Home Health Stocks Propelled by 2020 Final Rule

Home Health Stocks Propelled by 2020 Final Rule

The new Stoneridge Partners Home Health Index (HHI) shows home health stocks soaring in November, dramatically rebounding after a somewhat disappointing October. Home health stocks tracked by the HHI climbed more than 19% compared to the previous month, making November one of the strongest months in recent history.

“We saw an overall decline in home health stock values of more than 2.5% in October, but we knew that wouldn’t last long,” Stoneridge Partners President Rich Tinsley said. “We expected a solid rebound since the home health final payment rule for fiscal year 2020 included a significant improvement to the Patient-Driven Groupings Model, particularly when it comes to the overhaul’s behavioral adjustment component.”

Instead of the steep 8.01% behavioral adjustment included in a proposed version of PDGM, the final payment rule sets a more manageable 4.36% behavioral adjustment.

Mergers and acquisitions advisory firm Stoneridge Partners monitors the stock values of Baton Rouge, Louisiana-based Amedisys, Inc. (Nasdaq: AMED) and Lafayette, Louisiana-based LHC Group, Inc. (Nasdaq: LHCG) each month. The HHI also monitors stock prices for Frisco, Texas-based Addus HomeCare Corporation (Nasdaq: ADUS), but does not include its results in the monthly report due to differences in Addus’ patient base and its primary focus on personal care services.

Amedisys saw a more than 21% increase in its stock price in November, and LHC Group stock values climbed almost 17% during the same period. Addus stock was also up from October to November by nearly 10%. Home health stocks handily outperformed the broader market in November, as the S&P 500 was only up 3.29% compared to the previous month.

“Both Amedisys and LHC Group have some tailwinds in their favor moving forward – PDGM will likely create more merger and acquisition opportunities for both companies,” Tinsley said. “Their executives have repeatedly touted those opportunities during recent earnings calls.”

Thanks to November’s gains, Amedisys, LHC Group and Addus stock prices are also well outperforming their 2018 results. Year-to-date, Amedisys is up by almost 30%, LHC Group is up by almost 43%, and Addus has increased by nearly 37% over 2018. Additionally, the HHI is up almost 41% year-to-date.

Quote Of The Month

“I think there’s a stigma associated with mental health and a lot of attitudes that there’s something wrong with a person’s intellect or morality.  But mental illness has nothing to do with any of that, you know, it has to do with how your brain is working.” – Adriane Howard, a licensed independent clinical social worker with Empower Behavioral Health

Read the Full Article Here:  Dealing with grief during the holidays, mental health resources available

Webinar Announcement

What you need to know about buying and selling home care agencies

Date: December 19, 2019
Time: 10am Pacific / 11am Mountain / 12pm Central / 1pm Eastern
Location: Online (Go-to-Webinar)
Cost: FREE!

See More Information Here: What you need to know about buying and selling home care agencies

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 December 2019 | Stoneridge Partners)

 

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

Company 11/30/19 1 mos change YTD change 11/30/18 11/30/17
Amedisys 162.96 +21.13% +39.47% 137.93 54.0
LHC Group 133.4 +16.81% +42.77% 105.43 65.77
HH Index* 148.18 +19.19% +40.94% 121.68 59.72
S&P 3140.98 +3.29% +25.87% 2739.67 2637.37
Addus 93.21 +9.66% +36.95% 75.45 33.3

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) 11/30/19 11/30/18 11/30/17
Amedisys 5560 4060 1820
LHC Group 4200 3400 1280
HH Index Total 9760 7460 4046
Addus 1280 834 410


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

Company 11/30/19 11/30/18 11/30/17
Amedisys 294% 250% 125%
LHC Group 224% 214% 133%
HH Index Average* 259% 232% 130%
Addus 213% 171% 100%


Multiples of EV/EBITDA

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

Company 11/30/19 11/30/18 11/30/17
Amedisys 29.55 24.71 17.25
LHC Group 21.49 25.47 13.91
HH Index Average* 25.52 25.09 18.20
Addus 30.3 22.27 12.27

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 December 2019 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Soleo Health, a provider of specialty infusion services, acquired Paragon Infusion Therapy’s pharmacy business located in Dayton, OH
  • Discovery Behavioral Health, a nationwide leader in mental health services, has acquired Authentic Recovery Center (ARC), located in West Los Angeles, CA

CLOSED by Stoneridge

  • Stoneridge Partners, Partner Joe Lynch represented a South Carolina hospice agency that closed December 2019
  • Stoneridge Partners, Partner Ben Bogan represented a Pennsylvania home health agency that closed November 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.

 

Another Cartoon Favorite 

   

 

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Home Health Index December 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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AGENCIES FOR SALE

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  • $3.5 million Medicare certified home health agency
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