Home Health Stocks Slump in October – But Likely Not for Long
Home Health Stocks Slump in October — But Likely Not for Long
Home health stocks were down across the board in October, according to the latest Home Health Index (HHI) from Stoneridge Partners. That’s likely to change soon, however, thanks largely to the better-than-expected final payment rule for calendar year 2020, released by the Centers for Medicare & Medicaid Services (CMS) on Oct. 31.
The monthly HHI from Stoneridge Partners tracks the stock values of Amedisys Inc. (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG), two of the largest publicly traded home health companies in the U.S.
Stock values for Baton Rouge, Louisiana-based Amedisys were down 2.21% in October compared to September. Meanwhile, stock values for Lafayette, Louisiana-based LHC Group were down 2.98% in October compared to the previous month.
Those performances led to an HHI that was down 2.57%, marking one of the relatively rare instances this year when home health stocks fell behind the broader market. The S&P 500 was up 1.77% in October over September.
Already, stock values for Amedisys and LHC Group are showing signs of a November turnaround, rallying after CMS recently released the 2020 final rule.
“When CMS released the final rule, it also lowered the behavioral adjustment included in the Patient-Driven Groupings Model,” Stoneridge Partners President Rich Tinsley said. “Specifically, they reduced the behavioral adjustment from 8.01% to 4.36%. That’s still a hefty cut, but a much more manageable one, especially for the big home health providers like Amedisys and LHC Group.”
In addition to the decreased behavioral adjustment, Amedisys and LHC Group also stand to gain from CMS’s decision to eliminate home health pre-payments, which many smaller providers use to stay in business.
“Phasing out the Request for Anticipated Payment (RAP) is likely going to create a lot of M&A opportunities for the major home health players moving forward,” Tinsley said.
While it does not include the company in its monthly HHI, Stoneridge also tracks the stock performance of Frisco, Texas-based Addus HomeCare Corporation. Unlike Amedisys and LHC Group, Addus stock climbed 5.96% in October compared to September.
Despite the down month, the HHI was up still up 13.89% on a year-to-date basis, according to Stoneridge.
Quote Of The Month
“We need to define what palliative care is in the marketplace and whether it’s a community-based palliative care benefit, and it can’t be that you ask 10 different people what palliative care is and you get 13 different answers,” said Nick Westfall, CEO of VITAS Healthcare, the hospice subsidiary of Chemed Corp.
Read the Full Article Here: Lack of Palliative Care Definition Impacts Patients, Hospice Business
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.
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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.
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This graph displays HH Index performance since 2002.
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This graph compares the HH Index to the price of Addus stock (non-Medicare).
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(Home Health Index November 2019 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
| Company | 10/31/19 | 1 mos change | YTD change | 10/31/18 | 10/31/17 |
| Amedisys | 128.52 | -2.21% | +10.00% | 111.2 | 46.45 |
| LHC Group | 110.97 | -2.98% | +18.76% | 89.06 | 66.55 |
| HH Index* | 119.75 | -2.57% | +13.89% | 100.13 | 53.13 |
| S&P | 3037.56 | +1.77% | +21.72% | 2722.05 | 2575.5 |
| Addus | 84.21 | +5.96% | +23.73% | 65.79 | 35.3 |
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) | 10/31/19 | 10/31/18 | 10/31/17 |
| Amedisys | 4570 | 3570 | 1660 |
| LHC Group | 3970 | 3220 | 1300 |
| HH Index Total | 8540 | 6790 | 3712 |
| Addus | 1110 | 744 | 444 |
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
| Company | 10/31/19 | 10/31/18 | 10/31/17 |
| Amedisys | 242% | 226% | 114% |
| LHC Group | 195% | 238% | 135% |
| HH Index Average* | 219% | 232% | 118% |
| Addus | 197% | 163% | 108% |
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
| Company | 10/31/19 | 10/31/18 | 10/31/17 |
| Amedisys | 24.12 | 23.66 | 15.8 |
| LHC Group | 19.53 | 31.19 | 14.13 |
| HH Index Average* | 21.83 | 27.43 | 16.19 |
| Addus | 26.87 | 20.62 | 13.3 |
The above calculations are based on selling price being defined as Enterprise Value (EV), with data provided by Capital IQ. Enterprise value is defined as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents. EBITDA is calculated using methodology which may differ from that used by a company for its reporting. (Home Health Index November 2019 | Stoneridge Partners)
Recent Transactions From Around The Country
- Optalis Healthcare acquired five Beaumont-affiliated nursing facilities to expand in SE Michigan
- Discovery Behavioral Health, a national mental health services provider based in Orange County, California acquired New Life Addiction Counseling & Mental Health Services, an outpatient treatment facility near Baltimore
- Missouri Home Hospice, LLC acquired Missouri-based Transitions Hospice
CLOSED by Stoneridge
- Stoneridge Partners, Associate Partner Coley McDevitt represented a $3.5 million private care home health business in Miami, Florida that closed October 2019
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.
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Home Health Index November 2019 | 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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