National Senior Living Operator Bucks Trend; Leads Post-Acute Stocks During Downturn
Home Health Index | 2021 March Update
Home health and post-acute care stockholders are likely glad that February is the shortest month of the year.
Nearly all the companies in the Stoneridge Partners Home Health (HHI) and Post-Acute Care Indices (PAI) took a hit last month – only Brookdale Senior Living Inc. (NYSE: BKD) saw a month-over-month jump in its stock value, thanks to the major home health and hospice deal it announced with HCA Healthcare (NYSE: HCA) on February 24th.
“People have speculated that Brookdale might offload its home health and hospice business to maximize value, and that finally came to fruition in February,” said Stoneridge Partners President Rich Tinsley. “Meanwhile, the other major industry players gave back some of the impressive gains they’ve made over the past year, but I expect that to turn around as our economy begins to grow again and we see deal activity continuing to ramp up.”
The HHI fell by nearly 11% in February as compared to January; the PAI likewise plummeted by almost 21%. Meanwhile, the S&P 500 was up almost 3% for the month.
Home Health Index
The monthly HHI from Stoneridge monitors the stock values of Baton Rouge, Louisiana-based Amedisys, Inc. (Nasdaq: AMED) and Lafayette, Louisiana-based LHC Group, Inc. (Nasdaq: LHCG).
Amedisys stock fell by more than 12% in February as compared to January. LHC Group’s stock fell by almost 9% during the same period after announcing lower than expected projections for the first quarter of 2021. Nevertheless, stock values for both companies are up more than 40% compared to 12 months ago, continuing a trend that has seen both companies’ stock soar over the past five years.
“LHC Group and Amedisys are still riding plenty of tailwinds,” Tinsley said. “Each has talked about setting up innovative models of care to shift patients away from skilled nursing facilities (SNFs), which continues to be a national priority. Each has also made progress in securing stronger contracting positions with payers outside of fee-for-service Medicare. There may be bumps in the road, but overall, I think they’ll continue on their current upward trajectory.”
Post-Acute Care Index
The Stoneridge Partners PAI combines stock values for Amedisys and LHC Group with values for Addus HomeCare Corporation (Nasdaq: ADUS), Encompass Health Corp. (NYSE: EHC), The Pennant Group, Inc. (Nasdaq: PNTG) and Brookdale.
Frisco, Texas-based Addus’ stock dropped almost 5% in February – but that’s likely to rebound in March, buoyed by investor interest in the company’s recently announced value-based care arrangement with Presbyterian Health Plan in New Mexico. Meanwhile, Birmingham, Alabama-based Encompass Health saw its stock dip just less than 1% last month, and stock values for Eagle, Idaho-based Pennant dropped by almost 5%.
As for Brookdale, the Brentwood, Tennessee-based company’s stock climbed by nearly 17% in February compared to January.
“Brookdale has been very active in vaccinating residents against the COVID-19 virus, which helps with restoring occupancy,” Tinsley said. “But the agreement with HCA Healthcare also has a lot to do with the surge. Home health and hospice multiples remain incredibly high, so this is a good time for Brookdale to cash in on its health care services segment.”
Brookdale announced toward the end of last month that it’s selling an 80% stake in its health care services business to HCA Healthcare for $400 million, pending all necessary regulatory approvals.
“As we pursued this business opportunity, it was extremely important to find the right strategic partner with the same dedication to care,” Brookdale CEO Lucinda Baier said during her company’s fourth-quarter earnings call. “Our new partnership is designed to deliver value for our shareholders, and it ensures continuity of quality care for our residents and patients while improving access to additional health care services.”
Quote of the Month
“As baby boomers age, we will need to be thinking about how we take care of a population of people that will have some disabilities as they age but are still going to find it attractive to be independent and continue to be as viable as long as they can.” – Grace Terrell, CEO of Eventus Whole Health, an operator of skilled nursing and assisted living facilities in five states across the Southern and Midwestern U.S.
Read the Full Article Here: Home is Where The Care Is
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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 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 2008.
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
(Home Health Index March 2021 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
||1 mos change
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)
|HH Index Total
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*
The Stoneridge Partners Post-Acute Care Index is updated monthly and measures the performance of these six publicly traded post-acute care companies, all listed on the NASDAQ:
- LHC Group (LHCG)
- Amedisys (AMED)
- Addus (ADUS)
- The Pennant Group, Inc. (PNTG)
- Encompass Health (EHC)
- Brookdale Senior Living Inc. (BKD)
This graph displays Post-Acute Care Index performance starting late 2019.
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 March 2021 | Stoneridge Partners)
Recent Transactions From Around The Country
- Private-equity backed hospice and home health provider Charter Heath Group has acquired Serene Care Hospice in Omaha, NE
- Private-equity backed hospice and home health provider Charter Heath Group has acquired Physmed in Omaha, NE