In some respects it may seem like a good thing to have the government as a major customer for your healthcare services. After all, hospitals like HCA (NYSE: HCA) and Health Management Associates (NYSE: HMA) have to wrangle with the fact that they must treat all comers irrespective of ability to pay and bad debt expense is a major issue here. Unfortunately, Medicare and Medicaid are looming as major problem areas in the U.S. federal budget and reimbursement cutbacks threaten to limit Skilled Healthcare's (NYSE: SKH) ability to grow and prosper.
A Deceptively Good Third Quarter
Skilled Healthcare's third quarter results hint at what the company can do. Revenue was up a little less than 4% on flat occupancy. The company's core business, long term care, was down very slightly this quarter, while therapy services and hospice revenue were both up better than 20%. While Skilled Healthcare has stood out a bit from rivals like Kindred (NYSE: KND) and Sun Healthcare (Nasdaq: SUNH) on the basis of a higher mix of skilled services, the skilled mix was a little disappointing this quarter at less than 23%.
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http://seekingalpha.com/article/304388-can-the-government-afford-to-let-skilled-healthcare-prosper
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