What’s going on at Lincare?

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Wednesday, March 31, 2004

CLEARWATER, Fla. - Lincare officials refuse to comment on reports they’re asking employees for increased productivity and cutting back on pay and benefits as a way to help offset upcoming cuts in Medicare reimbursement.

But if that is the case, it wouldn’t surprise industry watchers.

“I think it’s another example of why Lincare is so well run,” said one HME insider. “They are not going to wait until Dec. 1, 2004 and then say, ‘Look how much cost we need to take out.’ They are doing the right thing.”

For years, Lincare’s double digit revenue and earnings growth endeared the company to Wall Street. But in November following passage of the Medicare Modernization Act, the company’s stock fell sharply and has yet to recover.

Apria’s stock also plummeted but has since rebounded. That Lincare’s stock still resides in the doldrums is not surprising. The company does more Medicare business than Apria, and Lincare derives a quarter to a third of its $1 billion in revenue from respiratory medications. MMA cuts for respiratory meds, scheduled to take effect in 2005, could be has high as 60%. Cuts of that magnitude would “kill the goose that laid the golden egg,” said one industry watcher, noting the product’s high profit margin.

“A lot of people are saying that the numbers that Lincare has been hitting in the past may be more difficult to achieve because of the growth environment,” said healthcare consultant Schuyler Hoss.

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