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U.S. Equity Research News
Shove Downgrades 3 Managed Care Stocks to UNDERPERFORM: HealthSpring (HS), Humana (HUM), Universal American (UAM)
February 23, 2009
Dave Shove, senior research analyst on our Healthcare team, has today downgraded the following three stocks to an UNDERPERFORM rating from MARKET PERFORM:
From Shove's note: "Friday evening, CMS released the preliminary Medicare Advantage (MA) capitation rate increase of 0.5%. This is dramatically lower than our expectation as well as the Street’s. If the final capitation growth rate remains below 2%, MA profitability is in serious jeopardy. Coding Adjustment – In addition to the low rate increase, CMS proposed an additional downward adjustment to reimbursement for coding disparities. If imposed, this adjustment would reduce risks scores, and subsequent payment, by 3.74%. Sell Health Net, HealthSpring, Humana, and Universal American – the earnings trajectories of these companies will be compromised by 2010 rate changes."
To receive a full copy of the report or for more information, please contact your BMO Capital Markets representative.
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