Becker's Hospital Review

8 CFO / FINANCE Investor confidence wavers in healthcare By Molly Gamble H ealthcare stocks begin 2025 with headwinds and election-driven uncertainty compounding an already tough market. And election jitters aren't entirely to blame for the volatility, The Wall Street Journal reported Jan. 6. President-elect Donald Trump's appointment of industry skeptics like Robert F. Kennedy Jr. to lead HHS has spurred selloffs across hospitals, pharmaceuticals, insurers and biotech. Anticipation of a Republican crackdown on Medicaid and the Affordable Care Act add to motivation for selloffs. But the election isn't the sole driver of healthcare's slump. The sector has underperformed the S&P 500 for two years in a row, trailing by 22 percentage points in 2023 and another 20 in 2024, according to the Journal. Goldman Sachs data reveals significant outflows from healthcare ETFs, second only to energy. Despite the bearish outlook, opportunities remain. One Goldman analyst cited in the Journal points to single-stock investments in companies delivering innovative products or those with undervalued stocks, sustainable business models and high dividends. Meanwhile, 2025 looks to be a pivotal year. Election-driven selloffs have often been followed by rebounds, as policy changes tend to be less disruptive than initially feared. How the year plays out could determine whether healthcare regains investor confidence or continues to lag behind broader market performance. As Barron's put it: "Healthcare stocks have gotten crushed in 2024, and next year doesn't look much better. But there are still opportunities for investors willing to sort through the wreckage." n Medical debt to be cut from credit reports: 4 things to know By Kristin Kuchno M edical bills will no longer be included on credit reports under a rule finalized by the Consumer Financial Protection Bureau. Four things to know: 1. The rule prohibits lenders from considering medical information when making lending decisions and bans consumer reporting agencies from including medical debt information on credit reports and scores, according to a Jan. 7 news release from the agency. 2. The CFPB said medical debt is a poor predictor of a borrower's ability to repay loans, noting that many consumers receive inaccurate bills or charges that should have been covered by insurance. 3. The rule is expected to remove approximately $49 billion in medical bills from about 15 million Americans' credit reports. The CFPB also projects it will result in the approval of about 22,000 additional mortgages annually and raise credit scores by an average of 20 points for those affected. 4. The rule is effective 60 days following publication in the Federal Register. n "Medicare Advantage remains a significant headwind as plan sponsors consistently reimburse at rates lower than traditional fee for service Medicare," Stephen Rinaldi, senior vice president and chief revenue officer of UNC Health Care System in Chapel Hill, told Becker's. "In the coming year, we will continue to work with our payer partners to ensure we have agreements that properly consider future inflation and performance targets. We must also do our part to embrace innovation, technology, and the many tools at our disposal to be as efficient as possible while delivering the quality care our patients expect and deserve." CMS has a goal of 100% original Medicare beneficiaries and most Medicaid beneficiaries in accountable care by 2030, exacerbating multiple financial challenges for hospitals. "In Western Massachusetts, Medicare and Medicaid will be a large and growing share of our community and patient base," said Peter Banko, president and CEO of Baystate Health in Springfield. "ese populations are already more than 70% of our revenue, with increasing value-based arrangements and the imperative to leverage very diverse care teams (physicians, nurses, navigators, and family members enabled by complex technology solutions)." e care model transformation is forcing Baystate to zero in on care offerings, design target, delivery resources and care design. Hospitals facing a similar reality across the country are entering into creative partnerships, leveraging technology and focusing on revenue sources. Jen Moore, vice president of payer relations and payment innovation at MaineHealth, said this year workforce challenges and rising costs, as well as contract labor, will remain big challenges. Limited capacity in long-term care facilities has driven up patient stays and utilization rates, which strains value-based contracts and impacts hospital margins. "ese financial pressures are compounded by payers exerting greater influence through tactics such as tougher contract negotiations, higher rates of claims denials, and steering patients toward lower-cost care settings," said Ms. Moore. "In this environment, hospitals must adopt adaptive strategies, with revenue diversification emerging as a critical element for survival and long-term sustainability." n

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