Hospital bond market hit hard on Medicaid expansion

The hospital and healthcare system municipal bond market has been particularly weak in recent months, but the situation is far worse for facilities in states that are not expanding Medicaid, Bloomberg reported.

According to Bloomberg, healthcare-related municipal bonds have lost 6 percent over the last 90 days, but it's even worse among the 21 states that have declined to expand their Medicaid programs under the Affordable Care Act.

"We're going to see spread widening on hospitals in states that are not expanding versus states that are expanding," Todd Sisson, a senior analyst at Wells Capital Management, told Bloomberg. "States that aren't expanding Medicaid are still going to have a high percentage of the uninsured. The hospitals are going to lose a lot of money."

Bloomberg cited Palmetto Health, whose spread on $139 million of recently issued debt narrowed by 15 percent, while the yield was not much higher than junk. By comparison, debt issued by Yavapai Regional Medical Center in Arizona, which has decided to expand its Medicaid coverage, has seen improving spreads in recent weeks.

The financial schism between hospitals in states that are choosing to expand Medicaid or stay put is already playing out, with at least one facility in North Carolina blaming its pending closure on the state's decision not to expand Medicaid enrollment.

According to Bloomberg, hospital debt does not fare as well as debt issued on utilities and sewer systems because it does not hold a monopoly on its customer base.

"It's going to be the system of the haves and have-nots, and that starts with which states are expanding Medicaid and which are not," Sisson said.

To learn more:
- read the Bloomberg article

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