Policy review lifts F&P Healthcare

Nick Stride

Friday 30th April 2004

Shares in Fisher & Paykel Healthcare jumped 30c on Tuesday after an analyst released a report highlighting a promising move in the US.

Goldman Sachs JB Were's Dennison Hambling reported the US government's Centers for Medicare and Medicaid Services (CMS) was reviewing its national coverage of obstructive sleep apnea (OSA) requiring continuous positive airway pressure (CPAP) therapy.

Healthcare is one of the main suppliers of CPAP equipment in the US market and stands to benefit significantly from any change in policy.

Policy requires polysomnography, or sleep tests, to be performed in a facility-based sleep-study laboratory. CMS is considering allowing diagnoses to be conducted in patients' homes using portable devices.

This would reduce waiting times, which could potentially lift industry growth rates by 400 basis points (4%) for the next three years, Mr Hambling said.

"If Healthcare were to benefit according to its current market share, this would lift its valuation by 42c."

CMS is an agency of the Department of Health and administers the US' federal health programmes.

According to its website nearly 40 million people are covered by Medicare and 33 million are eligible for Medicaid. Including with the State Children's Health Insurance Program the agency spent $US 429 billion in 2000.

It is expected to complete its review by October 8. The review was called for by a member of the advisory board of Resmed, a competing supplier of CPAP equipment. As Resmed would benefit from a policy change, that raises the possibility the agency might regard the need for change with some scepticism.

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