Obamacare Ruling May Affect Healthcare REITs

Wednesday, 27 Jun 2012 05:09 PM

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A Supreme Court decision to strike down President Obama's Patient Protection and Affordable Care Act may affect the value of certain real estate investments.

Healthcare Real Estate Investment Trusts (REITs) have done well in recent years, and according to CNBC data, holdings in the sector break down into 40 percent in senior housing, 30 percent in skilled nursing facilities, 20 percent in medical office buildings and 10 percent in biotech and other facilities.

Senior housing facilities won't be affected, experts say, since such services tend to move in line with the broader economy.

Those invested in REITs dealing with skilled nursing facilities should pay close attention to the ruling.

"Medicare and Medicaid are two very important revenue sources for skilled nursing facilities, and the government’s willingness to pay that tab, pay that bill or not is very important to the business," says Jim Sullivan of Green Street Advisors, CNBC adds.

"To the extent that the Supreme Court ruling goes against the law, that probably has to be bad news for the skilled nursing homes, the skilled nursing operators and therefore those who own the skilled nursing real estate."

Medical office building REITs could swing either way.

If Obamacare were upheld, more insured people enter the system and demand goes up at the nation's medical office buildings.

However, doctors could be paid less in turn with cuts to Medicare, which could cut into rents.

"It would be a modest positive if the law were upheld and a modest negative if law is overturned," Sullivan says.

The Supreme Court is set to rule on the legislation, and a poll shows that most Americans oppose it.

Fifty-six percent of people are against the healthcare overhaul and 44 percent favor it, according to a Reuters/Ipsos online poll.

Sixty-one percent of Americans oppose the individual mandate, which would require individual Americans to own healthcare insurance, while 39 percent favor it.

"That's really the thing that has come to define the (reform) and is the thing that could potentially allow the Supreme Court to dismantle it if they decide it's not constitutional," says Ipsos pollster Chris Jackson, according to Reuters.

The poll also finds that 82 percent of respondents favor banning insurance companies from denying coverage to people with pre-existing conditions.

© 2014 Moneynews. All rights reserved.

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