Skilled Nursing Stocks Plunge
August 1, 2011
August 1, 2011. Late Friday the Centers for Medicare and Medicaid Services announced that effective October 1, 2011, overall reimbursement rates for skilled nursing facilities...
would be cut by 11.1%, which is net of a few adjustments. This was close to the worst case scenario facing providers from last April 28's announcement that CMS was not happy with the sharp increase in Medicare payments since October 1, 2010 , and one no one thought would come to pass. With changes in therapy services regs, the effective cut could be even larger. The result is that skilled nursing stocks opened sharply lower today, with Sun Healthcare Group suffering the most, plunging 56% to $3.00 per share, followed by Skilled Healthcare Group, dropping 39% to $5.40 per share and Kiindred Healthcare falling 26% to just under $14.00 per share. Even the private pay seniors housing stocks felt the wrath of investors. On the REIT side, Sabra Healthcare REIT was clobbered, dropping 23% and Omega Healthcare Investors dropped 10%. These two REITs are the most heavily weighted toward skilled nursing facilities. For some, this will represent a buying opportunity; for others, it is just another frustrating reason why to avoid the skilled nursing sector.