Lifepoint Hospitals Inc. has a market cap of $1.68 billion; its shares were traded at around $30.47 with a P/E ratio of 11.5 and P/S ratio of 0.6. Lifepoint Hospitals Inc. had an annual average earning growth of 18.7% over the past 10 years. GuruFocus rated Lifepoint Hospitals Inc. the business predictability rank of 4.5-star.LPNT is in the portfolios of Richard Snow of Snow Capital Management, L.P., David Dreman of Dreman Value Management, John Hussman of Hussman Economtrics Advisors, Inc., Diamond Hill Capital of Diamond Hill Capital Management Inc, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Paul Tudor Jones of The Tudor Group, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:We generate revenues primarily through hospital services offered at our facilities. We generated $790.6 million and $735.3 million during the three months ended June 30, 2010 and 2009, respectively, and $1,576.8 million and $1,470.8 million during the six months ended June 30, 2010 and 2009, respectively, in revenues from continuing operations. For the three months ended June 30, 2010 and 2009, we derived 40.3% and 39.8%, respectively, and 40.6% and 40.5% for the six months ended June 30, 2010 and 2009, respectively, of our revenues collectively from the Medicare and Medicaid programs. Payments made to our hospitals pursuant to the Medicare and Medicaid programs for services rendered rarely exceed our costs for such services. As a result, we rely largely on payments made by private or commercial payors, together with certain limited services provided to Medicare recipients, to generate an operating profit.
On June 2, 2010, the Centers for Medicare and Medicaid Services (“CMS”) published a notice regarding the final Medicare inpatient prospective payment system (“IPPS”) payment rates for federal fiscal year (“FFY”) 2010. The notice implemented changes that were made to the Medicare program s reimbursement for hospital inpatient services in FFY 2010 by the Acts. Among other things, the notice decreased, for discharges occurring on or after April 1, 2010, the IPPS market basket update by 0.25%, from 2.10% to 1.85% for hospitals that successfully report the quality measures included in the Reporting Hospital Quality Data for Annual Payment Update (“RHQDAPU”) program and from 0.10% to -0.15% for hospitals that do not. The notice also decreased the IPPS outlier fixed-loss cost threshold for discharges occurring on or after April 1, 2010, from $23,140 to $23,135.
On July 30, 2010, CMS issued its IPPS final rule for FFY 2011, which begins on October 1, 2010. Among other things, the final rule provides a market basket update of 2.6% but reduces the update by 0.25% to 2.35% as required by the Acts. The market basket update will be reduced by an additional 2.0% to 0.35% for hospitals that do not successfully report the 2011 quality measures included in the RHQDAPU program. The final rule also decreases the IPPS outlier fixed-loss cost threshold to $23,075 and adds 10 new RHQDAPU quality measures which our hospitals would be required to report in order to receive the full market basket increase in FFY 2012. In addition to the market basket, outlier fixed-loss cost threshold, and RHQDAPU program updates, the final rule also, as required by Transitional Medical Assistance, Abstinence Education, and Qualifying Individuals Programs Extension Act of 2007 (the “TMA Act”), reduces IPPS payment rates in FFY 2011 by an additional 2.9% to account for the increase in spending that CMS believes is solely the result of changes in hospital coding and discharge classification practices that occurred in connection with the implementation of the Medicare severity diagnosis-related group (“MS-DRG”) system. Although CMS did not specify any additional reductions for FFY 2012, it indicated that the 2.9% reduction in FFY 2011 would only recover half of the increase in spending that is required to be recouped under the TMA Act and that it would need to make additional IPPS payment reductions in the future. Overall, CMS anticipates that the payment changes in the final IPPS rule will decrease Medicare operating payments to acute care hospitals by 0.4% or $440 million in FFY 2011.
On April 30, 2010, CMS published its Medicare inpatient psychiatric facility (“IPF”) prospective payment system update for rate year (“RY”) 2011, which began on July 1, 2010. Among other things, the notice included a market basket increase of 2.4%, which will be reduced by 0.25% as required by the Acts. The notice also reduced the standardized federal per diem base rate by 2.66% to account for changes in IPF practices, such as coding for comorbid medical conditions that do not reflect actual increases in patient acuity and set the outlier fixed dollar loss threshold amount at $6,372. CMS estimates that the updates contained in the notice will increase payments to IPFs by $95.0 million from RY 2010 to RY 2011.
On July 2, 2010 CMS issued a notice regarding the final Medicare hospital outpatient prospective payment system (“OPPS”) rates for calendar year (“CY”) 2010 to implement changes in Medicare s reimbursement policies for hospital outpatient services that were required by the Acts and its proposed hospital OPPS rule for CY 2011. Effective as of January 1, 2010, for CY 2010, the notice reduced the hospital operating market basket increase factor from 2.1% to 1.85% for hospitals that satisfy the requirements of the Hospital Outpatient Quality Data Reporting Program (“HOPQDRP”) and from 0.1% to -0.15% for hospitals that do not. With respect to CY 2011 rates, the proposed OPPS rule would provide a market basket increase of 2.15% for hospitals that satisfy the HOPQDRP requirements (after incorporating the adjustments required by the Acts) and 0.15% for hospitals that do not. The proposed rule would also waive the Medicare deductibles and copayments for certain preventative services that are reimbursed under OPPS, modify the Medicare program s supervision requirements for certain outpatient therapeutic services and add six additional quality measures to the list of items that a hospital must report to the HOPQDRP in order to receive the full market basket update in CY 2012. CMS anticipates that the OPPS proposed rule for CY 2011 will increase expenditures under OPPS by $3.9 billion from CY 2010 to CY 2011.
On July 23, 2010, CMS published the Medicare home health prospective payment system (“HH-PPS”) proposed rule for CY 2011. Among other things, the proposed rule, after taking into account the 1% reduction required by the Acts, would provide a 1.4% market basket update to the HH-PPS for home health agencies that submit the quality data required by CMS and a -0.6% market basket update for home health agencies that do not. The proposed rule also includes a 3.79% reduction to the national standardized 60-day episode payment rates and non-routine medical supply (“NRS”) factor for both CY 2011 and CY 2012 to offset the additional growth that has occurred in the aggregate home health case mix and that is not associated with any underlying changes in the medical conditions of home health patients. The proposed rule also includes a 3.00% rural add-on to the national standardized 60-day episode rate, national per-visit rates, low utilization payment adjustment and add-on payment, and NRS conversion factor when home health services are provided in rural areas. When combined with other changes that are being made to existing HH-PPS outlier policy by the Acts, CMS estimates that the HH-PPS proposed rule for CY 2011 will result in a 4.75% or $900 million decrease in Medicare payments to home health agencies in CY 2011.
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