Nursing home stocks rise on positive outlook of proposed Medicare rule

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News analysis: Seniors housing likely to recover sooner
News analysis: Seniors housing likely to recover sooner
Nursing home company shares rose on Friday following the release of a proposed government rule to cut Medicare funding in fiscal year 2009 by a net $60 million.

The increase reflected investors' relief that the reductions were not more severe. While the Centers for Medicare & Medicaid Services proposed slashing $770 million, or 3.3%, to nursing homes in Medicare payments, it said the loss would be offset by a market-basket increase. The 3.1% proposed increase would translate to $710 million in increased funding for facilities. These two measures would result in a total loss of $60 million.

Shares of Kindred Healthcare Inc. increased by 5.3%, to $25.30 in afternoon trading, while shares of Skilled Healthcare Group Inc. gained 2.4%, to $12.57. The stock price of Sun Healthcare Group Inc. rose by 10.8%, to $15.05.

Providers, meanwhile, decried the latest rule, estimating a loss in Medicare funding to nursing homes of $5 billion over five years.