Standard & Poor’s Ratings Services removed six nursing home companies’ from CreditWatch, stating uncertainty over the specifics of the mandated 2% cut required as a result of the Budget Control Act of 2011.
S&P affirmed the ratings for Drumm Investors LLC (rated ‘B+’), Genoa Healthcare LLC (‘B’), HCR Healthcare LLC (‘B’), Kindred Healthcare Inc. (‘B+’), Skilled Healthcare Group Inc. (‘B’), and Sun Healthcare Group Inc. (‘B’).
“The rating affirmations reflect our view that as the severity of the reimbursement cuts to the nursing home industry become apparent, it may become politically difficult for the Centers for Medicare and Medicaid Services (CMS) to implement another significant cut in the near future,” said S&P. ” At this time, uncertainty remains regarding the specifics of the mandated cut in 2013 of up to 2% as required under the Budget Control Act of 2011. Therefore, we have not incorporated a further cut in our credit metric estimates.”
The rating outlook on Genoa Healthcare Group is negative and is based on S&P’s view that the impact of the reimbursement cuts will negatively affect the company more so than its peers.
“Genoa is particularly vulnerable to state budgetary stress in Florida, which led to a 6.5% Medicaid payment reduction to nursing homes as of July 1 of this year,” said S&P. “The company’s single state concentration and the associated Medicaid reimbursement risk is a key reason why Genoa’s business risk is weaker than its peer nursing home companies. In addition, Genoa has not generated any revenue growth for nearly two years.”
Written by John Yedinak