Labor Challenges Stifle Post-Acute Care Growth

A difficult labor market continues to dampen post-acute care growth. Nonetheless, many of the nation’s home health giants are optimistic about their 2022 outlook due to skyrocketing demand for their services.

Currently, the biggest question mark surrounding the post-acute care sector’s future is the COVID-19 Omicron variant, which began spreading across the globe in November. If it proves to be as contagious as the Delta variant, Omicron could create yet another hurdle for operators to clear on their road to normalcy.

“It’s the same story we’ve heard all year,” said Stoneridge Partners President Rich Tinsley. “Demand for post-acute care — especially home health care — is at an all-time high. But labor shortages mean providers can’t accept new referrals, and Omicron may just end up exacerbating clinician burnout further.”

Home Health and Post-Acute Care Indices

The Stoneridge Partners Home Health (HHI) and Post-Acute Care Indices (PAI) showed signs of life in October after a mostly sluggish third quarter – but that recovery came to a halt in November.

The HHI dropped more than 16% in November as compared to the previous month, while the PAI fell almost 6%. Both indices underperformed the S&P 500, which was down by less than 1% during the same period.

To combat workforce shortages and build capacity to take on new referrals, post-acute care operators have turned to higher-than-normal levels of contract labor. Doing so comes at a steep price, Tinsley noted.

“Some larger providers are reporting that they’re using three or four times more contract labor than usual to complete visits,” Tinsley said. “That can translate into hundreds of thousands of dollars each quarter, which has a big impact on stock prices.”

Home Health Index

Updated monthly, the HHI tracks the stock prices of Amedisys, Inc. (Nasdaq: AMED) and LHC Group, Inc. (Nasdaq: LHCG).

Stocks for Baton Rouge, Louisiana-based Amedisys fell more than 17% in November; similarly, stock prices for Lafayette, Louisiana-based LHC Group fell almost 15% over the same time period.

LHC Group is attempting to beef up its staffing strength by leveraging more extenders, such as licensed practical nurses (LPNs) and physical-therapy assistants (PTAs). Amedisys is taking a similar approach while investing in predictive analytics to better track key staffing metrics.

“We’re going to have to continue improving our recruitment and retention efforts — and recruitment and retention are equally as important,” LHC Group Chairman and CEO Keith Myers said during a Dec. 3 investor presentation. “We have to make it easier for nurses to work here.”

Amedisys stock is down more than 52% on a year-to-date basis, while LHC Group stock is down more than 46%.

Post-Acute Care Index

The Stoneridge Partners PAI combines stock performance for Addus HomeCare Corporation (Nasdaq: ADUS), Brookdale Senior Living Inc. (NYSE: BKD), Encompass Health Corp. (NYSE: EHC) and The Pennant Group, Inc. (Nasdaq: PNTG) with results for Amedisys and LHC Group.

Brentwood, Tennessee-based Brookdale saw its stock dip by almost 10% in November, but overall, the company’s stock is still up more than 32% on a year-to-date basis. Stocks for Frisco, Texas-based Addus dipped nearly 7% last month, and year to date, its stock is down by more than 25%. Birmingham, Alabama-based Encompass Health — which is planning to spin off its home health and hospice segment next year — saw its stock drop by more than 9% in November compared to October; its stock is down slightly more than 30% on a year-to-date basis. Finally, stock prices for Eagle, Idaho-based Pennant fell by almost 21% last month, bringing the company’s stock values down by a total of 65% year to date.

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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 2015.

This graph compares the HH Index to the price of Addus stock (non-Medicare).

(Home Health Index December 2021 | Stoneridge Partners)

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

Company 11/30/21 1 mos change YTD change 11/30/20 11/30/19
Amedisys 139.65 -17.53% -52.39% 244.79 162.96
LHC Group 114.72 -14.76% -46.22% 196.32 133.40
HH Index* 127.19 -16.31% -49.79% 220.56 148.18
S&P 4567 -0.83% +21.59% 3660.25 3140.98
Addus 87.22 -6.72% -25.51% 99.25 93.21

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) 11/30/21 11/30/20 11/30/19
Amedisys 5140 8190 5560
LHC Group 4260 6140 4200
HH Index Total 9400 14330 9760
Addus 1520 1450 1280


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

Company 11/30/21 11/30/20 11/30/19
Amedisys 233% 405% 294%
LHC Group 196% 298% 224%
HH Index Average* 215% 352% 259%
Addus 182% 191% 213%


Multiples of EV/EBITDA

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

Company 11/30/21 11/30/20 11/30/19
Amedisys 13.70 31.03 29.55
LHC Group 16.11 28.28 21.49
HH Index Average* 14.91 29.66 25.52
Addus 21.11 24.09 30.30

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 December 2021 | Stoneridge Partners)

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4-star home health agency.  $2.5 million revenue.  Experienced management team.  Strong financials with outstanding local reputation.  Huge growth opportunities.

 Home Health /  Michigan

$1.5 million revenue Chiropractic/Physical Therapy business.  High profit margin/low operating costs.  Diverse referral sources.

 Other /  Maryland

Medicare/Medicaid certified home health organization.  $8+ million in annual revenue.  Diverse payor sources.  Multiple locations.

 Home Health /  Ohio

Approx. $700,000 non-skilled home health company.  Located in Florida's panhandle.  Accredited.  1/4 Private, 1/4 VA, 1/2 Medicaid Waiver.  All employees are W-2.

 Home Health /  Florida

$3.3 million in revenue.  Autism center providing ABA, OT, PT and ST.  In-clinic and in-home services.

 Other /  Michigan

Medicare-certified home health agency.  Minimal census.  Region 6.  Accredited.

 Home Health /  Texas

Non-skilled licensed home care organization.  Approx. $2 million in annual revenue.  Strong management team in place.  Southern California.

 Home Care /  California

Clean and accredited Medicare provider number.  Zero deficiencies.

 Home Health /  Connecticut

Joint Commission-accredited psychiatric treatment center.  Residential, PHP, IOP, OP and home health services.  National referral base; reputation for excellence, innovation.  $3M EBITDA on $7M revenue...

 Behavioral Health /  Midwest

Central Ohio based home health company with private pay.  $2.3 million in revenue.  13.5% EBITDA.  Strong growth trends, full staff in place.

 Home Health /  Ohio

Large home care franchisee.  $6.5 million in revenue.  Private duty.  Attractive market with great growth potential.

 Home Care /  Florida

Non-medical home care franchisor.  Platform opportunity with national footprint.  Systemwide revenues more than $12 million.  Franchise locations in 16 states.

 Home Care /  Texas

$2+ million private pay.  Profitable with great reputation.

 Home Health /  Pennsylvania

Profitable hospice agency with $600,000 in revenue.  Ready to grow with full complement of staff in place.

 Hospice /  Pennsylvania

Medicare/Medicaid agency with $3.5 million in revenue.  Established 20+ years.  Great reputation in eastern Michigan.

 Michigan

CHAP-accredited private duty business.  $2.8 million projected 2021 revenue.  Workers' compensation primary source of revenue.  Regions 9, 10 and 11.

 Home Health /  Florida

$4 million I/DD provider.  Great reputation and long history of profitability.

 ID/DD /  Kentucky

$25+ million home health agency.  Medicaid/Medicare-certified.  95%+ Medicaid.  Multiple locations.  Experienced management team.

 Home Health /  Massachusetts

Very rare opportunity in a CON state.  Located in Davidson County in Nashville, TN.  2020 revenue in excess of $650,000.

 Home Health /  Tennessee

Non-skilled home care company.  $10+ million in annual revenue.  Predominantly Medicaid.  Highly profitable.  Accredited.  Strong management team in place.

 Home Care /  Northeast

$1 million Medicare home health agency in northwest Minnesota.  Well-established.  Diverse referral sources.  Long history of excellent care.

 Home Health /  Minnesota

$50 million ID/DD platform opportunity.  Multi-state, Midwest.  Tenured management team to stay in place.  Double digit year over year organic growth.  Significant future opportunities for...

 ID/DD /  Midwest

Clean and accredited hospice provider number in the coveted San Antonio marketplace.  Current license is valid until the end of May 2022.

 Hospice /  Texas

$8 million Midwest ID/DD agency.  Highly profitable.  Consistent staff and clients.

 ID/DD /  Midwest

$4.9 million Medicare home health agency located in Phoenix, Arizona.  Showing strong year over year revenue growth since 2018.  Diverse referral sources, well run with...

 Home Health /  Arizona

$5 million Midwest-based ABA provider. Day supports and counseling. Highly profitable and respected. CARF accredited. Contracted with state and insurance companies.

 Behavioral Health /  Midwest

Hospice with $3.5 million in annual revenue. Accredited. No cap or regulatory issues.

 Hospice /  Texas

Treatment center with 28 beds, intensive outpatient program capacity of 40, full continuum of substance use disorder services and dual diagnosis treatment capability. JCAHO accreditation...

 Behavioral Health /  Texas

$1 million ID/DD agency with real estate. Long-term client base, additional growth potential and strong margins.

 ID/DD /  North Carolina

$2.5 million New Mexico home health agency. 87% Medicare. Long history in the community and existing staff in place.

 Home Health /  New Mexico

$2 million ID/DD agency in the Detroit area. Profitable service provider with existing management team in place.

 Michigan

Medicare and Medicaid certified home health agency.  $16.5 million in annual revenue with continued growth. 90%+ Medicaid.   Strong management in place. Accredited.

 Home Health /  Massachusetts

ID/DD service provider with $1 million in revenue. Residential and day services offered, located in Atlanta suburb.

 ID/DD /  Georgia

Home Health Index December 2021 | 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 at 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