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01.01.70

Mediscare: bitter pill for device makers: Shares in medical device makers and hospitals tanked on Friday after news that a Florida Medicare administrator would audit patients medical records before paying for certain costly cardiovascular and orthopaedic procedures. The report seemed to dovetail with a statement from the Centers for Medicare and Medicaid Services that similar audits would be implemented in 11 states representing half of the U.S. population. Stocks mostly bounced back on Monday when it appeared the two announcements might be unrelated. Device manufacturers should tremble though when the government threatens to tighten the leash. Companies such as Medtronic, Boston Scientific, St. Jude and Zimmer are all heavily dependent on the named procedures and on public reimbursement. At Medtronic, for example, half of U.S. revenues come from the government. Publicly traded hospitals may be safer: a Credit Suisse analysis finds that the procedures amount to about 1% of their revenues.

Source: Proactive Investors UK