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Stifel Nicolaus managing director Thomas Carroll on how the CMS report on the 2014 Medicare rates will impact investing.
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-- from Washington for more on this report from the CMS let's bring in steeple Nicholas managing director and health care services analyst Thomas Carroll.
It's not not wandering appeared this 45 days a comment this is -- companies can come back and tell the government.
Wait a minute an -- where many analysts are kind of pointed a finger at end report they say we appreciate the plans are facing several legislatively mandated changes.
This can represent challenges that the company -- come back to the government.
And lobby once again to make some changes correct.
Yeah that's actually correct -- good afternoon.
I -- for having me on and there's a number of underwriting levers that the industry can poll.
In order to kind of take the data point that the government is giving us.
You know work that through their benefit plan designs as well as they you know the supply side of the business so contracts -- doctors and hospitals really to offset.
The potential -- we're seeing.
And I think you'd you'd do we need the spirit your question is really -- during this 45 day period of time -- -- the industry comes back to the government.
Men and there's as I suppose somewhat of a negotiating period of time.
I'll -- some things can get change so I think we did see our rate cut going into next year probably in -- more closer to the 3%.
Side of the equation as opposed to the five or 6% side.
Yet -- can't help but ask the question though is as part of the perils of being a government sponsored business and Humana out of all the group -- the one that seems to be the most vulnerable as they really have put.
Many other eggs in the basket of the government comes to Medicare and didn't want your colleagues over -- -- economics ago cutting his rating.
From strong buy to buy on the stock gonna -- feeling in particular with Humana it would to cover do you think you're gonna maintain your rating on him him.
Yeah I don't see any reason really to change our opinion here.
You know has won -- best operators in the business.
They do get a bunch of error there their revenue and earnings for Medicare.
But that's the business -- and this is -- annual event.
That we got on Friday the 45 day notice we've seen in the past we'll see it again I think it's also instructive to look back to the 2009.
-- 45 day notice when the industry was hit -- unexpected very unexpected four and a half percent rate cut.
That really shook the stocks quite a bit in in the weeks after it came out.
You man actually grew its ebitda margin in the face of that cut.
And I think it was just a great endorsement of how the Medicare Advantage program and the companies that operate within it.
Are just so much more sophisticated today than they were you know say a decade ago so -- headwind.
Nonetheless but but we're still very positive on this name -- Since they basically by the witness in this name it is not just a minute that you cover you also cover.
UnitedHealth -- universal well cared -- point to lesser extent these companies also affected.
By this change but you -- when the affordable health care act was passed these companies also were dealt.
Similar blow lower level -- if you will when it came to Medicare patients in the reimbursements that you kind of a quick -- of a similar situation Tom.
Yes certainly back today when the Affordable Care Act was written in the law we saw some changes not just across Medicare but across.
You know basically all health services you know what we're seeing here that came out Friday is is is much more of a routine.
Release from the government from CMS.
You know and it it happens every year and it's just part of the part of the process and part of the pain and in this case of of being an investor health care.
One of the things on that you do point out in your research note -- you issued this morning after this news broke was that legislative issues of course can be the unknown factor.
And all of -- that if the government what congress can or cannot pass for come up with to regulate the industry how concerning about.
It's always a concern you know it's one of -- it's one of the overhang -- -- impacts the health care universe.
Kind of all the time.
And we look to try to minimize those things and kind of keep far our eyes looking -- -- To see what's coming on the horizon.
And you just never know all you can do is gonna take hey this is when you buy stocks right when they're under pressure.
-- right now I think we're seeing the government -- a lot of the industry.
The market -- who -- out I think that's when you buy good step up by good companies like Humana.
You know buyer you men and nine times all day today.
Well somebody turned 65 every thirteen seconds of this country's so we're getting -- -- any health -- -- Carol thank you very much Tom appreciate your time today.
