Larry Robbins' Obamacare Trade Helps Him Become One Of The Nation's Hottest Hedge Fund Managers

Larry Robbins, who runs Glenview Capital Management, has become one of the nation’s hottest hedge fund managers, partly by betting on hospitals that he thinks will benefit from Obamacare.

Robbins’ flagship Glenview Capital hedge fund, which has $4 billion under management, has returned a net of 29.45% through July 5. That’s one of the best investment performances among major hedge funds in the first half of the year and far in excess of the Standard & Poor’s 500 index, which returned 15.7% in 2013 through July 5.

Robbins, who oversees $6 billion at Glenview, has one third of his total assets under management invested in five hospital chains, like Tenet Healthcare , HCA and Lifepoint Hospitals. Last year at a hedge fund conference, Robbins said that he was buying hospital stocks because the Affordable Care Act means that hospitals will likely make money on most emergency room visits because more Americans will have health insurance. Robbins also appears to be betting that the implementation of Obamacare will lead to a round of hospital industry consolidation. Robbins' investment in hospitals has worked even though the health reform law’s requirement that employers insure their workers has been delayed.

His most prominent hospital investment is Glenview’s 14.6% stake in Health Management Associates, a Naples, Florida,-based hospital operator. Robbins has been mounting a campaign to replace HMA’s management and board, citing HMA’s “lost decade” of returns and struggles related to unresolved Department of Justice and Securities & Exchange Commission investigations. Robbins has tried to frame it as a more gentle hedge fund campaign, saying “in Hollywood terms, we are more Mr. Spock than William Wallace,” but at the same time Glenview has emphasized “the historical shortcomings of HMA’s leadership.” In a June letter Glenview wrote to gain shareholder support for his plans at HMA, Robbins pointed to Obamacare as a reason shareholders should move to make changes at the hospital company, citing "critical issues of regulatory compliance, exchange pricing, information technology investments and competitive positioning through the implementation of coverage expansion under the Patient Protection and Affordable Care Act."

Glenview’s blockbuster first half of 2013 follows a big year in 2012 that saw Glenview’s flagship hedge fund beat the U.S. stock market and the vast majority of hedge funds by scoring net returns of more than 24%. For Robbins, the last 18 months represent a huge comeback after Glenview Capital Partners lost 11% in 2011.