Home health advocates continue to flood Washington D.C., making their case against the dramatic cuts suggested by the U.S. Centers for Medicare and Medicaid Services’ (CMS) in its new proposed payment rule released on June 17. And while we’re still months away from understanding where the final payment rule will end up, some prognosticators are predicting that no matter what, it may have a negative effect on the red-hot home health and post-acute transaction markets.

Not so, says Ben Bogan, Managing Partner of national health care mergers and acquisitions firm Stoneridge Partners.

“This is exactly when smart operators should be turning to their advisors to help them sharpen their acquisition strategy, not abandon it. There’s no better time to think about diversifying your payor sources to blunt the impact of cuts in any one area. And in a time when your competitors may be pulling back and playing it safe, this is an opportunity to set your business apart from the pack by adding new geographies and new service lines. Strategic acquisitions will bolster your position, no matter what the payment landscape looks like.”

In the short-term, the proposed rule has certainly caused more headaches for an industry that has seemed poised to take off – if only it could unburden itself from the effects of the pandemic and ensuing economic challenges. June was no different, according to the Stoneridge Partners Home Health Index (HHI); home health stock values dipped by just more than 18% last month, compared to a more than 2% drop in the S&P.

Home Health Index

Stocks for both of the home health giants that make up the HHI fell in June as compared to May. Amedisys, Inc. (Nasdaq: AMED) stocks dropped more than 9% last month, while stocks for LHC Group, Inc. (Nasdaq: LHCG) were down by more than 6%.

Last month, Amedisys suggested it was going all-in on its work with high-acuity care services provider Contessa Health, which it acquired in June 2021. While the acquisition always signaled Amedisys’s continued move into home-based higher-acuity care, its leaders last month expressed a closer bond, with Contessa becoming an integral part its business.

“I think it’s safe to say that Contessa [on its own] was going to have a good run on hospital joint ventures, particularly around more regional and smaller-market hospitals,” Amedisys CEO Chris Gerard said during William Blair’s 42nd Annual Growth Stock Conference in June. “And then Amedisys was going to probably have a handful of joint ventures added on a day-in-and-day-out basis, but not really as a part of our core business. But now, we have such an offering that the hospital systems are really wanting to form a deep relationship with us so that they can optimize their beds.”

In March, UnitedHealth Group (NYSE: UNH) agreed to buy LHC Group for a reported $5.4 billion. This month, both companies received a request from the Federal Trade Commission (FTC) for more information regarding the deal.

Post-Acute Care Index

After a strong performance in May, post-acute care company The Pennant Group, Inc. (Nasdaq: PNTG) gave back its gains and more in June, with its stock price dropping by 33%. Addus HomeCare Corporation (Nasdaq: ADUS) was relatively stable, dropping by less than a point in June.

Pennant will soon have a new CEO when Brent Guerisoli officially takes the helm on Aug. 1. Guerisoli indicates that he plans to execute Pennant’s strategy of buying community-driven agencies.

“A lot of what we’re doing now is creating more structure around the frameworks, around their systems, around their processes,” Guerisoli told Home Health Care News in June. “That foundation is so critical because that’s what we build from. If we can do that in the right way, we are going to create a significant opportunity for future partners that are going to join the organization, and future patients and residents.”

Elsewhere in the Post-Acute Care Index (PAI), stocks for Encompass Health Corporation (NYSE: EHC) dropped by more than 14% last month as it completed its spin-off of Enhabit Home Health & Hospice (NYSE: EHAB).

Quote of the Month

“Certainly, any reduction in revenues from home health will make it much harder to implement new programs such as palliative care, participate in innovations such as hospice [value-based insurance design demonstration], and impact the ability of the provider to recruit and retain staff for any of its programs as demands for higher compensation grow. In some circumstances, lower home health revenues may lead to the use of hospice revenues to subsidize other programs, rather than to continue to invest in hospice improvements such as technologies.” – Bill Dombi, President of the National Association for Home Care & Hospice.

Read the Full Article Here: Medicare Home Health Cuts Could Have Ripple Effect on Hospice, Palliative Care

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 6/30/22 1 mos change YTD change 6/30/21 6/30/20
Amedisys 105.12 -9.31% -35.06% 244.93 198.54
LHC Group 155.74 -6.55% +13.49% 200.26 174.32
HH Index* 130.43 -7.68% -12.79% 222.60 186.43
S&P 3785.38 -8.52% -20.58% 4297.5 3100.29
Addus 83.28 -0.26% -10.94% 87.24 92.56

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 4210 8310 6730
LHC Group 5680 6260 5830
HH Index Total 9890 14570 12560
Addus 1580 1510 1280

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

Company 2022 2021 2020
Amedisys 189% 392% 340%
LHC Group 251% 302% 279%
HH Index Average* 220% 347% 310%
Addus 178% 193% 214%

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 July 2022 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Hospice provider Complete Oklahoma acquired a license from Houston-based Avenir Hospice Care
  • CommuniCare Health Services took over operations of hospice and home health provider Stonerise

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.

Behavioral health specializing in PHP and IOP to high functioning patients.  $4.6M in revenue with $1.3M EBITDA.  In-network payor mix.  Three locations.  20+ year market...

 Behavioral Health /  Southeast

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

Hospice.  65+ ADC.  Expertly run with administrative tram willing to stay involved.  No CAP or regulatory issues.

 Hospice /  Arizona

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 9. $1.8M in revenue. Accredited.

 Home Health /  Florida

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

Established hospice organization on HCHB. 2 locations in greater Los Angeles/Southland area. Leadership team in place.

 Hospice /  California

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

Hospice agency.  6 counties in northern California.  Moratorium in place.  Minimal census.  Accredited.

 Hospice /  California

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 $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 Health /  Texas

Skilled home health agency.  JCAHO accredited, zero deficiencies.  Excellent reputation and referral relationships.  $400k in revenue, impressive growth potential.

 Home Health /  Colorado

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

In-home DME manufacturer.  Patented mobility system.  $7.7M+ in revenue.  GSA/VA contract.  Strong industry supplier partnerships.

 Other /  California

$1M in revenue.  Small Medicare home health agency.  Region 5.

 Home Health /  Florida

Medicare-certified home health agency.  District 3.  Approximately $700k in revenue.  Accredited.

 Home Health /  Florida

Medicare-certified home health agency.  District 5.  Minimal census.  Accredited.

 Home Health /  Florida

$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

4-star home health agency.  $2.5 million revenue.  Experienced management team.  Strong financials with outstanding local reputation.  Huge growth opportunities.

 Home Health /  Michigan

$3.3 million in revenue.  Autism center providing ABA, OT, PT and ST.  In-clinic and in-home services.

 Other /  Michigan

Non-skilled licensed home care organization.  Approx. $2 million in annual revenue.  Strong management team in place.  Southern California.

 Home Care /  California

Hospice with $3.5 million in annual revenue. Accredited. No cap or regulatory issues.

 Hospice /  Texas / Popular

$2.5 million New Mexico home health agency. 87% Medicare. Long history in the community and existing staff in place.

 Home Health /  New Mexico / Popular

Home Health Index July 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