The Stoneridge Partners Home Health Index Hits New High For FOURTH Month Running
For the fourth month running, the Stoneridge Partners Home Health Index has reached a new, all-time high for the month of July, rising 2.8% and surpassing the previous high in June. The index tracks the monthly average market values of three of the largest publicly traded home health companies, Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG).
The companies have seen their share prices rise generally throughout the first half of 2016, bouncing back from an early drop at the start of the year. Year to date, the index is up 14.12%, and 9.81% for the trailing 12-month period.
“Buoyed by strong M&A activity, the home health index is continuing to hit all-time market value highs,” said Rich Tinsley, president and CEO of Stoneridge Partners, which publishes the index. “Home health companies are taking new regulations in stride as measures continue to roll out from national payers.”
While the overall impact remains to be seen, initial reports are positive on CMS’ Pre-Claim Review Demonstration, which rolled out August 3 in Illinois and requires home health agencies to submit claims earlier in the care process for reimbursement. The demonstration will continue to roll out in Florida, Michigan, Texas, and Massachusetts in the coming months.
The upcoming demonstration did not seem to weigh on all home health companies, and AFAM was even looking at the potential upside for the industry despite initial administrative burdens.
“We feel CMS’ recently announced pre-claim review process, which may initially be somewhat burdensome, if properly implemented should serve to reduce real and perceived payment error rates and help build a relationship of trust between the program and providers that is critical to home health achieving its real potential in the health care delivery system,” said Almost Family President Steve Guenther in a second quarter earnings release.
Despite a bullish attitude and overall increase across the index, AFAM’s share price declined 5.42% in July. Year to date, the company’s stock is up 5.41%.
AMED had the biggest gains of the month and saw its share prices rise 7.94%. Year to date, AMED’s stock is up 38.85%. LHCG also saw gains, with its share price increasing 4.88% in July, though the stock is up just 0.22% year to date.
Though the index continued to climb in July, it did not outpace the S&P 500 during the month, which grew 3.56%, compared to just 0.9% in June.
Addus Homecare, which is not included in the index because very little of its revenue comes from Medicare, also saw gains during the month. Its share price rose 5.85% in July.
Quotes Of The Month
“Now, people are starting to see the value in home care. The silver tsunami is coming. People are going to need help in their homes,” said Tanika Aden, a 15-year home care worker from Washington state who spoke at the Democratic National Convention in Philadelphia. For the full article, click here: Home Care Takes Center Stage at Democratic National Convention
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)
Please note the graphs representing (1) HH Index to the percentage change in the S&P 500 Index for over 14 years, (2) 12 month trailing chart of the HH Index, and (3) HH Index to the price of Addus stock (non-Medicare) can be found in the most recent issue of the Home Health Index.
Here are the results of the stock prices for the past two years:
|Company||7/31/16||1 mos change||YTD change||7/31/15||7/31/14|
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)||7/1/2016||7/1/2015||7/1/2014|
|HH Index Total||3341||2578||2783|
Enterprise Value (EV), aka Selling Price, as a Percent of Revenue.
|HH Index Average*||117%||101%||62%|
Multiples of EV/EBITDA.
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*||15.78||13.35||15.1|
*Included Gentiva prior to its acquisition in February 2015 by Kindred.
The above calculations are based on selling price being defined as Enterprise Value (EV), with data provided by Capital IQ. EV has been calculated based on stock prices September 1. 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 that may differ from that used by a company its reporting.
Stoneridge Partners’ Recent Transactions:
Arkansas: Kindred Healthcare, Inc. acquired the in-home healthcare operations for the Arkansas Department of Health for $39 million. Stoneridge Partners’ Associate Buyside Partner, Rhonda Gronberg, provided advisory services.
Other Recent Transactions From Around the Country:
- Geneva Glen Capital recapitalized Southeastern Home Health Services, one of the largest independent Medicare home health providers in Pennsylvania.No financial terms were disclosed for the transaction.
- Ensign’s home health and hospice portfolio subsidiary, Cornerstone Healthcare, acquired the assets of Hospice for Wright County. The hospice will be owned and operated by Heartland Healthcare under the name Gateway Hospice.
Exclusively Listed for Sale by Stoneridge Partners:
- Central Midwest – $5 million Medicare certified home health agency with small hospice operations. Strong bottom line and continued growth opportunities. Management team in place and outstanding clinical. Stoneridge File SBA-9010
- Colorado – $2.5 million diversified home care agency and hospice, accredited with excellent books and records. Stoneridge File SJL-1005
- Florida – Accredited $4 million Medicare certified home health agency in District 5. More than 90% traditional Medicare. Highly motivated seller. Stoneridge File SBA-6226
- Florida – Home care company in affluent area on west coast of Florida. $2.7 million run rate. Non-Medicare with 86% pure private pay. Consistent moderate growth. Caregivers are W-2 employees. Stoneridge File SDC-1253
- Florida – $2.4 million Medicare certified home health agency in District 3. Outstanding clinical with highest star rating. Longtime Home Care Elite top agency. Excellent growth opportunities. Stoneridge File SBA-4836
- Florida – $1.4 million accredited Medicare home health agency in District 8. Stoneridge File SBA-5224
- Florida – Accredited home health agency with approximately $850,000 in traditional Medicare revenue. Solid bottom line. 4.5 stars. Florida district 9. Stoneridge File SDC-5177
- Florida – Lee County Medicare agency. Approximately $400,000 in revenue. Accredited. 4 1/2 star rating. Oasis quality assessment 97.7%. Florida district 8. Stoneridge File SBA-4186
- Illinois – $5.5 million accredited Medicare agency located in northeastern Illinois. Strong bottom line. 4 1/2 star rating by CMS. Stoneridge File SDC-2734
- Minnesota – $14 million revenue Medicare/Medicaid home health agency. Well established and deficiency free. SJL-5268
- New Jersey – Opportunity to enter much sought after New Jersey market via a small hospice in the southern part of the state. Stoneridge File SJL-9002a
- Northwest – $3 million private pay home care. Growing company with a strong bottom line. Last four surveys deficiency free. Stoneridge File SJL-3003
- Ohio – $4+ million Medicare/Medicaid agency located in NE Ohio. Stoneridge File SBA-8002
- Oklahoma – Medicare certified hospice for sale in Central Oklahoma. $2.1 million run rate. Accredited. Multiple locations. Stoneridge File SBA-3881
- Pennsylvania – $14 million Medicaid provider with history of steady growth and terrific referral pipeline. Current management will stay if desired. Stoneridge File SBB-6722
- Pennsylvania – $4+ million hospice located in Western Pennsylvania. Stoneridge File SBA-5001
- Pennsylvania – $2.8 million Medicare certified home health agency with small hospice operations in Eastern Pennsylvania. 72% traditional Medicare for home health. Great tuck-in opportunity for strategic buyer. Requires corporate support functions. Stoneridge File SBA-4227
- Texas – $5 million home health agency in Houston (metro). Diversified agency – 70% Medicare, 30% private pay. Inherent capacity for growth. Stoneridge File SJL-2000
- Texas – Growing $3 million west Texas Medicare certified home health agency. Accredited with a wide variety of referral sources. Stoneridge File SJL-2892
- Texas – $1.9 million Medicare certified home health agency providing service to Region 2. More than 88% of revenue is from traditional Medicare. Stoneridge File SJL-3650
- Texas – $1.2 million established and profitable home health agency with two offices and service area from Conroe to Galveston. Stoneridge File SJL-6249
- Texas – $1.2 million home health Medicare provider. Showing upward trends. Staff in place. Stoneridge File SJL-3668
- Virginia – $5 million Medicare certified home health agency. Great clinicals and reputation in the market for providing quality services. Stoneridge File SBB-8675
- Florida – $4 million in pure private pay. 15% bottom line. Accredited on the central east coast. Stoneridge File SDC-3250. ON CONTRACT
- Florida – $5 million Medicare agency located in the Tampa – St. Pete area. Accredited, with solid bottom line. Stoneridge File SBA-4109. ON CONTRACT
- Massachusetts – $5 + million home health agency, primarily Medicaid, but also private pay and commercial insurance, plus Medicare certification. Zero deficiencies on last survey. Stoneridge File SBA-9300. ON CONTRACT
- Mid-Atlantic – $30 million Medicare/Medicaid agency with multiple branches in several states, including CON service areas. Long history and great reputation for quality care. Stoneridge File SBB-8300 ON CONTRACT
- Pennsylvania – Approximately $2 million in revenue. Licensed for entire state of Pennsylvania, so ready for growth. Stoneridge File SJL-9991 ON CONTRACT
- Pennsylvania – $1.8 million Medicare agency located in eastern Pennsylvania. 82% traditional Medicare. Growing agency with strong potential for future growth. Stoneridge File SBA-2745 ON CONTRACT
- Texas – $7 million Houston-based Medicare home health agency with sister staffing company. Accredited, expertly run and growing. Stoneridge File SJL-1500 ON CONTRACT
- Texas – $4.9 million well established Medicare provider in the Dallas/Ft. Worth metroplex. Deficiency free and showing positive growth. Stoneridge File SJL-4918 ON CONTRACT
- Texas – $4.1 million Dallas based home care company. Well managed and showing strong growth trends for 2016. Stoneridge File SJL-6002 ON CONTRACT
- Texas – $1.5 million all private pay agency located in Fort Worth, Texas. Excellent reputation, excellent reviews and extremely profitable. Stoneridge File SJL-5115 ON CONTRACT
To see more home care agencies and hospices exclusively listed for sale by Stoneridge Partners click here.
Do you know of any acquisitions that have taken place? We would be interested in your comments. At the top of this column is a “Contact Tab” with a section for comments. These can be sent anonymously. The return email address can be left blank. We are interested in what you have to say, or acquisitions that you know about.
Another Favorite from The New Yorker
For more cartoons and additional musings on the state of home care and what’s going on at Stoneridge Partners, visit our blog: Stoneridge Partners Blog
As part of our continued Louisville expansion, Stoneridge Partners is pleased to welcome, Tina Mackin, as Director of Business Development.
From Rich Tinsley, Publisher of “The Home Health Index”. Rich can be reached by email at [email protected] or at 1-800-218-3944