By Nicky Redl
Dialysis care provider Fresenius Medical Care AG & Co.
(FME.XE, FMS) is leading the DAX decliners, after the U.S. federal
government proposed sharp reductions to Medicare payment rates,
starting in 2014.
The proposal foresees a 9.4% reduction in Medicare payments for
dialysis treatment. While a lowering of rates was expected,
analysts say the cuts are much wider than anticipated. J.P. Morgan
Cazenove called the proposal "worse than worst fears," adding that
according to the brokerage's initial estimates, the
earnings-per-share consensus forecast for 2014 could be reduced by
around 20%. J.P. Morgan said the cuts would mean a $23 a treatment
reduction, while the brokerage had expected a cut of around $3 a
treatment.
Significantly lower payments would hit the company hard, as
North America is by far Fresenius Medical Care's biggest dialysis
market. In 2012, Fresenius Medical Care's net revenue was 13.8
billion euros ($18 billion), of which EUR9.04 billion were
attributable to North America, including Canada and Mexico.
When reporting first-quarter earnings in April, the company said
"any significant decreases in Medicare reimbursement rates could
have material adverse effects on our provider business and, because
the demand for products is affected by Medicare reimbursement, on
our products business."
Fresenius Medical Care recently was trading down 9.9%, while
parent company Fresenius SE (FRE.XE FSNUY) fell 3.9%. In addition,
another dialysis care provider, DaVita Healthcare Partners Inc.
(DVA), saw its shares slide 5.3% to $114.75.
The proposed rates are open to public comment until August 30,
with a final ruling expected later this year. A Fresenius Medical
Care spokesman said they will examine the proposal and discuss
costs and prices. Observers expect that the Centers for Medicare
and Medicaid Services, or CMS, will consider the feedback from
dialysis providers prior to a final decision.
Write to nicky.redl@dowjones.com
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