Goldman Weighs In On CMS Announcement (AMSG)

On Friday, the Centers for Medicare and Medicaid Services announced "preliminary CY2011 payment rules for services provided at hospital outpatient departments (HOPD) and ambulatory surgery centers (ASCs)," according to a research report by Goldman Sachs. Analysts at the investment bank offered a few key points to take away from the announcement. "After reducing the proposed HOPD rate to reflect a -25b bp productivity adjustment, HOPD rates will increase by a net +2.15% in 2011, modestly ahead of our expectations of a 1%-2% net rate update," the analysts said. They continued on that "ASCs will see no net rate update, as the CPI update of 1.6% is fully offset by the mandated productivity adjustment, though a flat rate update is largely in line with our already-low expectations for ASC Medicare rates in the final year of the ASC payment rule’s four-year phase-in." Goldman also noted the effect of the recent health care legislation on the announcement in saying, "20% co-pays and other co-insurance payments for most Medicare-covered preventive care procedures performed at hospital outpatient departments or ASCs will be waived starting January 1, 2011, which we believe could provide a modest boost to sluggish outpatient volume trends in recent quarters" AmSurg Corp. AMSG is likely to see a "material benefit due to increased volume" in the view of the analysts, as 33% of their revenue comes from Medicare, whereas most other hospitals Goldman covers reap only 10-20% from the government program.