Public home health care companies may be heavily impacted by pending U.S. health care reform, as many serving Medicare beneficiaries leave themselves open to reimbursement risk.

According to Analyst Tony Perkins, who covers health care services for First Analysis, the Medicare Payment Advisory Committee (MedPAC) included a 5.5% payment reduction to the home health care industry for 2010 and an additional 5% cut for 2011 in its recommendations to Congress earlier this year. While the Senate Finance Committee chose to make more modest cuts to the home health care sector in its proposal, the House bill closely follows MedPAC guidelines.

“Valuations for the entire industry are down and have been down almost the entire year, mainly on the unknowns of what will come out of health care reform,” says Perkins, who likes the home health space despite the obvious risks.

“It is a more cost-effective way to manage a sick, elderly population; it is much more cost-effective than long-term care or skilled nursing facilities,” He says, mentioning Amedisys (AMED) and LHC Group (LCHG) as two of his top industry picks. “Also due to the demographic trends driven mainly by the Baby Boomers approaching Medicare age, we think demographics will aid in promoting the usage of home health, so we like the sector over the long run.”

This entry was posted on Wednesday, December 9th, 2009 at 11:52 am and is filed under General Investing. You can follow any responses to this entry through the RSS 2.0 feed.