May was another roller coaster month for the U.S. stock market – and once again, home health and post-acute care stocks went along for the ride. But with the release last week of the U.S. Centers for Medicare and Medicaid Services’ (CMS) proposed home health rule, industry experts are concerned the bumpiest road may yet be ahead.

“Home health and post-acute providers have experienced unimaginable highs and lows over the past few years,” said Brian Bruenderman, Managing Partner of national healthcare mergers and acquisitions firm Stoneridge Partners. “They took on the challenges of providing home-based care throughout the pandemic and grew exponentially as patients sought out their services in record numbers. Once the pandemic finally began to subside, soaring growth was tempered by staffing issues and skyrocketing inflation. Now CMS’ proposed rate cuts poses a significant threat to the industry – and may be the final straw for smaller providers who have struggled through the last three years.”

The proposed rule – which is not final – seeks a 4.2% rate cut compared with 2022. It includes a 7.69% budget neutrality adjustment, linked to what CMS reports as changes to provider behavior under PDGM, and just a 2.9% inflation update, which industry advocacy groups argue is far from adequate in the face of double-digit inflationary increases. Overall, this drives the rate outlook down a combined 6.9% in 2023.

“With significantly rising costs for staff, transportation, and more, home health agencies across the country cannot withstand the impact of the proposed rate cut,” said William A. Dombi, President of the National Association for Home Care & Hospice (NAHC), in a statement. “We will be taking all steps to protect the home health benefit as this proposed rule advances and have fully prepared for congressional action and more.”

May’s Home Health Index

The two companies comprising the Stoneridge HHI went in different directions in May, with LHC Group (Nasdaq: LHCG) stocks up slightly month-over-month while Amedisys stocks fell by about 10% (Nasdaq: AMED). As a result, the HHI was down nearly 4% in May – in contrast, the S&P 500 ended the month up by almost half a percent after veering briefly into bear-market territory mid-month.

Amedisys continues to work through its acquisition of in-home, high-acuity care provider Contessa Health, which industry leaders — including those at Amedisys — knew would be a near-term drag. Still, recent comments indicate the company remains bullish on Contessa’s role as a core part of its business moving forward.

“We think we’ll be announcing some broader-based joint ventures in the very near future that I would say were not part of our roadmap prior to the acquisition of Contessa,” Amedisys CEO Chris Gerard said recently at William Blair’s 42nd Annual Growth Stock Conference.

Post-Acute Care Index

May was also a mixed bag for the companies tracked by the Stoneridge PAI.

Stock values for both Addus HomeCare Corporation (Nasdaq: ADUS) and Encompass Health (NYSE: EHC) fell in May, while The Pennant Group Inc. (Nasdaq: PNTG) was up by nearly 17% month-over-month.

All three companies are down since the onset of 2022. But there’s hope on the horizon thanks to evidence that some of the recent staffing woes plaguing the sector may be abating.

“We saw record kinds of hiring numbers on our personal care side in March and April,” Addus CFO Brian Poff said recently at the Jefferies Healthcare Conference. “We’ve been encouraged [with the labor market] recently. I think some of the government programs that have been out there that kept a lot of those folks on the sidelines, so to speak, have started to drop off. Because of that, we’ve tended to see applicant numbers increase.”

Quote of the Month

“Recognizing that they may need assistance as they get older does not mean that adults 50-plus have really thought about how they will live independently.” – AARP researcher Teresa Keenan

Read the Full Article Here: Payment Uncertainty Remains an Obstacle Between Seniors, At-Home Care Providers

Articles Featuring Stoneridge

Stoneridge Partners is proud to announce that our Managing Partner Benjamin Bogan served as exclusive advisor to Hope Nursing Home Care in its successful by Community Based Care, LLC.

Visit the Speaker Series Webinar Library on our website to watch our most recent Speaker Series discussing how to avoid common pitfalls when selling your healthcare business.

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)

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

Company 5/31/22 1 mos change YTD change 5/31/21 5/31/20
Amedisys 115.91 -9.20% -28.40% 258.37 192.05
LHC Group 166.66 +0.49% +21.45% 196.85 162.51
HH Index* 141.29 -3.72% -5.53% 227.61 177.28
S&P 4137.75 +.049% -13.19% 4204.11 3044.31
Addus 83.50 -0.93% -10.70% 96.17 98.96

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) 2022 2021 2020
Amedisys 4490 8670 6400
LHC Group 6040 6050 5440
HH Index Total 10530 14720 11840
Addus 1490 1640 1350

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

Company 2022 2021 2020
Amedisys 202% 410% 323%
LHC Group 267% 291% 260%
HH Index Average* 235% 351% 292%
Addus 169% 211% 225%

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 June 2022 | Stoneridge Partners)

Recent Transactions From Around The Country

  • SCAN Group acquired an organization that delivers home healthcare services to seniors
  • Trinity Health at Home acquired Iowa-based Above & Beyond Home Health Care and Hospice
  • Agape Care Group acquired Hospice of the Carolina Foothills
  • 24 Hour Home Care acquired Trusted Life Care, a home care agency that provides personal care for seniors in the Orange and Los Angeles counties
  • The Pennant Group, Inc. acquired First Choice Home Health, a home health and personal care services provider in Montana
  • HouseWorks acquired Greater Boston Home Health Care Services, Inc., a homecare provider in Eastern Massachusetts

SOLD!!! By Stoneridge

  • Stoneridge Partners is proud to announce that our Managing Partner Benjamin Bogan served as exclusive advisor to Hope Nursing Home Care in its successful acquisition by Community Based Care, LLC
  • Stoneridge Partners is proud to announce the successful sale of a home health agency in Tennessee
  • Stoneridge Partners is proud to announce the successful sale of a home care agency in Florida
  • Stoneridge Partners is proud to announce the successful sale of a personal assistance/companion care agency in Florida
  • Stoneridge Partners is proud to announce the successful sale of a home health agency in Arizona

View all of our closed transactions on our website

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 at Stoneridge Partners.

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

Large, established franchise territory.  $2.5 million revenue.  Two offices with strong leadership teams in place.

 Home Care /  Michigan

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

Well-established and profitable franchisee.  Revenue of $4.9M.  Medicaid and private pay.

 Home Care /  Southwest

Home Health Index May 2022 | Stoneridge Partners

From Brian Bruenderman, Publisher of “Home Health Index.” Brian 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