Is Obamacare Fueling More Buyouts?

Apparently, health care's 2014 buyout bonanza has not been limited to pharma, biotech, and medical device companies -- it's reached hospitals and insurers as well.

Ascension Health, the largest not-for-profit health system in the United States, is considering acquiring an insurance company, and according to an analyst with Leerink Partners (as first reported by Modern Healthcare), the two top targets could be Centene Corp  or WellCare Health Plans .

What would make these companies attractive acquisition targets?

Obamacare. More specifically, the Medicaid expansion. Both stocks are plays on the expansion of government-funded health care, and each makes sense as a potential buyout target due to their exposure to these expanding markets. But there's still possibility for additional upside with both, because of the uneven expansion of Medicaid -- many states, including some with big concentrations of Centene and WellCare members, haven't expanded Medicaid.

In the video below, from Friday's Market Checkup, the Motley Fool's health care-focused investing show, health care analysts Michael Douglass and David Williamson discuss the rumored deal, why the stocks look like potentially attractive buyout targets, and the more general trends we're seeing in hospitals and insurers around Obamacare.

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David Williamson has no position in any stocks mentioned. Michael Douglass has no position in any stocks mentioned. The Motley Fool recommends WellPoint. The Motley Fool owns shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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