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There were stocks on the move Monday, especially stocks in the healthcare sector after an announcement by the Center for Medicare & Medicaid Services (CMS).

Numerous healthcare stocks collapsed on Monday after the CMS announced an 11.1% cut in reimbursement in FY12. CMS announced a final rule reducing Medicare skilled nursing facility (SNF) Prospective Payment System (PPS) payments in FY12 by $3.87 billion, or 11.1% lower than payments for FY 2011. The FY 2012 rates correct for an unintended spike in payment levels and better align Medicare payments with costs.

CMS found that the parity adjustment made in FY11, which was intended to ensure that the new RUG-IV system would not change overall spending levels from the prior year, instead resulted in a significant increase in Medicare expenditures during FY11. This increase in spending was primarily due to shifts in the utilization of therapy modes under the new classification system differing significantly from the projections on which the original parity adjustment was based. The FY12 recalibration of the case-mix indexes will result in a reduction to skilled nursing facility payments of $4.47 billion or 12.6%. However, this reduction would be partially offset by the FY12 update to Medicare payments to skilled nursing facilities.

The following stocks dropped on the news: Sun Healthcare Group (NASDAQ:SUNH) -52%; Skilled Healthcare Group (NYSE:SKH) -43%; Kindred Healthcare (NYSE:KND) -29%; Sabra Healthcare REIT (NASDAQ:SBRA) -23%; The Ensign Group (NASDAQ:ENSG) -22%; Gentiva Health Services (NASDAQ:GTIV) -15%.

PAETEC Holding (NASDAQ:PAET) jumped 21% after Windstream (NASDAQ:WIN) agreed to acquire the company. PAETEC shareholders will receive 0.460 shares of Windstream common stock for each PAETEC share owned under the terms of the agreement, which was approved by the boards of directors of both companies. Windstream expects to issue approximately 73 million shares of stock valued at approximately $891 million, based on the company's closing stock price on July 29, 2011. Windstream also will assume or refinance PAETEC's net debt of approximately $1.4 billion at the time of closing. PAETEC stockholders are expected to own approximately 13% of the combined company upon closing of the transaction.

The transaction is expected to be accretive to free cash flow per share, excluding merger and integration costs, in the first year following the closing. The transaction is expected to generate annual pre-tax operating cost synergies of approximately $100 million and capital expenditure savings of approximately $10 million, which are expected to be fully realized by the third year after closing. Windstream expects to incur merger and integration costs of approximately $50 million in operating expense in the first year following the closing and approximately $55 million in capital expenditures over the first three years following closing.

The Talbots (NYSE:TLB) rose 18% after Sycamore Partners disclosed a 9.33% stake in the company. The fund said that it believes that the stock is undervalued and is an attractive investment.

Sycamore expects to engage in discussions with management, the board, other stockholders of the Issuer and other relevant parties concerning the business, assets, capitalization, financial condition, operations, management, strategy and future plans of Talbots.

Source: 8 Stocks on the Move Monday