Stock exchange traded funds fell Monday following a disappointing manufacturing report, but healthcare ETFs were the worst sector performers after the Centers for Medicare and Medicaid Services announced an 11.1% Medicare reimbursement reduction to skilled nursing facility rates.

“It will certainly have a devastating impact on the industry, and we expect the stocks to see significant selling pressure,” said Oppenheimer analyst Michael Wiederhorn in an Associated Press report.

Skilled nursing facility stocks such as Sun Healthcare Group (NasdaqGS: SUNH), Kindred Healthcare (NYSE: KND) and Skilled Healthcare Group (NYSE: SKH) traded sharply lower.

Health Care Select Sector SPDR Fund (NYSEArca: XLV), Vanguard Health Care ETF (NYSEArca: VHT) and iShares Dow Jones U.S. Health Care (NYSEArca: IYH) all slipped more than 2%.

In the broad stock indexes, iShares S&P 500 (NYSEArca: IVV) fell 1% in midday action Monday. U.S. equities opened higher as a deal reached over the weekend on the debt ceiling boosted sentiment briefly. However, the rally crumbled and the weak manufacturing report raised concerns over the health of the economy. [Poor Manufacturing Report Knocks Stock ETFs]

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