Pro-Home Health Legislation Introduced; Post-Acute Care Stocks Rise
On July 29th, Congress introduced groundbreaking legislation that would not only be a boon for home health providers – it could also change the U.S. healthcare system as we know it.
The bipartisan Choose Home Care Act of 2021 would allow certain nursing home-eligible Medicare beneficiaries to skip going to a rehab facility after a hospital discharge, and instead give them access to wrap-around care in the home alongside traditional home health care. Additionally, the act would create a new add-on payment to the normal home health Medicare reimbursement to support home health providers offering meals, transportation, personal care and more.
“Choose Home faces an uphill battle, with at least one major nursing home lobbying group already against it,” Stoneridge Partners President Rich Tinsley said. “But if it does pass, it would be a game-changer for well-diversified home health providers.”
Home Health and Post-Acute Care Indices
The Stoneridge Partners Home Health (HHI) and Post-Acute Care Indices (PAI) both trended upward in July after down months in May and June.
Buoyed by a relatively stable proposed payment rule from the U.S. Centers for Medicare & Medicaid Services (CMS), the HHI rose nearly 7% in July over the previous month. The PAI’s performance was not quite as strong, but still rallied by more than 3% on a month-over-month basis. Both indices slightly outperformed the S&P 500, which was up by just more than 2% in July compared to June.
While July brought good news for the HHI and PAI companies, the outlook for the rest of the year has been put in doubt by concerns about the spread of the COVID-19 delta variant.
Home Health Index
The Stoneridge Partners HHI tracks the stock values of Amedisys, Inc. (Nasdaq: AMED) and LHC Group, Inc. (Nasdaq: LHCG).
Baton Rouge, Louisiana-based Amedisys saw its stock jump by almost 7% in July as compared to June. In a similar performance, the Lafayette, Louisiana-based LHC Group saw its stock rise by more than 7% over the same time period.
Both Amedisys and LHC Group have made significant hospital-at-home plays in the past several weeks. On June 29, Amedisys announced plans to acquire hospital-at-home company Contessa Health for $250 million, while LHC Group touted a new in-home care partnership with SCP Health on July 7.
“Amedisys may have some initial hurdles to clear with the integration and growth of Contessa because it’s still an up-and-coming company,” Tinsley says. “But both moves should set Amedisys and LHC Group up for further in-home care innovation down the road.”
Post-Acute Care Index
In addition to Amedisys and LHC Group, Stoneridge monitors the stock performance of Addus HomeCare Corporation (Nasdaq: ADUS), Brookdale Senior Living Inc. (NYSE: BKD), Encompass Health Corp. (NYSE: EHC) and The Pennant Group, Inc. (Nasdaq: PNTG) in its post-acute index.
Outside of Amedisys and LHC, the rest of the companies making up the PAI had a tougher go of it in July. Only the Birmingham, Alabama-based Encompass Health posted positive stock gains, rising by almost 7%. Brentwood, Tennessee-based Brookdale was down nearly 5% month over month, while Eagle, Idaho-based Pennant was down more than 16%. Addus fared slightly better, with a dip of less than 1% in July.
Encompass Health recently indicated the company was nearing a potential spinoff of its home health and hospice segment.
“Many of the key preparatory actions for a separation have been completed, including, but not limited to, audited carve-out financial statements for the home health and hospice business, a confidential submission of a draft registration statement on Form S-1 with the United States Securities and Exchange Commission and certain required regulatory filings,” the company reported in a July 28th statement. “While no assurance can be provided, the company expects to announce a transaction in the second half of 2021.”
Quote of the Month
“Some studies are indicating that four out of 10 of us in the last year have experienced depression or anxiety in a clinical range. If you went back two years, that would have been one out of 10, so we are very concerned about people’s mental health. Often times we will take care of our physical health before our mental health. We’re hoping by this series to help folks reach out for the help they need.” – Glenn Simpson, System Service Line Administrator for Behavioral Health at Vidant
Read the Full Article Here: Behavioral Health Roundup: Mental Health Matters Series; anxiety exacerbated during pandemic
Articles Featuring Stoneridge
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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 2010.
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 August 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 August 2021 | Stoneridge Partners)