Voices: Ben Bogan, Partner, Stoneridge Partners

This article is sponsored by health care mergers and acquisitions (M&A) advisory firm Stoneridge Partners. In this Voices interview, Home Health Care News sits down with partner Ben Bogan and learns how the health care M&A market has shifted since the start of the COVID-19 pandemic, why some buyers have remained aggressive throughout the pandemic and why now is a good time to sell a home health care agency.

HHCN: In March, we interviewed your partner Joe Lynch in this series, just when COVID-19 was taking shape in the U.S. It was unclear at that point what impact the pandemic would have on health care M&A, but we have a clearer picture now. How has your outlook for buyers and sellers – and the insights you provide to them – changed these past four months?

Bogan: I don’t think the picture is much clearer now, because we’re still in the midst of dealing with COVID and so much is still up in the air and very fluid. The pandemic uncertainty made a number of buyers go on pause initially. I think they needed to stop, assess the situation and figure out what this was going to mean for them.

Most buyers we deal with are strategic. They needed time to focus their attention on their own operations. A lot of them put their M&A efforts on pause to work their way through the COVID situation and see how things played out before they were ready to get moving again.

Despite this, a smaller number of buyers decided to stay very aggressive during this time. They doubled down and committed to doing deals and because of that, we’ve seen a very active M&A space. It’s certainly been a smaller number of buyers, but they’ve accounted for significant activity.

Before this latest resurgence of COVID, I had many buyers who reached back out to say that they were ready to get moving again. They were ready to fill their pipelines and get deals going with the hopes of closing some transactions in 2020. Since those calls, we’ve seen a resurgence in the virus, so we’ll see if they’re rethinking their intentions at this point. Regardless, we still have a pool of buyers who are very aggressive.

 

For the aggressive buyers, is their aggressiveness combined with fewer buyers overall proving to be a winning strategy?

They’re getting deals done, but I think the real question is if those other buyers hadn’t paused their activity, would they have created a more competitive process? That’s an interesting question.

What I can tell you is that the aggressive buyers have full pipelines, are moving forward and getting deals done. Would they have fewer deals in their pipelines if the other buyers weren’t on pause? It’s hard to tell.

 

In light of what you’ve described, how are you advising sellers?

Keep in mind that not all sellers — and not all of our clients — look the same. They’re in different geographies, they’re in different service lines, they’re different sizes and they have different strengths. So, depending on their unique circumstances, the advice is always going to look different.

But in general, if you have a strong business and you’re interested in engaging with a potential buyer, COVID may impact negotiations but it isn’t necessarily a deal-breaker. I’m glad to discuss a seller’s specific situation to understand whether now would be a good time to engage in conversations with potential buyers.

 

You’re an attorney by education and training. What are the specific benefits of the legal background with regards to M&A health care transaction work?

A legal education provides a strong background of universal skills that help you operate in any industry including the M&A space, health care-related or not. It helps you develop strong writing and research skills to assist in understanding and managing complex issues. Regarding M&A work, my background helps me with negotiating terms and understanding legal documents.

 

What are smart sellers doing right now? What should they watch out for?

Owners should be focusing on providing quality care and surrounding themselves with good staff and advisors. They should focus not only in the business but on the business. Good financials are also key.

When it comes to a potential transaction, there are some things that are out of an owner’s control – geography, buyer interest at any particular time, etc. But if you’re running and building a strong business clinically and financially, with a strong team in place, there will always be interest from buyers.

And when the time comes, they should engage a good M&A advisor. The process is long, and an owner needs to continue to focus on their business without distraction. You’re looking at a six-to-12-month process, and you don’t want the business to falter during that time.

 

For potential sellers, is now a good time to sell?

The question should be, “Is now a bad time to sell?” There are certainly COVID-related issues impacting the M&A space, but as I said before, every situation is unique. Because of the aggressive buyers we discussed and the desire for buyers that were earlier on pause to get going again, we’re seeing a lot of deal activity.

 

But is it a good time?

Every situation is unique, but with active buyers, a market ripe for consolidation, and some experience with dealing with COVID under everyone’s belts, now might actually be a great time to consider selling. It’s certainly not a bad time to engage with potential buyers, or with advisors who can help you make sure your business is ready for a future transaction.

 

Editor’s note: This interview has been edited for length and clarity.

Stoneridge Partners is a national health care mergers and acquisitions advisory firm specializing in the brokerage of home care, home health, hospice and behavioral health companies. For more information about their services, contact their corporate office at 800-218-3944 or via email at [email protected]

The Voices Series is a sponsored content program featuring leading executives discussing trends, topics and more shaping their industry in a question-and-answer format. For more information on Voices, please contact [email protected]

To view the original article please click here

 

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Home Health Index | 2020 SEPTEMBER UPDATE

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Growth of Home Health, Post-Acute Care Stocks Continues in August

After a strong surge in July, stock values for home health and post-acute care providers moderated but continued their upward trajectory in August according to the new Home Health and Post-Acute Care Indices from national healthcare mergers and acquisitions firm Stoneridge Partners.

The home health sector has continued its steady rebound from the spring’s coronavirus-related disruption, while operators in the broader post-acute care landscape have also made positive gains in the face of persistent headwinds. Overall, the Home Health Index (HHI) added to July’s gains by nearly 5% in August, and the Post-Acute Care Index (PAI) grew by almost 2% over the same period.

“While gains like those we saw in July are exciting, I think this month’s numbers tell an even better story,” said Stoneridge Partner President and CEO Rich Tinsley. “Large swings – even in a positive direction – can mean volatility, but sustained, incremental gains show some stabilization in the market. Home health providers have pretty much said their volumes have recovered to pre-COVID-19 levels — or even higher. I’m hopeful this means we’re back on track for consistent growth.”

The S&P 500 also showed improved performance, up more than 7% in August compared to the previous month.

Home Health Index

The Stoneridge Partners HHI tracks the stock values of Amedisys Inc. (Nasdaq: AMED) and LHC Group Inc. (Nasdaq: LHCG), two of the country’s largest home health providers. Amedisys and LHC Group both have their headquarters in Louisiana.

In August, Amedisys saw its stock value rise more than 3% over July’s results. LHC Group’s stock value saw even larger gains — improving nearly 7% on a month-over-month basis.

“Both companies announced some interesting moves in August,” Tinsley said. “LHC Group announced another joint venture, this time with University Health Care System. On its end, Amedisys beefed up its personal care network by teaming up with BrightStar Care, a huge home care franchise company.”

Year to date, the HHI is up more than 48%.

Post-Acute Care Index

The PAI combines Amedisys and LHC Group stock values with values for Addus HomeCare Corporation (Nasdaq: ADUS), The Pennant Group Inc. (Nasdaq: PNTG), Encompass Health Corp. (NYSE: EHC) and Brookdale Senior Living Inc. (NYSE: BKD).

LHC Group and Amedisys helped to buoy the PAI in August, as Brookdale, Encompass Health and Addus all saw small dips in their stock values.

Birmingham, Alabama-based Encompass Health’s stock value was down just more than 4% in August compared to July, while Brentwood, Tennessee-based Brookdale’s stock value dropped less than a percent over that same period. Frisco, Texas-based Addus — which recently announced plans to exit the Nevada market due to Medicaid rate challenges — saw its stock dip almost 3% in August compared to the previous month.

But the strongest performance in the August PAI belonged to Eagle, Idaho-based The Pennant Group, which saw its stock value soar by almost 48% in August compared to July.

Quote Of The Month

“Many people living with serious medical illnesses also suffer from comorbid behavioral health issues,” according to a recent report from the Center to Advance Palliative Care (CAPC).

Read the Full Article Here: Providers Seek to Integrate Behavioral Health with Palliative Care

Articles Featuring Stoneridge

View our quarterly M&A webinars on current valuation trends, deal flow, and pertinent regulatory changes in home health, home care, hospice, ID/DD, and behavioral health industries. Visit the Speaker Series Webinar Library on our website.

Our Partner and Executive Vice President Benjamin Bogan discussed the current state of the health care M&A market in Home Health Care News.

Our Associate Partner Tony Siebel discusses the current state of the M&A market for Medication-Assisted Treatment Clinics in our most recent Stoneridge Q&A.

Traditions Health Acquires Physician’s Choice Hospice and Palladium Hospice. Our Partner and Executive Vice President Ben Bogan acted as sell side advisor to Palladium Hospice.

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 September 2020 | Stoneridge Partners)

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

Company 8/31/20 1 mos change YTD change 8/31/19 8/31/18
Amedisys 241.9 +3.31% +45.55% 128.71 125.01
LHC Group 208.44 +6.83% +51.31% 118.5 98.93
HH Index* 225.17 +4.91% +48.16% 123.61 111.97
S&P 3505 +7.15% +8.49% 2926.46 2884
Addus 93.66 -2.85% -3.66% 87.98 64.90

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) 8/31/20 8/31/19 8/31/18
Amedisys 8210 4490 3980
LHC Group 6440 4130 3430
HH Index Total 14650 8620 7410
Addus 1390 1150 804


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

Company 8/31/20 8/31/19 8/31/18
Amedisys 416% 248% 252%
LHC Group 308% 203% 253%
HH Index Average* 362% 226% 253%
Addus 188% 203% 176%


Multiples of EV/EBITDA

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

Company 8/31/20 8/31/19 8/31/18
Amedisys 33.92 24.92 26.41
LHC Group 30.79 20.33 33.19
HH Index Average* 32.36 22.63 29.80
Addus 24.93 27.74 22.30

The Stoneridge Partners Post-Acute Care 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)
  • Addus (ADUS)
  • The Pennant Group, Inc. (PNTG)
  • Encompass Health (EHC)
  • Brookdale Senior Living Inc. (BKD)

This graph displays Post-Acute Care Index performance starting late 2019.

[visualizer id=”11962″]

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 September 2020 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Jet Health Inc., a home health provider, acquired Carrington Hospice Care Inc.
  • Bristol Hospice acquired Irvine-based Remita Health, a hospice provider with six locations in Arizona.
  • Alleo Health System acquired Atlanta-based Angel Heart Hospice.
  • Actinium Healthcare Holdings – a Dallas, Texas-based private equity firm – acquired Central Home Health Services of Texas Inc.
  • Hometown Healthcare Management acquired Lane Nursing Home.

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Exclusively Listed For Sale By Stoneridge Partners


Do you know of any acquisitions that have taken place? We are interested in your comments. Contact us; Stoneridge Partners

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Home Health Index September 2020 | 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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Traditions Health, LLC, announced that it has acquired Physician’s Choice Hospice and Palladium Hospice and Palliative Care.  

COLLEGE STATION, TexasSept. 17, 2020 /PRNewswire/ — Traditions Health, LLC (“Traditions”), a multi-state hospice and home health provider, announced that it has acquired Physician’s Choice Hospice (“Physician’s Choice”) and Palladium Hospice and Palliative Care (“Palladium Hospice”).   These acquisitions will allow Traditions to provide a high quality of clinical care to a broader base of patients.

The acquisition of Physician’s Choice and its five locations in Oklahoma, alongside the recent acquisition of Faith Hospice, make Traditions a leading hospice provider in the state. “We are excited to be joining the Traditions family with its strong leadership team, highly regarded brand and leading Oklahoma industry position,” said Ginger Barsotti, Founder and President of Physician’s Choice.  “Building this company from the ground up has been one of the greatest joys of my life. This partnership will allow us to support our long-term growth initiatives, predicated on our rich history as a private company with a dedicated and loyal employee base.”

The acquisition of Palladium Hospice strategically strengthens Traditions’ footprint in the southeast.  In acquiring Palladium Hospice, Traditions is adding six locations in South Carolina and two in Mississippi.  Traditions is also bolstering its existing Georgia footprint. “We are proud to integrate our company’s experience and leadership into Traditions and helping them fortify their presence in the southeast. We look forward to joining the Traditions team,” said Diane Parker, CEO and President of Palladium Hospice.

As a leading provider of hospice and home health services, Traditions offers skilled nursing, therapy services, and both physical and spiritual end of life care. The announcement was made by Bryan Wolfe, the President and CEO of Traditions.  “I am extremely excited to expand our services to South Carolina and Mississippi and strengthen our existing presence in Oklahoma and Georgia. This is an enormous accomplishment for our organization, and we could not be more excited to welcome the employees and patients of both Physician’s Choice and Palladium Hospice into the Traditions family,” said Mr. Wolfe.

Infinity Capital Partners acted as the sell-side advisor to Physician’s Choice Hospice. Stoneridge Partners acted as the sell-side advisor to Palladium Hospice.

About Traditions Health
Headquartered in College Station, TX, Traditions Health is a leading provider of hospice care, home health care, consulting services and online policy manuals. The company provides care to over 3,250 patients across seven states. The company has recently been named to the 2020 Inc. Magazine’s Inc. 5000 list of fastest-growing businesses. Traditions Health is a portfolio company of Dorilton Capital. For more information, visit our website at www.traditionshealth.com.

About Dorilton Capital
Dorilton Capital is a private investment firm seeking to acquire, recapitalize and support the growth of middle market businesses across a range of industry sectors. Dorilton seeks control situations and prefers to partner with incumbent management to create value over the long term.  Please visit www.doriltoncapital.com.

For media inquiries or relevant opportunities, please contact [email protected]

SOURCE Traditions Health, LLC

Related Links

http://www.traditionshealth.com

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Stoneridge Q&A with Tony Siebel

Associate Partner Discusses the Current State of the M&A Market for Medication-Assisted Treatment Clinics

When we talk about medication-assisted treatment clinics, what do we mean?
Generally, medication-assisted treatment (MAT) clinics are outpatient clinics that work with patients who have challenges with the use of opioids. Typically, they offer comprehensive services such as counseling, therapy and prescriptions for medications that help patients manage their addiction to opioids. The cost of care provided by an MAT clinic is usually much less than full-continuum or residential substance abuse centers. These clinics employ a variety of service providers, from physicians to nurse practitioners to licensed clinical social workers (LCSWs).

 

Recent reports indicate that substance use is surging during the COVID-19 pandemic, and the stress of the pandemic is having negative effects on those suffering with substance use disorders. How are medication-assisted treatment providers responding? What does this mean for the future of medication-assisted treatment?
You know, at the beginning of the COVID pandemic, I had three transactions for MAT clinics that were in the due diligence phase – and our buyers got a little nervous with everything that was going on surrounding the quarantine. But after a few weeks of gathering data, they realized that the census in these clinics had actually gone up. Because of the quarantine, patients suffering from addiction were having a hard time getting their medications, they weren’t able to attend their regular support groups and meetings, and they had more time on their hands at home. MAT clinics were able to step into that void and really come through for a lot of patients in difficult times. Now, many of these clinics are healthier than they were even pre-COVID, and I predict a sustained increase in demand for their services. We’re also seeing some payers increasing their reimbursements right now, and I think that will continue because the patient demand will definitely be there.

 

What are some other effects the pandemic has had on MAT providers? Are there any silver linings?
In my recent conversations with several MAT clinic owners, they tell me the real silver lining of these challenging times has been the increased acceptance of telemedicine. Regulators were quick to realize that patients needed continued care, but that they’d likely be reluctant to come in and seek it in person, so they made the decision to strategically loosen some of the restrictions surrounding the use of telemedicine. It’s allowed the clinics to revamp their service delivery model while maintaining their regular levels of reimbursement, so it’s been very helpful.

 

What is the current state of the MAT mergers and acquisitions market?
I’d say the current state of the market is active and buyers are pretty aggressive, particularly regional private equity-backed players. Multiples are really strong right now and valuations are high as compared to other healthcare entities. And I don’t see that going away anytime soon – we’re in what I would call the first wave of consolidation in the industry, and a lot of owners are recognizing that it’s the right time to make an exit. We’re also seeing a push in some states for insurers to play a bigger role in field of medication-assisted treatment, which is standardizing how clinics operate and encouraging them to move away from cash payments to Medicaid and insurance. That transition may be more than some small operators will want to take on, which will fuel the consolidation even further.

 

What kind of treatment providers are most attractive in the market right now – higher-end, out-of-network providers? Lower-cost community-based treatment models? Residential? Non-residential?
Generally, addiction treatment is moving away from out of network, high-luxury, residential or full continuum of care treatment to an outpatient model. The cost of care is just so much less than a residential treatment setting, and many MAT patients have Medicaid as their payer source, so an effective treatment where patients get regular medications and counseling but can remain at home is attractive.

 

Who is buying in the MAT market right now?
There really aren’t any national players in the market at this point, but there are several large regional players with private equity support behind them who are very active in this space. The buyers I’m seeing are often current clinic owners who are seeking to grow their footprint by consolidating operations, or folks who don’t necessarily want to start a new clinic from scratch, but know they can buy an existing clinic, operate it and expand it on their own.

 

What do you see for MAT market activity for the rest of 2020 and beyond?
I think we’ll see the MAT market continue to be very strong. As I said before, we’re seeing multiples in the six to eight range, versus other industries where they’re somewhere around five to six. I would bet on that continuing into next year.

 

If someone is thinking about selling their MAT clinic in the next 6-12 months, what should she/he be doing to prepare in the short and long-term?
I’d say spend some time figuring out what is really important to you – do you want to sell your clinic and leave the industry altogether, sell and hope to stay on with the new owner, or partner with another clinic and grow your business? Know what your goal is. Then, get your financial house in order. Make sure all your taxes are filed and your financials are buttoned up and reflective of the true state of your business. Finally, speak to an advisor who has experience in the field. No matter where you are in your planning process for the future, it’s never too early to establish a relationship with a specialist who knows this space and can keep your interests in mind as they monitor broader industry developments.

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Home Health Index | 2020 AUGUST UPDATE

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July Home Health, Post-Acute Care Stocks Rebound, Showing Highest Gains in Months

There’s good news for both home health and post-acute care stock values according to the latest Home Health (HHI) and Post-Acute Care (PAI) indices from national healthcare mergers and acquisitions firm Stoneridge Partners.

The HHI continued its upward trajectory after last month’s positive results, soaring more than 15% in July. And after taking a tumble last month, the PAI picked up some steam and improved by an impressive 10% over June’s results. The S&P, comparatively, rose about 5.5% from June to July.

“I think this shows that with time, home health and post-acute companies are adjusting as best they can to COVID-19,” said Stoneridge Partners President and CEO Rich Tinsley. “They’ve been able to secure some more PPE and make sure their protocols are operating effectively. I also think there’s a greater need for their services, and patients are less hesitant to access them. That bodes well for these companies.”

Home Health Index

The Stoneridge Partners HHI follows the stock values of Baton Rouge, Louisiana-based Amedisys, Inc. (Nasdaq: AMED) and Lafayette, Louisiana-based LHC Group, Inc. (Nasdaq: LHCG).

In July, Amedisys stock values jumped nearly 18% over June, while LHC Group stock ticked up nearly 12%. These strong performances pushed the HHI up nearly 15% — its biggest one-month improvement since November of 2019.

Even with the financial turmoil that has roiled the U.S. economy since the beginning of the year, the HHI has posted a year-over-year increase of more than 66%.

“All of us in the healthcare industry have known for years that home health is a critical component in the spectrum of care resources,” Tinsley said. “The pandemic seems to have shone an even brighter light on the importance of the work home health providers do.”

Post-Acute Care Index

 Stoneridge also tracks stock values for leading post-acute care companies in its PAI.

Along with Amedisys and LHC Group, the PAI also includes Addus HomeCare Corporation (Nasdaq: ADUS), The Pennant Group, Inc. (Nasdaq: PNTG), Encompass Health Corp. (NYSE: EHC) and Brookdale Senior Living (NYSE: BKD).

While the PAI’s July performance didn’t best the HHI, the 10% month-over-month increase is welcome news after last month’s 3% decline.

Stock values for Birmingham, Alabama-based Encompass — which operates a mix of inpatient rehabilitation hospitals, home health and hospice agencies — jumped nearly 10% between June and July. Meanwhile, Eagle, Idaho-based Pennant Group recorded an increase of nearly 11% during the same period. Pennant operates home health, hospice and senior living businesses. Additionally, Frisco, Texas-based Addus, which focuses on Medicaid home-based care, saw its stock prices tick up more than 4% last month.

Brentwood, Tennessee-based Brookdale was the only company in the PAI to trend downward between June and July. The company, focused largely on the senior living community model, saw its stock values fall just over 6%. Still, that’s a marked improvement over last month’s performance when Brookdale’s stock plummeted more than 19%.

“It’s no surprise that post-acute care companies offering home-based care are faring better than those with a less diversified portfolio of services during the pandemic,” Tinsley said. “Congregate living facilities have worked incredibly hard to avoid coronavirus outbreaks in their facilities, but it’s a much more challenging environment and I think the current stock values reflect that.”

Quote Of The Month

“Hospitals have been given permission — for patients that were actively in an outpatient [setting] for that facility — to send them to outpatient therapists by way of telehealth into patients’ homes.” – National Association for Home Care & Hospice (NAHC) President William A. Dombi

Read the Full Article Here: Dombi: Regulatory Flexibilities: Mean More Competition for Home Health Providers

Articles Featuring Stoneridge

Join our quarterly M&A webinar on current valuation trends, deal flow, and pertinent regulatory changes in home health, home care, hospice, ID/DD, and behavioral health industries. Sign up here: Webinar Registration

Stoneridge Partners has a new updated website. Visit it here: Stoneridge Partners

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 2020 | Stoneridge Partners)

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

Company 7/31/20 1 mos change YTD change 7/31/19 7/31/18
Amedisys 234.16 +15.21% +40.89% 135.06 106.62
LHC Group 195.11 +10.66% +41.63% 123.51 91.15
HH Index* 214.64 +13.14% +41.23% 129.29 98.89
S&P 3271.12 +5.22% +1.25% 2980.38 2822.74
Addus 96.41 +3.99% -0.83% 81.05 67.05

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) 7/31/20 7/31/19 7/31/18
Amedisys 7740 4770 3100
LHC Group 6390 4370 3010
HH Index Total 14130 9140 6110
Addus 1350 1020 634


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

Company 7/31/20 7/31/19 7/31/18
Amedisys 393% 263% 201%
LHC Group 306% 216% 272%
HH Index Average* 350% 240% 237%
Addus 226% 186% 149%


Multiples of EV/EBITDA

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

Company 7/31/20 7/31/19 7/31/18
Amedisys 31.99 26.49 22.41
LHC Group 30.58 22.83 30.17
HH Index Average* 31.29 24.66 26.29
Addus 34.98 24.84 19.51

The Stoneridge Partners Post-Acute Care 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)
  • Addus (ADUS)
  • The Pennant Group, Inc. (PNTG)
  • Encompass Health (EHC)
  • Brookdale Senior Living Inc. (BKD)

This graph displays Post-Acute Care Index performance starting late 2019.

[visualizer id=”11962″]

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 August 2020 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Providence Treatment, an outpatient addiction treatment provider with three locations in the Greater Philadelphia area, has acquired Main Line Recovery, an outpatient facility in Haverford, Pennsylvania, offering comprehensive assessment for behavioral health concerns and psychotherapy for individuals, couples, families and groups.
  • The Pennant Group Inc. announced that it has purchased two home health agencies with multiple locations throughout southeastern Idaho and northern Utah.

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Exclusively Listed For Sale By Stoneridge Partners


Do you know of any acquisitions that have taken place? We are interested in your comments. Contact us; Stoneridge Partners

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Home Health Index August 2020 | 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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Available Opportunities 7/23/2020

AGENCIES FOR SALE

NEW PENNSYLVANIA: Stoneridge File #SBA-5618
  • Medicare-certified home health agency
  • Licensed to service Chester, Berks, Lancaster, and Delaware counties
  • ACHC-accredited
  • Minimal census of 20+/- patients
  • $4.9 million Medicare home health agency in Phoenix
  • Showing nice year-over-year revenue growth since 2018
  • Diverse referral sources, well run with complete staff in place
  • $11 million multi-location addiction treatment center
  • Located in Southern California
  • 21% bottom line
  • Strong growth trends
  • JCAHO accredited
  • $5+ million home health, home care, case management, and hospice company
  • Approximately 15% revenue from hospice, other service line revenues distributed relatively evenly
  • Multiple locations
  • Diverse payor sources
  • Hospice accreditation
  • Projected PDGM Impact of 30%+ for home health
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Home Health Index | 2020 JULY UPDATE

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Home Health Stocks Continue to Rise as Post-Acute Care Stock Values Fall

More than three months after the beginning of the nationwide quarantine due to COVID-19, the U.S. economy has showed signs that it is stabilizing. But according to the latest Home Health (HHI) and Post-Acute Care (PAI) Indices from national healthcare mergers and acquisitions firm Stoneridge Partners, not all post-acute care providers have been as lucky.

The HHI for June rose by 5% over May’s results, but the PAI went in the opposite direction – dropping more than 3% last month as the coronavirus continues to affect the senior care industry.

“I’m not surprised that home health stocks continued to tick up last month,” said Stoneridge Partners President and CEO Rich Tinsley. “Post-acute care stocks, on the other hand, took a slight – but expected – tumble. It makes sense when you think about the impact this virus is having on the industry. People still have concerns about congregate care right now, but home-based care is looking good.”

Home Health Index

The Stoneridge HHI follows the stock values of Baton Rouge, Louisiana-based Amedisys, Inc. (Nasdaq: AMED) and Lafayette, Louisiana-based LHC Group, Inc. (Nasdaq: LHCG).

Amedisys stock values rose more than 3% in June over May, while LHC Group stock increased 7% during that same period, leading to a 5% improvement for the overall HHI in June. In comparison, the S&P 500 rose by just less than 3%.

Post-Acute Care Index

Stoneridge tracks stock values for post-acute care companies in its PAI, which also includes Amedisys and LHC Group, as well as Addus HomeCare Corporation (Nasdaq: ADUS), The Pennant Group, Inc. (Nasdaq: PNTG), Encompass Health Corp. (NYSE: EHC) and Brookdale Senior Living (NYSE: BKD).

Even including the positive results from Amedisys and LHC Group, the PAI still dropped just more than 3% overall in June. Brentwood, Tennessee-based Brookdale took the biggest month-over-month fall – with a business model that’s mostly centered around senior living communities, Brookdale’s stock value plummeted by more than 19% last month.

“Senior living operators like Brookdale have been hit hard by the coronavirus,” Tinsley said. “It’s going to take them longer to rebound than it will for home health companies.”

Meanwhile, Birmingham, Alabama-based Encompass saw its stock values fall by more than 15%. Encompass operates a mix of inpatient rehabilitation hospitals, home health and hospice agencies.

Eagle, Idaho-based Pennant Group — which operates home health, hospice and senior living businesses — saw its stock dip more than 11% in June compared to May. And stock values for Frisco, Texas-based Addus, which focuses on Medicaid home-based care, fell more than 6%.

“Post-acute providers offering a diverse mix of services have been better able to weather the pandemic overall, but they still don’t have the stability of in-home, Medicare-reimbursed providers like Amedisys or LHC Group right now,” Tinsley said.

Quote Of The Month

“Much of the burden of COVID-19 on older adults has rightly been focused on long-term care facilities, where the majority of deaths have taken place,” – Dr. Madhuri Reddy, co-founder and chief medical officer at CareAcademy.

Read the Full Article Here: Home Care Agencies Starting to ‘Wake Up’ to Infection Control

Articles Featuring Stoneridge

Stoneridge Partners has a new updated website. Visit it here: Stoneridge Partners

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 July 2020 | Stoneridge Partners)

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

Company 6/30/20 1 mos change YTD change 6/30/19 6/30/18
Amedisys 198.54 +3.27% +19.46% 121.41 86.7
LHC Group 174.32 +6.77% +26.54% 119.58 85.34
HH Index* 186.43 +4.91% +22.67% 120.50 86.02
S&P 3100.29 +1.81% -4.04% 2941.76 2706.92
Addus 92.56 -6.91% -4.79% 74.95 56.7

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) 6/30/20 6/30/19 6/30/18
Amedisys 6730 4270 2880
LHC Group 5830 3770 2950
HH Index Total 12560 8040 5830
Addus 1280 945 637


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

Company 6/30/20 6/30/19 6/30/18
Amedisys 340% 247% 186%
LHC Group 279% 206% 266%
HH Index Average* 310% 227% 226%
Addus 214% 173% 149%


Multiples of EV/EBITDA

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

Company 6/30/20 6/30/19 6/30/18
Amedisys 327.90 24.27 20.81
LHC Group 27.87 21.67 29..56
HH Index Average* 27.89 22.97 25.19
Addus 33.11 23.05 19.60

The Stoneridge Partners Post-Acute Care 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)
  • Addus (ADUS)
  • The Pennant Group, Inc. (PNTG)
  • Encompass Health (EHC)
  • Brookdale Senior Living Inc. (BKD)

This graph displays Post-Acute Care Index performance starting late 2019.

[visualizer id=”11962″]

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 July 2020 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Tennessee-based Alleo Health System has acquired Upper Cumberland Hospice and Palliative Care Services.
  • Summit BHC, a leading provider of addiction treatment and behavioral health services, acquired Highland Hospital, a 131-bed psychiatric facility in Charleston, West Virginia.

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Exclusively Listed For Sale By Stoneridge Partners


Do you know of any acquisitions that have taken place? We are interested in your comments. Contact us; Stoneridge Partners

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Home Health Index July 2020 | 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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Stoneridge Q&A with Jacob Lynch

Associate Partner Discusses Behavioral Health Industry Response to COVID-19 and Planning for a Strategic Transaction

How has the COVID-19 pandemic affected the behavioral health industry? How have providers responded to the spread of the virus, and do you think any of those changes will be long-term?
The coronavirus has affected our industry in a number of ways, both positively and negatively. The most obvious is the need for greater safety precautions, like adding more protective gear for employees; accommodating social distancing requirements; incorporating technology for remote work, telemedicine and digital health; and putting new protocols and procedures in place to manage any contagious patients or employees.

But I think we’ve also seen an increase in patient demand for services, thanks both to the additional stress I think we’ve all felt during the quarantine, and the availability of new, “safer” – and possibly more cost effective – forms of communication and treatment providers have brought online in response to the nationwide shutdown. I think many of these new practices are likely to stick around. Some of the old ways may return – and should – but I think providers will keep telemedicine and some of their other new processes once things are back to “normal.”

From what I’ve seen, the majority of people I interact with in the industry transitioned very well. They were quick to get good advice, implement safety precautions, and adapt to new technology and procedures. I think we’ll see a more cost-effective business model going forward, but I think that will be accompanied by an increase in demand for services over time as the stress of the pandemic continues to affect our patients.

 

What does the market for behavioral health companies look like right now, and what do you predict for the rest of 2020/early 2021?
The behavioral health market is extremely attractive right now. Like I said, I believe patient demand will increase over the next two years in response to current stressors. We’re seeing new advances in treatment and technology, as well, and we’re getting better and better at tracking patient outcomes.

From an investor’s standpoint, this industry has quality margins, profit potential and longevity. For the rest of 2020, I think we’ll see an increase in census across most sectors in both digital and in-person treatment. The behavioral health field is well-suited to telemedicine, and I think our providers have set themselves up well to continue providing quality treatment regardless of quarantine or travel restrictions.

 

What are your recommendations for a behavioral health company that is poised for growth and ready to take the next step?
First of all, I think you need to have a good understanding of your own goals – for your company, and if you’re the owner, for your own personal future. Make some decisions about your timeframe and be honest with yourself about your company’s best and worst qualities.

If you’re ready to grow your company by opening additional locations, or by buying competing or complementary businesses you have synergies with, you need to decide which route you want to take. You can be very disciplined with your finances, save up and deploy those funds in the best way possible, or you can raise capital through loans or inviting investors to buy a portion of your business.

The main point is to think objectively and clearly, make plans and goals, and stick to them. Don’t be afraid to seek out expert advice. Make sure you have a solid roadmap that includes clear benchmarks and exit strategies. When you have a plan in place, you’ll be less likely to let personal emotions or what’s going on in the world or the industry affect your course of action.

If you’re thinking about taking that next step right now, let’s talk. It’s my job to take a look at your situation and help you determine whether you should find capital, try to grow organically, become more efficient on your own or buy your neighboring competition. There are plenty of both long- and short-term answers to consider. I can help you think through what’s best for you and which next step makes the most sense based on your goals.

 

What are potential buyers looking for in a behavioral health company right now?
Buyers want to be sure they can recreate the company’s same income and profitability once they have an ownership interest. That way, they know if they can recognize new synergies, identify cost savings or expand their footprint, they may be able to increase profitability while minimizing their risk.

Most buyers, regardless of market sector or service line, are looking for the same basic things – a solid business with a stable history, as few complaints or issues as possible, a positive culture with good human capital, and some potential runway for growth. Some may be looking for a distressed asset where they think they can provide better operations. Others are looking for something that’s already working extremely well that they can make stronger and add onto.

Part of what I love about my job is getting to know the buyers in our industry and what’s important to them. That way, I can seek out the best opportunities for my clients – when I have a client who’s a perfect fit for the right buyer, everybody wins. I can show that buyer why my client’s company would be a valuable asset for them to acquire and how it will maximize their synergies.

All in all, I think buyers are just looking for companies who do good work and do it well – keep your business reputation as spotless as possible, be honest and transparent about your operations and hire talented people that work well together. Be excellent and efficient at what you provide, and have the tools in place that will help you show your results.

 

What are some of the most important factors that affect valuations for behavioral health companies?
There are lots of factors that affect valuations, like your company’s size, geography, need for the services you provide in your area, census, income sources, etc. But I’m seeing an acceleration in consolidation right now, in my opinion, and that’s also affecting some valuations. I used to think it would take longer for the space to mature, but now I think that timeframe has moved up considerably. Buyers are more aggressive and want quality assets.

Two things seem to be happening – on one hand, buyers seem to be swarming around providers that operated on fairly thin margins and were just getting by prior to the quarantine shutdown, yet found a way to make it through a pandemic and are still surviving. Buyers know those businesses need help and capital, and the businesses know it makes sense for them to take on a partner and begin to compete and grow. But that may result in valuations that come in at a lower multiple than they would have a year ago.

On the other hand, the providers that were thriving pre-pandemic, had strong cash reserves, maybe even increased their census and made it through quarantine without any big problems are even more in demand than they previously were, have proven some of their stability and resiliency. I believe they will command an even higher multiple than this time last year.

In my opinion, the time is right for these businesses to take an attractive offer and start to build and grow to the next level. Large providers are beginning to get very aggressive in their growth. They’re consolidating amongst each other and buying up smaller operators and competitors. My recommendation would be, if you’re at all considering selling or growing your business over the next year or two, don’t wait. Team up with a quality buyer or find a partner for the future that fits into your culture so you’re not competing with these larger businesses at some point down the road.

 

If someone was thinking about the possibility of putting their behavioral health company on the market within the next year, what advice would you give them?
First off, I’d tell them I think they are hitting the market at a fantastic time. There’s a ton of investment begging to be deployed in the behavioral health space on a quality asset. So, if they have a solid business – combined with the influx of patients I think we’ll see over the next months and years – I think it’s a fantastic time to sell all or a portion of your business while increasing revenues and profits.

I would also advise them to decide what their goals are, and if after some thought they are ready to go to market or raise capital with the help of a growth partner, then it’s time to begin planning. Stoneridge will help them look at their business and identify its strengths and weaknesses. We’ll work with them to put the company in the best position for sale, with the help of our Strategic Consulting Group or other vendors if needed.

I can’t overstate how important it is to be prepared before you go to market. That’s the perfect time to make sure your expectations, timelines and goals are set, and that you’ve done all you can to make your business appear as strong as possible so it’s attractive to a potential buyer.

From there, my job is to streamline the process so owners can continue running the day-to-day operations of their business while I manage the transaction in the background. I sold my own company a few years ago, so I know it can be a stressful and time-consuming process. I wish I’d had someone to take on the responsibility of finding the right buyer, answering questions and helping with negotiations. That’s why I understand how important it is to have a trusted advisor on your side who can minimize your stress and give you objective advice so you can have peace of mind during the transaction process.

 

What do you see for the future of the behavioral health industry?
I do get a lot of folks who ask me what I think is comping up for the industry and how to prepare for it. In my opinion, there are a couple of key things we can expect to see.

First, I think we need to realize that telehealth and digital medicine are here to stay in some way, shape or form, and will likely grow substantially. I’m seeing a lot of companies right now offering tech-based apps or programs in the behavioral health space, but they’re still a little siloed. One might be focused on alumni, one on a directory of providers, one on telemedicine, etc. They all have their own value, but I think eventually someone will create good, comprehensive technology that will incorporate all these multiple functions and streamline how they’re used to provide quality care. There’s still definitely plenty of room for technology to change things in this space.

I also think we’ll see some changes in the way providers are paid for their services in the coming years. There’ve been some conversations about only paying for services that are considered “successful” and defining what success really means. I think those conversations will continue, particularly as the market further consolidates. Large providers and payors are used to collecting outcomes data and supporting programs or services that deliver results. They will lean towards setting expectations about certain goals that need to be achieved in order to get paid for your work. So this is a good time to start thinking differently about the care you provide and how you’re compensated for it.

Finally, I think we will need to continue educating the public about the vast spectrum of behavioral health services these companies provide and the positive influence they can have on clients and patients. For example, in the substance use disorder segment, we need the public to have a better understanding of how addiction works and how patients in recovery can live a life that’s full of potential.

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Stoneridge Q&A with Rich Tinsley

You’ll be speaking at Home Health Care News’ upcoming Capital + Strategy conference. Who is Capital + Strategy for – who should be thinking about adding this to their list of conferences to attend next year?
Capital + Strategy is sponsored by Home Health Care News, and it covers a whole spectrum of issues affecting home health and hospice providers. It’s for anyone who wants to know what’s going on in our industry, anyone who wants to know more about current trends. It’s one to keep an eye on for next year; this year’s event is already sold out.

 

What will you be discussing at Capital + Strategy?
I’ll be talking about the current state of the mergers and acquisitions industry, trends we’re seeing in 2020, and what kind of inventory is out there in home health and hospice from a deal perspective. It will be an update on the market generally and current deal flow.

 

Do you think mergers and acquisitions activity in any particular market segment will be “hotter” than the others in 2020, and if so, why?
I think hospice M&A will continue to be extremely hot, which is really a function of supply and demand. There are more providers who want to get into the hospice market than there are available hospice agencies for sale, so it’s a sellers’ market. Valuations and prices are very robust right now – and that’s just a continuation of something we’ve been seeing for the past couple of years.

 

In your recent M&A experience, have you noticed operators seeking to add different service lines in order to expand their continuum of care, or are they just looking to grow existing service lines? Which do you think will be most prevalent in 2020 and why?
Buyers are still seeking to add both to existing service lines and to expand services. But if you look back 15 years ago or so, providers were much more siloed. We are seeing more buyers who are looking to provide a continuum of services – episodic services, intermittent services, palliative and end-of-life care. They’re looking to build capacity in post-acute community care and crossing historical business lines. Many still want to increase their scope across geographies, but now we see more buyers trying to build size within one geography by investing in new services and growing their market penetration.

 

We’re two months into PDGM – what are you hearing from your industry contacts about how it’s affecting operators so far? How do you think it will affect M&A activity in 2020?
It’s still early, but from an operations perspective it is definitely having an impact. As far as how it will impact provider cash flow, we probably won’t know that until the end of this month, possibly even April or May. Providers still have cash coming in from the end of 2019, so any interruptions in cash flow probably haven’t hit the bottom line yet. I do think it’s had less of an impact, however, than the new regulations on skilled nursing facilities. I think we’re just in a wait-and-see mode right now. Providers are still just working hard and waiting to see how it all comes out – to be determined.

 

Has PDGM had a different effect on smaller providers vs. larger providers? If so, how?
I think from an M&A perspective, PDGM is going to create a bigger divide between the small and medium-sized providers and the larger providers. Impacts to cash flow may limit smaller providers from investing in growth opportunities, and reductions in RAP payments may convince some smaller agencies to sell. Newer transactions have been a little slow to come to market because everyone’s waiting to see what the valuations will look like. But I still think 2020 will be a good year for M&A, particularly a little later in the year.

 

Signs seem to indicate that the next step will be a unified post-acute care payment system. Is that on the horizon, in your opinion? If so, what do you predict the affect will be on the in-home care industry?
We’ve been talking about unified payments for a long time, and I think it will stay part of the conversation, but it’s probably three or more years out from being a reality. It’s going to take a lot of work to put such sweeping changes into place, but I think we’re heading in that direction – if we can get there. It’s not a sure thing. I think it’s probably the right way to go, but we won’t be there for likely three to five years.

 

If you’re in the early stages of determining the next steps for your home care, home health or hospice business or potentially considering a sale, where should you start?
If your horizon is less than five years at this point, I would start looking around the market now, because valuations are high and the future is uncertain. It’s time to be looking at potential exit strategies, or perhaps opportunities for partnerships. Reach out to people who do the kind of work we do at Stoneridge to begin managing your future – should you enter the buyers’ market and grow? Should you sell and move on? The time is right to ask. Staying the same may not be a viable answer with potential reimbursement changes like unified payments in our future. Now is the time to maximize your current value.

 

What is something operators are surprised by/don’t know/don’t expect about the M&A process?
It sounds simple, but the first thing sellers need to be sure of is that they really want to sell. It can be an emotional process – in many cases, sellers have put their lives and souls into their businesses, so you have to be sure you’re ready for the ups and downs of the negotiation process. And a lot of sellers are surprised at how intense that negotiation process can be. You’re not selling a house or a car – every transaction is different. These transactions are not cookie-cutter. Each one is multi-faceted and every distinct piece has to be negotiated. There’s a lot more to it than just finding a buyer, it’s finding the right buyer and negotiating the right terms. It can be a very time-consuming process. But that’s why I love the work we do at Stoneridge – we get to walk providers through this process step by step, advocate for them during negotiations and answer all their questions. We’re the advisors they can trust to help them achieve their goals.

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Stoneridge Q&A with Brian Heck

Senior Vice President and Associate Partner Talks About Challenges Facing ID/DD Providers and Effects of COVID-19 on Market Activity

You bring years of experience in working with Intellectual Disability/Developmental Disability (ID/DD) providers to Stoneridge. Tell us a little bit about your background.
I’ve spent more than a decade working in the ID/DD industry, most recently as the Vice President for Business Development at BrightSpring, formerly known as ResCare. I’ve done a little bit of everything – pipeline building, financial analysis, deal structuring, and integration. Deals I’ve helped to close range in revenue size from $500,000 to more than $40 million.

 

Obviously, the spread of coronavirus is on everyone’s minds. How do you see COVID-19 affecting ID/DD providers? Which of the changes they’re making in response to the virus are short-term vs. long-term? Are there any silver linings for ID/DD providers as the country grapples with the outcomes of this pandemic?
In the short-term, I think they’ll be dealing with the same problems facing all other healthcare providers – specifically, lack of PPE and figuring out how to provide their services in close confines while maintaining safety for staff and individuals. Additionally, they’ll have to contend with industry-specific issues, like lack of reimbursement for day supports and reduced availability (if at all) of non-medical transport and drop-in services.

 

Over the long-term we need to have a conversation about emergency preparedness. There needs to be a push for legislation providing alternative billing and funding mechanisms in the event of a pandemic. And we need to be thinking about cross-training staff to fill multiple roles, especially for residential/day supports.
I think if there’s a silver lining, it’s that in an industry where the biggest challenge for a long time has been recruiting and retaining Direct Support Professionals (DSPs), there has been a huge influx in employment applications from people with previous experience in food service, hospitality, manufacturing, etc. We have an opportunity to increase the workforce dramatically.

 

Beyond COVID-19 – what do you see as the biggest challenge facing the ID/DD field in 2020?
Just because we’re seeing an increase in employment applications today doesn’t mean we’re out of the woods. Retaining quality staff when the economy “opens back up” will still be a challenge. With stagnant reimbursement and ever-increasing fixed costs, it’s a challenge to pay staff what they’re truly worth in this industry. When Amazon can pay $3 to $5 more per hour than we can afford to pay DSPs who care for some of our most vulnerable citizens, there’s a problem.

 

Value-based care and coordination of care across a spectrum of services are hot topics among a variety of different healthcare industries – how do those conversations touch the ID/DD world?
We’ve seen several states go to managed care organization (MCO) models over the past five years, and I would expect to see that trend continue. Traditionally this leads to further consolidation and merger activity, and ultimately fewer providers in a state.

 

The market for ID/DD providers has been strong over the past few years – do you see that continuing in 2020, and if so, why?
With increasing state regulation, calls for more technology and reporting capabilities, the introduction of MCO models and stagnant reimbursement, I think the trend will only increase going forward. There has never been this much strategic interest, or so many financial/private equity buyers in the space.

 

If someone is thinking about selling an ID/DD agency right now, what do they need to know? What advice would you give them based on your knowledge of the market and understanding of the industry?
Right now, there are two main types of transactions occurring – “platform” acquisitions and “add-on” acquisitions. Platforms are typically $8-10 million in annual revenue, meaning most ID/DD providers are going to fall into the latter category. There are definitely different strategies for both of these kinds of companies when preparing for a sale, so sellers who turn to experienced advisors with a good understanding of those strategies will likely get better results. That’s our job – we’re here to help interested sellers get the information they need to start off on the right foot.

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