CMS Releases Final Payment Rule; Post-Acute Care Shows Signs of Improvement
After a surge in COVID-19 cases led to consecutive monthly losses for post-acute care stocks, providers are slowly starting to show signs of recovery. And with a reimbursement rate increase on tap for 2022, home health companies have reason to be optimistic.
The U.S. Centers for Medicare & Medicaid Services (CMS) released the final home health payment rule on Nov. 2, which includes a 3.2% payment boost for next year and finalizes the nationwide expansion of the Home Health Value-Based Purchasing (HHVBP) Model.
“This is the largest rate increase for the home health industry since 2002, which will help providers overcome the eventual return of Medicare sequestration,” said Rich Tinsley, President and CEO of Stoneridge Partners. “Value-based purchasing will also likely drive some consolidation among more advanced, high-performing home health companies.”
Home Health and Post-Acute Care Indices
The Stoneridge Partners Home Health (HHI) and Post-Acute Care Indices (PAI) were both down throughout most of the third quarter, but each started to show signs of life in October.
With the effects of the COVID-19 Delta variant waning, the HHI improved its recent performance, ending down less than 1% in October as compared to the previous month. In contrast, the PAI still struggled, down by 8% on a month-over-month basis. Both indices substantially underperformed the S&P 500, which was up nearly 7% in October.
One factor to watch in the coming months? The impact of the federal vaccine mandate on post-acute staffing levels. CMS and the U.S. Department of Labor (DOL) both released vaccination rules on Nov. 4, with vaccine requirements planned to take effect in January.
Home Health Index
The HHI from Stoneridge Partners follows the stock values of Amedisys, Inc. (Nasdaq: AMED) and LHC Group, Inc. (Nasdaq: LHCG). October saw varying results for the HHI companies, with Baton Rouge, Louisiana-based Amedisys’ stock rising almost 14% while Lafayette, Louisiana-based LHC Group saw its stock dip by more than 14% last month.
Both companies released their third-quarter financial results the week of Nov. 1 and detailed the pandemic-related headwinds they continue to face. But Amedisys, LHC Group and other home health providers will surely benefit from the 3.2% payment boost next year, and may also gain some stability around the Patient-Driven Groupings Model (PDGM) since CMS is keeping the payment model’s overall framework the same for 2022 apart from some minor recalibrations.
“On a more long-term basis, each could likewise see benefits from the Choose Home legislation currently making its way through Congress,” Tinsley added.
Post-Acute Care Index
In addition to Amedisys and LHC Group, Stoneridge tracks 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 PAI.
October ended in a split decision for the four additional PAI companies. Frisco, Texas-based Addus was up more than 17%, and Brentwood, Tennessee-based Brookdale was up more than 3% last month. Meanwhile, Pennant was down nearly 9%, while Encompass was down more than 15%.
During its Oct. 28 earnings call, Encompass confirmed plans to do a public spinoff of its home health and hospice business. The company expects the spinoff to take place in the first half of 2022.
Quote of the Month
“It could be very beneficial for people to consider hospice as an option as soon as they get news of a terminal illness. Often people wait too long, and miss out on the benefits and support the patient and the family could have received.” – Ginger Marshall, Nurse Practitioner and CEO of the Hospice and Palliative Nurses Association
Read the Full Article Here: 5 Common Questions About Hospice Care, Answered
Articles Featuring Stoneridge
The Last Stoneridge Partners Speakers Series of 2021 is December 14th at 1:30pm ET. Stoneridge Partners President and CEO Rich Tinsley will moderate a virtual panel discussion about the current state of the markets, valuation trends in 2021 and industry expectations for the new year. Featured speakers will include David Baiada, CEO of Bayada Home Health Care; Brian Bruenderman, Partner and Executive Vice President, Stoneridge Partners; and Tom Lillis, Partner and leader of Stoneridge Partners Strategic Consulting. 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 November 2021 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
| Company | 10/31/21 | 1 mos change | YTD change | 10/31/20 | 10/31/19 |
| Amedisys | 169.34 | +13.57% | -42.27% | 259.00 | 128.52 |
| LHC Group | 134.59 | -14.22% | -36.91% | 216.55 | 110.97 |
| HH Index* | 151.97 | -0.68% | -40.01% | 237.78 | 119.75 |
| S&P | 4605.38 | +6.91% | +22.61% | 3269.96 | 3037.56 |
| Addus | 93.50 | +17.24% | -20.15% | 97.57 | 84.21 |
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) | 10/31/21 | 10/31/20 | 10/31/19 |
| Amedisys | 5720 | 8520 | 4570 |
| LHC Group | 4610 | 6800 | 3970 |
| HH Index Total | 10330 | 15320 | 8540 |
| Addus | 1400 | 1460 | 1110 |
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
| Company | 10/31/21 | 10/31/20 | 10/31/19 |
| Amedisys | 260% | 422% | 242% |
| LHC Group | 216% | 330% | 195% |
| HH Index Average* | 238% | 376% | 219% |
| Addus | 173% | 198% | 197% |
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
| Company | 10/31/21 | 10/31/20 | 10/31/19 |
| Amedisys | 14.96 | 32.29 | 24.12 |
| LHC Group | 19.39 | 28.10 | 19.53 |
| HH Index Average* | 17.18 | 30.20 | 21.83 |
| Addus | 20.94 | 26.17 | 26.87 |
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 November 2021 | Stoneridge Partners)
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Hospice agency. 6 counties in northern California. Moratorium in place. Minimal census. Accredited.
Medicare home health agency. Health system relationship. Rare KY CON opportunity, multiple counties
Opportunity to establish a Houston-based hospice. Low-census provider licensed for regions 3, 4, 5 and 6.
Opportunity to establish a Medicare hospice and Medicare home health agency. Greater Salt Lake city area. Clean provider number with management and field staff in...
Large, established franchise territory. $2.5 million revenue. Two offices with strong leadership teams in place.
ABA in-home and community-based autism treatment for children and families. Located in Northeastern VA. $1M in revenue. Completely self-sufficient staff to remain.
Home health with $8+M in revenue. Medicare/Medicaid-certified. 90+% traditional Medicare/episodic. Services central Texas and licensed for entire state. Strong management team in place.
Home care franchisee. $8.4M in revenue. Highly profitable agency. Medicaid/private pay.
Skilled home health agency. JCAHO accredited, zero deficiencies. Excellent reputation and referral relationships. $400k in revenue, impressive growth potential.
Medicare-certified home health agency. Houston-area. Minimal census.
Medicare-certified home health agency. $1M+ in revenue. Long-established agency with excellent community rapport.
In-home DME manufacturer. Patented mobility system. $7.7M+ in revenue. GSA/VA contract. Strong industry supplier partnerships.
Private pay home care. $1.6M in revenue. Profitable, great reputation. Tenured staff.
Medicare-certified home health agency. District 3. Approximately $700k in revenue. Accredited.
Medicare-certified home health agency. District 5. Minimal census. Accredited.
$19.5M large home care franchisee. 89% Medicaid. Well-established company operating more than 20 years. Phenomenal year-over-year revenue growth.
$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.
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.
$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.
Central Ohio-based home health company with private pay. $2.3 million in revenue. 13.5% EBITDA. Strong growth trends, full staff in place.
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 November 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
