CMS goes after Oxygen

After quite a long time of silence, CMS weighed in with a massive 30% cut in oxygen reimbursement in 9 competitive bid markets. CMS has been trying for a couple of years to have providers compete for business based on price. After a court setback, CMS is back. The plan expands to cover 91 more MSAs in 2013 and the rest of the country in 2016. The cut was far worse than expected and again shows that oxygen services are over priced. The largest public company in oxygen, Lincare has argued, and probably correctly, that a big cut like this will allow it to gain significant market share. No argument there. Yet earnings are going to be under pressure and after a double in the stock it is quite vulnerable.

Time to be very cautious in the markets. The world’s debt problems are being recognized and the result will be a no growth world economy. The expectations of a 3%+ recovery will be an illusion. World governments are cutting spending and China has a real problem in a real estate bubble that dwarfs the U.S. bubble. Time will tell, but it could get really nasty and July is historically a poor month for investors.