Barclays on Health Care Facilities: Headline Risk Around Florida Medicaid Is Not a Surprise
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23 Buy, 11 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 6 | Down: 5 | New: 17
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Barclays on Health Care Facilities: Headline Risk around Florida Medicaid Is Not a Surprise
Analyst, Adam Feinstein, said, "Yesterday, Florida's Governor Rick Scott issued his preliminary budget proposal for fiscal year 2012/13 which included $1.9 billion in savings from the state Medicaid program, representing a 9% cut. Florida is a very important state for a number of hospital companies, including HCA Holdings (NYSE: HCA), Health Management Assoc (NYSE: HMA), Tenet (NYSE: THC), and, to a lesser extent, Universal Health Services (NYSE: UHS). As a result, we expect this news to be a key area of focus. Keep in mind, however, that Medicaid only represents ~10% of hospital revenue, so, we would be surprised if Florida's Medicaid program represents more than 2%-3% of revenue for any of the hospital companies. In addition, we highlight that the governor's proposal is simply the beginning of a long negotiation that should play out between him, the Florida legislature and CMS (for some of the Medicaid changes) between now and next June, noting that the changes that are being discussed will not begin until July 1, 2012."
"Barclays Capital Key Takeaways: 1) This is only a proposal and represents the beginning of a long series of negotiations that should occur over the next seven months; 2) This proposed cut could be a bargaining chip which Governor Scott could be using to get the approval for expanding the managed care program; 3) The $1.9 billion in savings represents a 10% cut, although our initial view is that a bigger part of the savings will come from fewer covered Medicaid services with a smaller impact from pure price cuts; and 4) Florida is one of the biggest states for the for-profit hospital industry."
Analyst, Adam Feinstein, said, "Yesterday, Florida's Governor Rick Scott issued his preliminary budget proposal for fiscal year 2012/13 which included $1.9 billion in savings from the state Medicaid program, representing a 9% cut. Florida is a very important state for a number of hospital companies, including HCA Holdings (NYSE: HCA), Health Management Assoc (NYSE: HMA), Tenet (NYSE: THC), and, to a lesser extent, Universal Health Services (NYSE: UHS). As a result, we expect this news to be a key area of focus. Keep in mind, however, that Medicaid only represents ~10% of hospital revenue, so, we would be surprised if Florida's Medicaid program represents more than 2%-3% of revenue for any of the hospital companies. In addition, we highlight that the governor's proposal is simply the beginning of a long negotiation that should play out between him, the Florida legislature and CMS (for some of the Medicaid changes) between now and next June, noting that the changes that are being discussed will not begin until July 1, 2012."
"Barclays Capital Key Takeaways: 1) This is only a proposal and represents the beginning of a long series of negotiations that should occur over the next seven months; 2) This proposed cut could be a bargaining chip which Governor Scott could be using to get the approval for expanding the managed care program; 3) The $1.9 billion in savings represents a 10% cut, although our initial view is that a bigger part of the savings will come from fewer covered Medicaid services with a smaller impact from pure price cuts; and 4) Florida is one of the biggest states for the for-profit hospital industry."
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