Bloomberg News

Amedisys Drops Most in 5 Months as Humana Pact Cuts Revenue

October 15, 2012

Amedisys Inc. (AMED:US), the biggest U.S. home-nursing provider, fell the most in five months after saying a contract with Humana Inc. (HUM:US) will provide half as much revenue as a previous deal.

Amedisys tumbled 9.4 percent to $12.08 at the close in New York, for its biggest one-day decline since May 9. The agreement to provide home health-care services to Humana will generate about half the $65 million to $70 million of the prior contract and affect earnings starting with the current quarter, Baton Rouge, Louisiana-based Amedisys said today in a statement.

While the companies had said they were renegotiating the contract, the terms are worse than expected, said Brian Tanquilut, a Jefferies & Co. analyst in Los Angeles. The old contract represented about 5 percent of Amedisys’s annual sales, he said. Amedisys also said it may not serve as many markets for Humana under the new agreement.

“We anticipated Humana reimbursement to fall by about 33 percent and had thought that our projection was one of the more bearish ones,” Tanquilut wrote in a note to clients. “Our analysis suggests that Amedisys’ contract with Humana is barely profitable (AMED:US) since Amedisys has little wiggle room in its direct costs,” such as nurses’ wages and mileage reimbursements.

Amedisys, which also provides hospice services, is the biggest home-care company by market value. Humana, the second- biggest seller of insurance for the government’s Medicare program, is based in Louisville, Kentucky.

To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


Cash Is for Losers
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • AMED
    (Amedisys Inc)
    • $25.34 USD
    • -0.27
    • -1.05%
  • HUM
    (Humana Inc)
    • $136.42 USD
    • 0.22
    • 0.16%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus