CMS Proposed ESRD Rule Worse Than Expected but Door Open for Adjustments

Deutsche Bank today maintained a Buy rating on DaVita (NYSE: DVA) with a price target of $136.00. Shares opened lower on Tuesday after the CMS issued 2014 Medicare ESRD proposed rule, reducing dialysis rates by 9.4%. The figure is twice as high as expected.

Commenting, analyst Darren Lehrich said, "At this time, we are not making changes to our model because we would expect CMS to make adjustments in a final rule – but we emphasize the final rule would have to improve at least ~$10/tx for us to remain confident in 2014 estimates. DVA performs ~19M Medicare txs per yr, so the gross impact (before any offsets) of this rule would be ~$440M to O.I. or ~30% impact to 2013E segment O.I. and ~20% 2013E consolidated O.I. Based on our read of the proposal, we believe CMS has left the door open for several
adjustments to its approach."

For an analyst ratings summary and ratings history on DaVita (NYSE: DVA) click here. For more ratings news on DaVita click here.

Shares of DaVita closed at $121.15 yesterday.

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