Labor Challenges Stifle Post-Acute Care Growth
A difficult labor market continues to dampen post-acute care growth. Nonetheless, many of the nation’s home health giants are optimistic about their 2022 outlook due to skyrocketing demand for their services.
Currently, the biggest question mark surrounding the post-acute care sector’s future is the COVID-19 Omicron variant, which began spreading across the globe in November. If it proves to be as contagious as the Delta variant, Omicron could create yet another hurdle for operators to clear on their road to normalcy.
“It’s the same story we’ve heard all year,” said Stoneridge Partners President Rich Tinsley. “Demand for post-acute care — especially home health care — is at an all-time high. But labor shortages mean providers can’t accept new referrals, and Omicron may just end up exacerbating clinician burnout further.”
Home Health and Post-Acute Care Indices
The Stoneridge Partners Home Health (HHI) and Post-Acute Care Indices (PAI) showed signs of life in October after a mostly sluggish third quarter – but that recovery came to a halt in November.
The HHI dropped more than 16% in November as compared to the previous month, while the PAI fell almost 6%. Both indices underperformed the S&P 500, which was down by less than 1% during the same period.
To combat workforce shortages and build capacity to take on new referrals, post-acute care operators have turned to higher-than-normal levels of contract labor. Doing so comes at a steep price, Tinsley noted.
“Some larger providers are reporting that they’re using three or four times more contract labor than usual to complete visits,” Tinsley said. “That can translate into hundreds of thousands of dollars each quarter, which has a big impact on stock prices.”
Home Health Index
Updated monthly, the HHI tracks the stock prices of Amedisys, Inc. (Nasdaq: AMED) and LHC Group, Inc. (Nasdaq: LHCG).
Stocks for Baton Rouge, Louisiana-based Amedisys fell more than 17% in November; similarly, stock prices for Lafayette, Louisiana-based LHC Group fell almost 15% over the same time period.
LHC Group is attempting to beef up its staffing strength by leveraging more extenders, such as licensed practical nurses (LPNs) and physical-therapy assistants (PTAs). Amedisys is taking a similar approach while investing in predictive analytics to better track key staffing metrics.
“We’re going to have to continue improving our recruitment and retention efforts — and recruitment and retention are equally as important,” LHC Group Chairman and CEO Keith Myers said during a Dec. 3 investor presentation. “We have to make it easier for nurses to work here.”
Amedisys stock is down more than 52% on a year-to-date basis, while LHC Group stock is down more than 46%.
Post-Acute Care Index
The Stoneridge Partners PAI combines stock performance for Addus HomeCare Corporation (Nasdaq: ADUS), Brookdale Senior Living Inc. (NYSE: BKD), Encompass Health Corp. (NYSE: EHC) and The Pennant Group, Inc. (Nasdaq: PNTG) with results for Amedisys and LHC Group.
Brentwood, Tennessee-based Brookdale saw its stock dip by almost 10% in November, but overall, the company’s stock is still up more than 32% on a year-to-date basis. Stocks for Frisco, Texas-based Addus dipped nearly 7% last month, and year to date, its stock is down by more than 25%. Birmingham, Alabama-based Encompass Health — which is planning to spin off its home health and hospice segment next year — saw its stock drop by more than 9% in November compared to October; its stock is down slightly more than 30% on a year-to-date basis. Finally, stock prices for Eagle, Idaho-based Pennant fell by almost 21% last month, bringing the company’s stock values down by a total of 65% year to date.
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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 December 2021 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
||1 mos change
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)
|HH Index Total
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*
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 December 2021 | Stoneridge Partners)