Home Health Index | April 2012

Stoneridge Partners | Home Health Index April 2012: The S&P 500 closes out the month up 3.1% and the first quarter up 12%…the best start to a year since 1998. Certainly nice results, but our Stoneridge Partners Home Health did even better. Bolstered by the strong market in general and perhaps a little clarity in future reimbursement, our Home Health Index gained 8.9% in March and is now up a whopping 44% for the first quarter. (Please note: Graphs and charts for the Stoneridge Partners | Home Health Index April 2012 are no longer available, but the data can still be seen in the recent issues of the Home Health Index.)

After nine straight months of decline, the HH Index has now been to the plus side four straight months….a very nice change.

Our HH Index now sits at 16.94. The high was set in September, 2008 at 41.75, so we have quite a ways to go….but, with four straight months to the upside, perhaps we’re on the way.

March’s increase was again led by Almost Family, up 13.7% and 57% YTD.

Amedisys came in a close second, up 12.5% in March.

March Results:

Almost Family, up 13.7%

Amedisys, up 12.5%

Gentiva, up 11.5%

LHC Group, up 8.9%

Home Health Index, up 11.8%

S&P 500 up 3.1%

We also note that Addus HealthCare’s stock closed out the month at $4.95, up a whopping 37.5% and now up 38.6% YTD.  They are a public company (NASDAQ:ADUS) but not in our HH Index.

Revenue Growth:  We totaled the revenue for all four HH Index public companies for the fourth quarter of 2011 and compared that to the third quarter.   According to their earnings reports, total revenue for all four companies in the 4th quarter, 2011 equaled $1.067B  compared to third quarter of $1.063B, which works out to the plus side a very modest $4M or 0.37%.

Revenue run rate based on the fourth quarter annualized follows, along with their market capitalization as of March 31, 2012 as published in Yahoo Finance :

Annual Run Rate (M) Market Cap (M)
Almost Family 357.3 243.6
Amedisys 1,483.0 433.8
Gentiva 1,796.8 270.1
LHC Group 630.8 348.7

As we mentioned in last month’s issue, Almost Family, in their earnings report, discussed their outlook for Medicare reimbursement in 2012.  Their computation took into account the market basket update, a downward adjustment of the case mix creep, the effect of reduced payments for high therapy episodes, the removal of two hypertension codes, re-calibrated case-mix weights, and a case-mix adjustment shifted to 2013.

Pretty complex, right? But the end result is an estimate that they feel will result in a 4.5% to 5.0% reduction in Medicare reimbursement in 2012.

MedPac issued their annual report, which again included two recommendations to Congress from last year’s report:

  • Create a home health copay.
  • Authorize faster case-mix changes to further reduce reimbursement

They report that freestanding home health agency margins will average 13.7%.  The report concludes “the high margins for home health care in 2011 reflect that payments substantially exceed costs and that reductions and administrative adjustments by CMS have not significantly reduced payments.”

Headline Dallas: and the story that continues to be part of every discussion regarding home health care: A Dallas physician, the office manager of his medical practice, and five owners of home health agencies were arrested on charges related to their alleged participation in a nearly $375 million health care fraud scheme involving fraudulent claims for home health service.

CMS also announced the suspension of an additional 78 home health agencies associated with the Dallas physician based on credible allegations of fraud against them.

If you would like a list of just who those 78 agencies are please let us know.

MERGER & ACQUISITION ACTIVITY

There has been very little in the way of public announcements regarding M&A. The market appears to be a little muddied as Buyers factor in future decreases in Medicare reimbursement, while Sellers want 2009 prices.

Susan Moyer, one of our partners, closed on another agency.  The Home Team of Kansas, primarily a Medicaid reimbursed agency, sold to a larger home care company.  Susan represented the seller.

We also note that TheraCare Home Health, a Texas based Medicare agency, sold to Cantex Senior Communities.

In the last two months Bayada Home Health Care acquired and transitioned 16 Nursefinders Home Care agencies, part of an AMD Health Care Company.

And, as reported last month, Arkansas based Aseracare Home Care & Hospice has now completely pulled out of Florida, closing down all of their locations.

LaFayette, LA:  An interesting development continues at LHC Group, as reported last month by Reuters – Private equity firm TPG Capital is considering making an offer for LHC Group, two people familiar with the matter said.

“Private equity makes more sense at this point,” said Kevin Ellich, senior research analyst at Piper Jaffray & Co. “You take the company private and deal with the regulatory and reimbursement headwinds in the next couple of years.”

One has to ask whether private equity also makes sense at other public home health companies as well.   Low multiples, increased regulations, Sarbanes-Oxley?  Get me out of here.

Visit Us: 

April 23-24 in Chicago for Decision Health’s M&A Home Health Conference. There will be two full days of presentations by the industry leaders. This is always a great conference and a must if you are even considering a sale of your agency.

UPDATE: March, 2012 Results

For the month of March, the S&P 500 was up 3.13% while the Home Health Index was up 11.8%.

Percentage change in stock prices for these public companies for the month of March and Year to Date (YTD) follows:

Company March YTD
Almost Family +13.7% +56.9%
Amedisys +12.5% +32.58%
Gentiva +11.5% +29.63%
LHC Group +8.9% +44.4%
Home Health Index +11.8% +43.9%
S&P 500 +3.1% +12.0%
Company Multiple of EBITDA
Almost Family 6.4
Amedisys 2.7
Gentiva 1.4

Multiples of EBITDA based upon the earnings results for the year 2011with the stock prices as of March 31, 2012.

 


Quote of the Month: “This year has been all about people coming away from the abyss that the world might end and now putting risk back on. We’re back to normalcy.”  Bob Doll, Money Manager, BlackRock,Inc.


Stoneridge Partners | Home Health Index April 2012: This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly. If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to  partners@stoneridgepartners.com.