UPDATE: Bank of America Downgrades HealthSouth to Underperform

Bank of America has published a research report on HealthSouth (NYSE: HLS) and has downgraded the company from Neutral to Underperform.In the report, Bank of America writes, "We are downgrading HLS to Underperform from Neutral and reducing our PO to $17 (5.9x 2012E EBITDAR) from $25 as we believe that the stock is likely to underperform during a period of Medicare rate uncertainty that we expect to last until early 2013. HLS has the highest exposure to Medicare (71% of rev) in our coverage, and although Inpatient Rehab Facilities (IRFs) appear less exposed to cuts than some, the industry has relatively high Medicare margins and the tail riskfrom the President's proposal creates an overhang. Capital deployment could be an offset, but the company appears more willing to see its leverage drop further below its target than it does in putting money to work. We see more upside elsewhere and prefer hospitals/physician staffing names (top pick HCA)."Bank of America has lowered the price objective from 425 to $17 on HealthSouth, which is currently trading down $0.24 from Friday's $17.67 closing price.