Capitol Health: Let's see

Why we’re holding the stock until the unknowns of regulatory change play out.

In December 2015, the federal government announced reforms to the incentives paid to MRI providers in Australia that will become effective on July 1 2016. Essentially, the change will “reduce the bulk billing incentive for Magnetic Resonance Imaging (MRI) services from 15 percent to 10 percent of the Medicare Benefits Schedule, aligning it with other diagnostic imaging services”. There are some small exceptions to this, but it appears that the changes will have a material adverse effect on the industry and on the ability of Capitol Health to grow its profits. In light of these proposed changes, CAJ’s prospects are far more uncertain, but this is well reflected in the current share price.

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