Amedisys Faces U.S. Medicare Pay Cut for Home Health CareAlex Wayne
Amedisys Inc., Gentiva Health Services Inc. and other in-home health-care providers tumbled in New York trading after the U.S. Medicare program announced plans to cut company payments by 1.5 percent on average in 2014.
Amedisys, the largest U.S. home-nursing provider, fell 13 percent to $11.60 at the close, the biggest single-day decline in more than 13 months. Gentiva declined 13 percent to $9.96 and LHC Group Inc. lost 13 percent to $19.58, the largest falls for both companies since October 2011.
Amedisys, which depends on Medicare for more than 80 percent of revenue, and other for-profit companies face deeper reductions -- a net 1.7 percent -- than nonprofit and government-run centers. The cuts, announced late yesterday and ordered by the 2010 Affordable Care Act, exceeded investors’ expectations, said Sheryl Skolnick, a CRT Capital analyst in Stamford, Connecticut.
“This is as bad as it could have been,” Skolnick said in a telephone interview. The home-health industry faces further cuts through 2017 that are likely to be just as deep, she said.
“The challenge for these guys is they’ve got three more years of this,” she said.
The government’s plan to trim payments to companies that provide therapy at home for elderly and disabled patients would save taxpayers $290 million in 2014, the Centers for Medicare and Medicaid Services said in a regulatory proposal made public yesterday. The rule, which will be formally published July 3, is subject to a 60-day comment period before being made final.
The agency said in a statement that the cuts “would foster greater efficiency, flexibility, payment accuracy and improved quality” for home health care.
Amedisys may lose $14 million in earnings next year, 21 percent of its profit before taxes and other costs, Skolnick said today in a note to clients. She has kept a sell rating on the Baton Rouge, Louisiana-based company’s shares since at least last year, according to data compiled by Bloomberg.
Kendra Kimmons, a spokeswoman for Amedisys, declined to comment on the proposed cuts. A message left yesterday with the answering service for Atlanta-based Gentiva wasn’t returned. Gentiva got more than 90 percent of its sales in the first quarter from Medicare, according to data compiled by Bloomberg.
Half of all home-health companies may not be able to sustain a “break-even or better business” if Medicare enacts the full cuts in each of the next four years, said Mark Anthony, senior vice president of sales and marketing at Homecare Homebase, a closely held company based in Dallas that makes computer software for home health agencies.
“The non-profits will be hurt but could stay around due to other funding sources,” he said in an e-mail. Publicly traded companies, with average operating margins from about 7 percent to 13 percent, will fare worse, he said.