Some stocks are reminiscent of sad country songs. The dog dies, the house burns down, and the truck won't start, but other than that everything looks great. Amedisys
The ugly
We'll begin with the ugly. Just look at the stock's chart over the past couple of years.
You might notice that the stock has rebounded nicely from its lows a few months ago, moving up around 40% since mid-May. Does that mean that things are now looking good for Amedisys? Not yet.
The company's results from the last quarter were ugly, too. Earnings were down 65% compared with the same quarter last year. Lower revenue from the company's core home health business accounted for a significant part of this decrease. Amedisys reported that home health revenue dropped by $17 million compared with last year.
Why are things so bleak? Amedisys receives more than 80% of its revenue from Medicare. Earlier this year, the Centers for Medicare and Medicaid Services (CMS) cut Medicare reimbursement rates for home health. The company states that $12 million of its loss of home health revenue stemmed directly from these rate decreases.
The bad
In July, CMS announced a proposal to increase home health reimbursements by 2.5% for fiscal year 2013. Good news for Amedisys? Unfortunately, no.
CMS must reduce rates by 1% because of Obamacare provisions. It also adjusted case-mix rates (the amount paid to providers for specific conditions treated) and the wage index, which specifies how providers in different geographic regions are reimbursed. The net impact for Amedisys is a 0.10% reduction in home health reimbursement.
This CMS decrease isn't too bad. However, it could get worse. The sequestration provisions of the deal Congress reached in 2011 call for an automatic reduction of Medicare home health and hospice payments of 2% in 2013. If Congress goes over the fiscal cliff, Amedisys and others in the industry will be hit by further cuts.
The company received more bad news in July as well. Humana
Are you beginning to hum a sad country tune yet?
The good
Is there any good news for Amedisys? Sure.
For one thing, competitors are struggling, too. Amedisys increased revenue in the most recent quarter. Rival Gentiva
Almost Family
Another piece of good news is that Amedisys reaffirmed its earnings guidance for the remainder of 2012 and raised the low end of its revenue guidance. Management expressed confidence in a significant bump in revenue for third quarter this year compared with the second quarter.
Probably the best news for Amedisys, though, stems from potential increased adoption of Accountable Care Organizations (ACOs). These organizations include multiple health-care providers that focus on improving patient outcomes and reducing costs.
Amedisys CEO William Borne stated that the company scored better than all of its rivals in the geographic areas that it serves in the latest CMS outcome reports. Amedisys also achieved higher patient satisfaction scores than its competitors, according to Borne. These types of results are important as ACOs look to partner with providers that can deliver the best patient outcomes.
Fistful of dollars
Movie buffs know that the spaghetti Western The Good, the Bad, and the Ugly was part of a trilogy that began with the movie A Fistful of Dollars. I think that the badness and ugliness of the home health industry should make us look elsewhere to deposit our own fistful of dollars.
One potential alternative with ties to home health is Allscripts
While Amedisys has some good points, the bad and the ugly will probably carry the day for the near term. Investors should probably sing to a different tune for now.
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