On December 20, Becker’s Hospital CFO Report noted that profitable healthcare companies like HCA will benefit from a lowering of the corporate tax rate to 21% from 35% (https://www.beckershospitalreview.com/…/why-hca-will-fare-b…). Companies with large debt loads, such as Community Health Systems and Tenet healthcare, will “not fare as well under the tax plan due to its limit on interest rate deductions. Under the plan, companies could deduct up to 30 percent of earnings before interest, taxes, depreciation and amortization. After four years, interest expense deductions would be further reduced.”
The Wall Street Journal adds that the tax overhaul is a mixed bag for the hospital industry, but that “The nation’s nonprofit hospitals—which account for about 60% of the sector—will maintain access to tax-exempt bond markets under Republicans’ compromise tax bill released Friday. House Republicans had proposed ending a tax exemption for so-called private-activity bonds, which nonprofit hospitals use to finance capital projects. The compromise released Friday didn’t include that provision” (http://www.wsj.com/graphics/taxes-corporate-sectors/).
– In 2016, hospitals sold $37 billion in tax-exempt bonds
– The Affordable Care Act mandate that most people purchase health insurance was repealed. This may increase the number of uninsured patients seeking care.
– Health Insurers will benefit from lower corporate tax rates. As the WSJ article above states, “Health insurers, an overwhelmingly domestic industry, will reap enormous benefits from the tax bill’s sharp cut to the corporate rate. ‘Analysts project that the companies initially could see sharp increases in earnings—perhaps in the 15% to 20% range,’ said Ana Gupte of Leerink Partners LLC.”