Nursing home owners and operators likely will get a boost from changes in Medicare's payment system next year, an analyst said Tuesday.
Despite the run-up in shares of real estate investment trusts that focus on senior care, Morgan Keegan analyst Robert Mains said the sector still will post strong earnings growth in 2011 due to a "favorable Medicare reimbursement environment and stable operating costs."
In October, Medicare launched a new reimbursement system in which it pays nursing homes per patient day, with rates based on the complexity of the services each patient receives. The system allows operators to treat patients who had previously had inadequate reimbursements.
Mains said the larger, publicly traded chains will be able to take advantage of this change because they have the economies of scale to do so.
On a related note, Mains also expects Medicaid rates to stay relatively stable in spite of concerns of cuts due to state budget problems.
Shares of The Ensign Group Inc. rose 20 cents to $23.75 in afternoon trading, while Kindred Healthcare Inc.'s stock added 5 cents to $19.04. National HealthCare Corp.'s shares increased 4 cents to $46.68. Skilled Healthcare Group Inc.'s stock rose 3 cents to $8.94.