November 1st Update

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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.

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Quote of the Month:

Although we are still assessing the impact of the partial government shutdown on completion of the calendar year 2014 Medicare fee for service regulations, we intend to issue the final rules on or before November 27, 2013.”   The Centers for Medicare & Medicaid Services (CMS)

The Home Health Index Falls Over 6%!

After hitting a two year high last month, our Stoneridge Partners Home Health Index slumped 6.4% in October.  In comparison the general market went on a tear with the S&P 500 up 4.5%.

All stocks in our index were down with LHC Group hit the worst….down over 12%.  Even Addus HealthCare, which had been phenomenal, was down 10.7%.

We are still up 6.5% for the year, however that pales in comparison to the general market with the S&P 500 up over 23% YTD.

Here are the results:

Company Price 10/31/13 % Change  Month % Change  YTD Price 10/31/12 % Change  One Year
Almost Family 19.23 -1.03% -5.08% 20.73 -7.24%
Amedisys 16.28 -5.40% 43.94% 11.04 47.46%
Gentiva 11.42 -5.15% 13.63% 9.37 21.88%
LHC Group 20.6 -12.19% -5.46% 17.52 17.58%
Home Health Index 16.88 -6.39% 6.50% 14.67 15.12%
S&P 500 1756.54 4.46% 23.16% 1412.16 24.39%
Addus 25.85 -10.77% 261.54% 5.43 376.06%

It is interesting to look back one year.  All stocks, with the exception of Almost Family, are to the plus side with Amedisys up over 47%.

For the last few months we have included Addus in our monthly tracking; however, because they have very little Medicare revenue, they are not included in our index.  Addus is a home care company to watch closely, and, for the past year, they have had outstanding stock market performance.   One year ago their stock sold for $5.35, today it sits at 25.85, up 376%.  Who saw that coming?

The high for our HH Index was set in September, 2008 at 41.75.  It now sits at 16.88, about where it was in March, 2012.

 GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through October, 2013.

(Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride)

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Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index going back to November, 2002.

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Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through October, 2013.

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MERGER & ACQUISITION ACTIVITY – Last month the big news was the Gentiva-Harden transaction.  The previous month it was the large investment KK&R made in Amedisys. This month it is the definitive agreements that call for Kindred Healthcare’s acquisition of Senior Home Care, and Almost Family’s acquisition of SunCrest HealthCare.

Is private equity headed for the hills?

Kindred Healthcare signs Definitive Agreement to Acquire Senior Home Care – For a purchase price of $95 million (66% of revenue).  Senior Homecare generates approximately $143 million in revenue and operates 47 locations.

We have been following the Senior Homecare story since the 90s when it was started by the Piazza family.  The original license was tied to ALFs exclusively.  They held on through the difficult IPS period, and then expanded across Florida.

To read the entire press release go to the following link: Kindred-Senior

Almost Family signs Definitive Agreement to Acquire SunCrest HealthCare –  For a purchase price of $75.5 million.  SunCrest revenues for 2012 were approximately $150 million (50% of revenue).  This appears to be an ideal transaction for Almost Family, bringing in new geographic clusters in Tennessee, Georgia and Mississippi, and significantly expanding their current clusters in Florida, the Northeast and the Midwest.

To read the entire press release go to the following link:  Almost Family-Suncrest

Jordan Health Services (“Jordan”), which provides home health services to patients throughout the state of Texas, and Healthcare Innovations Private Services (“HCIPS”), the largest provider of Medicaid home health services in the state of Oklahoma, announced that they have combined their organizations.  Together, the companies each day will fulfill the personal care, case management, skilled nursing, pediatric, and hospice needs of approximately 22,000 patients in Texas and Oklahoma through 61 locations across both states.

Stoneridge Partners Transactions:

  • Horizon Home Care, a New Mexico Medicare home nursing agency, sold to a local health care group.  Don Cummins & Rhonda Gronberg teamed up to provide sell-side advisory services.
  • Innovative Nurses & Sitters, a Houston private duty agency, sold to a national healthcare provider.  Kevin Taggart, one of our partners, provided sell-side advisory services.
  • A nine (9) location multi-state, Medicare agency sold to a strategic buyer. Cory Mertz, one of our partners, provided sell-side advisory services.
  • Mercer Street, Trenton, New Jersey, announced that they have finalized their sale of Friends Home Health, a Medicare agency, to Ocean Healthcare, a network of family-owned and operated healthcare centers headquartered in Lakewood, New Jersey.   Cory Mertz, one of our partners, provided sell-side advisory services.

We have completed ten transactions in the last ten weeks!  To see the complete list go to our blog at the following location:  http://stoneridgepartners.com/blog

By the Numbers:  Earning reports for the third quarter are pouring in.  We will have a complete summary in next month’s issue.

Selling Price as a Percent of Revenue:  For many years the selling price of good Medicare agencies was generalized at about 100% of revenue.  Clearly that is no longer the case.  These public companies (with the exception of Addus) are now selling for considerably less.  The following percentages are based on Enterprise Value (EV), with data provided by Capital IQ.

Company EV as % of Revenue
Almost Family 43%
Amedisys 42%
Gentiva 65%
LHC Group 60%
Addus 93%

Multiples of EBITDA which are based on Enterprise Value (EV).  Data provided by Capital IQ.

Company Multiple of EV/EBITDA
Almost Family 5.79
Amedisys 7.82
Gentiva 6.41
LHC Group 6.26
Addus 12.30

NAHC’S ANNUAL CONFERENCE & EXPO:  For the 12th straight year we attended NAHC.

We gave two presentations, one of which was a panel discussion with Shelly Berman of Simione Consulting, Peter Sosnow of SeniorBridge/Humana, Kevin Taggart, one of our partners and Brian Bruenderman, formerly with Almost Family.  Brian recently joined our team here at Stoneridge.  It was a lively discussion about the seismic changes taking place in Medicare, Medicaid Waiver and private pay.

We make note of the absence of many of the key executives from the public companies at NAHC.  If you are looking for them you might check out Home Care 100, February 1 – 4 in Florida at the Boca Raton Resort. http://www.homecare100.com

Do you know of any acquisitions that have taken place?  We would be interested in your comments.  At the top of this column is a “Contact Tab” with a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog

From Don Cummins, Publisher of “The Home Health Index”  don@stoneridgepartners.com

Previous editions of this monthly newsletter can be searched for at the bottom of this page.

Cartoon of the Month, from The New Yorker

Rescue

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group