Lab Corp. (LH) Frustrated with CLFS Proposal, UBS Cuts Price Target to $119
UBS maintained a Neutral rating on Laboratory Corporation of America (NYSE: LH), and cut the price target to $119.00 (from $125.00), following in-line 3Q15 earnings results. LH management voiced its frustration with the CLFS proposed rule. LH does not believe the proposal is consistent with Congress' intent under PAMA and noted the industry is being very active in the comment period.
Analyst A.J. Rice commented, "Not surprisingly, LH mgt voiced its frustration with the CLFS proposed rule. LH does not believe the proposal is consistent with Congress' intent under PAMA and noted the industry is being very active in the comment period. LH noted that the OIG recently published a data brief for 2014 that highlighted that Medicare paid $7 bln for Part B lab tests, of which, hospitals received 24% or $1.7 bln through the CLFS. CMS also cited lab spend going through the CLFS as a reason for its proposed reduction to OPPS rates for 2016. However, it's unclear at this point whether the industry will be able to foster any material changes in the final rule. At this point, LH is unable to say whether the 4.5% est reduction in CMS's impact analysis is accurate, but again expressed the view that the fee schedule changes do not represent a draconian risk for the company."
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Shares of Laboratory Corporation of America closed at $117.74 yesterday.