Major for-profit hospital operators' stock prices rallied Wednesday as U.S. Supreme Court Justice Anthony Kennedy, who holds a key vote in a lawsuit threatening the Patient Protection and Affordable Care Act, questioned the challenge to the health reform law, according to a Bloomberg report.
The Supreme Court heard arguments in King v. Burwell on Wednesday — a case that will determine whether PPACA subsidies will be provided in the 34 states that did not establish their own health insurance exchanges.
"There is a serious constitutional problem," Justice Kennedy said, if the Supreme Court rules in favor of those challenging the subsidies that help low- and middle-income people afford health insurance, according to Bloomberg.
It is still unclear which way Justice Kennedy will vote in the case. However, his questioning had a significant effect on for-profit hospital operators' stock prices on Wednesday.
Dallas-based Tenet Healthcare and Nashville, Tenn.-based HCA Holdings led the rally, according to Bloomberg. Shares of Tenet rose 7.4 percent to $50.52, and shares of HCA rose 7 percent to $75.71. The justice's questioning also had a positive effect on Franklin, Tenn.-based Community Health Systems' share price, which rose 6.3 percent to $52.70.
However, if the Supreme Court strikes down subsidies in the states that did not establish their own insurance exchanges, those stock prices will likely plummet.
The Supreme Court case carries high stakes for nonprofit hospitals as well. A ruling striking down the subsidies would cause the uninsured rate to increase and hospitals' uncompensated care costs to grow. That would be a credit negative for nonprofit hospitals, according to Moody's Investors Service.
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