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
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Well-established and profitable franchisee. Revenue of $4.9M. Medicaid and private pay.
Private-duty home care. Projected 2022 revenue of $2M. Strong bottom line.
Clinical trial pharmacy with $30M in revenue. Long operating history. Highly profitable with nice growth trends.
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.
Private duty home care franchise. Dual-licensed home health/home care companion agency. $1M+ in revenue. Attractive market with excellent growth potential.
Large home care franchisee. $5M in revenue. 100% private pay. Consistent growth trajectory.
$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.
$1.5 million revenue chiropractic/physical therapy business. High profit margin/low operating costs. Diverse referral sources.
Medicare/Medicaid-certified home health organization. $8+ million in annual revenue. Diverse payor sources. Multiple locations.
Approx. $700,000 non-skilled home health company. Located in Florida's panhandle. Accredited. 1/4 Private, 1/4 VA, 1/2 Medicaid waiver. All employees are W-2.
$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.
Large home care franchisee. $6.5 million in revenue. Private duty. Attractive market with great growth potential.
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.
Very rare opportunity in a CON state. Located in Davidson County in Nashville, TN. 2020 revenue in excess of $650,000.
Non-skilled home care company. $10+ million in annual revenue. Predominantly Medicaid. Highly profitable. Accredited. Strong management team in place.
$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 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
