Home Health Care Stocks Post Solid Response to PDGM

Home Health Care Stocks Post Solid Response to PDGM

July kicked off with big news for home health agencies when the Centers for Medicare & Medicaid Services (CMS) floated plans to both increase payments and overhaul the current prospective payment system with its new Patient-Driven Groupings Model (PDGM).

Overall, positives for the industry appear to have outweighed the negatives as home health care stocks performed strongly in July, according to the latest update of the Home Health Index by Stoneridge Partners.

The Index tracks market values of two of the nation’s largest publicly traded home health care companies: Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG).

Largely buoyed by the success of Nashville, Tennessee-based Amedisys, the Index jumped 14.96% in July over the previous month. In doing so, the Index dramatically outpaced the S&P 500, which gained 4.28% and the S&P showed signs of recovery after a down June.

“The proposed payment rule from CMS is projected to increase Medicare payments to home health agencies in calendar year 2019 by $400 million, or 2.1%, so that’s certainly a good sign for providers,” Stoneridge Partners President Rich Tinsley said. “And even though there are still important concerns regarding PDGM, it is a step forward from the Home Health Groupings Model, mainly in the sense that PDGM offers budget neutrality even after CMS’s 2019 2.1% increase.”

Amedisys’ stock climbed 22.98% in July compared to the previous month. Year to date, Amedisys’ stock more than doubled, increasing by 102.28%.

Lafayette, Louisiana-based LHC Group’s stock in July increased by a more modest 6.81%. Year to date, LHC Group’s share value was up 48.82%.

If included in CMS’ final rule, PDGM would be implemented Jan. 1, 2020. Among its major points, PDGM would change the 60-day episode of care unit of payment to 30 days and also stop the practice of using the number of therapy visits provided by home health agencies to determine payment.

In general, Amedisys and LHC Group leadership has expressed confidence in the wake of PDGM, while stating that their respective companies will continue to closely monitor updates related to CMS’ new model.

“This is something the industry was mostly prepared for,” Tinsley said.

Besides Amedisys and LHC Group, the Index also tracks Frisco, Texas-based Addus HomeCare Corporation (Nasdaq: ADUS), though it does not include the company in its monthly report. Most of Addus’ revenue comes from Medicaid and not Medicare.

Addus’ stock increased 18.25% in July compared to the previous month. Year to date, Addus’ stock prices were up 92.67%.

Quote Of The Month 

“Health care consumers—especially those living with chronic conditions—need to be empowered with home-based solutions that can help them stay healthier, out of the hospital, and living safely and comfortably in their own homes.” – Humana spokesperson

Read the Full Article Here: Humana Highlights Home Health’s Value in Reducing Hospital Readmissions

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 2002.
[visualizer id=”8359″]
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.
[visualizer id=”8361″]

This graph displays HH Index performance since 2002.

[visualizer id=”8363″]
This graph compares the HH Index to the price of Addus stock (non-Medicare).
[visualizer id=”8362″]

(Home Health Index August 2018 | Stoneridge Partners)

 

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

Company 7/31/18 1 mos change YTD change 7/31/17 7/31/16
Amedisys 106.62 +22.98% +102.28% 47.36 54.49
LHC Group 91.15 +6.81% +48.82% 57.9 45.39
HH Index* 98.89 +14.96% +75.22% 51.57 46.73
S&P 500 2822.74 +4.28% +5.58% 2470.3 2173.6
Addus 67.05 +18.25% +92.67% 33.95 18.45

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) 7/31/18 7/31/17 7/31/16
Amedisys 3100 1556 1890
LHC Group 3010 1137 911
HH Index Total 6110 4530 3341
Addus 634 399 232


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

Company 7/31/18 7/31/17 7/31/16
Amedisys 201% 105% 144%
LHC Group 272% 121% 110%
HH Index Average* 237% 117% 117%
Addus 149% 97% 67%


Multiples of EV/EBITDA

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

Company 7/31/18 7/31/17 7/31/16
Amedisys 22.41 18.31 23.64
LHC Group 30.17 13.35 11.08
HH Index Average* 26.29 17.65 15.78
Addus 19.51 12.75 9.68

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 August 2018 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Wellforce, the parent company of Tufts Medical Center, will acquire Home Health Foundation as it expands out of state.
  • Optimal Health Services, a provider in hospice and home health services was acquired by Bristol Hospice.
  • Delphi Behavioral Health Group, a leading nationwide provider of addiction and detox treatment programs, acquired Family Recovery Specialist of Miami, Florida.

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

     

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Home Health Index August 2018 | Stoneridge Partners

From Rich Tinsley, Publisher of “Home Health Index”. Rich can be reached at [email protected] or (239) 561-0826 and toll-free 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

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