Obamacare-Proofing Your Portfolio

If your health IT system can enforce discipline among doctors and hospitals, doing the obvious first, pushing generic drugs, using best practices and checklists, that per-patient cost is lower.
Over time this will put hospital chains into play for big insurers. And the most financially troubled of the chains may make the best bargains for the big guns. Thus, taking a flyer on, say, Tenet Healthcare(THC) , recently upgraded by Wells Fargo, and noted in an article on the US Election News Web site, may pay off for the speculative investor. Just be aggressive and if it gets a take-out offer, push for the company to grab it.

Sell speculative pharmaceuticals like Dendreon(DNDN) . The biggest losers in reform will be companies selling expensive cures directly to doctors, many of whom will lose their power to offer such treatments until they are proven.
Dendreon, for instance, offers Provenge for advanced prostate cancer, shown to improve lifespans by just four months at a cost of $93,000 per treatment. Insurers won't buy that, when their financial incentives are geared to lower per-patient costs.
The global pharmaceutical business has long focused on the U.S. because once a treatment is approved it can be sold directly to doctors. In other advanced countries, the health care system demands that such treatments show themselves to be cost-effective before they will pay. That kind of system is coming here, enforced by private insurers, so if the drug you're backing has a high cost you now have a much-higher hurdle to make sales.

I know most TSC readers don't like the new law. Many doubtless hope that a President Romney, who instituted a similar program as governor of Massachusetts in the last decade, will repeal it with a Republican Congress. But even if he does, whatever replaces it will look a lot like what has now been approved. Even if he doesn't, the incentives for big insurers to lower per-patient costs will likely remain.

And there is this consolation. Among the winners will likely be the big health IT companies, the outfits supplying the systems needed to enforce best practices, so a Bush is bound to be one of those winners. That would be Jonathan Bush, a nephew of George H.W., cousin to George W., and CEO of AthenaHealthDIS(ATHN) .

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.