Jefferies On The Implications Of Medicare Payment Rule (CYH, HCA, HMA, LPNT, UHS, KND)

Jefferies reports that Centers For Medicare and Medicaid Services proposed an FY12 Medicare payment rule that was “likely slightly worse for acute care hospital operators (like Community Health Systems, Inc. CYH, HCA Inc. HCA, Health Management Associates Inc. HMA, Lifepoint Hospitals Inc. LPNT, and Universal Health Services Inc. UHS) and inline-toslightly better for LTCHs (like Kindred Healthcare Inc. KND).” “The final rule, which should emerge by late July/early August, is frequently less onerous than the proposal,” Jefferies writes. “Our estimates currently factor in a net cut of -1.1% FY12 (Oct 2011-Sept 2012). So if the proposed rule is finalized, we will need to raise our numbers slightly. However, we do not believe consensus estimates fully factor in the magnitude of this cut, suggesting that we could see some weakness in hospital stocks (like CYH, HCA, HMA, LPNT and UHS) today. Although, it will likely be mild with many investors believing that the final rule will be less onerous.”