Express Scripts Holding Company (ESRX), Community Health Systems (CYH), Pfizer Inc. (PFE): Why Health-Care Costs Are Likely to Rise

First, some companies will benefit from higher utilization associated with the implementation of Obamacare and possible higher GDP growth down the road. For example, Community Health Systems (NYSE:CYH), which operates 135 hospitals, could experience gains if health reform allows it to reduce the levels of bad debt written off from uninsured patients. However, note that a recent study from Deloitte casts doubt on whether hospitals will actually lower their bad debt levels with Obamacare.

Pfizer Inc. (NYSE:PFE) could be one stock that allows investors to profit from higher prescription drug spending. The big pharmaceutical firm has felt the pain of the patent cliff, but counts several new products in its lineup with strong potential and a pretty robust pipeline.

The second way to profit from higher health costs is to go with companies that help minimize those costs. Express Scripts Holding Company (NASDAQ:ESRX) is a good pick in that regard. As the nation’s largest pharmacy benefits manager, or PBM, it has the scale and analytical capabilities to help other companies keep prescription drug spending under control.

MedAssets, Inc. (NASDAQ:MDAS) is another potential winner. The company provides solutions for health-care supply chain management, and revenue cycle management to hospitals. Helping customers save money in an environment of rising costs makes for a pretty good business model, in my view.

Some people might think that the slowing health spending rates are here to stay — with most Americans emerging as winners. I suspect that a rebound in GDP growth, Obamacare, and fewer new generic drugs will prove that view too optimistic. Then again, I might be too optimistic about the prospects for the economy, and for Obamacare’s success in spurring demand for health-care services. We’ll see which optimistic view wins.

The article 3 Reasons Why Health-Care Costs Are Likely to Rise originally appeared on Fool.com and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Express Scripts. The Motley Fool owns shares of Express Scripts.

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