Bloomberg News

Radiation Therapy Bonds Plunge After Medicare Proposes Rate Cut

July 10, 2012

Bonds of Radiation Therapy Services Inc. fell to a record low after the government proposed cutting payment rates to cancer clinics in 2013.

Radiation Therapy’s $360 million of 9.875 percent notes due April 2017 dropped 5.5 cents to 59.5 cents on the dollar at 1:52 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The Fort Myers, Florida-based company’s bonds, which traded at 78.5 cents last week, now yield 24.8 percent.

The Centers for Medicare & Medicaid Services, known as CMS, announced plans July 6 that would update payment policies and rates for services to Medicare beneficiaries in hospital outpatient departments and ambulatory surgical centers beginning Jan. 1. Radiation Therapy, which had $644.7 million in revenue (RTSX:US) last year, would see sales fall by about $44 million if the cuts are enacted, Bryan Carey, the company’s chief financial officer, said on a conference call on July 9 posted on its website.

“Much to our surprise, the proposed fee schedule included some drastic cuts to radiation oncology,” Carey said. The overall reduction would be about 20 percent for Radiation Therapy, he said.

The Medicare plans are often revised after fee reductions are announced, according to John Bluemke, who follows the company for Standard & Poor’s.

“The preliminary proposal can be one thing, and the final rule that will come out in November can be quite another,” Bluemke said in a telephone interview.

Radiation Therapy is owned by Vestar Capital Partners, a New York-based private-equity firm, according to a March regulatory filing.

To contact the reporter on this story: Zeke Faux in New York at

To contact the editor responsible for this story: Alan Goldstein at

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