S&P may cut nursing homes

Standard & Poor's said it placed the ratings of six for-profit nursing home operators on CreditWatch with negative implications.

The companies are Drumm Investors LLC (rated B+), Genoa Healthcare Group LLC (B), HCR HealthCare LLC (B), Kindred Healthcare Inc. (B+), Skilled Healthcare Group Inc. (B) and Sun Healthcare Group Inc. (B).

S&P said the Centers for Medicare and Medicaid Services has decided to reduce rates 11.1% and adversely revise reimbursement guidelines for therapy services for fiscal year 2012. The decision to reduce rates is to "correct for an unintended spike in payment levels and better align Medicare payments with costs," according to Medicare. The new rates and guidelines become effective Oct. 1.

The consequent reimbursement changes could reduce EBITDA for the six nursing home companies from an estimated 30% to 60%, the agency said.

"In particular, we will focus on the effect of potential EBITDA declines on liquidity and each company's ability to meet or revise tight debt covenant requirements in resolving the CreditWatch listings," S&P analyst David Peknay said in a statement.

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