Community Health Leads Hospitals Down on U.S. Spending Drop

Jun 26, 2014 4:40 pm ET

(Updates with closing prices in second paragraph.)

June 26 (Bloomberg) -- Community Health Systems Inc. led hospital stocks lower today after health-care spending declined in the first three months of the year.

Community Health fell 3.2 percent to $44.15 at the close in New York, the biggest single-day drop since May 7. The Bloomberg Industries Index of North American hospitals declined 2.1 percent.

Health-care spending decreased 1.4 percent in the first quarter, according to a Bureau of Economic Analysis report on Wednesday. That’s the first drop in health spending since the third quarter of 2011. Earlier estimates predicted a 10 percent increase in the sector.

“There is an expectation that volumes are going to be higher with more new patients from the Affordable Care Act, but the report yesterday shows there was not the kind of spending increase that was expected,” said Ana Gupte, an analyst with Leerink Swann & Co.

Hospital stocks have risen 18 percent this year through yesterday, according to the Bloomberg Industries index. Increased enrollment in health plans because of the requirements of the Patient Protection and Affordable Care Act have driven expectations of more revenue for hospitals with less uncompensated care provided.

Universal Health Services fell 1.1 percent to $95.94, Tenet Healthcare Corp. fell 2.7 percent to $46.63, and HCA Holdings Inc. fell 1.9 percent to $55.76.