Home Health Index | 2019 NOVEMBER UPDATE

Home Health Stocks Slump in October – But Likely Not for Long

Home Health Stocks Slump in October — But Likely Not for Long

 Home health stocks were down across the board in October, according to the latest Home Health Index (HHI) from Stoneridge Partners. That’s likely to change soon, however, thanks largely to the better-than-expected final payment rule for calendar year 2020, released by the Centers for Medicare & Medicaid Services (CMS) on Oct. 31.

The monthly HHI from Stoneridge Partners tracks the stock values of Amedisys Inc. (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG), two of the largest publicly traded home health companies in the U.S.

Stock values for Baton Rouge, Louisiana-based Amedisys were down 2.21% in October compared to September. Meanwhile, stock values for Lafayette, Louisiana-based LHC Group were down 2.98% in October compared to the previous month.

Those performances led to an HHI that was down 2.57%, marking one of the relatively rare instances this year when home health stocks fell behind the broader market. The S&P 500 was up 1.77% in October over September.

Already, stock values for Amedisys and LHC Group are showing signs of a November turnaround, rallying after CMS recently released the 2020 final rule.

“When CMS released the final rule, it also lowered the behavioral adjustment included in the Patient-Driven Groupings Model,” Stoneridge Partners President Rich Tinsley said. “Specifically, they reduced the behavioral adjustment from 8.01% to 4.36%. That’s still a hefty cut, but a much more manageable one, especially for the big home health providers like Amedisys and LHC Group.”

In addition to the decreased behavioral adjustment, Amedisys and LHC Group also stand to gain from CMS’s decision to eliminate home health pre-payments, which many smaller providers use to stay in business.

“Phasing out the Request for Anticipated Payment (RAP) is likely going to create a lot of M&A opportunities for the major home health players moving forward,” Tinsley said.

While it does not include the company in its monthly HHI, Stoneridge also tracks the stock performance of Frisco, Texas-based Addus HomeCare Corporation. Unlike Amedisys and LHC Group, Addus stock climbed 5.96% in October compared to September.

Despite the down month, the HHI was up still up 13.89% on a year-to-date basis, according to Stoneridge.

Quote Of The Month

“We need to define what palliative care is in the marketplace and whether it’s a community-based palliative care benefit, and it can’t be that you ask 10 different people what palliative care is and you get 13 different answers,” said Nick Westfall, CEO of VITAS Healthcare, the hospice subsidiary of Chemed Corp.

Read the Full Article Here:  Lack of Palliative Care Definition Impacts Patients, Hospice Business

 

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 November 2019 | Stoneridge Partners)

 

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

Company 10/31/19 1 mos change YTD change 10/31/18 10/31/17
Amedisys 128.52 -2.21% +10.00% 111.2 46.45
LHC Group 110.97 -2.98% +18.76% 89.06 66.55
HH Index* 119.75 -2.57% +13.89% 100.13 53.13
S&P 3037.56 +1.77% +21.72% 2722.05 2575.5
Addus 84.21 +5.96% +23.73% 65.79 35.3

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) 10/31/19 10/31/18 10/31/17
Amedisys 4570 3570 1660
LHC Group 3970 3220 1300
HH Index Total 8540 6790 3712
Addus 1110 744 444


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

Company 10/31/19 10/31/18 10/31/17
Amedisys 242% 226% 114%
LHC Group 195% 238% 135%
HH Index Average* 219% 232% 118%
Addus 197% 163% 108%


Multiples of EV/EBITDA

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

Company 10/31/19 10/31/18 10/31/17
Amedisys 24.12 23.66 15.8
LHC Group 19.53 31.19 14.13
HH Index Average* 21.83 27.43 16.19
Addus 26.87 20.62 13.3

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 for its reporting. (Home Health Index November 2019 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Optalis Healthcare acquired five Beaumont-affiliated nursing facilities to expand in SE Michigan
  • Discovery Behavioral Health, a national mental health services provider based in Orange County, California acquired New Life Addiction Counseling & Mental Health Services, an outpatient treatment facility near Baltimore
  • Missouri Home Hospice, LLC acquired Missouri-based Transitions Hospice

CLOSED by Stoneridge

  • Stoneridge Partners, Associate Partner Coley McDevitt represented a $3.5 million private care home health business in Miami, Florida that closed October 2019

Exclusively Listed For Sale By Stoneridge Partners

State
Agency Profile
Status
Reference Number
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
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
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
Mid-Atlantic$10+ million non-skilled home care agency. Primarily Medicaid reimbursed with 20% EBITDA margins. Strong management team in place. Available
SBH-9651
NevadaMedicare-certified home health agency in Las Vegas area. Approximately $1 million in annual revenue. Accredited. Available
SBA-8367
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
Oklahoma$5+ million home health, home care, case management, and hospice company. Approximately 15% revenue from hospice, other service line revenues distributed relatively evenly. Multiple locations. Diverse payor sources. Hospice accreditation. Projected PDGM impact of 30%+ for home health. Available
SBA-1668
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
South TennesseeVery rare opportunity in a CON state. Located in Davidson County in Nashville, TN. 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
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. Available
SJL-4994
Texas$3.5 million all-Medicaid home care company located in Houston, TX. 20%+ year-over-year revenue growth since 2016. Available
SJL-3670
TexasHome health agency located in Arlington, TX with $2.3 million in revenue. Growing and profitable company. Managed staff in place. No compliance issues. Available
SJL-6308
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
ColoradoOpportunity to establish Medicare home health agency. Denver market. ACHC accreditation until 2022.Under Contract
SJL-7771
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
FloridaSouth Florida staffing agency. $2 million + revenue. Approximately 30% gross margin. Licensed to service entire state of Florida. Systems and staff in place. Under Contract
SBA-6942
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
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. Under Contract
SCM-6034
Mid-west$5 million Midwest-based ABA provider. Day supports and counseling. Highly profitable and respected. CARF accredited. Contracted with state and insurance companies. Under Contract
SBH-9071
Multi-StateWell-established pediatric provider. Revenue more than $40 million. Medicaid and insurance accepted. Under Contract
SBB-2138
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. Under Contract
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. Under Contract
SBB-9207
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
Texas$4.2 million home health agency. 17.5% bottom line. Located in Houston, TX. Large coverage area. Diverse referral network. Fully staffed with no clinical issues. Under Contract
SJL-5691
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.Under Contract
SJL-4824

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 November 2019 | 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: Amedisys | LHC Group

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