicare.
Should the legislative reform fail, managed care will benefit will hospitals will get hit, Gurda wrote.
"We remain generally positive on managed care, although plan proponents may step up their efforts in the next few weeks," the note said. "We are more cautious on the hospitals, where they appear dependent upon a more narrow middle-of-the-road reform bill (not too far to the right or the left,) and more exposed in the event reform fails."