If you thought you were having a tough day, try being a shareholder of Capitol Health Ltd (ASX: CAJ). The company's shares have fallen more than 27% to 41.2 cents, while they're down nearly 63% since March this year.
Capitol Health is Victoria's leading medical diagnostic imaging facilities operator while it is also expanding its operations into other states.
Today's plunge appears to be related to an announcement made after the market's close on Tuesday in which Capitol Health downgraded its revenue guidance for the 2016 financial year.
It said that the Federal Government's recently announced Medicare Benefits Schedule (MBS) review has led to changes in referral patterns in some areas, prompting slower-than-anticipated growth so far in FY16.
Gross revenues are 4% to 6% below expectations with existing Victorian operations experiencing even greater revenue weakness than that of recent acquisitions, including those in New South Wales.
Indeed, the MBS review was launched earlier this year by the Minister of Health and Sport, Susan Ley, and will aim to cut unnecessary costs for the Australian government. This will likely include a crackdown on doctors ordering too many scans and x-rays which can cost hundreds of millions of dollars per year.
Primary Health Care Limited (ASX: PRY) is another pathology and diagnostic imaging provider that is vulnerable to the review, as is Sonic Healthcare Limited (ASX: SHL). In saying that, Sonic Healthcare is less reliant on the domestic market with more than half of its revenues being generated overseas in the 2015 financial year.
While a further update will be provided at the group's Annual General Meeting next month, the company said it is too early to tell whether the trend will continue for the remainder of the financial year.
