Post-Acute Care Stocks Continue Downturn as Staffing Shortages Persist

The demand for home health services is still skyrocketing, but staffing remains a significant challenge for operators. And as vaccine mandates begin to take effect across the country, their ultimate impact on home health staffing levels is yet unknown.

The Biden administration announced a six-point COVID-19 plan in September that included mandatory vaccinations for all health care providers who receive reimbursement from Medicare and/or Medicaid; an Interim Final Rule and comment period is expected to be announced this month. Meanwhile, healthcare companies are ramping up their push for employee vaccination, and in some places like New York, state and local mandates have already been implemented with better than expected results – so far.

“It differs based on geographic location, but home health providers we’ve talked to have anywhere from 60% to 80% of their staff vaccinated,” said Stoneridge Partners President and CEO Rich Tinsley. “But we know operators are already dealing with staff shortages, and if a large number of workers refuse to get vaccinated and leave the industry, that will force agencies to decline referrals. There’s just such a supply and demand imbalance right now.”

Home Health and Post-Acute Care Indices

The Stoneridge Partners Home Health (HHI) and Post-Acute Care (PAI) Indices each continued their recent downturn in September.

With ongoing staffing woes plaguing the industry, the HHI fell by more than 17% in September as compared to August. The PAI fared better but still came in negative, down almost 4% on a month-over-month basis.

In comparison, the S&P 500 was down nearly 5% in September as compared to August.

Home Health Index

The Stoneridge Partners HHI tracks stock values for Amedisys, Inc. (Nasdaq: AMED) and LHC Group, Inc. (Nasdaq: LHCG). Baton Rouge, Louisiana-based Amedisys saw its stock drop almost 19% in September, while stocks for Lafayette, Louisiana-based LHC Group dropped nearly 16%, with its per share pricing on a similar trajectory.

“Without a doubt, the public companies are navigating the same disruption that all health care providers are,” Tinsley says. “Even so, they remain active from an M&A perspective.”

Amedisys announced in September that it had signed a definitive agreement to acquire regulatory assets allowing it to establish home health centers in the Charlotte and Raleigh markets in North Carolina. LHC Group also announced agreements to purchase a home health agency and a hospice provider in Virginia last month.

Post-Acute Care Index

The Stoneridge Partners PAI includes stock results for Amedisys and LHC Group, as well as Addus HomeCare Corporation (Nasdaq: ADUS), Brookdale Senior Living Inc. (NYSE: BKD), Encompass Health Corp. (NYSE: EHC) and The Pennant Group, Inc. (Nasdaq: PNTG).

Frisco, Texas-based Addus’ stock values fell more than 11% in September as compared to August, and Brookdale, headquartered in Brentwood, Tennessee, saw its stock drop almost 14% on a month-over-month basis. Meanwhile, Birmingham, Alabama-based Encompass Health stocks dipped by more than 4% and Eagle, Idaho-based Pennant stocks fell just more than 8%.

In another sign that home health transaction activity hasn’t been slowed by the industry’s volatility in the stock market, LHC Group announced in September that it would acquire home health and hospice agencies in 22 states from the recently formed venture between Brookdale and HCA Healthcare (NYSE: HCA).

“That was a good deal for LHC Group because it expands their footprint,” Tinsley said. “It also works for HCA, because they’re focused on operating home health and hospice agencies only where they have an existing hospital. For Brookdale, this gives them a little more liquidity. So they described the transaction as a true ‘win-win-win,’ so to speak.”

Quote of the Month

“We are living in unprecedented times, and there is a mental health tsunami underway with a dramatic increase in mental health challenges such as anxiety, depression, suicidality, alcohol and substance abuse and relationship distress. We need to be hyper vigilant to these challenges and find strategies to address them with openness, respect and compassion—especially at work, where individuals face even more layers of stress.” – Dr. Thomas Plante, a professor of psychology at Santa Clara University and clinical professor of psychiatry and behavioral sciences at Stanford University School of Medicine.

Read the Full Article Here: World Mental Health Day Has Huge Implications For Workplace Leaders

Articles Featuring Stoneridge

Rich Tinsley, President and CEO of Stoneridge was featured in Home Health Care News: I Haven’t Seen Anything Cool Off; Home Health Market Stays Hot Heading into 2022.

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 October 2021 | Stoneridge Partners)

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

Company 9/30/21 1 mos change YTD change 9/30/20 9/30/19
Amedisys 149.10 -18.72% -49.17% 236.43 131.36
LHC Group 156.91 -15.98% -26.44% 212.56 114.28
HH Index* 153.01 -17.34% -39.60% 224.50 122.82
S&P 4307.54 -4.76% +14.68% 3380.75 2983.69
Addus 79.75 -11.31% -31.89% 94.51 79.19

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) 9/30/21 9/30/20 9/30/19
Amedisys 5580 7610 4390
LHC Group 5250 6160 3980
HH Index Total 10830 13770 8370
Addus 1480 1330 1070

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

Company 9/30/21 9/30/20 9/30/19
Amedisys 263% 386% 242%
LHC Group 246% 299% 195%
HH Index Average* 255% 343% 219%
Addus 182% 181% 188%

Multiples of EV/EBITDA

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

Company 9/30/21 9/30/20 9/30/19
Amedisys 15.11 31.44 24.41
LHC Group 22.10 25.44 19.57
HH Index Average* 18.61 28.44 21.99
Addus 22.03 23.98 25.72

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 October 2021 | Stoneridge Partners)

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

Non-medical home care franchisee.  $9.6+M in revenue.  50% Medicaid/30% Private Pay/ 14% VA/ 6% Misc.  Experienced management team to stay post-transition.

 Home Care /  Multi-State

Hospice.  45+ ADC.  Rio Grande Valley.  No CAP or regulatory issues.

 Hospice /  Texas

$2M revenue home care agency.  100% private pay.  Primarily non-medical.  Skilled designation, not Medicare-certified.  W-2 caregivers.  Region 8.  Accredited.

 Home Care /  Florida

Profitable private-duty home health agency in Northern Virginia.  $1.5M in revenue.  20+ years in the community.

 Home Health /  Virginia

Profitable home care franchise with consistent sales growth.  Revenue of $1.3M.  Great reputation within the community.

 Home Care /  Iowa

$40M+ home care agency with 20+% AEBITDA.  Primarily private-duty, non-medical (90%).  Medicaid waiver programs.  40% family caregivers.  Multiple locations.

 Home Care /  Pennsylvania

Colorado Springs and surrounding areas.  Opportunity to grow existing small hospice.  Motivated Seller

 Hospice /  Colorado

Medicare-certified home health agency.  Houston/Kingwood area.  Approximately $600k in revenue.  Accredited.

 Home Health /  Texas

I/DD provider offering SCL & FHP services.  $3M in revenue.  Recent rate increase.

 I/DD /  Kentucky

Hospice.  30+ADC.  No CAP or regulatory issues.

 Hospice /  Illinois

Behavioral Health/Suboxone Clinic.  $900k in revenue.  21 years in business with stellar reputation.  Single office, great opportunities for expansion.  All cash paying patient base.

 Behavioral Health /  Kentucky

I/DD residential services.  $11M in revenue.  Highly profitable agency with long-standing reputation.  Community Residential Services (CRS) 4-bed model & Integrated Community Supports (ICS) apartment settings.

 I/DD /  Minnesota

Well established home health agency.  $4M in revenue.  Fully staffed.  Profitable.  Good history of compliance.

 Home Health /  Missouri

Home Health CON in Montgomery County.  Profitable agency generating over $1.3M in revenue.  95%+ Medicare.  Built in marketing relationship and growth potential.

 Home Health /  Maryland

Skilled Home Health & Private Duty. $4.4 million in revenue. 22% census increase over last year. Established over 23 years.

 Home Health /  Florida

Medicare/Medicaid Home Health agency. $8 million in revenue. Long history in the community.

 Home Health /  Oklahoma

86 patient hospice located Northeast of Houston, TX. $4M+ in revenue with 20% + adjusted EBITDA. Full staff in place. Excellent record of compliance.

 Hospice /  Texas

Medicare-certified home health agency. District 7. Census of approximately 30 patients. Accredited.

 Home Health /  Florida

Hospice. 150 ADC. Strong growth. Expertly run with administrative team willing to stay involved. No CAP or regulatory issues.

 Hospice /  Southwest

Mental Health Treatment Center. $1.1M in revenue. Long-established, profitable practice. Full spectrum of medical treatment and therapy services.

 Behavioral Health /  Indiana

Medical Staffing Agency. $4.6M in revenue. Established over 25 years. Excellent rapport with regional hospital network.

 Other /  Kentucky

Medicare home health agency.  Health system relationship.  Rare KY CON opportunity, multiple counties

 Home Health /  Kentucky / Popular

Home health with $8M in revenue.  Medicare/Medicaid-certified.  90+% traditional Medicare/episodic.  Services central Texas and licensed for entire state.  Strong management team in place.

 Home Health /  Texas

Medicare-certified home health agency.  Houston-area.  Minimal census.

 Home Health /  Texas

Medicare-certified home health agency.  $1M+ in revenue.  Long-established agency with excellent community rapport.

 Home Health /  Texas

$19.5M large home care franchisee.  89% Medicaid.  Well-established company operating more than 20 years.  Phenomenal year-over-year revenue growth.

 Home Care /  Illinois / Popular

Home Health Index September 2021 | Stoneridge Partners

From Brian Bruenderman, Publisher of “Home Health Index.” Brian can be reached at [email protected] 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