Home Health Care Stocks Slipped Before HHGM Decision
Home health care stocks fell sharply in October, perhaps on jitters related to the then-forthcoming home health groupings model (HHGM) decision, according to the latest data in the Home Health Index tracked by Stoneridge Partners. But the decision ultimately fell in the industry’s favor: The Centers for Medicare & Medicaid Services (CMS) on Nov. 1 released its final rule for the home health care prospective payment system (PPS) 2018 update without finalizing HHGM.
In the weeks leading up to the decision, however, the index reflected nervous anticipation among home health companies. The index, which tracks market values of three of the largest publicly traded home health care companies in the U.S.—Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG)—dropped 11.73% in October compared to the previous month.
The Index lagged behind the S&P 500, which ticked up 2.23% in October. And October’s drop is another sharp contrast to the Index’s rebound seen in September.
Investors were likely on edge over HHGM, which threatened to upend the home health payment system, cutting hundreds of millions in payments within its proposed changes.
“The big news here is what happened with HHGM,” said Stoneridge President Rich Tinsley. “That should overshadow many of the month’s losses. Investors can be confident HHGM is off the table for the immediate future.”
Lafayette, Louisiana-based LHC Group’s stock shed 6.16% in October. Year to date, LHC Group’s stock has climbed 45.62%, which is the largest yearly gain on the Index.
Amedisys, meanwhile, lost the most value in October. The Baton Rouge, Louisiana-based company’s stock value tumbled 16.99% in the month. Year to date, its share prices are still up 8.96%, according to the Index.
Louisville, Kentucky-based Almost Family also saw its stock value sag in October. The company lost 13.59% that month, erasing some of its 2017 gains. The company’s year-to-date share value was up just 5.22% in October.
Addus HomeCare (Nasdaq: ADUS), which is not included in the index because so little of its income comes from Medicare, saw no change in its share value in October. Year to date, Addus’s stock price has risen 0.71%.
Quote Of The Month
“There’s an inaccurate perception among the American public that hospice means you’ve given up. Those of us who have worked in the field have seen firsthand how hospice and palliative care can improve the quality of life. There’s a growing body of research showing that hospice and palliative care may prolong the lives of some people who receive care. However, all too often, families sign on with hospice very late in the process. We often hear: I wish we had known about you sooner!” – J. Donald Schumacher, president and CEO of the National Hospice and Palliative Care Organization.
Read the Full Article Here: November is National Home Health, Hospice and Palliative Care Month
See It To Believe It!
The Stoneridge Partners Home Health Index (HH Index) is updated monthly and measures the performance of these three publicly traded home health companies, all listed on the NASDAQ:
- Almost Family (AFAM)
- 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 for over 14 years, going back to 2002.
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 over the past 24 months.
This graph compares the HH Index to the price of Addus stock (non-Medicare).
(Home Health Index November 2017 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
|Company||10/31/17||1 mos change||YTD change||10/31/16||10/31/15|
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)||10/31/17||10/31/16|
|HH Index Total||3712||2980|
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*||118%||97%|
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*||16.19||13.51|
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 it’s reporting. (Home Health Index November 2017 | Stoneridge Partners)
SOLD by Stoneridge!
- Stoneridge represented a private pay home care company in Florida in a transaction that closed in October, 2017. Partner, Ben Bogan, provided sell-side advisory services for this transaction.
Recent Transactions From Around The Country
- Odyssey Behavioral Healthcare, a portfolio company of Nautic Partners, acquired Selah House, an eating disorder treatment center for women in Anderson, Indiana.
- Invo Healthcare, a portfolio company of The Wicks Group, The Jordan Company and Post Capital Partners announced the acquisition of Autism Home Support Services, a leading provider of home and center-based Applied Behavioral Analysis (“ABA”) therapy to children diagnosed with autism spectrum disorder.
- Magellan Health, Inc. announced the acquisition of Senior Whole Health, a company focused on serving complex, high-risk populations.
Exclusively Listed For Sale By Stoneridge Partners
Do you know of any acquisitions that have taken place? We are interested in your comments. At the top of this column is a “Contact Tab” with a section for comments. These can be sent anonymously and the return email address can be left blank.
Another Cartoon Favorite from the New Yorker
Home Health Index November 2017 | Stoneridge Partners