Home Health Care Stocks Slipped Before HHGM Decision
Home health care stocks fell sharply in October, perhaps on jitters related to the then-forthcoming home health groupings model (HHGM) decision, according to the latest data in the Home Health Index tracked by Stoneridge Partners. But the decision ultimately fell in the industry’s favor: The Centers for Medicare & Medicaid Services (CMS) on Nov. 1 released its final rule for the home health care prospective payment system (PPS) 2018 update without finalizing HHGM.
In the weeks leading up to the decision, however, the index reflected nervous anticipation among home health companies. The index, which tracks market values of three of the largest publicly traded home health care companies in the U.S.—Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG)—dropped 11.73% in October compared to the previous month.
The Index lagged behind the S&P 500, which ticked up 2.23% in October. And October’s drop is another sharp contrast to the Index’s rebound seen in September.
Investors were likely on edge over HHGM, which threatened to upend the home health payment system, cutting hundreds of millions in payments within its proposed changes.
“The big news here is what happened with HHGM,” said Stoneridge President Rich Tinsley. “That should overshadow many of the month’s losses. Investors can be confident HHGM is off the table for the immediate future.”
Lafayette, Louisiana-based LHC Group’s stock shed 6.16% in October. Year to date, LHC Group’s stock has climbed 45.62%, which is the largest yearly gain on the Index.
Amedisys, meanwhile, lost the most value in October. The Baton Rouge, Louisiana-based company’s stock value tumbled 16.99% in the month. Year to date, its share prices are still up 8.96%, according to the Index.
Louisville, Kentucky-based Almost Family also saw its stock value sag in October. The company lost 13.59% that month, erasing some of its 2017 gains. The company’s year-to-date share value was up just 5.22% in October.
Addus HomeCare (Nasdaq: ADUS), which is not included in the index because so little of its income comes from Medicare, saw no change in its share value in October. Year to date, Addus’s stock price has risen 0.71%.
Quote Of The Month
“There’s an inaccurate perception among the American public that hospice means you’ve given up. Those of us who have worked in the field have seen firsthand how hospice and palliative care can improve the quality of life. There’s a growing body of research showing that hospice and palliative care may prolong the lives of some people who receive care. However, all too often, families sign on with hospice very late in the process. We often hear: I wish we had known about you sooner!” – J. Donald Schumacher, president and CEO of the National Hospice and Palliative Care Organization.
Read the Full Article Here: November is National Home Health, Hospice and Palliative Care Month
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 November 2017 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
|Company||10/31/17||1 mos change||YTD change||10/31/16||10/31/15|
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)||10/31/17||10/31/16|
|HH Index Total||3712||2980|
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*||118%||97%|
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*||16.19||13.51|
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 November 2017 | Stoneridge Partners)
SOLD by Stoneridge!
- Stoneridge represented a private pay home care company in Florida in a transaction that closed in October, 2017. Partner, Ben Bogan, provided sell-side advisory services for this transaction.
Recent Transactions From Around The Country
- Odyssey Behavioral Healthcare, a portfolio company of Nautic Partners, acquired Selah House, an eating disorder treatment center for women in Anderson, Indiana.
- Invo Healthcare, a portfolio company of The Wicks Group, The Jordan Company and Post Capital Partners announced the acquisition of Autism Home Support Services, a leading provider of home and center-based Applied Behavioral Analysis (“ABA”) therapy to children diagnosed with autism spectrum disorder.
- Magellan Health, Inc. announced the acquisition of Senior Whole Health, a company focused on serving complex, high-risk populations.
Exclusively Listed For Sale By Stoneridge Partners
|State||Agency Profile||Status||Reference Number|
|Arizona||Opportunity to establish hospice in Phoenix area. ACHC accredited.||Available|
|California||$11 million multi-location addiction treatment center. Located in Southern California. 21% bottom line. Strong growth trends. JCAHO accredited.||Available|
|California||Medicare certified Home Health agency that was established in 2003. $2 million annual revenue in 2018. PDGM revenue neutral. Located in Southern California. Clean business with no ADR's.||Available|
|Colorado||Opportunity to establish Medicare home health agency. Denver market. ACHC accreditation until 2022.||Available|
|Florida||Medicare certified home health agency. Approx. $3.8 million revenue with 17% bottom line. District 9 & 10. Revenues split evenly between districts. Accredited. 4.5 star quality of patient care rating||Available|
|Georgia||ID/DD Services. $1 million revenue. Residential and Day Services. Atlanta Suburb.||Available|
|Illinois||$5.5 million accredited Medicare agency located in northeastern Illinois. Strong bottom line. 4 1/2 star rating by CMS.||Available|
|Louisiana||Boutique full service clinical laboratory specializing in preventative diagnostic testing.|
Medicare & Medicaid certified, and insurance contracts in over 20 Southeast States. Several unique programs and innovative technologies.
|Massachusetts||Medicare and Medicaid certified Home Health agency. |
$13+ million in annual revenue and growing. Diverse payor mix. Strong Management in place. Accredited.
|Massachusetts||Medicare/Medicaid Home Health Agency. Motivated seller in western MA. $7.5 million annual revenue. Great add-on for existing provider.||Available|
|Michigan||Medicare home health and hospice agency. $10 million annual revenue. Attractive referral relationships.||Available|
|Michigan||$2 million ID/DD. Profitable. Existing management team in place. Greater Detroit area.||Available|
|Michigan||$1.5 million private duty home health agency in eastern Michigan. Profitable and well positioned for additional growth. Self-sufficient staff in place. 82 long-term clients.||Available|
|Mid-Atlantic||$10+ million home care agency. Non-skilled, primarily Medicaid reimbursed. 20% EBITDA margins. Strong management team in place.||Available|
|Multi-State||Well-established pediatric provider. Revenue over $40 million. Medicaid and insurance.||Available|
|Nevada||Medicare certified home health agency. Approx. $1 million in annual revenue. Accredited. Las Vegas area.||Available|
|New Mexico||Home health and hospice. $15 million annual revenue. Revenue split: 2/3 Home health and 1/3 Hospice. Medicare/Medicaid certified. Accredited.||Available|
|New York||LHCSA in five boroughs. Approx. $20 million revenue. Long history in the community.||Available|
|New York||$13 million revenue LHCSA. 30-year history. Licensed in all 5 boroughs.||Available|
|New Mexico||$2.5 million New Mexico home health agency. 87% Medicare. Long history in the community. Staff in place.||Available|
|North Carolina||$1 million ID/DD Agency. Long-term client base. Growth potential with real estate. Strong margins.||Available|
|Oklahoma||Medicare certified home health organization. $9.6 million in annual revenue. 98% traditional Medicare and other PPS Payors. Medicare/Medicaid certification. Multiple locations.||Available|
|South||28 bed, IOP capacity of 40, full continuum SUD treatment center, dual diagnosis, pending JCAHO. $4+ million revenue, highly competitive in network contracts, average census of 30. Existing marketing relationships with county, parole, local hospitals, churches and universities. Solid business in desirable location, little competition, good opportunity.||Available|
|South||Full continuum, JCAHO accredited, co-occurring, SUD treatment center on 100+ acre horse ranch. 16 beds, 22 staff. $1.5 million EBITDA on $3.5 million revenue. In-network. Good reputation, great contracts/rates, solid opportunity. Census is great.||Available|
|South||National growth opportunity. No direct competition for niche market. Unique program and strong branding. PHP/IOP with census and revenue growth. Seeking strategic partner||Available|
|Southwest||$5+ million outpatient treatment center. Fully accredited. 37 beds. Recently revamped to increase growth and margin. Great census, UR, acquisition and solid numbers. Out of network and transitioning some in network.||Available|
|Southwest||64 bed full continuum treatment center in 2 Southwest US metropolitan cities.|
$4 million pro forma EBITDA run rate. 3rd location set to open May 2019. Run rate based on 30% occupancy with significant growth expected. Strong infrastructure to support growth trajectory.
|South-Atlantic||$12+ million in annual revenue. Home Health Agency (HHA) and Adult Day Care Center (ADC). HHA (represents 85% of revenue). ADC (represents 15% of revenue). HHA is primarily Medicaid business but is Medicare-certified. Accredited.||Available|
|South Texas||Hospice. $3.5 million in annual revenue. Accredited. Clean: No cap or regulatory issues.||Available|
|Tennessee||Very rare opportunity in a CON state. Located in Davidson County in Nashville, TN. Projected 2019 revenue in excess of $800,000.||Available|
|Texas||$5.3 million Medicaid agency in San Antonio, TX. 16.5% EBITDA. CHAP accredited. Staff in place for a smooth transition.||Available|
|Texas||$5.3 million all Medicaid Home Care company located in Houston, TX. 20%+ year over year revenue growth since 2016. Nice bottom line.||Available|
|Texas||$5 million revenue. Home health and hospice covering 10 counties in West Texas/Eastern New Mexico. No clinical issues, under CAP. Very profitable. Easily separated.||Available|
|Texas||$4 million home health agency. Dallas/Ft. Worth based. Full staff in place. Medicare and managed care with great contacts.||Available|
|Texas||$3.5 million Medicare certified home health agency. Located in San Antonio, TX. Fully staffed & CHAP accredited. Branch office included in sale||Available|
|Texas||$1.7 million Medicare home health agency. Located in Southwest Houston. Well-established with predictable referral sources. Very profitable.||Available|
|Texas||$1 million Medicare certified agency. Licensed in 7 counties in the Houston area. 80% is traditional Medicare.||Available|
|USA||New software application. Potential investment opportunity. Great test results.|
Helps connect those in recovery socially. Helps connect therapists to patients. Facilitates total successful recovery and gathers important helpful data.
|Virginia||$6 million Medicare certified agency in Northern Virginia.||Available|
|Virginia||$2.3 million revenue Physical Therapy and Wellness operation. 95% cash pay. Potential to franchise Nationwide. 2018 EBITDA $257,000.||Available|
|West||Premier provider of primary mental health services for adolescents aged 13-18. 2 locations. In process of growing in-network contracts.||Available|
|East||Healthcare testing laboratory. $7 million revenue, $4 million EBITDA. 16 employees, multiple state licenses.||Under Contract|
|Florida||$9.5 million Home Health Agency. Very strong operationally, clinically, and financially. 99% of revenue comes from traditional Medicare.||Under Contract|
|Florida||Medicare/Medicaid certified home health agency. $2.5 million annual revenue. 5-star. Accredited. District 10.||Under Contract|
|Kentucky||Medication-assisted clinic. IOP counseling for substance abuse and co-occurring disorders. Profitable with strong team in place. 150 clients. 95% Medicaid.||Under Contract|
|Kentucky||Medication-assisted Treatment center. Suboxone only. Strategic location between Louisville and Lexington, Kentucky. Great reputation with strong clinical team in place. 110 clients with room to expand and grow, minimal marketing. In-network contracts. Clients come in twice a month and pay $150 per visit for counseling. Owners are near retirement and will help with the transition.||Under Contract|
|North Carolina||$5 million Medicaid agency. CAP/PCS services. Long history, quality services.||Under Contract|
|Pacific Northwest||Full continuum in Washington State. $3,625,000. revenue with $1,100,000 EBITDA. States has moved from BHO to MCO for Medicaid. Co-occurring, Medicaid paid, 40 bed facility, 40 employees, census is very strong.|
Outpatient is full. Opportunity for marketing. SUD mental health gambling. Equine therapy and other perks.
|Southwest||$25 million in annual revenue. Provider of Waiver and ICF ID/DD Services. Statewide Platform. Strong management team. Excellent reputation for quality services.||Under Contract|
|Texas||Three Hospice companies with affiliated home health. $6 million total revenue. South, South Central, and South East Texas locations.||Under Contract|
|Texas||$3+ million hospice agency based in Dallas/Fort Worth. Well established. Clinically clean and growing. Full staff in place.||Under Contract|
|Texas||$1.4 million revenue pediatric therapy business. Company provides Physical Therapy (PT), Occupational Therapy (OT), and Speech Therapy (ST) to disadvantaged and disabled children in near a major metropolitan city in Texas and the surrounding counties. Positive reputation for providing quality help in an environment comfortable to the child. Founded in January 2008 as an investment for the owner. Average census is 190 patients with a goal of 225 for calendar year 2019.||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.
Another Cartoon Favorite from the New Yorker
Home Health Index November 2017 | Stoneridge Partners