Proposed Medicare moves lift hospital stocks

Investors jump on surprise reimbursement increase plan

A proposed hike in what Medicare will pay for treating elderly patients lifted stocks of hospital operators Monday by about 5 percent.

The Centers for Medicare and Medicaid Services on Friday afternoon said it plans to raise its net reimbursement rates by 0.8 percent, which was significantly higher than what analysts and investors had expected. The consensus ahead of time had ranged from no change to a drop of 1 percent.

“We believe that downside risk for hospital stocks has been eliminated and that the only remaining factor that investors will focus on is the Jan. 1, 2014, implementation of the Affordable Care Act’s key components,” said Jefferies analyst Brian Tanquilut, as quoted in a Bloomberg story.

In their proposed rules, which would take effect Oct. 1, CMS officials also said they plan to cut by less than expected some payments related to patient coding improvements and tweaked its list of procedures exempt from readmission penalties. The agency is taking comments on its plans until late June and will make a final rule by Aug. 1. For an in-depth breakdown of the proposal's parts at HealthLeaders, click here.

CMS' plans led investors to push up stocks of HCA Holdings, Community Health Systems, LifePoint Hospitals and Vanguard Health Systems by at least 4 percent, adding more than $1.3 billion in market value to those companies. HCA, the largest company in Middle Tennessee, was up 5.5 percent at about 2:15 p.m., taking its market cap to almost $18 billion. Year to date, the local hospital chains' shares all are up 20 percent or more, doubling up the rise in the benchmark Standard & Poor's 500.