Hospital operators down after White House memo calls for eliminating waste in Medicaid

Shares of hospital operators Universal Health Services UHS.N down 1.5% at $175.14, Tenet Healthcare THC.N fall 4.3% to $159.02 and HCA Healthcare HCA.N down 1.3% to $368.31 - on track for second straight session of losses

Shares fell after a White House memo on June 6 directed health secretary to "eliminate waste, fraud and abuse in Medicaid" and mentioned State Directed Payments (SDP) to ensure "Medicaid payment rates are not higher than Medicare"

State Medicaid programs may pay hospitals with additional payments over low base rates to pursue their overall Medicaid program and quality goals

"SDPs are a significant portion of ACHC/HCA/THC/UHS EBITDA, and though the memo carries risk of further program modifications, we see this as less than likely and believe the share reaction is overdone"- TD Cowen