Health industry braces for cuts

• By TED GRIGGS
• Advocate business writer
• Published: Nov 4, 2009 - Page: 6B

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The federal government’s plan to cut home health providers’ Medicare reimbursements by 1 percent overall next year has had little effect on the stocks of Amedisys Inc. and LHC Group Inc., both in Louisiana, but industry observers and members say the real impact will come from pending health legislation.

The reduction was slightly higher than the Centers for Medicare and Medicaid Services’ preliminary recommendation of 0.86 percent, but that will not affect BB&T Capital Markets’ forecast for either firm, said K. Newton Juhng, senior equity research analyst with BB&T.

Amedisys was trading Tuesday at $41.25 per share. Its trading range over the past 52 weeks has been $25.20-$59.24.

LHC Group was trading at $28.11 Tuesday, with its 52-week trading range at $16.56-$36.83.

The far bigger question is what impact the legislation to overhaul the health industry will have on reimbursements.

The CMS rules show that home health agencies in urban areas face a 4.35 percent cut while rural for-profit agencies will see a 3.1 percent increase, according to Concept Capital, a research firm and division of SMH Capital Inc.-Washington Research Group.

Both Amedisys and LHC receive the vast majority of their revenue from Medicare. Lafayette-based LHC Group has targeted mainly rural areas, while Amedisys, wioth headquarters in Baton Rouge,  serves a mix of areas.

Juhng said caution should be used in judging whether the reimbursement rates are more favorable to one firm than another. Both firms have a mixture of rural and urban agencies, he said. It’s difficult to assess the impact unless one goes through the reimbursements for each agency.

Amedisys has more than 500 home health agencies; LHC Group more than 220.

LHC spokesman Eric Elliott said health-care reform can ultimately change the 2010 fiscal year reimbursements.

“I don’t think this particular rule changes anything in terms of acquisitions today,” Elliott said. “The big elephant in the room is definitely health-care reform, and the bill that will ultimately come out of Congress and how that will affect the industry.”

Amedisys spokesman Kevin LeBlanc said the bottom line is that no one knows exactly what will come out of Congress. The proposals from the House contain larger cuts than the Senate proposal, but everything is subject o change, he said.

According to Concept Capital, MS has hinted that if Congress makes significant cuts to home health agencies, CMS will not accelerate the larger cuts envisioned for 2011. However, if Congress does not act, CMS will, according to Concept Capital.