** Shares of hospital operators Tenet Healthcare THC.N, HCA Healthcare HCA.N and Universal Health Services UHS.N fall between 1.5% and 3.5%

** US Medicare agency late on Wednesday proposed a rule that would change state-directed payment policies (SDPs) and set new limits on certain fee​-​for​-​service (FFS) supplemental payments

** SDPs are a Medicaid funding mechanism where states tell health insurers to pay hospitals higher rates for treating Medicaid patients; separately, Medicaid also pays hospitals under FFS using supplemental payments

** The agency is proposing to expand the impact of the restrictions included in the One Big Beautiful Bill Act back in July 2025, Mizuho says

** The proposed rule is "consistent with how we expected SDP policies to be implemented and a neutral or slightly negative development for hospital stocks" - Barclays

** "New limits on certain FFS supplemental payments are the most notable unanticipated element and would reduce such payments for physician, medical transport, and dental practitioners by ~11-14%, driving a ~$2.4 bln reduction in Medicaid payments from 2029-35" - Barclays

** "Overall, we do not see the proposal as a fundamental change in the DPP outlook for the hospital group" - Mizuho

** Including session moves, HCA down 15%, THC down 5.7% and UHS down 24.6% YTD