Home Health Stocks Rebound as Home Health Index Narrows to Two Comapnies
Home Health Stocks Rebound as HHI Narrows To Two Companies
Home health stock prices rebounded in April after a short-lived decline in values in March.
The bounce-back came on the heels of major changes in the sector at the beginning of 2018, including the completion of a mega-merger that will change the scope of the Home Health Index (HHI) created by Stoneridge Partners moving forward.
The HHI, which has long tracked the market values of Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG), has narrowed to two companies following the merger of AFAM and LHCG at the start of April 2018. Almost Family will no longer be included in the HHI because it is no longer traded as an individual stock.
The mega-merger makes LHC Group the second-largest home health care company in the nation, with 775 locations in 36 states and combined annual revenue of nearly $2 billion. The merger also had a profound impact on the company’s stock price, which jumped 20.9% in April from the previous month. Year to date, the stock is up 21.5%.
Despite having closed this enormous transaction, LHC Group seemingly isn’t slowing down on its mergers and acquisitions activity. The company has an active pipeline of 24 ongoing discussions with health systems and hospitals to form home health joint ventures, CEO Keith Myers stated during the company’s recent first quarter earnings call.
Also in April, Amedisys’s (NASDAQ: AMED) stock price rose 9.3%. Amedisys is based in Baton Rouge, Louisiana. During Q1 2018, Amedisys saw its margins swell to their highest levels since 2015, according to quarterly earnings results published in early May. Year to date, the stock is up 25.2%.
Removing Almost Family from the HHI led to significant change in the index. At the end of April, the HHI was up 18.4%, with the recalculation of the index playing a role in the uptick. By comparison, the HHI declined 2.7% in March. Year to date, the index is up 24.4%. Home health stocks weren’t the only ones to rebound from a tough March; the S&P 500 slightly recovered, rising 0.90%.
Share value gains may have been partly buoyed by the announcement that non-skilled in-home care supports will be allowed as a supplemental benefit for Medicare Advantage plans in 2019, the Centers for Medicare & Medicaid Services said in a proposal at the beginning of April. Medicare Advantage is a growing opportunity for the large home health care providers.
“On top of the completion of a major transaction that changed the face of the home health care industry, the news from CMS definitely helped companies overcome a turbulent March,” said Stoneridge Partners President Rich Tinsley. “And with strong first quarter earnings, the coming months may be even better for home health companies.”
Elsewhere in the industry, Frisco,Texas-based Addus HomeCare (Nasdaq: ADUS) continues its positive stock streak. As April ended, Addus’ stock price rose 7.19%. Year-to-date, Addus stock is up 49.86%. Even though Addus is a major personal care services provider, it’s not part of the HHI because little of its revenue comes from Medicare.
Quote Of The Month
Gone are the days of visiting hours and restricted call times; home health care means friends and family can visit whenever they want. “Receiving care at home allows patients to stay in their own environment within close range to loved ones. We know this can have a positive impact on mental well being.” – Rebecca Bell, General Manager – Member Health at Medibank
Read the Full Article Here: Five Benefits of Home Health Care
See It To Believe It!
The Stoneridge Partners Home Health Index (HH Index) is updated monthly and measures the performance of these two publicly traded home health companies, all listed on the NASDAQ:
- 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 May 2018 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
|Company||4/30/18||1 mos change||YTD change||4/30/17||4/30/16|
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)||4/30/18||4/30/17||4/30/16|
|HH Index Total||3700||3739||3025|
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*||143%||128%||113%|
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*||16.84||18.92||14.34|
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 May 2018 | Stoneridge Partners)
Recent Transactions From Around The Country
- Amedisys enlarged its personal care footprint with its subsidiary Associated Home Care’s close of the acquisition of East Tennessee Personal Care Services based in Knoxville, Tennessee.
- Delphi Behavioral Health Group has merged with Summit Behavioral Health in a deal that brings with it facilities in New Jersey, Massachusetts and Pennsylvania—three new markets for Delphi.
- National Home Health Care of Cromwell merged with Great Lakes Caring of Jackson and Jordan Health Services of Dallas.
SOLD!!! by Stoneridge
- Stoneridge Partners, Partner Ben Bogan and Associate Partner Charles Jantzi, provided sell side M&A advisory services in the Addus Homecare & Ambercare transaction with revenue of approximately $57,000,000.
Exclusively Listed For Sale By Stoneridge Partners
|State||Agency Profile||Status||Reference Number
|Arizona||$2+ million home care agency in Southern Arizona. Diverse payor sources (Medicaid/Private Pay/ W/C. Diverse referral sources. Great reputation.||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|
|Connecticut||$6 million Medicaid/Medicare agency. Nice growth trend. Stable margins, great surveys.||Available|
|East||Healthcare testing laboratory. $7 million revenue, $4 million EBITDA. 16 employees, multiple state licenses.||Available|
|East||Opportunity to buy a leading franchisor in the assisted living referral space. 10+ existing franchisees. Perfect business for the entrepreneur who can scale a predictable, simple and low expense business. 3 year average income of $134,000. Owner near retirement.||Available|
|Florida||$9.5 million Home Health Agency. Very strong operationally, clinically, and financially. 99% of revenue comes from traditional Medicare.||Available|
|Florida||$1.6 million revenue. Pediatric Medicaid agency.||Available|
|Florida||Medicare certified home health agency. District 10. Census: Minimal. Accredited.||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.
|Maryland/DC/Virginia||Opportunity to establish a Medicare home health agency. N. Virginia with large service area. Low census, motivated seller.||Available|
|Massachusetts||Medicare and Medicaid certified Home Health agency. |
$13+ million in annual revenue and growing. Diverse payor mix. Strong Management in place. Accredited.
|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|
|Minnesota||$9 million Medicaid agency. Consistent growth & profitability. Recent rate increase. Attractive Medicaid margin.||Available|
|New York||LHCSA in five boroughs. Approx. $20 million revenue. Long history in the community.||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|
|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||Three Hospice companies with affiliated home health. $6 million total revenue. South, South Central, and South East Texas locations.||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||$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||Medicare home health agency and hospice. San Antonio, Dallas, Austin. $3 million revenue, multiple provider numbers. Great opportunity for existing Texas providers.||Available|
|Texas||$2.6 million revenue Home Health agency in East Texas. Great local reputation, with strong financials. 2018 adjusted EBITDA $606,000. Has second license with minimal census available.||Available|
|Texas||$2 million Medicare home health agency in Austin, TX. Offers outstanding reputation and strong management & clinical teams. CHAP accredited & consistently Top 100 or Top 500 Home Care Elite for past 8 years.||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|
|Texas||Home Health agency in Texas. Near Sam Houston National Forest. Clean license with minimal census and minimal revenue.||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||$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|
|Florida||Medicare/Medicaid certified home health agency. $2.5 million annual revenue. 5-star. Accredited. District 10.||Under Contract||
|Florida||$1.5 million non-skilled private duty home health business. Strong management team in place. District 1.||Under Contract||
|Illinois||Hospice. Census in mid-70's. Accredited. Chicago area.||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||
|New York||$13 million revenue LHCSA. 30-year history. Licensed in all 5 boroughs.||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||$5.3 million all Medicaid Home Care company located in Houston, TX. 20%+ year over year revenue growth since 2016. Nice bottom line.||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||$2.2 million Dallas-area Medicare home health agency. 22% bottom line. Well-established with a very clean compliance record. Full management team 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||
|Virginia||$6 million Medicare certified agency in Northern Virginia.||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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Home Health Index May 2018 | Stoneridge Partners