• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
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Moody's: Supreme Court decision on healthcare law has three likely outcomes

Global Credit Research - 06 Jun 2012

New York, June 06, 2012 -- The pending ruling by the US Supreme Court on the constitutionality of the 2010 Affordable Care Act is likely to result in one of three possible outcomes, says Moody's Investors Service in its new special comment "For-Profit Hospitals, Drug Companies and Medical-Device Makers, Three Likely Outcomes of the Supreme Court's Pending Decision on the 2010 Healthcare Law." The decision is expected later this month.

Each of the three scenarios detailed in the report has different implications for the credit profiles of for-profit hospitals, pharmaceutical companies and medical-device makers, says Moody's.

If the US Supreme Court decides the law is constitutional, Moody's says for-profit hospitals — including HCA Inc., CHS/Community Health Systems Inc. and Tenet Healthcare Corp. — would benefit because their exposure to bad-debt charges would drop. Pharmaceutical companies led by Pfizer Inc. and Merck & Co. will continue to incur the costs associated with the law and medical-device makers Medtronic Inc. and Stryker Corp., among others, will need to pay a new tax on US revenues.

Moody's says that if the court strikes down the individual mandate but leaves most of the law standing, the effect will be credit negative for all three industry segments. With fewer people covered by healthcare insurance, for-profit hospitals will face increased bad-debt exposure and reduced reimbursement rates. Pharmaceutical companies would sell fewer drugs and medical-device makers would pay a new excise tax and feel pricing pressure from hospitals, says the report.

The third possible scenario, where the court decides the mandate is unconstitutional and essentially strikes down the law, would provide near-term relief for pharmaceutical and medical device companies but for-profit hospitals would see pressure from continued increases in bad debt charges as individuals remain without insurance. However, this outcome would be negative in the long-term for all three segments because of market uncertainty over cost control by the government, says Moody's.

Moody's research subscribers can access this report at http://www.moodys.com/research/US-HealthcareThree-Likely-Outcomes-of-the-Supreme-Courts-Pending-Decision--PBC_142544.

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Dean Diaz
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Corporate Finance Group
Moody's Investors Service, Inc.
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New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
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JOURNALISTS: 212-553-0376
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Moody's: Supreme Court decision on healthcare law has three likely outcomes
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