Home Health Index | 2018 APRIL UPDATE

Home Health Stocks Falter as Economic Uncertainties Linger

Home Health Stocks Falter as Economic Uncertainties Linger

After surviving market turbulence in January and February 2018, home health share prices failed to experience the same buffer in March. The Home Health Index by Stoneridge Partners, which tracks the market value of the three largest public home health companies — Almost Family (NASDAQ: AFAM), LHC Group (NASDAQ: LHCG) and Amedisys (NASDAQ: AMED) — fell 2.67% last month, roughly tracking the overall stock market. By comparison, the S&P declined 3.10% in March.

The good news: not every company in the HHI experienced stock price declines. Year to date, the HHI is up 5.07%. Amedisys, based in Baton Rouge, Louisiana, saw its stocks climb 2.14%. The increase may be a positive response to news in March that Amedisys received an average Quality of Patient Care Star Rating of 4.22 (out of a possible 5 stars total) from the Centers for Medicare & Medicaid Services. That rating is approximately 30% higher than the industry average.

Louisville Kentucky-based Almost Family’s stock fell 5.12%, while Lafayette, Louisiana-based LHC Group experienced a drop of 4.43% during March. On March 29, Almost Family and LHC Group completed their long-discussed merger. The all-stock merger created the second-largest home health provider in the country with an annual revenue of nearly $1.8 billion. Kindred Healthcare (NYSE: KND) remains the largest home health company in the industry, though its home health and hospice business is also undergoing an acquisition by Humana (NYSE: HUM).

However, home health companies may fare better following an April 2 announcement from CMS that non-skilled in-home care supports will be allowed as a supplemental benefit for Medicare Advantage plans in 2019.

“Home health providers surely welcome this change, and this announcement puts companies in a strong position for April and the remainder of 2018,” said Stoneridge Partners President Rich Tinsley. “That’s good news after a rocky March that saw declines in the HHI and S&P 500, as investors reacted to fears over major economic uncertainties, including a potential trade war with China and other countries rattled markets.”

Also of note in the home health industry, Frisco, Texas-based Addus HomeCare (NASDAQ: ADUS) stock prices rose 39% after it announced it achieved a new record for net service revenue during Q4 2017. Addus, a major personal care services provider, is not part of the HHI because little of the company’s revenue comes from Medicare.

Quote Of The Month 

“It’s easier for seniors to plan their own funerals than to budget and plan for assisted living.  I think the thought that they might not be able to care for themselves is frightening.  You know that death is going to happen. But you don’t know what you’re going to go through on the way there.” – Karen Hanson, the community service manager for Home Instead Senior Care.

Read the Full Article Here: Senior care planning should begin early

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 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 since 2002.


This graph compares the HH Index to the price of Addus stock (non-Medicare).
(Home Health Index April 2018 | Stoneridge Partners)

 

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

Company 3/31/18 1 mos change YTD change 3/31/17 3/31/16
Almost Family 58.95 +2.34% +6.50% 49.85 38.58
Amedisys 59.21 +11.97% +12.33% 51.2 38.2
LHC Group 64.38 +1.23% +5.11% 48.52 36.84
HH Index* 60.85 +4.86% +7.81% 49.86 37.87
S&P 500 2718.5 -3.77% +1.68% 2396.96 1948.05
Addus 34.35 -6.15% -1.29% 33.7 23.41

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) 3/31/18 3/31/17 3/31/16
Almost Family 879 750 444
Amedisys 2090 1790 1670
LHC Group 1280 1050 670
HH Index Total 4249 3590 2784
Addus 500 391 180


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

Company 3/31/18 3/31/17 3/31/16
Almost Family 110% 120% 87%
Amedisys 138% 126% 136%
LHC Group 120% 117% 87%
HH Index Average* 123% 121% 103%
Addus 120% 98% 54%


Multiples of EV/EBITDA

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

Company 3/31/18 3/31/17 3/31/16
Almost Family 25.02 19.05 12.09
Amedisys 16.29 21.96 18.76
LHC Group 14.27 12.51 8.64
HH Index Average* 18.53 17.84 13.16
Addus 15.21 12.54 7.52

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 April 2018 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Nova Leap Health Corp, based in Halifax, Nova Scotia, an international provider of personal home care and support services acquired the business assets of Home Health Solutions, Inc. located in Holyoke, Massachusetts.
  • LHC Group, a Louisiana-based home health care provider has become the second-largest in the United States with the completion of its acquisition of Almost Family, a Kentucky-based firm.

Exclusively Listed For Sale By Stoneridge Partners

State
Agency Profile
Status
Reference Number
ArizonaOpportunity to establish hospice in Phoenix area. ACHC-accredited. Available
SBB-8218
California$11 million multi-location addiction treatment center. Located in Southern California. 21% bottom line. Strong growth trends. JCAHO-accredited. Available
SJL-7229
CaliforniaMedicare-certified home health agency established in 2003. $2 million annual revenue in 2018. PDGM revenue-neutral. Located in Southern California. Clean business with no ADRs. Available
SCM-7298
ColoradoOpportunity to establish Medicare home health agency. Denver market. ACHC accreditation until 2022.Available
SJL-7771
FloridaMedicare-certified home health agency. Approximately $3.8 million in revenue with 17% bottom line. Located in Districts 9 and 10. Revenues split evenly between districts. Accredited. 4.5-star quality of patient care rating.Available
SBA-3029
GeorgiaID/DD service provider with $1 million in revenue. Residential and day services offered, located in Atlanta suburb. Available
SBH-6806
Illinois$5.5 million accredited Medicare agency located in northeastern Illinois. Strong bottom line. 4.5-star rating by CMS.Available
SBA-2734

LouisianaBoutique full-service clinical laboratory specializing in preventative diagnostic testing. Medicare- and Medicaid- certified, with insurance contracts in more than 20 southeastern states. Available
SJD-6825
MassachusettsMedicare- and Medicaid-certified home health agency.
$13+ million in annual revenue with continued growth. Diverse payor mix. Strong management in place. Accredited.
Available
SBA-6010
MassachusettsMedicare- and Medicaid-certified home health agency. Motivated seller in western Massachusetts. $7.5 million annual revenue. Great add-on for existing provider. Available
SBB-7607
MichiganMedicare home health and hospice agency. $10 million in annual revenue with numerous referral relationships. Available
SBB-8684
Michigan$2 million ID/DD agency in the Detroit area. Profitable service provider with existing management team in place. Available
SBH-1697
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
SCM-6034
Mid-Atlantic$10+ million non-skilled home care agency. Primarily Medicaid reimbursed with 20% EBITDA margins. Strong management team in place. Available
SBH-9651
Multi-StateWell-established pediatric provider. Revenue more than $40 million. Medicaid and insurance accepted. Available
SBB-2138
NevadaMedicare-certified home health agency in Las Vegas area. Approximately $1 million in annual revenue. Accredited. Available
SBA-8367
New MexicoHome health and hospice with $15 million in annual revenue. Revenue split is 2/3 home health and 1/3 hospice. Medicare- and Medicaid-certified. Accredited. Available
SBA-5334
New YorkLicensed home care services agency with services in five boroughs. Approximately $20 million in revenue and a long-standing history in the community. Available
SBB-9207
New YorkLicensed home care services agency with $13 million in revenue. 30-year history. Licensed in all five boroughs.Available
SBB-8249
New Mexico$2.5 million New Mexico home health agency. 87% Medicare. Long history in the community and existing staff in place.Available
SBA-5295
North Carolina$1 million ID/DD agency with real estate. Long-term client base, additional growth potential and strong margins. Available
SBH-9905
OklahomaMedicare-certified home health agency with $9.6 million in annual revenue. 98% traditional Medicare and other PPS payors. Medicare- and Medicaid-certified with multiple locations. Available
SBA-6607
SouthTreatment center with 28 beds, intensive outpatient program capacity of 40, full continuum of substance use disorder services and dual diagnosis treatment capability. JCAHO accreditation pending. $4+ million in revenue, highly competitive in-network contracts. Average census of 30. Existing relationships with county, parole, local hospitals, churches and universities. Solid business in desirable location with little area competition.Available
SJD-1118
SouthFull continuum, JCAHO-accredited substance use disorder treatment center on 100+ acre horse ranch. Dual diagnosis treatment capability with 16 beds and 22 staff. $1.5 million EBITDA on $3.5 million in revenue. In-network with great contracts/rates and strong census. Available
SJD-3485
SouthPartial hospitalization treatment program/intensive outpatient program seeking strategic partner. Strong census and revenue growth. No direct competition for niche market. Available
SJD-8349
Southwest$5+ million 37-bed outpatient treatment center. Fully accredited and recently revamped to increase growth and margin. Great census, UR, acquisition and solid numbers. Out of network but transitioning to some in-network.Available
SJD-3448
Southwest64 bed full continuum 64-bed full continuum treatment center in two southwestern US metropolitan cities. JCAHO-accredited and in-network. $4 million pro forma EBITDA run rate based on 30% occupancy with significant growth expected. Strong infrastructure to support growth trajectory.Available
SJD-4008
South-AtlanticHome health agency and adult day care center with $12+ million in annual revenue. Home health represents 85% of revenue while adult day represents 15% of revenue. Home health is primarily a Medicaid business but is Medicare-certified. Accredited. Available
SBA-9973
South TexasHospice with $3.5 million in annual revenue. Accredited. No cap or regulatory issues. Available
SBA-8064
TennesseeVery rare opportunity in a Certificate of Need state, located in Nashville, TN (Davidson County). Projected 2019 revenue in excess of $800,000.Available
SCM-8651
Texas$5.3 million Medicaid agency in San Antonio, TX. 16.5% EBITDA. CHAP-accredited. Staff can remain in place for a smooth transition. Available
SJL-5322
Texas$5.3 million all-Medicaid home care company located in Houston, TX. 20%+ year-over-year revenue growth since 2016. Available
SJL-3670
Texas$3.5 million Medicare certified $3.5 million Medicare certified home health agency located in San Antonio, TX. Fully staffed and CHAP-accredited. Branch office is included in sale.Available
SJL-4824
Texas$1.7 million Medicare home health agency located in Southwest Houston. Well-established with predictable referral sources and revenues. Available
SJL-6080
Texas$1 million Medicare-certified agency licensed in seven counties in the Houston area. 80% traditional Medicare. Available
SBA-1542
USANew software application helping build social connections among patients in recovery and giving them increased access to therapists. Potential investment opportunity. Facilitates total successful recovery and gathers important helpful data.Available
SJD-1777
Virginia$6 million Medicare-certified agency in Northern Virginia. Available
SBA-7366
VirginiaPhysical therapy and wellness operation with $2.3 million in revenue. 95% cash payors. Potential to franchise nationwide. 2018 EBITDA was $257,000. Available
SCM-7368
WestPremier provider of primary mental health services for adolescents aged 13-18 with two locations. Currently growing in-network contracts. Available
SJD-7984
EastHealthcare testing laboratory with $7 million in revenue and $4 million EBITDA. 16 employees, multiple state licenses. Under Contract
SJD-1067
Florida$9.5 million home health agency with strong management, clinical and financial operations. 99% of revenue comes from traditional Medicare. Under Contract
SCM-6925
FloridaMedicare/Medicaid certified home health agency. $2.5 million annual revenue. 5-star. Accredited. District 10.Under Contract
SBA-8305
KentuckyMedication-assisted clinic. Intensive outpatient program counseling for substance abuse and co-occurring disorders. Profitable with strong team in place. 150 clients. 95% Medicaid. Under Contract
STS-1093
KentuckyMedication-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 grow. In-network contracts. Clients pay $150 per visit for counseling twice per month. Owners are near retirement and will help with the transition. Under Contract
STS-2658
North Carolina$5 million Medicaid agency. $5 million Medicaid agency. CAP/PCS services. Long history of providing quality services. Under Contract
SBB-4927
Pacific NorthwestFull continuum substance use disorder, mental health and gambling addiction treatment center in Washington state with $3,625,000 in revenue and $1,100,000 EBITDA. 40 bed facility with 40 employees. Strong census, full outpatient program and Medicaid payors. Under Contract
SJD-4921
SouthwestProvider of waiver and intermediate care facility ID/DD services with $25 million in annual revenue. Statewide platform with a strong management team and excellent reputation for quality services. Under Contract
SBH-2042
TexasThree Hospice companies with Three hospice companies with affiliated home health and $6 million in total revenue. Locations in south, southcentral, and southeast Texas. Under Contract
SJL-9650
TexasHome health and hospice covering 10 counties in west Texas/eastern New Mexico with $5 million in revenue. No clinical issues, under CAP. Very profitable. Easily separated. Under Contract
SJL-4994
Texas$4 million home health agency based in Dallas/Ft. Worth. Full staff in place. Medicare and managed care with great contacts.Under Contract
SJL-8406
Texas$3+ million hospice agency based in Dallas/Ft. Worth. Well established with full staff in place. Clinically clean and growing. Under Contract
SJL-6009
Texas$1.4 million revenue pediatric Pediatric therapy business with $1.4 million in revenue. Provides physical therapy (PT), occupational therapy (OT) and speech therapy (ST) to disadvantaged and disabled children in a major Texas city and surrounding counties. Positive reputation for providing quality care in a child-friendly environment. Average census is 190 patients with a goal of 225 for calendar year 2019.Under Contract
SCM-3034

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

     

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Home Health Index April 2018 | Stoneridge Partners

From Rich Tinsley, Publisher of “Home Health Index”. Rich can be reached at rich@stoneridgepartners.com or (239) 561-0826 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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