Year-to-date excess returns for the hospital sector have outpaced the overall municipal market by about 100bps. We have been overweighting the sector for some time now and continue to like well-run regional hospital systems. A few weeks back, we wrote about the expected impact of the Affordable Care Act on municipal hospital credits, and this week we received fresh data confirming the positive credit trend in the sector. The Colorado Hospital Association performed an analysis of Medicaid coverage expansion on hospital volumes based on 465 hospitals across 30 different states, 15 of which expanded Medicaid and 15 that did not. The results show an immediate impact from additional Medicaid revenue and a commensurate decrease in self-pay and charity care in the states that choose to expand Medicaid. Reductions in self-pay and charity care lowered uncompensated care. Uncompensated care is a write-off that reduces net patient revenues. More revenue means higher margins and more financial flexibility, which is a credit positive. The improved financial flexibility of these hospitals means that they are in a better position to handle the coming reduction in Medicare and Medicaid reimbursements. Most of our hospital credits are located in Medicaid coverage expansion states and will benefit from the current positive trend in credit metrics.