Tuesday, August 2, 2011

Which stocks get hit by the budget cut? Part I

While budget cuts are inevitable following the debt ceiling deal, the Centers for Medicare and Medicaid Services surprised the market on Friday that it planned to reduce payments to skilled-nursing facilities by 11.1% for fiscal 2012, cutting $3.87 billion out of the spending plan. The 11% was much larger than the 5-6% that was anticipated. CMS said in a note Friday that the rates “correct for an unintended spike in payment levels and better align Medicare payments with costs.”

The news hit nursing and healthcare facilities. Catching the eyeball was Sun Healthcare Group (SUNH) which dropped more than 50% in a day. Others hard hit by the news included Skilled Healthcare Group Inc.(SKH), Kindred Healthcare Inc. (KND),  Ensign Group Inc.(ENSG) , National Healthcare Corp. (NHC) , Five Star Quality Care Inc. (FVE). Real Estates Investment Trusts (REITs) that cater to nursing and healthcare facilities did not escape the slump. Omega Healthcare Investors (OHI) , Health Care REIT Inc. (HCN) , HCP Inc. (HCP) all lost more than 6% on Monday.

General care hospitals soon joined the slump as the market anticipated further Medicare/Medicaid cut would involve this group that included HCA Holdings Inc. (HCA), Community Health Systems Inc.(CYH) and Universal Health Services Inc. (UHS).


Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author may have released this information prior to this post to affiliates or parties that have financial interests in trading on this information. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.

Disclosure: The blog author does not own any of the above positions in her personal account as of August 2, 2011

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