Post-acute care sector poses funding challenges
The post-acute care sector of the health care services industry has seen a spike in patient volume, but challenging Medicare funding cuts still loom, according to an FBR Capital Markets analyst.
FBR initiated coverage for three home health and hospice operators — Amedisys Inc., Gentiva Health Services Inc. and LHC Group Inc. — and Kindred Healthcare Inc., an operator of skilled nursing centers and long-term acute care hospitals.
Analyst Newton Juhng did not recommend any of the stocks.
"Our fundamental thesis on the subsector is that volume trends remain strong through most of the post-acute care service areas, but Medicare pricing has become more challenging," Juhng said.
He said Medicare has increased spending as patient volume rises, but the government also has adjusted its pricing structure for some services, sometimes with sizable cuts.
Juhng said they expect providers to continue to receive reduced Medicare reimbursement, as the government tries to pay for health care reform.
He also said the sector lacks an effective political lobby.
"In the post-healthcare reform era, we view effective legislative lobbies as an important part of an investor's evaluation of the space, and post-acute care has ample room for improvement," he wrote.
Shares of Amedisys fell 95 cents, or 3.3 percent, to $28.42 at the start of trading Thursday. Gentiva dropped 29 cents, or 1.2 percent, to $23.99; LHC Group was down 7 cents to $24.25; and Kindred was down 14 cents to $12.38.