Pro-Home Health Legislation Introduced; Post-Acute Care Stocks Rise

On July 29th, Congress introduced groundbreaking legislation that would not only be a boon for home health providers – it could also change the U.S. healthcare system as we know it.

The bipartisan Choose Home Care Act of 2021 would allow certain nursing home-eligible Medicare beneficiaries to skip going to a rehab facility after a hospital discharge, and instead give them access to wrap-around care in the home alongside traditional home health care. Additionally, the act would create a new add-on payment to the normal home health Medicare reimbursement to support home health providers offering meals, transportation, personal care and more.

“Choose Home faces an uphill battle, with at least one major nursing home lobbying group already against it,” Stoneridge Partners President Rich Tinsley said. “But if it does pass, it would be a game-changer for well-diversified home health providers.”

Home Health and Post-Acute Care Indices

The Stoneridge Partners Home Health (HHI) and Post-Acute Care Indices (PAI) both trended upward in July after down months in May and June.

Buoyed by a relatively stable proposed payment rule from the U.S. Centers for Medicare & Medicaid Services (CMS), the HHI rose nearly 7% in July over the previous month. The PAI’s performance was not quite as strong, but still rallied by more than 3% on a month-over-month basis. Both indices slightly outperformed the S&P 500, which was up by just more than 2% in July compared to June.

While July brought good news for the HHI and PAI companies, the outlook for the rest of the year has been put in doubt by concerns about the spread of the COVID-19 delta variant.

Home Health Index

The Stoneridge Partners HHI tracks the stock values of Amedisys, Inc. (Nasdaq: AMED) and LHC Group, Inc. (Nasdaq: LHCG).

Baton Rouge, Louisiana-based Amedisys saw its stock jump by almost 7% in July as compared to June. In a similar performance, the Lafayette, Louisiana-based LHC Group saw its stock rise by more than 7% over the same time period.

Both Amedisys and LHC Group have made significant hospital-at-home plays in the past several weeks. On June 29, Amedisys announced plans to acquire hospital-at-home company Contessa Health for $250 million, while LHC Group touted a new in-home care partnership with SCP Health on July 7.

“Amedisys may have some initial hurdles to clear with the integration and growth of Contessa because it’s still an up-and-coming company,” Tinsley says. “But both moves should set Amedisys and LHC Group up for further in-home care innovation down the road.”

Post-Acute Care Index

In addition to Amedisys and LHC Group, Stoneridge monitors the stock performance of Addus HomeCare Corporation (Nasdaq: ADUS), Brookdale Senior Living Inc. (NYSE: BKD), Encompass Health Corp. (NYSE: EHC) and The Pennant Group, Inc. (Nasdaq: PNTG) in its post-acute index.

Outside of Amedisys and LHC, the rest of the companies making up the PAI had a tougher go of it in July. Only the Birmingham, Alabama-based Encompass Health posted positive stock gains, rising by almost 7%. Brentwood, Tennessee-based Brookdale was down nearly 5% month over month, while Eagle, Idaho-based Pennant was down more than 16%. Addus fared slightly better, with a dip of less than 1% in July.

Encompass Health recently indicated the company was nearing a potential spinoff of its home health and hospice segment.

“Many of the key preparatory actions for a separation have been completed, including, but not limited to, audited carve-out financial statements for the home health and hospice business, a confidential submission of a draft registration statement on Form S-1 with the United States Securities and Exchange Commission and certain required regulatory filings,” the company reported in a July 28th statement. “While no assurance can be provided, the company expects to announce a transaction in the second half of 2021.”

Quote of the Month

“Some studies are indicating that four out of 10 of us in the last year have experienced depression or anxiety in a clinical range. If you went back two years, that would have been one out of 10, so we are very concerned about people’s mental health. Often times we will take care of our physical health before our mental health. We’re hoping by this series to help folks reach out for the help they need.” – Glenn Simpson, System Service Line Administrator for Behavioral Health at Vidant

Read the Full Article Here: Behavioral Health Roundup: Mental Health Matters Series; anxiety exacerbated during pandemic

Articles Featuring Stoneridge

Join us for our Speaker Series on August 25, 2021 at 4:00 p.m. Register here.

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 August 2021 | Stoneridge Partners)

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

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)

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

Multiples of EV/EBITDA

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

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 August 2021 | Stoneridge Partners)

Home Health Index August 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