Shares of Amedisys (AMED) are on the rise after the Centers for Medicare & Medicaid Services announced it is not finalizing the Home Health Groupings Model and “will take additional time to further engage with stakeholders to move towards a system that shifts the focus from volume of services to a more patient-centered model.” Following the announcement, Mizuho upgraded Amedisys and HealthSouth (HLS) to Buy. Additionally, both Almost Family (AFAM) and LHC Group (LHCG) are higher following the CMS’ update.

PAYMENT RATES, HHGM UPDATE: Last night, the Centers for Medicare & Medicaid Services issued a final rule that updates the 2018 Medicare payment rates and the wage index for home health agencies serving Medicare beneficiaries. The rule also finalizes proposals for the Home Health Value-Based Purchasing Model and the Home Health Quality Reporting Program. It added, “CMS is not finalizing the Home Health Groupings Model and will take additional time to further engage with stakeholders to move towards a system that shifts the focus from volume of services to a more patient-centered model. CMS will take the comments submitted on the proposed rule into further consideration regarding patients’ needs that strikes the right balance in putting patients first.” CMS projects that Medicare payments to HHAs in 2018 will be reduced by 0.4%, or $80M, based on the finalized policies.

BUY AMEDISYS, HEALTHSOUTH: Commenting on CMS’ decision to take the public comments about Home Health Groupings Model under further consideration, Mizuho analyst Sheryl Skolnick upgraded Amedisys and HealthSouth to Buy from Neutral. The analyst told investors that she is “even more convinced” that Home Health Groupings Model is not likely to be reintroduced for some time, clearing the way for 2018 and probably 2019 to be normal years. Skolnick expects Amedisys shares to have strong positive follow through and has increased confidence in 40% EBITDA growth year-over-year. Meanwhile, the analyst noted that she also has increased confidence in HealthSouth’s execution and free cash flow generation.