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:
Company | 11/30/21 | 1 mos change | YTD change | 11/30/20 | 11/30/19 |
Amedisys | 139.65 | -17.53% | -52.39% | 244.79 | 162.96 |
LHC Group | 114.72 | -14.76% | -46.22% | 196.32 | 133.40 |
HH Index* | 127.19 | -16.31% | -49.79% | 220.56 | 148.18 |
S&P | 4567 | -0.83% | +21.59% | 3660.25 | 3140.98 |
Addus | 87.22 | -6.72% | -25.51% | 99.25 | 93.21 |
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) | 11/30/21 | 11/30/20 | 11/30/19 |
Amedisys | 5140 | 8190 | 5560 |
LHC Group | 4260 | 6140 | 4200 |
HH Index Total | 9400 | 14330 | 9760 |
Addus | 1520 | 1450 | 1280 |
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
Company | 11/30/21 | 11/30/20 | 11/30/19 |
Amedisys | 233% | 405% | 294% |
LHC Group | 196% | 298% | 224% |
HH Index Average* | 215% | 352% | 259% |
Addus | 182% | 191% | 213% |
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
Company | 11/30/21 | 11/30/20 | 11/30/19 |
Amedisys | 13.70 | 31.03 | 29.55 |
LHC Group | 16.11 | 28.28 | 21.49 |
HH Index Average* | 14.91 | 29.66 | 25.52 |
Addus | 21.11 | 24.09 | 30.30 |
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)
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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.
$2M revenue home care agency. 100% private pay. Primarily non-medical. Skilled designation, not Medicare-certified. W-2 caregivers. Region 8. Accredited.
Profitable private-duty home health agency in Northern Virginia. $1.5M in revenue. 20+ years in the community.
Profitable home care franchise with consistent sales growth. Revenue of $1.3M. Great reputation within the community.
$40M+ home care agency with 20+% AEBITDA. Primarily private-duty, non-medical (90%). Medicaid waiver programs. 40% family caregivers. Multiple locations.
Colorado Springs and surrounding areas. Opportunity to grow existing small hospice. Motivated Seller
Medicare-certified home health agency. Houston/Kingwood area. Approximately $600k in revenue. Accredited.
I/DD provider offering SCL & FHP services. $3M in revenue. Recent rate increase.
Hospice. 30+ADC. No CAP or regulatory issues.
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.
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.
Well established home health agency. $4M in revenue. Fully staffed. Profitable. Good history of compliance.
Home Health CON in Montgomery County. Profitable agency generating over $1.3M in revenue. 95%+ Medicare. Built in marketing relationship and growth potential.
Skilled Home Health & Private Duty. $4.4 million in revenue. 22% census increase over last year. Established over 23 years.
Medicare/Medicaid Home Health agency. $8 million in revenue. Long history in the community.
86 patient hospice located Northeast of Houston, TX. $4M+ in revenue with 20% + adjusted EBITDA. Full staff in place. Excellent record of compliance.
Medicare-certified home health agency. District 7. Census of approximately 30 patients. Accredited.
Hospice. 150 ADC. Strong growth. Expertly run with administrative team willing to stay involved. No CAP or regulatory issues.
Mental Health Treatment Center. $1.1M in revenue. Long-established, profitable practice. Full spectrum of medical treatment and therapy services.
Medical Staffing Agency. $4.6M in revenue. Established over 25 years. Excellent rapport with regional hospital network.
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.
Medicare-certified home health agency. Houston-area. Minimal census.
Medicare-certified home health agency. $1M+ in revenue. Long-established agency with excellent community rapport.
$19.5M large home care franchisee. 89% Medicaid. Well-established company operating more than 20 years. Phenomenal year-over-year revenue growth.
Home Health Index December 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