Sun Healthcare Group, Inc. (SUNH)

[surf1944]

8:39AM Sun Healthcare issues new guidance (previously withdrawn) following assessment of CMS rule imapct; EPS below consensus; rev consensus near high end of new range (SUNH) 3.08 : Sun Healthcare announced the withdrawal of its full-year 2011 guidance on August 1, 2011 in order to have time to evaluate the impact of the final rule for skilled nursing facilities that was published by the Centers for Medicare and Medicaid Services on July 29, 2011. The CMS final rule includes a parity adjustment reducing Medicare rates by 11.1 percent, changes to group therapy reimbursement, and the introduction of new change-of-therapy provisions as patients move through their post-acute stay. Co issues guidance for FY11 (Dec), sees EPS of $0.83-0.94 vs. $1.05 Capital IQ Consensus Estimate ($1.30-1.45 prev.); sees FY11 (Dec) revs of $1.925-1.945 bln vs. $1.94 bln Capital IQ Consensus Estimate ($1.95-1.995 bln prev.). The co has commenced a broad-based mitigation initiative, which includes infrastructure cost reductions that will reduce the net impact of the final rule during the fourth quarter and is expected to continue to ramp up into 2012. "Our analysis demonstrates that the rate reductions imposed by the CMS final rule have far exceeded the stated goal of parity with prior Medicare rates, and we remain concerned that these reductions may have serious consequences for our entire industry. That said, we are moving expeditiously to mitigate the impact of the rule on our operations while retaining our focus on our primary mission of providing quality care."