Standard & Poor's removed six nursing homes from CreditWatch and affirmed their respective ratings on Wednesday. The nursing homes were placed on CreditWatch with negative implications in August following the Centers for Medicare & Medicaid Services' announcement of an 11.1 percent Medicare payment cut to skilled nursing facilities and changes to therapy rules.
[See also: CMS to cut Medicare payments to skilled nursing facilities.]
"The cuts and the changes in rules were very significant from an absolute numbers standpoint," said David Peknay, an S&P analyst during a conference call Thursday about the nursing homes' removal from CreditWatch. "At the end of the day, we ultimately decided not to change any ratings."
Ratings for the six nursing homes are:
• Drumm Investors – B+
• Genoa Healthcare – B
• HCR Healthcare – B
• Kindred Healthcare – B+
• Skilled Healthcare Group – B
• Sun Healthcare Group – B
The decision to affirm the ratings of the six for-profit nursing homes was based on a review of the nursing homes' mitigation plans and the belief that another sizable cut is not likely any time soon, Peknay said.
"When there is a significant reimbursement cut, which this is at this time, it's going to take a little time for the affect of it to be recognized, to really become more apparent to everyone and also to be apparent to those that legislated this cut," Peknay said. "In our view, as this plays out, it's unlikely we'll see anything sizable for the foreseeable future. However, we do recognize the potential that there could be another cut on the smaller side relative to this one as a result of what happened with the Budget Control Act of 2011. The supercommittee having not completed its task…. could result, as it's supposed to, in mandated cuts that would take place in 2013."
All the nursing homes, except Genoa, have been given a stable outlook. Genoa's outlook is negative.
The reason for Genoa's negative outlook, explained Peknay, is that in addition to the Medicare cuts, the company, which has all its facilities in Florida, faces a state Medicaid cut. "Basically, a larger portion of the total revenue base for that company was affected by rate cuts," said Peknay. "Going forward, for that company, it will be a little more difficult for them, because of the magnitude of all of those cuts, to offset it as much as the other companies."
Follow HFN associate editor Stephanie Bouchard on Twitter @SBouchardHFN.