SNF stocks could drop an additional 25% by January 2012
This is just the beginning of the pain for the nursing homes. Most people think the only cut that SNF's are going to experience is the published 11.1% cut from Medicare. This cut is a result of Medicare "recalibrating" the rates to offset their previous attempt at a "Budget Neutral" shift to the MDS 3.0 and RUGS IV reimbursement system. Most providers are going to see an additional 5%-12% cut in Medicare revenue as a result of the new Change of Therapy(COT) and End of Therapy(EOT)assesments required under the new Final Rule. They are also going to see an increase in the cost of providing therapy which will amount to an increase in salary costs of approximately 5%-15% due to the change in the way group therapy is billed. This is all before "The Joint Select Committee on Deficit Reduction" decides what else to cut. They are also exposed to potential Medicaid cuts from the states as a result of the federal government reducing matching funds. I would stay away from all SNF providers until after they report Fourth quarter earnings in Jan. 2012. I believe that we could see another 25%-35% drop in these stock prices by Feb 2012.