Sector Snap: Medicare Bill has broad impact

The bill, which passed by a vote of 355 to 59, still has to make it through the Senate with a veto-proof margin as President Bush has said he may use his veto power. But, the unexpectedly approved legislation reverses a planned 10.6 percent reimbursement cut for physicians and instead turns it into a 1.1 percent boost.

Shares of several hospital operators and insurers gained ground on the approved bill. Bethesda, Md.-based Coventry Health Care Inc. rose $1.11, or 3.8 percent, in morning trading. Tampa, Fla.-based WellCare Health Plans Inc. gained 81 cents, or 2.2 percent, to reach $37.89.

Meanwhile, Dallas-based Tenet Healthcare Corp. gained 10 cents to reach $5.57 while Franklin, Tenn.-based Community Health Systems Inc. rose 77 cents, or 2.3 percent, to reach $33.76.

The bill also requires prompt payment to pharmacies under the Medicare prescription drug program, delays competitive bid requirements for medical equipment companies, and proposes no cuts to home oxygen or wheelchair providers.

The Senate is reportedly working on a similar bill Medicare bill, said Cowen and Co. analyst Kemp Dolliver.

"Given passage of H.R. 6331 in the House yesterday with a veto-proof majority, the looming July 1st deadline, and the desire to get the legislation complete before the July 4th recess, we think it's highly likely the Senate will move quickly on this compromise Bill," he said, in a note to investors.

The current legislation would positively impact a wide range of health care companies, according to J.P. Morgan analyst Ipsita G. Smolinski.

San Antonio, Texas-based Kinetic Concepts Inc., which makes a range of wound care and therapy products and Elyria, Ohio-based Invacare Corp., which makes medical equipment including wheelchairs, would benefit from the delayed bid requirements. Also, the bill would prevent Clearwater, Fla.-based home oxygen equipment company Lincare Holdings Inc. form facing cuts.

Kinetic shares jumped $3.08, or 8 percent, to $41.60 while Invacare shares rose 62 cents, or 3.2 percent to $19.92 and Lincare's stock gained 58 cents or 2.2 percent to $27.13.