Companies that invest in Medicare-supported healthcare facilities saw their stock retreat Monday as investors and analysts digested the impact of an announcement Friday that the government plans to cut Medicare reimbursement rates by 11.1 percent.

Companies that buy, develop, lease, manage and help finance senior housing and skilled nursing care centers are organized as real estate investment trusts.

They typically have diversified portfolios that include skilled nursing centers that receive Medicare funds, but many also finance independent living facilities, assisted living centers and continuing care retirement communities.

Shares for companies in this sector fell an average of around 4 percent.
Some companies saw shares tumble as much as 12 percent.

Long Beach, Calif.-based HCP Inc. shares were down $2.11, or 5.7 percent, to $34.86 in late morning trading.

Omega Healthcare Investors Inc., of Hunt Valley, Md., fell $2.43, or 12 percent, to $17.21, near its 52-week low of $16.97, also reached Monday. The company has traded as high as $24.46 in the past year.
Ventas Inc., based in Chicago, saw shares fall $2.19, or 4 percent, to $51.90.

National Health Investors Inc. fell $3.07, or 6.8 percent, to $42.42, and Senior Housing Properties Trust fell 74 cents, or 3 percent, to $23.20.

One analyst said Monday's market reaction was due to the initial shock of the announced Medicare cuts, but he doesn't expect it to last long as investors realize the long-term impact isn't significant.

The 11.1 percent cut was a surprise to BMO Capital Markets analyst Richard Anderson, who said cuts around 5 percent were expected.

However, he said the real estate investment trusts investing in these care facilities typically have very good return on their investment through strong rental agreements. Many also are diversified enough that any impact on revenue and profitability should not be significant.

He said the impact of the headlines of the funding cut created concern among investors initially, but it isn't expected to be long-lived.

"Everything is fine but people are trying to absorb the information and see where there might be some pockets of issues but that's going to work itself out over the next few days," he said in an interview with The Associated Press.

Market indices were trending lower by about a half a percentage point by late morning after a disappointing manufacturing report stripped away the early gains that came from the announcement of a debt ceiling deal in Washington.

Other real estate investment trusts in the healthcare sector seeing impact from the Medicare reduction included Health Care REIT Inc., which slipped $3.45, or 6.5 percent, to $49.35; LTC Properties Inc., which fell $1.25, or 4.6 percent; and Brookdale Senior Living Inc. Co., which fell $1.03, or 4.8 percent, to $20.36.