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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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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