** Shares of hospital operators Universal Health Services UHS.N down 1.5% at $175.14, Tenet Healthcare THC.N fall 4.3% to $159.02 and HCA Healthcare HCA.N down 1.3% to $368.31 - on track for second straight session of losses

** Shares fell after a White House memo on June 6 directed health secretary to "eliminate waste, fraud and abuse in Medicaid" and mentioned State Directed Payments $(SDP.UK)$ to ensure "Medicaid payment rates are not higher than Medicare"

** State Medicaid programs may pay hospitals with additional payments over low base rates to pursue their overall Medicaid program and quality goals

** "SDPs are a significant portion of ACHC/HCA/THC/UHS EBITDA, and though the memo carries risk of further program modifications, we see this as less than likely and believe the share reaction is overdone"- TD Cowen

(Reporting by Sneha S K and Siddhi Mahatole)

((siddhi.mahatole@thomsonreuters.com))