Shares of nursing home operators rebounded Tuesday from sharp declines last week after a Morgan Keegan analyst said the shares fell too far and predicted Medicaid payments to nursing homes are not at huge risk.
Last week, nursing home stocks fell sharply following comments from a top official at the Centers for Medicare & Medicaid Services suggesting Medicare payments to nursing homes would be reduced in 2009, said Morgan Keegan analyst Robert Mains.
In a note to investors Tuesday, Mains said he thinks Medicaid payments to nursing homes are not at significant risk, and said the slowing economy is leading to investor worry over payment cuts.
Mains said seniors in nursing facilities receive most their health care services from nursing homes, and Medicaid is the dominant provider for these operators.
"Medicare, which generates higher revenues and margins, is more subject to reimbursement risk, but there is now neither the imperative to cut Medicare spending nor the institutional mind-set in Washington to pursue nursing home cuts, in our opinion," said Mains.
Meanwhile, Kindred Healthcare Inc.'s shares rose ahead of its earnings report expected after the close Tuesday.
Stifel Nicolaus & Co. analyst Robert Hawkins expects a positive quarter for the company on stronger volumes. He maintains a "Buy" rating and $30 price target.
Kindred rose 33 cents to $25.88.
Elsewhere in the sector, Sun Healthcare Group Inc. rose 47 cents to $16.84, Five Star Quality Care Inc. jumped 19 cents to $7.24. Brookdale Senior Living Inc. rose 19 cents to $23.44 and Skilled Healthcare Group Inc. rose 17 cents to $12.91.
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