September 1 Update

The Stoneridge Partners Home Health Index (HH Index) is updated monthly and measures the performance of these three publicly traded home health companies, all listed on the NASDAQ:

  • Almost Family (AFAM)
  • LHC Group (LHCG)
  • Amedisys (AMED)

Quote of the Month:

“Changes to how the government pays for home healthcare for Medicare patients stands to benefit Amedisys, as weaker performers are driven out.  There is going to be a tremendous consolidation in this industry if these things come close to fruition.”  Paul Kuserow, President, Amedisys

The Stoneridge Partners Home Health Index Takes a Step Back!

As we all know, August was a punishing month for the the stock market in general with the S&P 500 dropping over 6%, now down over 4% YTD, so the small drop of 1.1% in our HH Index is rather easy to take.

What is amazing is that three home care stocks, LHC Group, Addus, and Almost Family were up for the month,  with only Amedisys being down.

This follows the record high set by our HH Index at the end of July at 42.55.  Going back one year the S&P 500 is now down 1.6% while our HH Index is up 70%.  Not too bad!

See It to Believe It!

This graph compares the percentage change of the HH Index to the percentage change in the S&P 500 Index for over 13 years, going back to January, 2002. It has been quite a ride.

This 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  August, 2015.

This graph compares our HH Index to the price of Addus stock (non-Medicare).

Here are the results of the stock prices for the past two years:

Company 8/31/15 1 mos change YTD change 1 yr change 2 yr change
Almost Family 44.30 +1.2% +53.0% +58.3% +134.8%
Amedisys 38.64 -11.4% +31.6% +84.7% +137.2%
LHC Group 43.30 +7.5% +38.9% +68.21% +91.3%
HH Index** 42.08 -1.1% +41.1% +69.1% +118.5%
S&P 500 1972 -6.3% -4.2% -1.6% +20.7%
Addus 28.74 +5.9% +18.4% +31.2% +35.7

Although we track the performance of Addus, they  are not included in our HH Index because very little of their revenue comes from Medicare.

Enterprise Value (EV)

EV (in M)) 9/1/15 8/1/15 7/1/15 6/1/15
Almost Family 454 458 416 403
Amedisys 1,390 NA 1,420 1,170
LHC Group 817 775 742 666
HH Index Total 2,661   2,578 2,239
Addus 329 285 311 302

Enterprise Value (EV), aka Selling Price,  as a Percent of Revenue. Note that only two years ago these stocks were selling for 50% of EV.

Company 9/1/15 8/1/15 9/1/14 9/1/13
Almost Family 90% 91% 72% 42%
Amedisys 115% NA 70% 42%
LHC Group 108% 104% 77% 66%
HH Index Average 104% 73% 50%
Addus 83% 88% 77% 80%

Multiples of EV/EBITDA.

Think of this as selling price as a multiple of EBITDA.

Company 9/1/15 8/1/15 9/1/14 9/1/13
Almost Family 12.4 14.0 17.3 5.7
Amedisys 15.5 NA 23.5 7.8
LHC Group 11.4 11.75 9.5 6.8
HH Index Average 13.1 16.7 6.8
Addus 11.2 12.2 13.3 10.5

The above calculations are based on selling price being defined as Enterprise Value (EV), with data provided by Capital IQ.   EV has been calculated based on stock prices September 1. Enterprise value is defined as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents. EBITDA is calculated using methodology that may differ from that used by a company it is reporting.

Hot off the Press!

HealthSouth (HLS) announces its agreement to acquire home health operator, CareSouth, for $170 million in cash.

HealthSouth Corporation (NYSE: HLS) (“HealthSouth”), a leading provider of post-acute healthcare services, announced its Encompass Home Health operating unit (“Encompass”) has entered into a definitive agreement to acquire the home health agency operations of CareSouth Health System, Inc. (“CareSouth”) for a cash purchase price of $170 million. CareSouth operates a portfolio of 45 home health locations in 7 states and generated revenues of approximately $104 million in 2014. The transaction was approved by both companies’ boards of directors and is expected to close in the fourth quarter of 2015, subject to regulatory approval.

The CareSouth acquisition enables HealthSouth to leverage the operating platform of Encompass across home health locations in the new markets of Alabama, Georgia, North Carolina, South Carolina, and Tennessee. CareSouth also improves Encompass’ market share position in the key states of Florida and Virginia. Upon completion of this transaction, Encompass will become the third largest home health provider in Virginia and the ninth largest home health provider in Florida. These new home health locations will overlap with fourteen of HealthSouth’s existing inpatient rehabilitation hospitals. The addition of these assets will allow HealthSouth to better serve the post-acute needs of patients in those markets by offering both facility-based and home-based post-acute services.

Good News! In what we consider to be good news for home care stocks, Wells Fargo has initiated coverage on both Amedisys and LHC Group, with an outperform rating on both companies.   Meanwhile, Oppenheimer reissued their outperform rating on Addus.

LHC Group in the News!

LHC Group buys Halcyon for $59M in cash

  • LHC Group acquires Halcyon Hospice for $58.5M in cash.  Halcyon operates 16 hospices across three states. Annual revenues are ~$41M.  That price works out to about 1.4 times revenue.
  • LHC’s post-deal hospice business will consist of 53 sites in 12 states with over $110M in annual revenues.

 Almost Family in the News!

Almost Family pays $50.5 million for Willcare

  • Almost Family has completed the acquisition of the stock of Willcare Health Care. Almost Family will operate over 230 branches across 15 states and its annual net revenue run rate is expected to approach the $600 million mark.
  • The acquired operations generated total revenues of approximately $29.4 million ($27.5 million of which was in New York.

Amedisys in the News!

  • According to a recent press release, Amedisys has significantly amped up its acquisition ambitions, putting together a lengthy list of possible  targets as it looks to consolidate a fragmented industry.
  • New CEO Paul Kusserow says the company is looking at more than 200 candidates for outright M&A as well as joint ventures and partnerships: “We have a lot of firepower, a lot of powder, to go out and buy things on a large scale.”
  • To assist in funding acquisition opportunities, Amedisys has arranged for a $100 million loan and a $200 million line of credit.

Merger & Acquisition Activity:

SOLD BY STONERIDGE PARTNERS!

Elite Healthcare, Inc, a New Jersey Medicaid home care agency sold to a regional home care provider. Brian Bruenderman, one of our partners at Stoneridge, provided sell-side advisory services.

OTHER SALES FROM AROUND THE COUNTRY:

MISSION VIEJO, Calif., The Ensign Group, Inc., the parent company of the Ensign™ group of skilled nursing, rehabilitative care services, home health care, hospice care, assisted living and urgent care companies, announced today that Cornerstone Healthcare, Inc., Ensign’s home health and hospice portfolio subsidiary, had acquired Apismellis Homecare, a Medicare and Medicaid certified home health agency serving the communities of Lake Havasu City, Bullhead City, and Parker, Arizona, and Big River, California.

Join Us in Columbus, Ohio:

For   the Ohio Council for Home Care & Hospices’ annual conference and expo, September 15-16 at the Hyatt Regency Convention Center. On Tuesday at 1 pm we will be giving our popular and entertaining presentation “M&A Update for Home Care and Hospice Agencies”.  Ohio Conference & Expo

Join Us in Maryland:

For the Maryland National Capital Homecare Association’s annual conference.  On September 17 at 4:15 pm we will again be giving our popular and entertaining presentation “M&A Update for Home Care and Hospice Agencies”. Maryland Conference & Expo

Exclusively Listed for Sale by Stoneridge Partners:

  • Pennsylvania – Approx. $4 million Medicaid home care agency located in central PA. Accelerated and profitable growth trajectory with continued opportunity for future growth. Professionally run with outstanding clinical and excellent staff in place.  Stoneridge file S-1000
  • Colorado – $2.5 million diversified home care agency  and hospice,  accredited with excellent books and records.  Stoneridge file #S-1005
  • Rhode Island – $2.5 million Medicare agency.  Accredited in CON state.  Stoneridge file #S-1100
  • Oklahoma –  $3.5 million revenue Oklahoma City Medicare certified home health agency.   90% of revenue from traditional Medicare. Stoneridge file S-3200
  • Florida – $4 million in pure private pay.  15% bottom line.  Accredited on the central east coast.  Stoneridge file #S-3250.
  • Illinois – $5 million plus Medicare agency with four offices. Strong management with excellent clinical.  Stoneridge file #S-6550
  • New Mexico – $2.4 million Medicare agency with a long history of excellent care. 90% of revenue from traditional Medicare. Stoneridge profile S-5295.
  • Kentucky – Certificate of Need for 3 counties in Northern KY, rare opportunity to establish or expand services in populous CON service area. Stoneridge file S-1121
  • Illinois – $3 million hospice in Chicago area.  Average census 58.  Stoneridge file #S-5325
  • Texas – $5 million East Texas Medicare certified home health agency with diverse payor sources, including Medicare, Medicaid, pediatric and private pay.  Stoneridge file S-3665
  • Illinois –  $2.3 million Chicago area Medicare agency, clean surveys, excellent clinical reputation.  Stoneridge file #S-4300
  • Massachusetts – $5 + million home health agency, primarily Medicaid, but also private pay and commercial insurance, plus Medicare certification. Zero deficiencies on last survey.  Stoneridge file #S-9300
  • Washington State – $2 million revenue. This agency has a long history of profitability. Diverse payor sources includes Medicaid programs and private pay. Great reputation in a unique service area. Stoneridge file S-7010 ON CONTRACT
  • Florida – $5 million Medicare agency located in the Tampa – St. Pete area.  Accredited, with solid bottom line.  Stoneridge file S-4109 ON CONTRACT
  • Texas – $8 million East Texas agency, Medicare certified with deficiency free survey, no audits, and top-of- the line software.  Stoneridge file S-3001
  • Texas – $1.5  million East Texas Medicare certified home health agency, providing skilled care, approx 75% from traditional PPS Medicare.  Last survey was deficiency free. Stoneridge file S-4088
  • Texas – $2.3 million Medicare certified home health agency in Houston, Texas. 92% Traditional Medicare. Stoneridge file S-1542
  • North Carolina – $2.2 million Medicaid provider with two locations serving Charlotte, NC and surrounding areas. Service waiver programs include: PCS, PDN, and CAP. Accredited. Professionally run company with outstanding clinical. Great tuck-in opportunity. Stoneridge file S-2999 ON CONTRACT
  • Texas – $3.3 million accredited Medicare home health agency. Profitable and still growing with approximately 87% of revenue coming from traditional Medicare. Strong marketing team in place with diversified referral sources. Stoneridge file S-1500
  • Texas – $2 million Fort Worth Medicare agency, approx 90% traditional Medicare.Stoneridge file S-2650
  • Florida – $2.8 million Medicare certified agency serving District 3. Solid operational team in place. 95% Medicare.  Stoneridge file S-9000
  • Ohio – $2.5 million Medicare agency in Columbus area, 75% traditional Medicare, long history of quality care.  Stoneridge file S-5232.
  • Texas $1.2 million Medicare certified home health care agency in the Galveston area. Stoneridge file S-9015
  • Texas – $1 million Medicare agency in the DFW area – 995 of revenue from traditional Medicare.  Stoneridge file #S-1015

To see more home care agencies and hospices exclusively listed for sale by Stoneridge Partners go to the following link: Agencies for Sale

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.

Another Favorite from the New Yorker

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More

For more cartoons and additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: http://stoneridgepartners.com/category/blog/.
From Don Cummins, Publisher of “The Home Health Index” don@stoneridgepartners.com – 800-218-3944

Previous editions of this monthly newsletter can be searched for at the bottom of the home page of the Home Health Index. Links to Google Finance: Almost Family | Amedisys | LHC Group