BOSTON -- Shares of companies that own Medicare-supported health care facilities fell on Tuesday after an analyst reduced ratings on two of the stocks, citing the potential for cuts to the federal health program.
Jefferies & Co. analyst Omotayo Okusanya cut his ratings of Ventas Inc. and Omega Healthcare Investors Inc. to "Hold" from "Buy."
In a note to clients, Okusanya said real estate investment trusts that own and sometimes operate health care facilities are vulnerable to possible Medicare cuts as Congress and the White House face a year-end deadline to craft a budget deal. Tax increases and automatic budget cuts take effect unless a deal is reached. Congress may address the issue during a lame-duck session after the Nov. 6 elections.
Approaching the Dec. 31 deadline, stocks of health care REITs "could come under pressure given concern that meaningful Medicare cuts could occur to resolve some issues," Okusanya said.
At highest risk, he said, are health care REITs that focus on hospitals providing long-term acute care and inpatient rehabilitation facilities. If Medicare cuts are approved, an increasing number of patients currently getting long-term care at those facilities would instead be treated in lower-cost nursing homes, Okusanya said.
He said that Ventas was among the health care REITs with "meaningful exposure" to long-term acute-care facilities and inpatient rehab centers.
Okusanya cited that risk in downgrading shares of Ventas, as well as concerns about the stock's current price relative to funds earned from the REIT's operations.
In downgrading Omega Healthcare, he primarily cited that stock's valuation. He also cited its 24 percent year-to-date gain through Monday.
Shares of Chicago-based Ventas fell $1.39, or about 2.2 percent, to $63.13 in midday trading, slightly more than the decline in the broader market. Shares of Omega Healthcare of Hunt Valley, Md., fell 45 cents, or 1.9 percent, to $23.56.
Shares of other health care REITs also were down. HCP Inc. fell 54 cents, or 1.2 percent, to $44.37; LTC Properties Inc. slipped 22 cents, or 0.7 percent, to $32.47; National Health Investors Inc. declined 59 cents, or 1.1 percent, to $52.98; Senior Housing Properties Trust fell 32 cents, or 1.5 percent, to $21.33; and Health Care REIT Inc. fell $1.04, or 1.7 percent, to $58.79.