Sun lowers earnings forecast for 2009

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Sun Healthcare Group Inc. has altered its earnings forecast downward for 2009 as a result of the estimated impact of changes to Medicare and Medicaid reimbursement.

One of the largest nursing home providers in the country, Sun has lowered its earnings projection to $1.07 to $1.10 per share from $1.15 to $1.19 per share. The company also has cut $43 million from its revenue guidance. The full-year revenue guidance is estimated to be $1.88 billion to $1.89 billion. It was originally $1.92 billion to $1.93 billion. Like many nursing homes across the country, Sun Healthcare is reacting to the 2.2% market-basket update, which has been negatively offset by a 3.3% reimbursement reduction to nursing homes. These two actions result in a Medicare reduction for nursing homes of $360 million in fiscal year 2010. The revised guidance is also a response to Medicaid cuts and Medicaid rate freezes in many states as they try to balance their budgets.

Sun said it is implementing infrastructure reductions that will reduce costs by more than $10 million per year. While the company has said none of the jobs lost will be at the nursing center level, the restructuring will affect overhead positions. The company expects to take a nearly $1 million charge in the third quarter related to severance costs in connection with the restructuring, Richard Matros, chairman and CEO of Sun said.