Congress Delays Medicare Sequestration; Post-Acute Stocks Bounce Back from Difficult February
Home Health Index | 2021 April Update
Just days before Medicare sequestration payment reductions – temporarily halted during the COVID-19 pandemic – were set to resume, Congress approved another delay in March, postponing the cuts until the end of 2021.
This was fantastic news for home health providers, many of whom struggled through a complicated web of quarantines and lockdowns last year to continue providing their services. But according to Brian Bruenderman, Partner and Executive Vice President at Stoneridge Partners, the delay also has the potential to result in big benefits for operators looking to take their business to market.
“Medicare home health providers faced a lot of uncertainty last year, and I think you saw that reflected in a lower volume of transactions – even though the interest was still there from buyers,” Bruenderman said. “But savvy providers not only survived, they thrived in many instances. They adjusted to PDGM and to the demands of a post-COVID environment, which were two of the big question marks holding buyers back. Now, another uncertainty has been eliminated with the sequestration postponement. I think we can expect the pent-up demand for quality home health operations to result in substantially higher transaction volumes. For any owners who’ve been thinking about putting a home health business on the market, the time is right to get in on the front end of that wave.”
Home Health and Post-Acute Care Indices
March also brought good news for major home health and post-acute stock values.
Coming off a difficult month that saw significant drops for both the Home Health (HHI) and Post-Acute Care Indices (PAI), March roared in like a lion and erased any lingering February doubts. The Stoneridge Partners HHI was up by nearly 6% last month, and the PAI’s rebound was even stronger – increasing by more than 14% over February’s result.
Both indices outpaced the S&P 500, which was up almost 4% over the same time period.
Home Health Index
The Stoneridge Partners HHI tracks the stock values of Baton Rouge, Louisiana-based Amedisys, Inc. (Nasdaq: AMED), and Lafayette, Louisiana-based LHC Group, Inc. (Nasdaq: LHCG). Both companies bounced back in March after a lackluster February, with Amedisys stock rising by nearly 6% and LHC Group climbing by just more than 6%.
Post-Acute Care Index
The Post-Acute Care Index combines stock values for Amedisys and LHC Group with monthly results for Addus HomeCare Corporation (Nasdaq: ADUS), Encompass Health Corp. (NYSE: EHC), The Pennant Group, Inc. (Nasdaq: PNTG) and Brookdale Senior Living, Inc. (NYSE: BKD).
Brookdale saw its stock value climb the most – more than 15% from March to February, continuing its recent strong performance after the Brentwood, Tennessee-based company announced last month that it would sell a majority stake in its home health and hospice segment to HCA Healthcare Inc. (NYSE: HCA). Birmingham, Alabama-based Encompass Health also saw positive results in March, up almost 2% over February.
But it wasn’t all gains across the board for the PAI. Frisco, Texas-based Addus saw its stock dip by more than 2% in March, while Eagle, Idaho-based Pennant stock took a tumble of more than 12% during that time.
Quote of the Month
“We get calls all the time from providers in post-acute care, especially home health, to train and help people manage behavioral health, and I feel it’s due to the fact that individual clients are so isolated. They haven’t been able to get out to medical providers or see their families. We’ve seen a real increase in agencies, managing depression, anxiety and suicidal patients.” – Katherine Vanderhorst, president of C&V Senior Care Specialists
Read the Full Article Here: Why Home Health Providers Should Consider Offering Behavioral Health Services
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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)
(Home Health Index April 2021 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
||1 mos change
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)
|HH Index Total
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*
The Stoneridge Partners Post-Acute Care Index is updated monthly and measures the performance of these six publicly traded post-acute care 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.
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 April 2021 | Stoneridge Partners)
Recent Transactions From Around The Country
- Valeo Home Health & Hospice has acquired Hearts for Hospice & Home Health in Utah.
- Abode Healthcare, a provider of home health care and hospice services, was acquired by BrightSpring Health Services.
- Charter Health Care Group has acquired Providence Home Health & Hospice in Houston, Texas.
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
Home Health Index March 2021 | Stoneridge Partners
From Rich Tinsley, Publisher of “Home Health Index.” Rich can be reached at [email protected] or (239) 561-0826, and toll-free at 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