Home Health Care Stocks Plummet in July
Home Health Index August 2017 | Stoneridge Partners: After six months largely marked by market gains, home health care companies saw their share values sharply drop in July, according to the latest figures from the Home Health Index by Stoneridge Partners. The index, which tracks the market values of three of the largest publicly traded home health care companies—Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG)—dropped 19.57% in July compared to the previous month. The decline was in stark contrast to the S&P 500, which climbed 1.93% in July from June.
The stock market reaction among home health companies was influenced by a significant proposal issued during the month that is expected to have wide-ranging consequences for the sector. Compared to the first half of 2017, home health care stocks were on a hot streak, vastly outpacing the S&P 500.
“Investors in July reacted to the proposed Home Health Groupings Model (HHGM) from the Centers for Medicare & Medicaid Services (CMS),” said Stoneridge President Rich Tinsley. “The proposed rule would overhaul reimbursement payment to Medicare-certified home health care providers and has the potential to cut nearly $1 billion in payments to the industry. The drastic cuts sent investors scurrying from public companies in the sector.”
Amedisys, based in Baton Rouge, Louisiana, saw its share price drop the most amongst its peers during July, with a decline of 24.60%. Year to date, the stock is still up 11.10%, according to the Index. Amedisys CEO Paul Kusserow recently stated in the company’s second quarter 2017 earnings call that while the proposed rule is worrisome, there is still a process to undergo before the rule will be implemented.
Louisville-based Almost Family’s stock also took a big hit in July, dropping 19.79% from June. Almost Family has still seen gains throughout the year, and its share price remains up 12.13% year to date, despite monthly losses.
LHC Group fared the best of its peers in July, though also experienced a significant drop in its share value. The Lafayette, Louisiana-based company’s share price declined 14.71%. Year to date, LHC Group’s stock has risen 26.70%. Despite the proposed rule, the company is moving forward with acquisition and joint venture deals, CEO and chairman Keith G. Myers announced during the company’s most recent quarterly earnings report.
Addus HomeCare (Nasdaq: ADUS), which is not included in the index because so little of its income comes from Medicare, also felt the sting of the proposal, with its share price dropping 8.74%. Addus, which is based in Frisco, Texas, and is known as a personal care services provider, has maintained steady gains throughout the year; its stock is up 10.34% year to date.
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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 of the Home Health Index to the percentage change in the S&P 500 Index for over 14 years, going back to 2002.
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.
This graph displays HH Index performance over the past 24 months.
This graph compares the HH Index to the price of Addus stock (non-Medicare).
(Home Health Index August 2017 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
|Company||7/31/17||1 mos change||YTD change||7/31/16||7/31/15|
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)||7/31/17||7/31/16|
|HH Index Total||3530||3341|
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*||117%||117%|
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*||17.65||15.78|
The above calculations are based on selling price being defined as Enterprise Value (EV), with data provided by Capital IQ. 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 which may differ from that used by a company it’s reporting. (Home Health Index August 2017 | Stoneridge Partners)
Recent Transactions From Around The Country
- Boyne Capital Partners announced the acquisition of AmeriBest Home Care, Inc., a home care provider serving seniors and disabled residents in Pennsylvania.
- ncgCare, a Richmond-based behavioral healthcare provider, has acquired Appalachian Community Services in North Carolina, a provider of mental health, substance abuse and ID/DD services.
- Encompass Home Health and Hospice entered the state of Illinois with the acquisition of VNA Healthtrends.
- Crossroads Treatment Centers has completed its acquisition of Center of HOPE, an opioid treatment program in Myrtle Beach, South Carolina.
- JourneyPure, a Nashville, Tennessee-based addiction treatment provider has acquired The Center for Professional Excellence, a local provider of addiction and mental health services.
- BayMark Health Services, Texas-based opioid treatment provider has acquired Valley Alliance Treatment Services, an opioid treatment center in Morgantown, West Virginia.
- Berks Community Health Center announced they have signed an LOI to acquire All About Children Pediatric Partners in Reading, Pennsylvania.
- MedEquities Realty Trust announced they have signed a definitive agreement with AAC Holdings to acquire four behavioral health and substance abuse treatment facilities in Las Vegas and Dallas.
Exclusively Listed For Sale By Stoneridge Partners
|State||Agency Profile||Status||Reference Number
|Alabama||Home care company in Alabama. Approx. $1.5 million in annual revenue. 95% private pay. Outstanding clinical||Available|
|California||$1.3 million home health agency located 2 1/2 hours Northeast of Sacramento. Opportunity to grow North from present location. No competition in area.||Available|
|California||$1 million Medicare certified and JCAHO accredited home health agency located in the bay area. Growth opportunities abound for this long established agency (2004)||Available|
|Florida||$4.5 million Medicare certified home health agency in Districts 6 and 7. Solid bottom line. Accredited and outstanding clinicals.||Available|
|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.||Available|
|Florida||$2.5 million Medicare agency in Port St. Lucie. Great reputation and clinicals.||Available|
|Florida||$1.4 million growing private duty business in District 7. Well-run clinically and poised for growth FY 2017.||Available|
|Idaho||Medicare Certified (ACHC) Hospice located in Idaho. 30 patients and growing. Expertly run by veteran operators with staff in place.||Available|
|Illinois||$5.5 million accredited Medicare agency located in northeastern Illinois. Strong bottom line. 4 1/2 star rating by CMS.||Available|
|Kentucky||$5 million Medicaid behavioral health agency. Great reputation for quality services. Staff in place.||Available|
|Massachusetts||$10+ million Medicare and Medicaid certified Home Health agency. Diverse payor sources. Strong Management in place.||Available|
|Michigan||$1.3 million and growing Medicare home health agency located in Southwestern Michigan. Local physical therapy school provides surplus of qualified employees. Stable referral base.||Available|
|Mountain State||$20 million Medicaid agency. Steady growth for many years. Great client retention and reputation.||Available|
|Multi-State||Approx. $50 million in revenue. Several CON States. Medicare and Medicaid business mix.||Available|
|New Mexico||$2.5 million New Mexico home health agency. 87% Medicare. Long history in the community. Staff in place.||Available|
|Ohio||Medicare certified agency. Diverse payor mix - 50% Skilled Medicaid, 20% Medicare, 30% Commercial/Other. $4 million in annual revenue. Carve-out from larger existing business. Strong management team.||Available|
|Ohio||$3 million Medicare home health agency. Located in the Columbus area. Unique clinical specialty and well-established referral sources.||Available|
|Ohio||Medicare Home Health, Hospice and Private Duty agency. Approx. $4 million in annual revenue. Located in Akron area. Very attractive preferred provider relationships.||Available|
|Oregon||$1.4 million Private Duty business located in Central OR. Serving an affluent community near local resort for over 30 years. Long term employees in place with well-established referral base.||Available|
|Oregon||Home care company in Oregon. $1.1 million in annual revenue. Predominantly private pay. Well-established. Outstanding clinical.||Available|
|Pennsylvania||$1.5 million profitable Medicaid business located in South Central Pennsylvania. Excellent relationships with all waiver service coordinators in the area. Primed for growth.||Available|
|Pennsylvania||Medicare and Medicaid certified home health agency in the Greater Pittsburgh area with a Census of 2||Available|
|Southwest||$25 million in annual revenue. Provider of Waiver and ICF ID/DD Services. Statewide Platform. Strong management team. Excellent reputation for quality services.||Available|
|Texas||Staffing business for Physical, Speech & Occupational Therpaists and Medical Social Workers. Approx. $1.3 million in annual revenue. Located North of Dallas. Revenue up 60% in a two year period. Payors are 100% cash from local Home Health Agencies.||Available|
|Texas||$3.5 million home health agency in Houston (metro). Diversified agency - 70% Medicare, 30% private pay. Inherent capacity for growth.||Available|
|Texas||Profitable $3 million Medicare & Medicaid top 500 home care company in East Texas. CHAP accredited. 4.5 star rating. Full staff in place. Well-run with an excellent reputation.||Available|
|Texas||Approx. $1.8 million in annual revenue. Dallas/Plano Texas area. Medicare certified home health agency. 70% Medicare/30% Medicare Advantage.||Available|
|Texas||$1.2 million established and profitable home health agency with two offices and service area from Conroe to Galveston.||Available|
|Wisconsin||$1.2 million Medicare certified home health agency. Licensed in Wisconsin. Clean survey and deficiency free. Staff in place. Motivated seller.||Available|
|Virginia||$6 million Medicare certified agency in Northern Virginia.||Available|
|Arizona||$2.2 million physical therapy business in Central Arizona. Started in 2005. Two locations and strong, clean financials.||Under Contract||
|Florida||$1.8 million Medicare certified home health agency in District 10. 100% Medicare. Accredited.||Under Contract||
|Illinois||$1.5 million Medicare certified home health agency. Clean survey and deficiency free. Quality clinical operation with staff in place.||Under Contract||
|Indiana||$10 million behavioral health agency in Indiana. 30-year history providing quality services. Stable referral base.||Under Contract||
|Kentucky||Medicare home health agency with large CON service area. $3 million annual revenue. Includes metropolitan areas.||Under Contract||
|Minnesota||$8 million Medicaid agency. Well-established in metropolitan service area with staff in place.||Under Contract||
|Nebraska||$3.8 million Medicare agency located in the Omaha area. Consistent growth trend.||Under Contract||
|Pacific Northwest||$30 million Medicaid agency. Strong growth curve and history of organic growth. Well-eatablished referral relationships||Under Contract||
|Pennsylvania||$10 million Medicaid agency serves eastern part of the state. Long history in the community. Well established referral relationships.||Under Contract||
|Southwest||$60 million agency providing home health, personal care and hospice services in the Southwest. Approximately 50% of revenue derived from hospice operations. Long history with great reputation for quality care. Consistent, strong growth. Multiple locations with strong presence in the markets served.||Under Contract||
|Texas||Growing $2.6 million West Texas Medicare certified home health agency. Accredited with a wide variety of referral sources.||Under Contract||
|Virginia||$6+ million private pay home care agency for sale in Northern Virginia. Non-medical home care services. Recently surveyed. Strong profitability.||Under Contract||
Do you know of any acquisitions that have taken place? We are interested in your comments. At the top of this column is a “Contact Tab” with a section for comments. These can be sent anonymously and the return email address can be left blank.
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