July 14, 2010 / 3:06 PM / in 8 years

UPDATE 1-LHC Group, Gentiva shares fall on SEC probe

* RBC cuts Almost Family, LHC Group to to “sector perform”

* Baird cuts Amedisys to “hold” (Adds analyst comments, updates share movement)

July 14 (Reuters) - Shares of home healthcare agencies LHC Group Inc (LHCG.O) and Gentiva Health Services Inc GTIV.O fell on Wednesday, a day after the companies said U.S. regulators have launched an investigation into their Medicare reimbursement practices.

Earlier this month, the U.S. Securities and Exchange Commission had launched similar investigations against rivals Amedisys Inc (AMED.O) and Almost Family (AFAM.O) seeking documents from them. [ID:nSGE6600JD]

“We do not believe that the market will be surprised by this news as Gentiva and LHC Group have been weak following their peers’ investigation announcements,” said Oppenheimer & Co analyst Michael Wiederhorn in a note to clients.

Wiederhorn said the issues under discussion are industry-wide and should lead to broad changes to reimbursement policy.

The involvement of Gentiva and LHC Group in the SEC investigation will help Amedisys and Almost Family as all the companies will have to share the burden now, said Wiederhorn.

“This also significantly reduces the likelihood of a doomsday scenario for any one company,” he added.

    RBC Capital Market downgraded Almost Family and LHC Group shares to “sector perform” from “outperform” and said increased government scrutiny could lead to downward pressure on volumes and reimbursement.

    Robert W Baird & Co analyst Whit Mayo downgraded Amedisys to “neutral” from “outperform,” saying the company will feel prolonged stress on operations from a slew of regulatory criticisms that may weigh heavily on the organization.

    The brokerage also lowered its price target on Gentiva and LHC Group stocks, citing government reimbursement risks and SEC investigation. [ID:nWNAB5404]

    Gentiva shares were down 5 percent at $21.15, while LHC Group shares were down 5 percent at $21.89 in Wednesday morning trade on Nasdaq. LHC shares touched a year-low of $20.50 in early trade.

    Almost Family shares fell 5 percent to $24.92 on Nasdaq, while Amedisys shares were down 2 percent at $26.17. (Reporting by Anand Basu in Bangalore; Editing by Gopakumar Warrier)

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