The ‘New Normal’ of Post-Acute Care Referrals; Home Health Stocks Down
Home Health Index | 2021 JUNE UPDATE
Post-acute care referrals have rebounded impressively since the country began to emerge from the COVID-19 pandemic – now we have evidence indicating that growth isn’t just an aberration.
According to recent data from CarePort Health, a WellSky company, hospital discharges to post-acute care are trending more toward in-home care. Historically, discharges were evenly split between skilled nursing facilities (SNFs) and home health providers. Now, the split is closer to 60% vs. 40% in favor of home health care.
While SNF volume has continued to lag slightly compared to pre-pandemic baselines, home health volume reached 116% of 2019 levels in March.
“Post-pandemic, we’re seeing hospitals and other referral sources place their confidence in in-home care more frequently than they have in the past,” says Stoneridge Partners President Rich Tinsley. “That’s a positive for home health providers. Pent-up demand, especially as elective procedures return in full, will put home health assets at a premium.”
Home Health and Post-Acute Care Indices
After a steady March and solid April, the Home Health (HHI) and Post-Acute Care (PAI) Indices were each down about 5% in May. Both indices underperformed the S&P 500, which was up less than 1% on a month-over-month basis.
The down month may have been more of a market recalibration than a response to a negative policy or regulatory development. For the most part, post-acute care companies — particularly home health providers — remain buoyed by positive government support systems. That may change by July, when the U.S. Centers for Medicare & Medicaid Services (CMS) is expected to release the next home health proposed payment rule.
Home Health Index
The HHI from Stoneridge Partners follows the stock values of Amedisys, Inc. (Nasdaq: AMED) and LHC Group, Inc. (Nasdaq: LHCG), two of the nation’s largest home health providers.
Baton Rouge, Louisiana-based Amedisys saw its stock drop more than 4% in May compared to the previous month. Similarly, stock for the Lafayette, Louisiana-based LHC Group fell more than 5%. Despite the lackluster May, Amedisys is up more than 34% over the past 12 months, with LHC Group up more than 21% during that time.
Post-Acute Care Index
For a broader look at the post-acute care landscape, the Stoneridge PAI follows Amedisys and LHC Group, plus Addus HomeCare Corporation (Nasdaq: ADUS), Brookdale Senior Living Inc. (NYSE: BKD), Encompass Health Corp. (NYSE: EHC) and The Pennant Group, Inc. (Nasdaq: PNTG).
Brentwood, Tennessee-based Brookdale and Birmingham, Alabama-based Encompass Health were the two PAI winners in May.
After consecutive positive months, Encompass Health added to its recent run with a 1% gain in May compared to April. Fresh off the successful acquisition of Frontier, Encompass Health remains in the midst of a possible sale or spinoff for its home health and hospice segment, with no clear-cut suitor yet to emerge.
Brookdale’s stock climbed more than 3% in May over April. Since the start of 2021, Brookdale — a major senior living owner and operator that also runs a large health care services segment — has made substantial progress on its occupancy rates.
“While we can’t tell you the exact timing of the recovery, based on our recent experience, and with dramatically lower construction starts and the accelerating demographic tailwind, I am confident that demand will continue to improve,” CEO Cindy Baier said during the company’s Q1 2021 earnings call at the start of May. “I am very optimistic about our future.”
In contrast to Brookdale and Encompass Health, the final two PAI companies were both down last month. Frisco, Texas-based Addus saw its stock drop more than 9% in May compared to April. Eagle, Idaho-based Pennant experienced an even bumpier May, with its stock down more than 15% on a month-over-month basis.
Addus and Pennant each remain on the M&A hunt, however, with the latter acquiring the assets of Fort Worth, Texas-based Cardiovascular Home Care in early May. Cardiovascular Home Care will operate under the name Custom Care Home Health.
“Having a strong hospice agency and a number of senior living communities in Dallas, we have carefully looked for the right opportunity to add home health services in the DFW area,” Pennant CEO Danny Walker said in a statement. “This acquisition provides a strong platform for our local leaders to better address the needs of the community.”
Quote of the Month
“What’s happening is … all of that stuff you’re doing in the hospital, you’re starting to be able to do in the home. And we think this is part of an overall movement of care moving from hospitals to other settings.” – Eric Dickson, the president and CEO of UMass Memorial Health
Read the Full Article Here: UMass Memorial Health Hopes to Grow Hospital -at-Home Program Tenfold in the Next Year
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.
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 June 2021 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
| Company | 5/31/21 | 1 mos change | YTD change | 5/31/20 | 5/31/19 |
| Amedisys | 258.37 | -4.25% | -11.92% | 192.05 | 111.88 |
| LHC Group | 196.85 | -5.48% | -7.72% | 162.51 | 112.95 |
| HH Index* | 227.61 | -4.79% | -10.15% | 177.28 | 112.42 |
| S&P | 4204.11 | +.055% | +11.93% | 3044.31 | 2751.98 |
| Addus | 96.17 | -9.10% | -17.87% | 98.96 | 68.01 |
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) | 5/31/21 | 5/31/20 | 5/31/19 |
| Amedisys | 8670 | 6400 | 3840 |
| LHC Group | 6050 | 5440 | 3980 |
| HH Index Total | 14720 | 11840 | 7820 |
| Addus | 1640 | 1350 | 860 |
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
| Company | 5/31/21 | 5/31/20 | 5/31/19 |
| Amedisys | 410% | 323% | 222% |
| LHC Group | 291% | 260% | 197% |
| HH Index Average* | 351% | 292% | 210% |
| Addus | 211% | 225% | 157% |
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
| Company | 5/31/21 | 5/31/20 | 5/31/19 |
| Amedisys | 27.23 | 26.51 | 21.84 |
| LHC Group | 24.04 | 26.03 | 20.76 |
| HH Index Average* | 25.64 | 26.27 | 21.30 |
| Addus | 27.82 | 29.32 | 21.23 |
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 June 2021 | Stoneridge Partners)
Recent Transactions From Around The Country
- Eden Home Health of Bozeman has acquired WEL-Home Health of Bozeman.
- Murfreesboro-based senior care company National Healthcare Corp. has acquired the remaining interest in Nashville-based hospice and palliative care provider Caris Healthcare.
- Hospice Source, the leading provider of durable medical equipment dedicated to the hospice market, has acquired Respiratory Therapy Home Care of Bellflower, California.
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Do you know of any acquisitions that have taken place? We are interested in your comments. Contact us; Stoneridge Partners
Medicare-certified home health agency. District 3. Approximately $700k in revenue. Accredited.
Medicare-certified home health agency. District 5. Minimal census. Accredited.
Co-occurring, dual-diagnosis, addiction and mental health treatment center, 13- year history. PHP, IOP, OP levels of care, prime location and setting, treating SUD and multiple...
$19.5M large home care franchisee. 89% Medicaid. Well-established company operating more than 20 years. Phenomenal year-over-year revenue growth.
$2.5M private pay home care agency. 20-year history, diverse referral sources. Competitive bill rates. Unique and successful recruiting and retention strategy.
$2.8M home health agency. Medicare and Medicaid-certified. Approximately 70% skilled: 10% Medicare, 25$ Medicaid, 65% MA and HMO. Approximately 30% non-medical; 100% private pay. Accredited.
$27M highly profitable, tech-enabled health care staffing company. Provides on-demand workers for LTC facilities. Impressive growth trends with extraordinary upside
Well-established and profitable franchisee. Revenue of $4.9M. Medicaid and private pay.
ABA in-home autism therapy for children. $2.4M in revenue. Strong growth and bottom line.
Opportunity to acquire a Medicare-certified home health agency. JCAHO-accredited. Zero deficiencies. Region 9.
Opportunity to acquire a Medicare-certified home health agency. JACHO-accredited. Zero deficiencies. Minimal census.
Opportunity to acquire a Medicare-certified home health agency. Zero deficiencies. Minimal census.
Rare southern hospice/home health CON opportunity. $3.5M in revenue, 60+ hospice ADC. Strong staff recruiting and retention.
Medicaid/private pay, Medicare-certified. $3 million in revenue. CHAP-accredited.
$1.5 million home health company. Medicare/Medicaid-certified. Primarily skilled services. 80+% HMO. 15+% Medicare.
4-star home health agency. $2.5 million revenue. Experienced management team. Strong financials with outstanding local reputation. Huge growth opportunities.
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$3.3 million in revenue. Autism center providing ABA, OT, PT and ST. In-clinic and in-home services.
Non-skilled licensed home care organization. Approx. $2 million in annual revenue. Strong management team in place. Southern California.
Joint Commission-accredited psychiatric treatment center. Residential, PHP, IOP, OP and home health services. National referral base; reputation for excellence, innovation. $3M EBITDA on $7M revenue...
Central Ohio-based home health company with private pay. $2.3 million in revenue. 13.5% EBITDA. Strong growth trends, full staff in place.
Non-medical home care franchisor. Platform opportunity with national footprint. Systemwide revenues more than $12 million. Franchise locations in 16 states.
$2+ million private pay. Profitable with great reputation.
Profitable hospice agency with $600,000 in revenue. Ready to grow with full complement of staff in place.
CHAP-accredited private duty business. $2.8 million projected 2021 revenue. Workers' compensation primary source of revenue. Regions 9, 10 and 11.
$1 million Medicare home health agency in northwest Minnesota. Well-established. Diverse referral sources. Long history of excellent care.
$4.9 million Medicare home health agency located in Phoenix, Arizona. Showing strong year over year revenue growth since 2018. Diverse referral sources, well run with...
Hospice with $3.5 million in annual revenue. Accredited. No cap or regulatory issues.
$2.5 million New Mexico home health agency. 87% Medicare. Long history in the community and existing staff in place.
Home Health Index June 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
