December 1st Update

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This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.
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Quote of the Month

“If  Congress fails to come to an agreement on the fiscal cliff, the US unemployment rate will go to 9.1% in 2013”

–Congressional Budget Office

UPDATE:  The Stoneridge Partners Home Health Index gains 2.3%.

After dropping 9.6% in October our Stoneridge Partners Home Health Index (HH Index) popped back a little in November.  The general market as measured by the S&P 500 was down 2% in October and up slightly, 0.3%, in November. The S&P is now up 12.6% for the year and our HH Index is up 27% for the year.

Although our Index is now up nicely for the year, that entire increase took place in the first quarter.  On April 1, 2012 the HH Index was at 16.93 and on December 1 it was at 15.0.

This past month’s increase came from only two companies.  Both LHC Group and Gentiva were up about 10% while Almost Family and Amedisys were both down.

For the year, Amedisys is the only stock that is down.

The high for our Index was set in September, 2008 at 41.75.  Since then a huge drop.

The third quarter earnings reports follows these graphs, and will provide a clue as to the reason for this drop.

Here are the results for the month of November and YTD:

Company Stock Price 10/30/12 Stock Price 11/30/12 Change in % Month Change in % YTD
Almost Family 20.73 19.84 -4.29% +19.66%
Amedisys 11.04 10.47 -5.16% -4.03%
Gentiva 9.37 10.30 +9.93% +52.59%
LHC Group 17.52 19.39 +10.67% +51.13%
Home Health Index 14.67 15.00 +2.28% +27.47%
S&P 500 1412.16 1416.18 +0.28% +12.61%

We also note that on November 1 Addus HealthCare’s stock was at 6.78 up a sparkling 24.9% for the month.  They are now up about 90% for the year.  Impressive. They are a public company (NASDAQ:ADUS), but, because they are not heavily dependent upon Medicare revenue, they are not in our HH Index.

GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through November, 2012.

Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through November, 2012.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through November, 2012.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

EARNINGS SEASON – In November all four public companies released their third quarter earnings.  Due to the complex nature of the financial reporting of public companies it is sometimes difficult to make a meaningful comparison of earnings.  We have attempted to simplify matters by comparing only revenue and gross profit.   This clearly points out the headwinds our industry has faced over the past two years.

THIRD QUARTER (in thousands)

Company 2012 2011 2010 2 Year Change 2 Year Change %
Almost Family Revenue 85,128 86,207* 84,897 +231 0.3%
Gross Profit 40,610 42,862 45,766 (5,156) -11.3%
Gross Profit % 47.7% 49.7% 53.9% -6.2% -11.5%
Amedisys Revenue 375,625 370,288 404,680 -29,055 -7.2%
Gross Profit 161,494 168,195 198,378 -36,884 -18.6%
Gross Profit % 43.0% 45.4% 49.0% -6.0% 12.3%
Gentiva Revenue 424,444 449,748 379,681* 44,763 11.8%
Gross Profit 200,555 206,805 194,373 6,182 3.2%
Gross Profit % 47.3% 46.0% 51.2% -3.9% -7.7%
LHC Group Revenue 158,926 153,398 165,672 -6,746 -4.1%
Gross Profit 67,692 65,583 78,445 -10,753 -13.7%
Gross Profit % 42.6% 42.8% 47.3% -4.8% -10.0%
Total Revenue 1,044,123 1,059,641 1,034,930 9,193 0.9%
Gross Profit 470,351 483,445 516,962 -46,611 -9.0%
Gross Profit % 45.0% 45.6% 50.0% -5.0% -10.0%

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*Almost Family acquires Cambridge Home Care in Aug. 2011 with approx. 38M in revenue.

*Gentiva acquires hospice provider Odyssey in Aug. 2010 with over $700M revenue.
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It looks like the current revenue run-rate for the total of all four public companies is about $4.2 billion.  So in spite of the acquisitions over the past two years,  for the third quarter, revenue is up only slightly, while actual gross profit dollars are down considerably….over $43 million…..and down $13 million from just a year ago.

MERGER & ACQUISITION ACTIVITY FOR THE MONTH

“Financial sponsors in general are being cautious and pursuing deals with less risk,” said John Shea, Managing Partner at Berkery Noyes. “Nonetheless, the fear of higher capital gains taxes in 2013, along with the looming fiscal cliff, is having a noticeable impact on M&A activity at the moment. Moreover, many private equity firms are still seeking opportunities to deploy investment funds that they raised before the downturn a few years ago.”

Not much M&A activity reported over the last month.

Nurse-On-Call:  At the beginning of the month Nurse-On-Call (NOC), in a surprise, announced their sale to Emeritus Corporation – Senior Living, the nations largest assisted living and memory care services company.  The sale closed this past month in a purchase 91% of Florida’s Nurse-On-Call for $102 million.  Dale Clift, the CEO,  remains a stockholder and continue in his position as CEO.

NOC operates 28 offices in 47 Florida counties.    Revenue is approx. $140 million with an EBITDA of approx. $17 million.

It is interesting to note that we originally brokered the sale of NOC to Dale Clift toward the end of year 2003.  At that time it was a troubled agency, and was going to have difficulty making its Friday payroll.  Dale visited with the owner on Thursday and closed on the transaction the next day.  Done Deal!

American Companion Care, a non-Medicare pure private pay agency in Kansas City, sold to a national health care provider.  We provided advisory services representing the Seller.

Although November produced few reported acquisitions, we believe December will see many closings as sellers try to get their sale in before larger capital gains take hold.

We also believe that there will be a continuing trend in increased acquisition activity.  There has been little  growth among these public home care companies.  We believe that acquisitions will become the driving force toward future growth.

EBITDA Multiples: 

Multiples of EBITDA from earning results through the 3rd quarter 2012 with stock prices as of November 30, 2012.

Company Multiple of EBITDA
Almost Family 5.3
Amedisys 2.7
Gentiva 1.7

We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

WEBINAR:  This past month we held a webinar on the process of selling a home health agency or hospice.  We were very pleased with the attendance and the positive feed-back.  In January we will be giving another webinar on Building the Value of a Home Health Agency.  You will be sent details….look for them.

Something to think about.  If you’re not laughing, look again.

Honey Pot


A repeat of a Favorite Cartoon:

Cartoon Expression

And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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November 1st Update

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This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.
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Quote of the Month

“A house divided against itself cannot stand”

– Abraham Lincoln, 1858, years prior to the Civil War.  Spoken in the Lincoln/Douglas debates during his unsuccessful bid for the Senate. Two years later he became President, and the divided house did not stand.

UPDATE:  For the month of October the Stoneridge Partners Home Health Index drops 9.6%.

Although the S&P 500 was up 2.4% in September it dropped 2% in October and is now up a little over 12% for the year.  Our  Stoneridge Partners Home Health Index was up 0.5% in September but fell back 9.6% in October.

Although our Index is now up 24.6% for the year, that entire increase took place in the first quarter.  The only stock in our index that is up since April 1, 2012 is Gentiva;  the other three are all down.  On April 1, 2012 the HH Index was at 16.93 and on November 1 it was at 14.67.

All four stocks were down in October with Amedisys leading the downward charge, off over 20%

The high for our Index was set in September, 2008 at 41.75.  Since then a huge drop.  Take a quick look below the graphs at the change in gross profit.  It will provide a clue as to the reason for this drop.

Here are the results for the month of October and YTD:

Company Stock Price 9/30/12 Stock Price 10/31/12 Change in % Month (Dismal) Change in % YTD
Almost Family 21.28 20.73 -2.58% +25.03%
Amedisys 13.82 11.04 -20.12% +1.19%
Gentiva 11.32 9.37 -17.23% +38.8%
LHC Group 18.47 17.52 -5.14% +36.55%
Home Health Index 16.22 14.67 -9.6% +24.6%
S&P 500 1440.67 1412.16 -1.98% +12.29%

We also note that on November  1 Addus HealthCare’s stock was at 5.43 up 1.5% for the month.  This follows an increase of 10% last month.  They are now up over 50% for the year.  Impressive. They are a public company (NASDAQ:ADUS), but not in our HH Index.

GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through October, 2012.

Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through October, 2012.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through October, 2012.  Note the nice pop in the Gentiva stock.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

 

EARNINGS SEASON – Coming up in November will be the results from the third quarter.  In next month’s newsletter we will have a complete report.  Meanwhile we thought it might be interesting to compare gross profit percentages for the 2nd quarter 2012 to 2nd quarter 2010 (the good old days).

When adding up the gross profit for all four public companies in our index for 2nd quarter 2010 and 2012

Quarter Profit %
Gross Profit – 2nd quarter 2010 54.4%
Gross Profit – 2nd quarter 2012 45.5%
Difference -8.9%

It looks like the current revenue run-rate for the four public companies is about $4.3 billion.  A loss of 8.9% of gross profit works out to a loss of annual gross profit dollars of about $382 million.  Something to think about.

MERGER & ACQUISITION ACTIVITY FOR THE MONTH

Nurse-On-Call (NOC):  In a surprise, Emeritus Corporation – Senior Living, the nations largest assisted living and memory care services company, announced that they have entered into an agreement to purchase 91% of Florida’s Nurse-On-Call for $102 million.  Dale Clift, the CEO, will remain a stockholder and continue in his position as CEO.

NOC operates 28 offices in 47 Florida counties.    Revenue is approx. $140 million with an EBITDA of approx. $17 million.

It is interesting to note that we originally brokered the sale of NOC to Dale Clift toward the end of year 2003.  At that time it was a troubled agency, and was going to have difficulty making its Friday payroll.  Dale visited with the owner on Thursday and closed on the transaction the next day.  Done Deal!

The Purchase price was primarily an assumption of debt.  Dale made payroll from his money market account.  Revenue at the time was about $2.5 million.  A nine year trip to $140 million.

Victory goes to the bold.  Congratulations Dale.

Celtic & The Washington Post:  Last month we were taken by surprise when the Post announced their acquisition of  Celtic Healthcare, a $43  million revenue, Pennsylvania based home care and hospice company.  Celtic was founded in 1996 by Arnie Burchianti.

We had the pleasure of speaking with Arnie at last month’s NAHC conference.  He said that the primary reason he decided to go with the Post was that Berkshire Hathaway is a large investor in the Post, and that they take a long term outlook on their businesses…..which was exactly what he was looking for.  He did not want to sellout 100% to a strategic, neither did he  want to sell a majority to a private equity group, only to be forced to sell five years down the road.  As Arnie said….he was looking for a needle in the haystack, and he found it.

Although the Washington Post holds a majority share, Arnie remains a stockholder and CEO.

Allied Health Care Corporation, with Florida Medicare home health agencies in Broward, Palm Beach, and Martin/St. Lucie counties, was merged into Oklahoma based Carter Health Care.  We provided representation to the Sellers.  Congratulations to Carol Brafman and Ron Kaplan for building such a fine organization.

Henry Ford Health System, Beaumont plan to merge.  After much speculation, Beaumont Health System, Royal Oak, Michigan, and Henry Ford System, Detroit have signed a Letter of Intent to merge, creating a new not-for-profit system with eight hospitals in SE Michigan.

These are just a start:  We believe that there will be a continuing trend in increased acquisition activity.  As the numbers state, there has been little  growth among these public home care companies.  We believe that acquisitions will become the driving force toward future growth.

EBITDA Multiples: 

Multiples of EBITDA from earning results through the 2nd quarter 2012 with stock prices as of October 31, 2012.  Gentiva’s EBITDA is through the 3rd quarter.

Company Multiple of EBITDA
Almost Family 5.4
Amedisys 2.8
Gentiva 1.8

We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

WEBINAR:  This past month we held a webinar on the process of selling a home health agency or hospice.  We were very pleased with the attendance and the positive feed-back.  In January we will be giving another webinar on Building the Value of a Home Health Agency.  You will be sent details….look for them.

A Favorite Cartoon: 

  cat Voucher

A repeat of a Favorite Cartoon:

Cartoon Expression

And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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October 1st Update

This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.  See archived updates below.  If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to  [email protected].

Quote of the Month:

 To tax and to please, no more than to love and be wise, is not given to man.” Edmund Burke

UPDATE: Another very good month for the S&P 500, what a nice rally….up 2.4% in September and now up 14.5% for the year.

The Stoneridge Partners Home Health Index (HH Index) has not fared so well, up only 0.5% for the month.   Although our Index is now up 38% for the year, that entire increase took place in the first quarter.  The only stock in our index that is up since April 1, 2012 is Gentiva;  the other three are all down.  On April 1, 2012 the HH Index was at 16.93 and on October 1 it was at 16.22.

LHC Group led this past month with a 6.1% increase.  Gentiva, after an explosive August, up 65%, continued with a 3.1% increase in September.

The high for our Index was set in September, 2008 at 41.75.

Both Almost Family and Amedisys were down for the month.  Gentiva has the greatest percentage gain for the year, up 68%.

Here are the results for the month of September and YTD:

Stock Price Change in %
8/31/12 9/30/12 Month YTD   
Almost Family 22.08 21.28 -3.62% +28.35%
Amedisys 14.08 13.82 -1.85% +26.67%
Gentiva 10.98 11.32 +3.1% +66.70%
LHC Group 17.40 18.47 +6.15% +43.96%
Home Health Index 16.14 16.22 +0.54% +37.86%
S%P 500 1406.58 1440.67 +2.42%% +14.56%

We also note that on October 1  Addus HealthCare’s stock was at 5.35, up 10% for the month.  This follows an increase of 10% last month.  They are now up a stellar 50% for the year.  They are a public company (NASDAQ:ADUS), but not in our HH Index.

GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through September, 2012.

Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through September, 2012.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through September, 2012.  Note the nice pop in the Gentiva stock.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

 

EARNINGS SEASON – BY THE NUMBERS:


Because we feel this issue is so important we are repeating this chart from last month’s column.  Revenue and gross margin for all four companies, 2nd quarter 2012 compared to second quarter 2011.   We feel that this is the reason our HH Index is struggling.

 in thousands Q2 2011 Q2 2012 Difference Difference
Amedisys Revenue   368,424   378,498 10,074 2.7%
Gross Margin   178,998   166,232 (12,766) (7.1%)
% Gross Margin     48.6%     43.9%
Almost Family Revenue    81,721    86,892 5,171 6.3%
Gross Margin    42,106    41,554 (552) -1.3%
% Gross Margin     51.5%    47.8%
LHC Group Revenue   161,015   158,055 (2,960) (1.8%)
Gross Margin    74,999     65,837 (9,162) (12.2%)
% Gross Margin     46.6%     41.7%
Gentiva Revenue   448,712   427,691 (21,021) (4.7%)
Gross Margin   214,561   204,954 (9,607) (4.5%)
% Gross Margin     47.8%     47.9%
TOTALS Total HHI Revenue 1,059,872 1,051,136 (8,736) (0.8)%
Total HHI Gross Margin   510,664   478,577 (32,087) (6.3%)
% Gross Margin      48.2%      45.5% (2.7%)

This clearly shows why our HH Index is struggling.  Year-to-year total revenue  was down 0.8%, and, in gross profit dollars, it was even worse….down over $32 million or 6.3%.

We note that  total gross profit margin dropped 5.6%….from 48.2% to 45.5%, and every company was down in gross profit dollars.

Addus’ 2nd quarter revenue was 70.3 million, up 3% over last year’s 2nd quarter.  They were also up slightly in gross profit dollars, +1.5%.

MERGER & ACQUISITION ACTIVITY FOR THE MONTH

The Washington Post:  We were certainly surprised when the Post announced their acquisition of  Celtic Healthcare, a $43  million revenue, Pennsylvania based home care and hospice company.  Celtic was founded in 1996 by Arnie Burchianti, who will continue to run the business as CEO and co-owner.  The Post will provide capital for expansion.  Congratulations Arnie!

Gentiva:  Gentiva announced its acquisition of North Mississippi Hospice, based in Oxford, MS.

Prince of Peace Home Health, a Medicare agency in Phoenix, Arizona sold  to a local health care provider with Stoneridge Partners representing the Seller.

We believe that there will be a continuing upward trend in acquisition activity.  As our chart above shows, there has been no growth among these public home care companies.  Acquisitions will have to become the driving force toward future growth.

EBITDA Multiples: 

Multiples of EBITDA from earning results through the 2nd quarter 2012 with stock prices as of September 30, 2012.

Company Multiple of EBITDA
Almost Family 5.5
Amedisys 3.4
Gentiva 1.9

We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

VISIT US AT NAHC in Orlando October 22-24.  You will, as always, find us at our booth at the Expo.  We will also be giving two presentations.  The first presentation will discuss how to build the value of a home health agency or hospice for M&A purposes, and the second presentation will go through the entire process of negotiating a sale.

For this second presentation we will be joined by Brian Bruenderman, the Director of Development for Almost Family (NASDAQ:AFAM).  You will find this presentation not only very informative but also very entertaining.

www.nahc.org.

WEBINAR:  Check out the link at the top of this page to our October 16 Webinar where we will review the entire negotiating process of selling a home health agency or hospice.  Join us for a fun and fact filled session.

A Favorite Cartoon: 

Debate 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 

A repeat of a Favorite Cartoon:

Cartoon Expression

And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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September Update

Stoneridge Webinar Banner

This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.  See archived updates below.  If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to  [email protected].

Quote of the Month:

 “You’re bored with politics?  Kid, right now is when it gets interesting.” Peggy Noonan, Wall Street Journal

Isn’t that the truth as the Republicans join the battle, and the Democrats get ready for Charlotte.  We note that Mitt Romney will be speaking at NAHC’s annual October conference in Orlando.  www.nahc.org

The S&P 500, after gaining  a very respectable 1.3% in July, followed  up with a 2% gain in August, and now is up close to 12% for the year.

The Stoneridge Partners Home Health Index did much better, jumping close to 10% for the month,  now up 37% for the year.

This past month however belonged to Gentiva, who’s stock price jumped from $6.66 to $10.98….an impressive 65% increase in just one month.  This came on the heels of their Q2 earnings announcement, where they exceeded analysts’ expectations.

Our HH Index is  now sitting at 16.14.  The high was set in September, 2008 at 41.75.

The only stock in the HH Index that was down in August was LHC Group.  Gentiva now has the greatest percentage gain for the year.

Here are the results for the month of August and YTD:

Stock Price Change in %
7/31/12 8/31/12 Month YTD   
Almost Family 22.01 22.08 +0.32% +33.17%
Amedisys 12.19 14.08 +15.50% +29.06%
Gentiva 6.66 10.98 +64.86% +62.67%
LHC Group 17.89 17.40 -2.74% +35.62%
Home Health Index 14.66 16.14 +9.86% +37.11%
Gentiva 6.66 10.98 +64.86% +62.67%
LHC Group 17.89 17.40 -2.74% +35.62%
Home Health Index 14.66 16.14 +9.86% +37.11%
S&P 500 1362.16 1379.32 +1.26% +9.68%

We also note that on September 1  Addus HealthCare’s stock sat at 4.87, up 10% for the month and up 36% for the year.  They are a public company (NASDAQ:ADUS), but not in our HH Index.

GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through August, 2012.

Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through August, 2012.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through July, 2012.  Note the nice pop in the Gentiva stock.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

 

EARNINGS SEASON – BY THE NUMBERS:
Revenue and gross margin for all four companies, 2nd quarter 2012 compared to second quarter 2011.  Struggling for growth.

 in thousands Q2 2011 Q2 2012 Difference Difference
Amedisys Revenue   368,424   378,498 10,074 2.7%
Gross Margin   178,998   166,232 (12,766) (7.1%)
% Gross Margin     48.6%     43.9%
Almost Family Revenue    81,721    86,892 5,171 6.3%
Gross Margin    42,106    41,554 (552) -1.3%
% Gross Margin     51.5%    47.8%
LHC Group Revenue   161,015   158,055 (2,960) (1.8%)
Gross Margin    74,999     65,837 (9,162) (12.2%)
% Gross Margin     46.6%     41.7%
Gentiva Revenue   448,712   427,691 (21,021) (4.7%)
Gross Margin   214,561   204,954 (9,607) (4.5%)
% Gross Margin     47.8%     47.9%
TOTALS Total HHI Revenue 1,059,872 1,051,136 (8,736) (0.8%
Total HHI Gross Margin   510,664   478,577 (32,087) (6.3%)
% Gross Margin      48.2%      45.5% (2.7%)

REVENUE DOWN:  Total revenue  was down 0.8%, and, in gross profit dollars, it was even worse….down over $32 million or 2.7%.

We note that  total gross profit margin dropped 5.6%….from 48.2% to 45.5%.  Only Gentiva showed an increase in % margin.  At 47.9% they also had the highest GP margin.

Every company was down in gross profit dollars.

One year ago our Home Health Index was at $16.08.  Today it sits at $16.14.

Addus’ 2nd quarter revenue was 70.3 million, up 3% over last year’s 2nd quarter.  They were also up slightly in gross profit dollars, +1.5%.

Merger and Acquisition Activity

Gentiva:  Gentiva announced its acquisition of Family Home Care, based in Spokane, Washington.

CareSouth: Augusta, Georgia based CaresSouth Health Systems acquired Boynton Beach, Florida based Alliance Care along with eleven Florida locations.

Kindred:  Louisville, Kentucky based Kindred Health Care Systems (NYSE) finalized their acquisition of IntegraCare Holdings with 47 locations throughout Texas.

  • Purchase Price:  $71 million plus a potential of another $4 million earnout.
  • Revenue: $71 million
  • EBITDA: $9 million
  • Expected synergies: $1.5 million

VNA of Greater Philadelphia, in an interesting transaction, acquired a house call physician practice known as Home Visit Doctors.  Price and terms were not announced, however we can’t help but wonder if the future will hold more such transactions.

Innovative Home Health, a Medicare agency in Lawton, Oklahoma sold  to a large regional home care provider.  Cory Mertz, one of our partners, handled the sale representing the Seller.

We believe that this trend in acquisition activity will continue. As our chart above shows, there has been no growth among these public home care companies.  Acquisitions will become the driving force toward future growth.

EBITDA Multiples: 

Multiples of EBITDA from earning results through the 2nd quarter 2012 with stock prices as of August 31, 2012.

Company Multiple of EBITDA
Almost Family 5.7
Amedisys 3.5
Gentiva 1.9

We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

A Favorite Cartoon:   Every month “The New Yorker” has a contest to create a caption for one of their cartoons.  This month’s contest was:

Winning Caption
Think about this for a moment before reading further.

The winning caption was:

“Could you go back to the front desk, the receptionist has some forms for you to fill out.”  Won by Adam Hackbarth, O’Fallon, MO

 

A repeat of a Favorite Cartoon: “To tax and to please, no more than to love and be wise, is not given to man.” Edmund Burke

 

Cartoon Expression

And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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August Update

This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.  See archived updates below.  If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to  [email protected].

Quote of the Month:

 “We are continually faced with a series of great opportunities, brilliantly disguised as insoluble problems.” John W Gardner

We recently listened to William Dombi, lead attorney with NAHC, speak at the Florida Home Care Conference.  The above quote fits nicely with what he had to say….that there are certainly challenges ahead, but there are also great opportunities in home care.

Following June’s nice gain of 4%, the month of July was pretty blah for the Stoneridge Partners Home Health Index (HH Index). While the S&P 500 gained a respectable 1.3%, our HH Index was up a trifling 0.12%.

In spite of all the issues making headlines i.e. the continuing European economic difficulties, and the stubbornly high unemployment rate, the stock market in general is doing quite well, with the S&P 500 up close to 10% for the year.

Our HH Index is doing even better, now sitting at 14.67, up 24.6% for the year.  The high was set in September, 2008 at 41.75.

The only stock in the HH Index that is down this year is Gentiva.  LHC Group leads, now up 39%.

Here are the results for the month of July and YTD:

Stock Price Change in %
6/30/12 7/31/12 Month YTD   
Almost Family 22.34 22.01 -1.48% +32.75%
Amedisys 12.45 12.19 -2.09% +11.73%
Gentiva 6.93 6.66 -3.90% -1.33%
LHC Group 16.96 17.89 +5.48% +39.44%
Home Health Index 14.67 14.69 +0.12% +24.81%
S&P 500 1362.16 1379.32 +1.26% +9.68%

We also note that on August 1  Addus HealthCare’s stock sat at 4.43, down 9.8% for the month but still up 24% for the year.  They are a public company (NASDAQ:ADUS), but not in our HH Index.

This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through July, 2012.

Note that by hovering your pointer over a spot, you will get the price at that point.

For the past decade, it’s been quite a ride

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through July, 2012.

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through July, 2012.

HOT OFF THE PRESS: 

Last month’s “Hot off the Press” was the Supreme Court’s surprise decision on the Affordable “Obama” Health Care bill, which, in spite of the headlines,  created somewhat of a ho hum with the HH Index.

This month it was the issuance by CMS of the proposed rule regarding 2013 payment rates. The proposal includes the 2013 Market Basket Index (MBI) update of 2.5%, the required 1% under the Affordable Care Act, and the previous set 1.32% case mix creep adjustment.

CMS estimated that the net impact will be a $20 million overall reduction in payments in 2013, or approximately 0.1%. While the base rates would increase, the impact of the wage index changes lowers total expenditures.

This seemed to be a smaller than anticipated decrease, so we thought it would be good news, but again, our HH Index gave the news another big  ho-hum ….barely moving.

The Partnership for Quality Home health Care is a  consortium of home health care providers which includes the large public companies.  It was established in 2010 to work in partnership with government officials to ensure access to quality home healthcare services for all Americans.

They seem to be making progress in Washington, especially in regard to fraud and abuse. “The Partnership couldn’t be more aligned with the government to put controls in place that will be effective in impacting fraud and abuse”.  Check out their web site for updated information:  http://www.homehealth4america.org/about-us

What interests us is the relationship between NAHC and this Partnership.  We were present when an organizational meeting took place.  At that time NAHC was both a supporter and a member of the partnership, and we now note that they are no longer listed as a member.

We can’t help but wonder….is NAHC still a member and if not, was there a conflict that caused them to leave?

We would be interested in your comments.  At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say.

Earnings Announcements:  In the next couple of weeks the public companies will be making their earnings’ releases.  Conference calls are scheduled as follows….information can be found on their web sites:

Amedisys – August 7

LHC Group – August 7

Almost Family – August 8

Gentiva and Addus have already released:

Gentiva’s 2nd quarter revenue was 427.7 million down 5% from last year’s 2nd quarter.  When factoring in closed and sold locations, their revenue is up slightly.

Addus’ 2nd quarter revenue was 70.3 million, up 3% over last year’s 2nd quarter.

We will have a complete wrap-up of these announcements in next month’s column.

MERGER & ACQUISITION ACTIVITY

For the first time in several months there were a couple of announcements from the public companies regarding acquisitions.  We believe that this trend in acquisition activity will continue.  Growth among these public home care companies continues to be slow.  Acquisitions very well may become the driving force toward future growth.

Announcements in the news:

Gentiva Health Services, Inc. (NASDAQ: GTIV), announced the acquisition of Advocate Hospice, located in Danville, Indiana.

LHC Group Inc. (Nasdaq:LHCG), continues their investment into hospital based home health agencies.  It appears to be a strategy that is working well for them. This month they acquired 100 percent of the assets of Huguley Home Health Agency from Huguley Memorial Medical Center in Burleson, Texas.

Pro Care Home Health, a certified home health firm based in Hartford, KY, has been acquired by Christian Care Communities.

UMass Memorial Health Care announced that they have reached a preliminary agreement to sell its home health and hospice service to VNA Care Network & Hospice of Worcester. Terms were not disclosed.

EBITDA Multiples:  Multiples of EBITDA from earnings results through the 1st quarter 2012 with stock prices as of July 31, 2012.

Company Multiple of EBITDA
Almost Family 5.3
Amedisys 2.3
Gentiva 1.1

A Favorite Cartoon:

Eye Chart Cartoon

A repeat of a Favorite Cartoon: “To tax and to please, no more than to love and be wise, is not given to man.” Edmund Burke

 

Cartoon Expression

And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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July 1 Update

This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.  See archived updates below.  If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to  [email protected].

Quote of the Month:

 “With the recent Supreme Court decision on health care, the home health industry is still front and center for cuts … but, bottom line, more people are going to be on the rolls in the long term.” Oppenheimer analyst Michael Wiederhorn

What an interesting month.  First we will review the results for the month of June (positive),  then we will dive into the effect the health care bill seems to be having on the public home care stocks.

For the month of June the S&P 500 gained 4%, a nice month, but our Stoneridge Partners Home Health Index (HH Index) did even better, coming in with a 5.6% gain, and now up 24.7% year to date (YTD).  What a pleasant change from two straight months of decline

There was however a wide divergence between the individual companies within the index.  Almost Family trailed with only a 0.5% gain while Gentiva led the pack, gaining 23.5%.  It is interesting to note however that last month Gentiva trailed the group with a hefty 32% drop.

All of these stocks are now up for the  year, with Almost Family leading the pack, up 34.7% YTD.

Our HH Index now sits at 14.67. The high was set in September, 2008 at 41.75.

Here are the results for the month of June and YTD:

Stock Price Change in %
5/31/12 6/30/12 Month YTD   
Almost Family 22.23 22.34 +0.5% +34.7%
Amedisys 10.97 12.45 +13.5% +14.1%
Gentiva 5.61 6.93 +23.5% +2.7%
LHC Group 16.75 16.96 +1.2% +32.2%
Home Health Index 13.89 14.67 +5.6% +24.7%
S&P 500 1310.33 1362.16 +4.0% +8.3%

We also note that Addus HealthCare’s stock now sits at 4.91, up a whopping 23.1% for the month and now up 37.5% YTD.  They are a public company (NASDAQ:ADUS), but not in our HH Index.

This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through June, 2012.

Note that by hovering your pointer over a spot, you will get the price at that point.

For the past decade, it’s been quite a ride, and we’ve been on that ride with you

 

[iframe_loader src=”https://stoneridgepartners.com/hhi/hhi.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through June, 2012.

[iframe_loader src=”https://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through June, 2012.

[iframe_loader src=”https://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

HOT OFF THE PRESS: 

Hot off the press?  It  can’t get hotter than Thursday’s Supreme Court surprise decision on the Obama Health Care bill.

The Wall Street Journal immediately ran an article Friday morning, commenting on a drop in the home care stocks, but then, on Friday, the stocks somewhat came back.

Our index ended Wednesday at 14.8.

On Thursday, after the big announcement, our  HH Index dropped 4.3% to 14.1.

After Friday the index was back up to 14.7 for a 1% drop over the two days.

Meanwhile the S&P 500 had a spectacular Friday, and for that same two day period gained 2.3%.

The HH Index was down 1% while the S&P 500 was up 2.3%.  Certainly too short of a time period for any generalization, but interesting to note.  At first blush it would seem that, regarding home health, the new health care law has not been looked upon favorably by the investment community.

We spoke to some executives of larger agencies dealing primarily with Medicare, and there was a bit of a ho-hum, with Medicare reimbursement still up in the air.  Other than that it appears that there are pluses and minuses for home health and hospice.

On the plus side it looks like Medicaid roles will be increased.

On the minus side, the requirement for agencies with over 50 employees to provide health care will certainly be problematic for some agencies, esp. for private duty agencies where there are W-2 agencies competing with 1099 agencies and registries.

We also find it interesting that our association, The National Association for Home Care and Hospice (NAHC) immediately sent out an email with the following subject line: “NAHC Urges Advocates to Contact Congress: Health Care Advocates Hail Historic Supreme Court Ruling”.

Do they mean that if you are a health care advocate you are in favor of this law?

Please write us with your comments:  We are interested in your thoughts as to how this law will effect your business.  At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say.

Information on The Partnership for Quality Home health Care:  A consortium of home health care providers including the large public companies and NAHC.

It was established in 2010 to work in partnership with government officials to ensure access to quality home healthcare services for all Americans. Representing more than 1,500 community- and hospital-based home healthcare agencies nationwide, the Partnership is dedicated to developing innovative reforms to improve the program integrity, quality, and efficiency of home healthcare for our nation’s seniors.

“The Partnership couldn’t be more aligned with the government to put controls in place that will be effective in impacting fraud and abuse”.  Check out there web site for updated information:

http://www.homehealth4america.org/about-us

MERGER & ACQUISITION ACTIVITY

For another month there have been no announcements from these public companies regarding any acquisition activity at all.

We believe this will soon change as there has been very little in the way of organic growth among these public companies.  We believe that acquisitions are an engine that can and will provide growth!

Here at Stoneridge Partners we are now seeing more acquisition activity coming from private equity rather than the public companies.

Announcements in the news:

Genesis HealthCare announced its acquisition of Sun Healthcare Group, Inc.  The transaction price announced is$8.50 per share of common stock resulting in a transaction value of approximately $275 million, a 43.1% premium over the price of the stock at the time of the announcement.

Arcadia Services, Inc. has gone through a stock transfer with a newly formed Holding company, Arcadia Holdings II, Inc. With Comerica as the senior lender, Arcadia Services now finds itself under new ownership. The new CEO, John Elliott, has returned after five years to resume operations, focusing on the home care and staffing industry. The stock transfer has allowed Arcadia Services to become a privately owned company once again. Mr. Elliott plans to rebuild momentum lost over the past few years through focus on the

EBITDA Multiples:  Multiples of EBITDA from earnings results through the 1st quarter 2012 with stock prices as of June 30, 2012.

Company Multiple of EBITDA
Almost Family 5.4
Amedisys 2.4
Gentiva 1.1

A Favorite Cartoon:

Grrrr                                                                            Grrrrr is not a word

 

A Repeat of a Favorite Cartoon:

 

Cartoon Expression

And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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Home Health Index | June 2012

Stoneridge Partners | Home Health Index June 2012: What a lousy month! Both the Stoneridge Partners Home Health Index (HH Index), and the market in general were down. The S&P 500 put in its worst month in two years, while our HH Index did even worse.

We started out the year with such optimism. For the first three months our HH Index showed a very nice increase.  But in April we dropped 4%, and now May has knocked us down another 14%. We are still up for the year however…. about 18% while the S&P 500 is up only 4%.  But we are definitely headed the wrong way.

The only stock down for the year is Gentiva. Almost Family has turned in the best result for the year….up over 34%.

Our HH Index now sits at 13.89. The high was set in September, 2008 at 41.75.  Quite a difference.

All four companies were down for the month of May. LHC Group turned in the best performance, down only 5.4%, while Gentiva turned in the worst performance, down over 32%.

Here are the results:

Chart6

We also note that Addus HealthCare’s stock was down 13.6% but remains up about 12% for the year.  They closed May at 3.99.  They are a public company (NASDAQ:ADUS), but not in our HH Index.

 

 

HOT OFF THE PRESS: 

This was earnings season for the public companies.  We took a look at revenue and gross profit margins for the previous four quarters.  If you are looking for growth you are looking in the wrong place.

The revenue run rate for the four public companies at the end of the 1st quarter in 2011 was about $4.29 billion vs. $4.22 billion for the 1st quarter in 2012….down about 1.7%.

Even worse however was the gross profit….down about $11.4 million or 7.2%.

The only company showing a positive result was Almost Family, and their increase was due in a large part to their acquisition in the 3rd quarter, 2011 of Cambridge Home Health.

The result:

Wo Graphs

Totals in chart form:

Graph Final

“THE PARTNERSHIP FOR QUALITY HOME HEALTH CARE” is a consortium of home health care providers including the large public companies and NAHC.  Previously they put forth a proposal to limit “Outliers”, which was adopted and is reported to have produced savings to the Medicare program of $860 million.

The Partnership has made additional proposals to CMS for further controls.  According to the Almost Family earnings report, “The Partnership couldn’t be more aligned with the government to put controls in place that will be effective in impacting fraud and abuse”.

MERGER & ACQUISITION ACTIVITY

For another month there have no announcements from these public companies regarding any acquisition activity at all.

We believe this will soon change as there has been very little in the way of organic growth among these public companies.  We believe that acquisitions are an engine that can and will provide growth!

Here at Stoneridge Partners we are now seeing more acquisition activity coming from private equity rather than the public companies.

Announcements in the news:

We are pleased to announce that Jordan Health Services acquired Providence Homecare Services, a Medicare home care provider in Lufkin, Texas.   We provided sell side representation.

The KPC Group, based in Riverside, California, announced their acquisition of Ramona VNA & Hospice.  Their name has been changed to Empire Home Health & Hospice.

This is truly a global business.  Linde Healthcare, one of Linde Group’s three strategic growth pillars, announced that it has completed its acquisition of Air Product’s Continental European home care business.  This comprises homecare operations in Belgium, France, Portugal and Spain, with sales of €390 million, 250,000 patients and 850 employees.

EBITDA Multiples:  Multiples of EBITDA from earnings results through the 1st quarter 20012 with stock prices as of May 31, 2012.

Company Multiple of EBITDA
Almost Family 5.1
Amedisys 2.1
Gentiva 0.8

 

A Favorite Cartoon:

Stoneridge Partners | Home Health Index June 2012

 

Quote of the Month: “The power to tax involves the power to destroy”  Chief Justice John Marshall, 1819


Stoneridge Partners | Home Health Index June 2012: The Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly. If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to [email protected]

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Home Health Index | May 2012

Stoneridge Partners | Home Health Index May 2012: It was kind of a blah month for the stock market in general and a little worse for our home health index (HH Index). After a great first quarter, the S&P 500 was down 0.75% in April. (Please note: Graphs and charts May 2012 are no longer available, but the data can still be seen in the recent issues of the Home Health Index.)

But after four straight months of terrific increases (up 44% in the first quarter alone), our HH Index lost about 4% in April….2% of which was on the final day of the month.

Our HH Index now sits at 16.27. The high was set in September, 2008 at 41.75. The only company that showed an increase in their stock price was Amedisys, closing out the month at 14.73, up 1.87%.

April Results:

Almost Family, down 6.3%
Amedisys, up 1.9%
Gentiva, down 5.4%
LHC Group, down 4.4%
Home Health Index, down 3.9%
S&P 500 down 0.7%

We also note that Addus HealthCare’s stock, after a 37.5% increase in March,  closed out April down 6.7%.  They are a public company (NASDAQ:ADUS), but not in our HH Index.

 

HOT OFF THE PRESS: 

Headline Florida: On May 2nd the feds charged 107 suspects with submitting $452 million in false bills to Medicare in seven U.S. cities. In Miami alone, 59 of those defendants — including three nurses and two therapists — were accused of trying to steal $137 million from the taxpayer-funded healthcare program.

Not surprisingly, “South Florida has the lion’s share of the cases,” U.S. Attorney Wifredo Ferrer told reporters after 22 indictments were unsealed in Miami federal court.

This follows up on last month’s announcement of the arrest of a Dallas physician, his office manager, and five owners of home health agencies who were arrested on charges related to their alleged participation in a nearly $375 million health care fraud scheme involving fraudulent claims for home health service.

Earnings Season:  All four public companies will be announcing their 1st quarter earning this week.  Almost Family led with their announcement on May 2.  Genitva and LHC Group are next next up on May 3rd, then Amedisys on May 8.

To listen to their reports you can go to their websites (links below) for dial-in information.  We will be giving a summary in next month’s update.

Revenue Growth: For the fourth quarter of 2011, we totaled the revenue for all four HH Index public companies and compared that to the third quarter.   According to their earnings reports, total revenue for all four companies in the 4th quarter, 2011 equaled $1.067B  compared to third quarter of $1.063B, which works out to the plus side a very modest $4M or 0.37%.

Revenue run rate based on the fourth quarter annualized follows, along with their market capitalization as of March 31, 2012 as published in Yahoo Finance:

Annual Run Rate (M) Market Cap (M)
Almost Family 357.3 243.6
Amedisys 1,483.0 433.8
Gentiva 1,796.8 270.1
LHC Group 630.8 348.7

 

“THE PARTNERSHIP FOR QUALITY HOME HEALTH CARE” is a consortium of home health care providers including the large public companies and NAHC.  Previously they put forth a proposal to limit “Outliers”, which was adopted and is reported to have produced savings to the Medicare program of $860 million.

The Partnership has made additional proposals to CMS for further controls.  According to the Almost Family earnings report, “The Partnership couldn’t be more aligned with the government to put controls in place that will be effective in impacting fraud and abuse”.

THE SENATE FINANCE COMMITTEE met again last week for a hearing on Medicare fraud and abuse.  Daniel Levinson, head of the Office of the Inspector General gave testimony that home health is an important ingredient in both delivering  medical care and saving money.  He went on to say that the government needs to develop better analytics to detect fraud, and to better regulate and monitor those that do get in.

MERGER & ACQUISITION ACTIVITY

There have not been any announcements from these public companies regarding any acquisition activity at all.  The market appears to be a little muddied as buyers factor in future decreases in Medicare reimbursement, whiles Sellers want 2009 prices.

We believe this will soon change as there has been very little in the way of organic growth among these public companies.  Acquisitions are an engine that can provide growth!

Announcements in the news:

Ancor Capital Partners sold Tritax Healthcare Services, a DFW home healthcare services provider to Jordan Health Services.  Ancor will now focus on pediatric care.

Home Health International, Inc. (PINKSHEETS: HHI) announced that is has entered into a letter of intent to acquire Mount Aubern, Inc. dba Associated Home Health, a Medicare-certified home health agency based in Florida.

Hospice Advantage, a Michigan based hospice, announced its acquisition of HC Healthcare (formerly Hospice Complete) located in Alabama.  Hospice Advantage now has over 50 locations nationwide.

Millenium Home Health Care, Broomall, PA announced that Saints Home Healthcare, a Medicare-certified home health care provider in Smyrna, Delaware is now part of their family of providers.

The Ensign Group, Inc. (NASDAQ:ENSG) announced their acquisition of Zion’s Way Home Health & Hospice based in St. George, Utah.

UPDATE: April, 2012 Results

For the month of April, the S&P 500 was down 0.75% while the Home Health Index was down 3.91%.

Percentage change in stock prices for these public companies for the month of April and Year to Date (YTD) follows:

Company April YTD
Almost Family -6.27% +47.04%
Amedisys +1.87% +35.01%
Gentiva -5.37% +22.67%
LHC Group -4.43% +38.04%
Home Health Index -3.91% +38.30%
S&P 500 -0.75% +11.16%
Company Multiple of EBITDA
Almost Family 5.9
Amedisys 2.8
Gentiva 1.3

Multiples of EBITDA based upon the earnings results for the year 2011with the stock prices as of April 30, 2012.

 

Stoneridge Partners | Home Health Index May 2012 Cartoon

Stoneridge Partners | Home Health Index May 2012

Quote: “A government that robs Peter to pay Paul can always depend on the support of Paul”. – George Bernard Shaw


Stoneridge Partners | Home Health Index May 2012: This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly. If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to [email protected].

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Home Health Index | April 2012

Stoneridge Partners | Home Health Index April 2012: The S&P 500 closes out the month up 3.1% and the first quarter up 12%…the best start to a year since 1998. Certainly nice results, but our Stoneridge Partners Home Health did even better. Bolstered by the strong market in general and perhaps a little clarity in future reimbursement, our Home Health Index gained 8.9% in March and is now up a whopping 44% for the first quarter. (Please note: Graphs and charts for the Stoneridge Partners | Home Health Index April 2012 are no longer available, but the data can still be seen in the recent issues of the Home Health Index.)

After nine straight months of decline, the HH Index has now been to the plus side four straight months….a very nice change.

Our HH Index now sits at 16.94. The high was set in September, 2008 at 41.75, so we have quite a ways to go….but, with four straight months to the upside, perhaps we’re on the way.

March’s increase was again led by Almost Family, up 13.7% and 57% YTD.

Amedisys came in a close second, up 12.5% in March.

March Results:

Almost Family, up 13.7%

Amedisys, up 12.5%

Gentiva, up 11.5%

LHC Group, up 8.9%

Home Health Index, up 11.8%

S&P 500 up 3.1%

We also note that Addus HealthCare’s stock closed out the month at $4.95, up a whopping 37.5% and now up 38.6% YTD.  They are a public company (NASDAQ:ADUS) but not in our HH Index.

Revenue Growth:  We totaled the revenue for all four HH Index public companies for the fourth quarter of 2011 and compared that to the third quarter.   According to their earnings reports, total revenue for all four companies in the 4th quarter, 2011 equaled $1.067B  compared to third quarter of $1.063B, which works out to the plus side a very modest $4M or 0.37%.

Revenue run rate based on the fourth quarter annualized follows, along with their market capitalization as of March 31, 2012 as published in Yahoo Finance :

Annual Run Rate (M) Market Cap (M)
Almost Family 357.3 243.6
Amedisys 1,483.0 433.8
Gentiva 1,796.8 270.1
LHC Group 630.8 348.7

As we mentioned in last month’s issue, Almost Family, in their earnings report, discussed their outlook for Medicare reimbursement in 2012.  Their computation took into account the market basket update, a downward adjustment of the case mix creep, the effect of reduced payments for high therapy episodes, the removal of two hypertension codes, re-calibrated case-mix weights, and a case-mix adjustment shifted to 2013.

Pretty complex, right? But the end result is an estimate that they feel will result in a 4.5% to 5.0% reduction in Medicare reimbursement in 2012.

MedPac issued their annual report, which again included two recommendations to Congress from last year’s report:

  • Create a home health copay.
  • Authorize faster case-mix changes to further reduce reimbursement

They report that freestanding home health agency margins will average 13.7%.  The report concludes “the high margins for home health care in 2011 reflect that payments substantially exceed costs and that reductions and administrative adjustments by CMS have not significantly reduced payments.”

Headline Dallas: and the story that continues to be part of every discussion regarding home health care: A Dallas physician, the office manager of his medical practice, and five owners of home health agencies were arrested on charges related to their alleged participation in a nearly $375 million health care fraud scheme involving fraudulent claims for home health service.

CMS also announced the suspension of an additional 78 home health agencies associated with the Dallas physician based on credible allegations of fraud against them.

If you would like a list of just who those 78 agencies are please let us know.

MERGER & ACQUISITION ACTIVITY

There has been very little in the way of public announcements regarding M&A. The market appears to be a little muddied as Buyers factor in future decreases in Medicare reimbursement, while Sellers want 2009 prices.

Susan Moyer, one of our partners, closed on another agency.  The Home Team of Kansas, primarily a Medicaid reimbursed agency, sold to a larger home care company.  Susan represented the seller.

We also note that TheraCare Home Health, a Texas based Medicare agency, sold to Cantex Senior Communities.

In the last two months Bayada Home Health Care acquired and transitioned 16 Nursefinders Home Care agencies, part of an AMD Health Care Company.

And, as reported last month, Arkansas based Aseracare Home Care & Hospice has now completely pulled out of Florida, closing down all of their locations.

LaFayette, LA:  An interesting development continues at LHC Group, as reported last month by Reuters – Private equity firm TPG Capital is considering making an offer for LHC Group, two people familiar with the matter said.

“Private equity makes more sense at this point,” said Kevin Ellich, senior research analyst at Piper Jaffray & Co. “You take the company private and deal with the regulatory and reimbursement headwinds in the next couple of years.”

One has to ask whether private equity also makes sense at other public home health companies as well.   Low multiples, increased regulations, Sarbanes-Oxley?  Get me out of here.

Visit Us: 

April 23-24 in Chicago for Decision Health’s M&A Home Health Conference. There will be two full days of presentations by the industry leaders. This is always a great conference and a must if you are even considering a sale of your agency.

UPDATE: March, 2012 Results

For the month of March, the S&P 500 was up 3.13% while the Home Health Index was up 11.8%.

Percentage change in stock prices for these public companies for the month of March and Year to Date (YTD) follows:

Company March YTD
Almost Family +13.7% +56.9%
Amedisys +12.5% +32.58%
Gentiva +11.5% +29.63%
LHC Group +8.9% +44.4%
Home Health Index +11.8% +43.9%
S&P 500 +3.1% +12.0%
Company Multiple of EBITDA
Almost Family 6.4
Amedisys 2.7
Gentiva 1.4

Multiples of EBITDA based upon the earnings results for the year 2011with the stock prices as of March 31, 2012.

 


Quote of the Month: “This year has been all about people coming away from the abyss that the world might end and now putting risk back on. We’re back to normalcy.”  Bob Doll, Money Manager, BlackRock,Inc.


Stoneridge Partners | Home Health Index April 2012: This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly. If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to  [email protected].

 

 

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Home Health Index | March 2012

Stoneridge Partners | Home Health Index March 2012: The Dow Jones closes out February at over 13,000 for the first time in about four years, and the S&P 500 is up 8.6% for the year. Nice results, but our Stoneridge Partners Home Health Index did even better, gaining 17% in February and is now up 28% for the year. (Please note: Graphs and charts from Stoneridge Partners | Home Health Index March 2012 are no longer available, but the data can still be seen in the recent issues of the Home Health Index.)

After nine straight months of decline, the HH Index has now been to the plus side for three straight months – very nice change. This past month’s increase was lead by Almost Family, up 21% in February and 38% YTD. LHC Group came in a close second, up 15% for February and 33% YTD.

February Results:

Almost Family, up 22.9%
Amedisys, up 22.4%
Gentiva, up 8.1%
LHC Group, up 15%
Home Health Index, up 17%
S&P 500 up 4.1%

The high for our HH Index was set in September, 2008 at 41.75, so we have quite a ways to go….but  we’re on the way.

We also note that Addus HealthCare’s stock closed out the month at $3.60/share, down 1.4% and up 0.8% YTD.  They are a public company (NASDAQ:ADUS) but not in our HH Index.

 

The month of February brought earnings results from all four companies for the year 2011.

Revenue Growth:  We totaled the revenue for all four companies for the fourth quarter and compared that to the third quarter to try to get some direction.

Total revenue for all four companies in the 4th quarter (000) equaled $1,067,000 compared to third quarter of $1,063,000, which works out to the plus side about $4M or 0.37%.

Almost Family lead with a 3.6% quarter to quarter increase, and LHC Group was up 2.8% quarter to quarter.  Amedisys and Gentiva were down slightly, which was probably to be expected as they closed or sold a number of under-performing branches.

Replays of the earnings reports are available on the individual company websites, certainly interesting comments. Almost Family discussed in detail the changes that took place in 2011, and their outlook for future reimbursement.

Their computation takes into account, not only an increase in the market basket update and a downward adjustment of the case mix creep, but also the effect of reduced payments for high therapy episodes, the removal of two hypertension codes, re-calibrated case-mix weights, and a case-mix adjustment shifted to 2013.

The end result is an estimate that they feel the end result to them will be a 4.5% to 5.0% reduction in Medicare reimbursement in 2012.

Of course each agency’s numbers will differ somewhat.  Different numbers….different results, and, in speaking with knowledgeable owners and executives around the country, we have heard a wide range of estimates for 2012…..all of them were down.

Headline Dallas and perhaps the most important story of the monthA Dallas physician, the office manager of his medical practice, and five owners of home health agencies were arrested on charges related to their alleged participation in a nearly $375 million health care fraud scheme involving fraudulent claims for home health service.

CMS also announced the suspension of an additional 78 home health agencies associated with the Dallas physician based on credible allegations of fraud against them.   (Does anyone know who those 78 agencies are?  If so please let us know).

MERGER & ACQUISITION ACTIVITY

There as been very little in the way of public announcements regarding M&A.  The market appears to be a little muddied as Buyers may factor in future decreases in Medicare reimbursement, while Sellers want 2009 prices.

Susan Moyer, a partner in our office, completed that sale of a nice New Mexico non-Medicare agency.  Congratulations Susan.

Bayada Home Health Care acquired and transitioned 16 Nursefinders Home Care agencies, part of an AMD Health Care Company at the beginning of the month.

We recently attended (and sponsored) NAHC’s private duty conference in Las Vegas and had the opportunity to speak with Peter Sosnow of SeniorBridge to discuss the recent sale of their company to Humana.  He states that this is a “done-deal” only waiting for regulatory approvals (New York) for finalization. Perhaps June.

On another interesting front Arkansas based Aseracare Home Care & Hospice has completely pulled out of Florida, closing down all of their locations.

LaFayette, LA:  One of the more interesting announcements among our public companies this past month came from the LHC Group….the following as reported by the Associated Press:

“LHC Group said that they were in the process of a review that would involve an exploration and evaluation of a range of strategic alternatives to enhance stockholder value.

It did not detail what those options might be — and did not set a timetable for when the review might be finished.  Generally, when a company undertakes such a review, options include share buybacks, a share dividend or sale of the company.”

One has to wonder if a sale of the company is in the works, kind of a reverse IPO…..more like an FPS (Final Public Sale).  Increased regulations, Sarbanes-Oxley?  Get me out of here.  Perhaps the decrease in IPOs has to do with these very issues.

Visit Us: 

March 14-16 in Chicago at the Illinois HomeCare & Hospice annual conference, where we will be giving a presentation on increasing the value of a home health agency.

April 23-24 in Chicago for Decision Health’s M&A Home Health Conference.  There will be two full days of presentations by the industry leaders.  This is always a great conference and a must if you are considering a sale of your agency.

https://www.decisionhealth.com/homehealthmergers/index.html

UPDATE: February, 2012 Results

For the month of February, the S&P 500 was up 4.1% while the Home Health Index was up 17.0%.

Percentage change in stock prices for these public companies for the month of February and Year to Date (YTD) follows:

Company February YTD
Almost Family +21.4% +21.4%
Amedisys +23.4% +17.8%
Gentiva +8.1% +16.3%
LHC Group +15.0% +32.7%
Home Health Index +17.0% +28.7%
S&P 500 +4.1% +8.6%

Multiples of EBITDA based upon the earnings results for the year 2011with the stock prices as of February 29, 2012.

Company Multiple of EBITDA
Almost Family 5.6
Amedisys 2.4
Gentiva 1.2

 

Quote: “In the long term, we believe it will ultimately prove economically impossible for our nation to meet its commitment to provide health care for our elderly without a strong and vibrant home health industry.”  William Yarmouth, CEO Almost Family


 

And the next time you take a cruise ladies….pack a pair of these:

Stoneridge Partners | Home Health Index March 2012

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Stoneridge Partners | Home Health Index March 2012

US Debt:

As a final note we would like to point out that our national debt is now running more than 100% of our GDP, which puts us in the company of Greece, Italy, Ireland and Portugal…we’re all over 100% of GDP.  The only difference being that we print money, they can’t.  By way of comparison, Australia is at 27%.

Stoneridge Partners | Home Health Index March 2012


Stoneridge Partners | Home Health Index April 2012: This Home Health Index (HH Index) measures the performance of four publicly traded home health companies,
all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED).  This index is updated monthly. If you would like to receive a monthly e-mail of this update,  please e-mail us your name and e-mail address to [email protected]

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