Publicly held home health companies faltered on Wall Street in response to an announcement last week from the Centers for Medicare and Medicaid Services proposing Medicare reimbursements to home health providers will fall 1.5% in 2014, or $290 million based on estimates.
Public companies including Gentiva Health Services (NASDAQ: GTIV) and Amedisys Inc. (NASDAQ: AMED) saw stocks tumble, according to a Bloomberg News report indicating the companies’ share prices lost 13% and marking historic single-day losses. LHC Group (NASDAQ: LHC) also sustained a 13% loss following the announcement.
The cuts were greater than investors or analysts had anticipated, Bloomberg reports.
“This is as bad as it could have been,” Sheryl Skolnick, a CRT Capital analyst, told Bloomberg News. “The challenge for these guys is they’ve got three more years of this,” she said.
Amedisys counts more than 80% of its revenue attributable to Medicare and Gentiva more than 90%, Bloomberg reports, with for-profit companies in the sector faring far worse than non-profits.
“The non-profits will be hurt but could stay around due to other funding sources,” Mark Anthony, senior vice president of sales and marketing at Homecare Homebase told Bloomberg. “Publicly traded companies, with average operating margins from about 7 percent to 13 percent, will fare worse, he said.”
Written by Elizabeth Ecker