Shares of Irvine health services company Sun Healthcare Group Inc. were upgraded Friday by a Friedman Billings Ramsey analyst who said that Medicare is making smaller-than-expected reimbursement cuts to nursing homes.
Investors responded Sun’s shares were up 11% at the close of New York trading with a market value of $645 million.
Analyst James Kumpel upgraded Sun to “outperform” from “market perform.”
In a report, Kumpel said that while the Centers for Medicare and Medicaid Services is lowering reimbursement to nursing home operators, it also made a surprise move of raising its estimate for the cost of goods and services.
Those moves roughly cancel each other out, Kumpel said. He indicated that he didn’t expect Medicare to raise its cost estimates until 2009.
Kumpel’s report also indicated that payments to nursing homes could remain flat or even increase up to 2%, adding the news would lift nursing home stocks.
Sun operates some 190 nursing homes. Its other businesses include assisted and independent living centers, short-term rehabilitation centers, hospices, as well as a medical staffing arm.
