An analyst for Oppenheimer and Co. downgraded UnitedHealth Group Inc. today, saying the largest U.S. health insurer with operations in Hartford faces a smaller profit in 2010 because it expects unrealistic Medicare reimbursement rates.
Carl McDonald said the Minnetonka, Minn.-based company assumes Medicare costs will fall next year because physician costs will come down. But McDonald said that is very unlikely, and UnitedHealth will probably face a third consecutive year of smaller profits.
He lowered his rating on the stock to “underperform” from “perform,” and cut his share price target to $24 from $32.
McDonald said UnitedHealth projects a 21 percent drop in physician costs and expects the Centers for Medicare and Medicaid Services to adjust its rates accordingly. But the 2010 Medicare season starts Oct. 1, and there is probably not enough time before then for the Centers to lower their rates.
The company’s competitors think Medicare rates will fall about 5 percent next year, with costs going up about 5 percent, McDonald said. He cut his 2010 profit estimate for UnitedHealth to $3 per share from $3.30 per share.
At 11 a.m., shares of UnitedHealth fell $2.29, or 8.9 percent, to $23.44. (AP)
