Home Health Index | 2016 SEPTEMBER UPDATE

Home Health Index Reverses Course with First Decline in Four Months

For the first time in four months, the average market value of the top three largest public home health care companies has declined. During the month of August, The Stoneridge Partners Home Health Index dropped 1.13% from the previous month, reversing a months-long upward trend. The index was outpaced by the S&P 500, which contracted 0.12% during the month.

The index tracks the average market values of Almost Family (Nasdaq: AFAM), Amedisys Inc. (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG). The index had consistently achieved new all-time highs for four consecutive months from May through August.

The share prices of Almost Family, Amedisys and LHC Group have generally risen over the last year, and, year to date, the index is up 12.83%. For the trailing 12-month period, the index is up 9.79%.

“After recent all-time highs, the home health index slumped slightly at the end of August, but valuations remain strong,” said Rich Tinsley, president and CEO of Stoneridge Partners. “The publicly traded home health companies have been highly acquisitive throughout 2016 and are keeping an eye on new regulations coming down the pike.”

Home health care companies are preparing for the Pre-Claim Review Demonstration by the Centers for Medicare & Medicaid Services (CMS), which rolled out in Illinois at the beginning of August and is expected to roll out in four more states over the coming months. While it’s still unclear how the pilot program will fare in the long term, initial reports from Illinois reveal challenges, including a low confirmation rate from Medicare’ contractors in the state and reports of missing documentation.

The reports prompted two U.S. Senators from Florida to write to CMS officials urging them to delay implementation of the demonstration in Florida.

CEO of LHC Group Keith Myers recently stated that pre-claim could put a temporary damper on acquisitions, and the company has already downgraded its ambitious acquisition pipeline, which originally reached for $1 billion in acquisitive revenue.

Roughly half of the company’s planned acquisitions were within the five states where the pre-claim demonstration will become effective—Illinois, Florida, Massachusetts, Michigan and Texas. The Lafayette, Louisiana-based company saw a slight decrease in its August share price of 0.29%. Year to date, LHC Group’s stock is up 0.07%.

Almost Family, which reported record revenues at the end of the third quarter, is more supportive of the pre-claim demonstration, though executives recently stated they are unclear of the long-term impacts. The Louisville, Kentucky-based care provider has exposure in three of the five pre-claim states, including Illinois. Despite a bullish attitude, Almost Family’s stock declined 1.27% for the month of August. Year to date, its stock is up 4.08%.

Baton Rouge, Louisiana-based Amedisys was also confident about new payment models and regulations in recent presentations, though the company’s share price decreased 1.73% in August. Year to date, the stock is up 36.19%

Only Addus Homecare, which is not included in the index because very little of its revenue comes from Medicare, bucked the downward trend. For the month of August, its share price increased 2.22%.

Quotes Of  The Month 

“The thing about in-home care is it’s a big deal. It keeps people living independently and out of other forms of more expensive care. For the full article, click here: Meals on Wheels Acquires In-Home Health Care Nonprofit

See It to Believe It!

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)

This graph compares the percentage change of the HH Index to the percentage change in the S&P 500 Index for over 14 years, going back to 2002. It has been quite a ride.


Please note the graphs representing (1) HH Index to the percentage change in the S&P 500 Index for over 14 years, (2) 12 month trailing chart of the HH Index, and (3) HH Index to the price of Addus stock (non-Medicare) can be found in the most recent issue of the Home Health Index.


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

Company 8/31/16 1 mos change YTD change 8/31/15 8/31/14
Almost Family 39.79 -1.27% +4.08% 44.30 27.98
Amedisys 53.35 -1.73% +36.19% 38.64 20.92
LHC Group 45.26 -0.29% -0.07% 43.30 25.74
HH Index* 46.20 -1.13% +12.83% 42.08 24.88
S&P 500 2170.95 -0.12% +6.21% 1972.18 2003.37
Addus 18.86 +2.22% -18.99% 28.74 21.9

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) 9/1/2016 8/1/2015 8/1/2014
Almost Family 540 416 443
Amedisys 1890 1420 1670
LHC Group 911 742 670
HH Index Total 3341 2578 2783
Addus 232 311 180

 

Enterprise Value (EV), aka Selling Price,  as a Percent of Revenue.

Company 9/1/2016 8/1/2015 8/1/2014
Almost Family 97% 83% 65%
Amedisys 144% 119% 51%
LHC Group 110% 100% 69%
HH Index Average* 117% 101% 62%
Addus 67% 96% 83%

Multiples of EV/EBITDA.

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

Company 9/1/2016 8/1/2015 8/1/2014
Almost Family 12.63 12.77 16.96
Amedisys 23.64 16.02 19.72
LHC Group 11.08 11.26 8.60
HH Index Average* 15.78 13.35 15.1
Addus 9.68 13.28 10.50

*Included Gentiva prior to its acquisition in February 2015 by Kindred.

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 its reporting.

Recent Transactions From Around the Country:

  • Dallas’ Epic Health Services, Inc. boosts their presence in Nevada by acquiring Las Vegas-based Spring View Home Health Care, which offers private duty nursing services for children and adults as well as therapy and skilled nursing services for adults. The company also expanded its services into Michigan by purchasing Detroit-based Pediatric Special Care, the only child-focused home nursing medical equipment company in Michigan.
  • Meals on Wheels Central Texas acquired the in-home health care nonprofit, Helping the Aging, Needy and Disabled, better known as HAND. The group provides personal care attendants to low-income older adults and people with disabilities. The assistance allows their clients, most of whom are elderly, to continue living independently in their homes, which is why Meals on Wheels saw the acquisition as a perfect fit for its agency.

Exclusively Listed for Sale by Stoneridge Partners:

  • Colorado – $2.5 million diversified home care agency  and hospice,  accredited with excellent books and records.  Stoneridge File SJL-1005
  • Florida – Located in the huge east coast Florida District 5, this is a $6 million Medicare agency with approx. 98% of revenue coming from traditional Medicare.  Very well run with excellent financial records and solid bottom line. Stoneridge File SDC-7429
  • Florida – Located in the Orlando area this is a $4 million diversified home health agency.  Payor sources include Medicare, Medicaid and private pay, 35% of which is traditional Medicare.  Top management will assure smooth transition.   Well run with excellent financial records and solid bottom line. Stoneridge File SDC-3739
  • Florida – Accredited $4 million Medicare certified home health agency in District 5. More than 90% traditional Medicare. Highly motivated seller. Stoneridge File SBA-6226
  • Florida – Home care company in affluent area on west coast of Florida. $2.7 million run rate. Non-Medicare with 86% pure private pay. Consistent moderate growth. Caregivers are W-2 employees. Stoneridge File SBA-1253
  • Florida – $2.4 million Medicare certified home health agency in District 3. Outstanding clinical with highest star rating. Longtime Home Care Elite top agency. Excellent growth opportunities. Stoneridge File SBA-4836
  • Florida – $1.4 million accredited Medicare home health agency in District 8. Stoneridge File SBA-5224 
  • Florida – Accredited home health agency with approximately $850,000 in traditional Medicare revenue. Solid bottom line. 4.5 stars. Florida district 9.  Stoneridge File SDC-5177
  • Illinois – $5.5 million accredited Medicare agency located in northeastern Illinois. Strong bottom line. 4 1/2 star rating by CMS. Stoneridge File SDC-2734
  • Illinois – $3.4 million Medicare deficiency free home health agency in Northern Illinois.  This agency has built its success by concentrating on a very profitable and loyal market niche, and has an outstanding reputation with both their patients and community. Stoneridge File SCM-3291
  • Illinois – Opportunity to establish a Medicare certified home health agency. Pristine license in state under moratorium. Medicare certification. Accredited. Stoneridge File SBA-5000
  • Minnesota – $14 million revenue Medicare/Medicaid home health agency. Well established and deficiency free. Stoneridge File SJL-5268
  • New Jersey – Opportunity to enter much sought after New Jersey market via a small hospice in the southern part of the state. Stoneridge File SJL-9002a
  • Ohio –  $4+ million Medicare/Medicaid agency located in NE Ohio. Stoneridge File SBA-8002
  • Oklahoma – Medicare certified hospice for sale in Central Oklahoma. $2.1 million run rate. Accredited. Multiple locations. Stoneridge File SBA-3881
  • Pennsylvania – $14 million Medicaid provider with history of steady growth and terrific referral pipeline. Current management will stay if desired. Stoneridge File SBB-6722
  • Pennsylvania – $2.8 million Medicare certified home health agency with small hospice operations in Eastern Pennsylvania. 72% traditional Medicare for home health. Great tuck-in opportunity for strategic buyer. Requires corporate support functions. Stoneridge File SBA-4227
  • Texas – $5 million home health agency in Houston (metro). Diversified agency – 70% Medicare, 30% private pay. Inherent capacity for growth.  Stoneridge File SJL-2000
  • Texas – $3.2 million hospice in McAllen, Texas. CHAP accredited with a solid reputation. Stoneridge File SJL-1112
  • Texas –  Growing $3 million west Texas Medicare certified home health agency. Accredited with a wide variety of referral sources. Stoneridge File SJL-2892
  • Texas – $2.6 million established home health agency in Dallas with both Medicare and Medicaid lines of business. Stoneridge File SJL-8335
  • Texas – $1.2 million established and profitable home health agency with two offices and service area from Conroe to Galveston. Stoneridge File SJL-6249
  • Texas – $1.1 million solid and clean Medicare home health agency located in the Fort Worth area. Stoneridge File SJL-7530
  • Texas – $1 million agency in Tyler, Texas. Excellent opportunity to break into the attractive market. Stoneridge File SJL-8967
  • Virginia – $5 million Medicare certified home health agency. Great clinicals and reputation in the market for providing quality services. Stoneridge File SBB-8675
  • Central Midwest – $5 million Medicare certified home health agency with small hospice operations. Strong bottom line and continued growth opportunities. Management team in place and outstanding clinical. Stoneridge File SBA-9010 ON CONTRACT
  • Florida – $4 million in pure private pay.  15% bottom line.  Accredited on the central east coast.  Stoneridge File SBA-3250. ON CONTRACT
  • Florida – $5 million Medicare agency located in the Tampa – St. Pete area.  Accredited, with solid bottom line.   Stoneridge File SBA-4109. ON CONTRACT
  • Florida  – Lee County Medicare agency. Approximately $400,000 in revenue. Accredited. 4 1/2 star rating. Oasis quality assessment 97.7%. Florida district 8. Stoneridge File SBA-4186. ON CONTRACT
  • 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 SBA-9300. ON CONTRACT
  • Mid-Atlantic – $30 million Medicare/Medicaid agency with multiple branches in several states, including CON service areas. Long history and great reputation for quality care. Stoneridge File SBB-8300 ON CONTRACT
  • Pennsylvania – $4+ million hospice located in Western Pennsylvania. Stoneridge File SBA-5001 ON CONTRACT
  • Pennsylvania – Approximately $2 million in revenue. Licensed for entire state of Pennsylvania, so ready for growth. Stoneridge File SJL-9991 ON CONTRACT
  • Pennsylvania – $1.8 million Medicare agency located in eastern Pennsylvania. 82% traditional Medicare. Growing agency with strong potential for future growth. Stoneridge File SBA-2745 ON CONTRACT
  • Texas – $7 million Houston-based Medicare home health agency with sister staffing company. Accredited, expertly run and growing. Stoneridge File SJL-1500 ON CONTRACT
  • Texas – $4.9 million well established Medicare provider in the Dallas/Ft. Worth metroplex. Deficiency free and showing positive growth. Stoneridge File SJL-4918 ON CONTRACT
  • Texas – $4.1 million Dallas based home care company. Well managed and showing strong growth trends for 2016. Stoneridge File SJL-6002 ON CONTRACT
  • Texas – $1.5 million all private pay agency located in Fort Worth, Texas. Excellent reputation, excellent reviews and extremely profitable. Stoneridge File SJL-5115 ON CONTRACT

To see more home care agencies and hospices exclusively listed for sale by Stoneridge Partners click here.

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 Cartoon Favorite From the New Yorker


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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From Rich Tinsley, Publisher of “The Home Health Index”. Rich can be reached at rich@stoneridgepartners.com, (502) 822-4510 and toll-free 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

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