Humana Investors Disappointed With Results Of Medicare Star Quality Ratings

Humana Inc HUM investors didn't hide their disappointment with the star quality ratings assigned by the Centers for Medicare and Medicaid Services. The company tried to limit the damage by increasing its Q3 EPS forecast  and expecting to deliver above the estimates for the full year.

However, investors took the negative sentiments seriously by dumping the stock. The company's membership in four-star plans or higher for the year 2018 dropped from about 78 percent, or 2.15 million members, to about 37 percent, or 1.17 million members.

Shares traded recently at $168.48, down 5 percent.

The company clarified that the drop in membership failed to take into some operational actions that it plans to takeover in the coming quarters to offset any possible unfavorable impact of published ratings on bonus revenues.

In a statement, the company said, "Humana believes that its Star ratings for the 2018 bonus year do not accurately reflect the company's actual performance under the applicable Star measures. Consequently, the company intends to file for reconsideration of certain of those ratings under the appropriate administrative process."

Additionally, Humana lifted its EPS forecast by about $0.30 a share to $3.07 and $3.15 on a GAPP and adjusted basis respectively. This is higher than the Street analysts' estimates of $2.88 a share.

Similarly, the company guided full year GAAP and adjusted EPS $8.80 and $9.50, respectively. Analysts are looking for an EPS of $9.24. The company attributed it to better-than-expected results in its Medicare Advantage business and its Healthcare Services.

The negative impact extended to other companies in the sector.

  • CIGNA Corp CI traded at $122.26, down $2.73, or 2.18 percent
  • Aetna Inc AET fell $2.14, or 1.91 percent, to $109.93
  • Anthem Inc ANTM shed $1.35, or 1.11 percent, to $120.55
  • Molina Healthcare MOH traded at $56.55, down $1.00, or 1.74 percent
  • UnitedHealth Group UNH shed $0.53, or 0.39 percent, to $134.22
Posted In: NewsGuidanceHealth CareMoversTrading IdeasGeneral
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