Northern, WI 2/24/12 (StreetBeat) -- Shares of Kindred Healthcare Inc. (NYSE: KND) tumbled Friday after the health care services provider reported a fourth-quarter loss, reduced its 2012 earnings forecast and said Medicare funding cuts had hurt some of its businesses.THE SPARK: Kindred said Medicare reimbursement cuts that started Oct. 1 hurt its nursing center and rehabilitation therapy results. Medicare is the federal program that provides health coverage for the elderly and disabled.
The Louisville, Ky., company said Thursday after the market closed that it lost $71.8 million, or $1.40 per share, in the three months that ended Dec. 31. That compares with earnings of $20.4 million, or 52 cents per share, in the final quarter of 2010.
Adjusted earnings, which exclude certain items, were 27 cents per share.
Revenue climbed 34 percent to $1.52 billion.
Analysts surveyed by FactSet expected, on average, earnings of 36 cents per share on $1.58 billion in revenue.
The company also said it was suspending its practice of offering quarterly earnings guidance due to "the significant volatility in its earnings in connection with recent changes in Medicare reimbursements."
Kindred now expects 2012 income from continuing operations to range between $1.35 and $1.55 per share, down from previous guidance of $1.65 to $1.85.
Analysts, on average, had expected earnings of $1.65 per share.
THE BIG PICTURE: Kindred operates long-term acute care hospitals, inpatient
rehabilitation hospitals, nursing and rehabilitation centers and hospice and home care businesses. It also runs RehabCare, a contract rehabilitation services business it bought last June for $900 million.
THE ANALYSIS: Kindred and other nursing home operators had hinted in recent weeks that the changes to Medicare reimbursement were proving "very difficult," Susquehanna analyst A.J. Rice said in a Friday research note.
"We believe many investors had begun to anticipate that there might be a downward revision in the company's earnings outlook," Rice wrote.
SHARE ACTION: Down nearly 16 percent, or $1.99, to $10.50 in late-morning trading, while broader trading indexes were nearly flat.
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