The improving U.S. economy is helping Americans take better care
of their health now. Citizens who delayed treatments are now able
to afford the costs, which will eventually push healthcare spending
up. A report from PricewaterhouseCoopers's (PwC) Health Research
Institute has forecast a modest 6.8% increase in healthcare
spending in 2015. Some may call the term 'modest' a misnomer as the
forecasted growth is in stark contrast to the five-year contraction
in costs the industry witnessed.
Along with the improving economy, the Patient Protection and
Affordable Care Act (PPACA) or the Affordable Care Act (ACA) or
"Obamacare" has also played significant role. Total health spending
will probably trend up as more people can avail the insurance under
the ACA. The aging society, hospitals acquiring more in-house
physicians and costly technologies are among other factors that may
drive healthcare spending upward.
Healthcare spending is forecasted to rise 6.8% in 2015, up from the
6.5% increase expected this year. The increase may seem a bit tepid
compared to double-digit growth in medical inflation recorded ahead
of the economic downturn. However, this reverses the five-year
contraction, thanks to economic recovery. Ceci Connolly, managing
director of PwC's Health Research Institute and the report's
co-author said: "Now that overall economy has improved and come
back significantly, we see for 2015 that health spending is also
This is largely due to Americans being in a better position to
afford medical costs. "Folks who postponed some services - some
elective, some more serious - are going ahead and taking care of
it," commented Connolly.
Health Insurance Plan
The healthcare spending forecast is the difference in cost to treat
patients from one year to the next. This analysis tracks the cost
increase in employer-based health plan market that has 150 million
people under its ambit. The forecast combines the services cost and
the amount of services used.
However, the increase in healthcare spending is expected to have
"little effect on employer health spending." This is because
employers usually adjust the plan offerings based on the spending
trend. High-deductible plans are already rising and employers may
further increase employees' burden, i.e. the amount they are
required to pay before the insurance coverage is effective. "It
probably means some additional cost shifted to individuals,"
The net increase is thus projected at around 4.8%.
The PwC study also notes that 44% of employers are considering
health plans as the only insurance option for employees for the
next three years.
Affordable Care Act (ACA)
Talking of insurance plan, the ACA should also increase healthcare
spending. "Obamacare," which was enacted in Mar 2010 and was taken
as a bitter pill is now unveiling the significance for a systematic
healthcare reform in the U.S. (Read:
Will Obamacare Happen Smoothly?
The World Health Organization had stated that healthcare
expenditure per person in the United States is the highest in the
world. Despite the large amount of money spend on health care,
millions of Americans lacked health insurance coverage or were
underinsured. This was mostly due to a dysfunctional system. To
expand coverage, President Obama introduced drastic health care
reforms, which aimed at bringing down the country's uninsured rate.
The multi-year implementation of ACA is finally reflected in
positive signs from healthcare providers (in the form of improved
earnings), consumers (higher enrolments) and the market (wider
coverage at lower healthcare spending). This paves the way for
affordable healthcare facilities and expanded coverage for patients
with pre-existing health conditions, while also bringing about 32
million uninsured citizens under the coverage umbrella.
Additionally, the ACA aims to invest in information technology and
state-based exchanges to curb any fraud and manhandling of
policies, hence offering complete authentic health insurance
coverage in the long run.
As for the hospitals, the ACA is making the consumers stronger and
the hospital industry can no longer cherry-pick their customers.
Obamacare Plays: 3 Hospital Stocks to Buy
Jason Furman of the Council of Economic Advisers said healthcare
spending will most likely jump in coming quarters "as the millions
of people who gained health insurance coverage during the
Affordable Care Act's first open enrollment period begin to use
their new coverage." Many Americans got their insurance at the
first quarter end; thereby opening up the possibility of higher
3 Medical Stocks to Witness Strong Growth
The rise in healthcare spending, if true, will increase business
for hospitals, diagnostic centers and healthcare related industry.
Eventually, the healthcare industry should benefit and help medical
stocks be profitable bets now.
The medical stocks listed below carry either Zacks Rank #1 (Strong
Buy) or Zacks Rank #2 (Buy). If you are looking for fast growing
stocks that are still seeing plenty of opportunities on the
horizon, make sure to consider the following medical stocks. Not
only do they have double-digit earnings growth prospect, but their
impressive Zacks Rank suggests that analysts believe better days
are ahead for these companies.
Biogen Idec Inc.
) is among the leading biotechnology companies. Biogen is the
market leader in therapies for the treatment of multiple sclerosis
(MS). Biogen is now focusing on the development of those candidates
that represent higher return potential. Biologics is another area
which could help drive long-term growth at the company.
Biogen also generates significant royalties from partnering
agreements with other pharmaceutical and biotechnology companies.
Biogen has collaborations with companies like
Roche Holding AG
Acorda Therapeutics, Inc.
) among others.
Biogen saw EPS growth of 36.8% last year, and is looking great for
this year too. The current growth estimate for this year calls for
earnings-per-share growth of 30.9%. Biogen has seen estimates rise
over the past two months for the current fiscal year by about 4.1%.
Biogen has a Zacks Rank #2 (Buy) which further underscores the
potential for outperformance in this company.
) is a leading operator of single-specialty practice-based
ambulatory surgery centers (ASCs) in the US. At the end of Mar
2014, AmSurg operated 242 ASCs located in 35 states and the
District of Columbia. Revenues are derived from facility fee
charges, which are largely funded by third-party reimbursement
programs such as government and private insurance.
AmSurg has made consistent progress with several quarters of
double-digit sales growth. In order to pave its way into the
fast-growing fragmented physician outsourcing market, AmSurg
acquired Sheridan Healthcare, a prominent multi-specialty
outsourced physician services provider.
AmSurg saw EPS growth of 12.6% last year, and is looking great for
this year too. The current growth estimate for this year calls for
earnings-per-share growth of 11.9%. AmSurg has actually seen
estimates rise over the past two months for the current fiscal year
by about 2.1%. AmSurg has a Zacks Rank #2 (Buy) which further
underscores the potential for outperformance in this company.
Acadia Healthcare Company, Inc.
) provides inpatient behavioral health care service. Acadia
Healthcare has acquired about 1,700 beds based on seven
acquisitions executed in the past 15 months. The latest acquisition
of Partnerships in Care (PiC) added 1,200 beds, thereby
appreciating inpatient volumes. The acquired and the organic bed
expansion along with smooth execution of the ACA policies are
expected to drive meaningful growth for the company going forward.
Acadia Healthcare saw EPS growth of 62.1% last year, and is looking
great for this year too. The current growth estimate for this year
calls for earnings-per-share growth of 34.1%. Acadia Healthcare has
actually seen estimates rise over the past two months for the
current fiscal year by about 10.8%. Acadia Healthcare has a Zacks
Rank #1 (Strong Buy) which further underscores the potential for
outperformance in this company.
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