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Investing.com -- Bank of America downgraded multiple health care stocks, warning that recently signed U.S. legislation will trigger a reversal of years-long regulatory tailwinds, posing significant risks to growth from 2026 onward.
The bank cut HCA Healthcare (NYSE:HCA) to Neutral and downgraded Centene (NYSE:CNC), Universal Health Services (NYSE:UHS), and privately held Ardent Health to Underperform given exposure to Medicaid and exchange coverage losses stemming from the Reconciliation Bill.
The legislation introduces funding cuts that BofA said are not yet reflected in consensus estimates or share prices.
"The shift from regulatory tailwinds to regulatory headwinds on Jan 1 could be more meaningful than investors realize," analysts wrote.
While hospital fundamentals remain solid for 2025, BofA expects investor sentiment to weaken in the second half of this year as attention shifts to the longer-term impact.
The bill is projected to shave 1–3% off annual EBITDA growth for hospitals through 2030, effectively halving the sector’s historical growth rate, the note said.
Among hospitals, BofA sees HCA as relatively well-positioned but sees limited upside following recent gains.
Tenet Healthcare (NYSE:THC) remains the firm’s preferred pick due to its ambulatory surgery center business, which is largely insulated from the cuts.
For managed care, large caps such as UnitedHealth (NYSE:UNH), Cigna (NYSE:CI) and Humana (NYSE:HUM) are seen as relatively protected, but Medicaid-heavy names like Centene, Molina, and Oscar Health face steeper headwinds.
Centene, in particular, could see a 6% impact to 2027 estimates, BofA said, prompting its downgrade and estimate cuts.
Overall, the firm estimates that lost health coverage could reduce hospital volumes by 2% over five years, marking a stark reversal from the coverage-driven growth of the past decade.