Wachovia Keeps 'Market Perform' on Apria Healthcare

Analyst William Bonello says Medicare reimbursement cuts are worse than he expected, and could limit near-term appreciation of the shares

Wachovia keeps its market perform rating on Apria Healthcare (AHG ).

Analyst William Bonello says Medicare reimbursement cuts included in the national prescription-drug bill is worse than he expected. He notes the respiratory drug reimbursement is set to be cut by 16% in 2004, and an additional 65% or more in 2005. He figures drug cuts could reduce earnings per share by about 18 cents in 2004 and 93 cents in 2005 -- all else held equal.

Furthermore, Bonello thinks bidding could limit growth rates in 2007 and beyond. While Apria has a competitive business model in a growing fragmented market, he thinks near-term appreciation may be limited due to potential changes in Medicare's reimbursement for respiratory therapy.

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