Ahead of the Bell: Lincare Holdings

The House of Representatives passed the Medicare Improvements for Patients and Providers Act of 2008 by a wide margin on Wednesday, and the Senate is expected to take up the bill Thursday. If passed, the bill will raise reimbursement rates for doctors, and in particular, would help Lincare because it does not include cuts to home oxygen treatment rates.

Wachovia analyst William Bonello upgraded the stock to "Outperform" from "Market Perform" Thursday, and said that if the bill becomes law, it could raise Lincare's pretax profit by $50 million or $60 million, to a range of $390 million to $400 million.

Bonello said the bill would also delay a reduction in reimbursement rates for DuoNeb, a drug used in the treatment of chronic obstructive pulmonary disorder. The bill also cuts Medicare's budget for durable medical equipment, and it delays the implementation of competitive bidding for that equipment.

The cuts to DuoNeb reimbursement are now scheduled to go into effect November 1, but Bonello said they could be delayed further than that.

Citing Lincare's estimates, SunTrust Robinson Humphrey analyst David MacDonald said the cuts in reimbursement for DuoNeb and Xopenex would cost the company $15.4 million in revenue per quarter.

Lincare did not immediately return calls seeking comment.