Skilled Healthcare lowers outlook on Medicare cuts
FOOTHILL RANCH, Calif. (AP) — Nursing home operator Skilled Healthcare Group Inc. said Thursday it expects cuts in Medicare and Medicaid payment rates to reduce its annual revenue by about $45 million, or about 5.5 percent of last year's total.
The company said it expects to be able to counteract about $15 million in cuts by reducing spending and improving its productivity. Skilled Healthcare also lowered its 2011 profit and revenue estimates because the cuts will take effect Oct. 1. It now expects an adjusted profit of $1.07 to $1.12 per share in 2011, on revenue of $865 million to $870 million. The company reported $820.2 million in revenue in 2010.
In July, the Centers for Medicare & Medicaid Services said it will cut reimbursement rates by 11.1 percent. It first proposed the cuts in April. Skilled Healthcare's previous forecast, which did not account for the cuts, called for an annual profit of $1.22 and $1.32 per share on revenue of $857 million and $877 million. Analysts currently expect a profit of $1.11 per share on $870.3 million in revenue, according to FactSet.
Shares of Skilled Healthcare fell 33 cents, or 6.4 percent, to $4.81 in afternoon trading. The stock is down 45 percent since the cuts in reimbursement rates were announced.
The company said it expects the rate cuts to reduce Medicare payments for skilled nursing by about $7 million in the fourth quarter. It said rehabilitation revenue will decrease and expenses will increase by a combined $3.5 million. It also forecast a $1 million reduction in quarterly Medicaid revenue because of payment cuts at the state level.
Analysts expect Skilled Healthcare to report $872.1 million in revenue in 2012.