A Break for Hospice Providers

Highlighted stocks include Odyssey Healthcare Inc. (ODSY), Chemed Corp.  (CHE) and Gentiva Health Services, Inc. (GTIV).

A Moratorium for Medicare Cuts to Hospice Providers

The nation¹s hospice community claimed a significant victory this week after President Barack Obama signed a bill (H.R. 1-The American Recovery and Reinvestment Act of 2009) into law that includes a one-year moratorium on cuts in Medicare funding for the more than 4,700 hospice programs nationwide.

On April 28, 2008, CMS [Centers for Medicare &  Medicaid Services] had proposed a 3-year phase-out of the budget neutrality adjustment factor (BNAF) to the hospice wage index, a key component of the Medicare hospice reimbursement formula. CMS proposed phasing out the BNAF by 25% in 2009, 75% in 2010 and completely in 2011.

CMS issued a final rule phasing out the budget neutrality factor that is included in the computation of the annual hospice wage index.

The effort to halt the hospice rate cuts has been underway since the Bush Administration announced its intention to eliminate the BNAF in its FY09 budget. Efforts by the National Hospice and Palliative Care Organization, the Alliance for Care at the End of Life and hospice advocates to overturn the proposed 2008 regulation issued by the Centers for Medicare and Medicaid Services culminated in the one year reprieve, which we believe is medium term positive for listed hospice providers like Odyssey Healthcare Inc. (ODSY), Chemed Corp.  (CHE) and Gentiva Health Services, Inc. (GTIV).

Odyssey Healthcare Inc. (ODSY)

Odyssey Healthcare recently reported 4Q08 net income of $5.4M, or EPS of $0.17, compared with net income and EPS of $2.3M and $0.07 respectively in 4Q07. ODSY 4Q08 financial results were in line with expectations and included operations of Vistacare, which was acquired in March 2008.

We are encouraged by the progress to date of the integration of the Vistacare acquisition and believe the recent BNAF related Medicare reimbursement phase-out reprieve announced in the stimulus package is positive for the stock. We retain our Hold rating at current levels.

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Read the full analyst report on GTIV

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