Medical Services: MCOs Immune, but Tariffs May Cause Near-Term Stress at Providers and Suppliers 

Over the past week, tariff-related news has created significant volatility in the US market, including in medical-services-related firms like managed care organizations, caregivers, and medical suppliers.

Why it matters: Some of these companies look largely tariff-proof, including managed care organizations like UnitedHealth, while others look merely recession-resistant, including caregivers like HCA and medical suppliers like Baxter.

• As US-based and US-focused firms, MCOs look largely immune to tariffs. The only concern could be in the near term if the US economy falls into recession and causes a mix shift in medical insurance members from employer to lower-margin Medicaid plans.
• Providers and medical suppliers could feel more direct effects of higher costs in their supply chains due to tariffs. Of these two, medical suppliers face the more significant profit risk due to multiyear contracts with clients and potential delays in large equipment orders from clients.

The bottom line: In February, we reduced our fair value estimate for medical supplier Baxter on near-term tariff concerns, and we do not anticipate making further changes to it. We see most of the medical services firms we cover (MCOs, providers, and suppliers) as undervalued currently.

• In managed care, our moat ratings were all recently updated during our moat staleness review process. UnitedHealth, Humana, Elevance, and Cigna remain at narrow, while CVS and Centene are now at none.
• In providers and suppliers, most of our moat ratings were also reviewed in late 2024 or early 2025. They remain narrow for Baxter, DaVita, Fresenius Medical Care, HCA, and Tenet and none for ICU Medical.

Coming up: We plan to keep a close eye on how hospital capital expenditure budgets develop and how they could affect medical suppliers in a scenario where tariffs create sticker shock on large equipment especially. Also, investors should be aware of other regulatory factors that could affect the MCOs.