BREAKING NEWS: UnitedHealth Group (NYSE: UNH) closes LHC Group Inc. (Nasdaq: LHCG) transaction. More information below.

REGULAR UPDATE:

After a rough 2022, publicly traded post-acute providers are hoping to turn to a better page in the new year.

Almost all post-acute providers face significant staffing headwinds. It’s a near-universal problem. Home health providers, specifically, are dealing with those headwinds along with a dramatic shift in the way they’re paid.

Because Medicare Advantage (MA) plans are a much larger part of the equation than they used to be, providers are having to adjust.

“Transitioning the business to adjust to a new payer mix is certainly an uphill battle,” says Stoneridge Partners Managing Partner Joe Lynch. “It will be interesting to see which companies are able to seamlessly make the transition.”

The Stoneridge Home Health Index (HHI) increased 4% over the last month, while the Post-Acute Index (PAI) decreased by 4.5%.

Home Health Index

Though the HHI was up 4% month over month, that number was artificially dragged down by news about a possible Federal Trade Commission (FTC) challenge to UnitedHealth Group’s (NYSE: UNH) deal for LHC Group Inc. (Nasdaq: LHCG).

The FTC, however, did not make that challenge to the $5.4 Billion deal, which has now closed. LHC Group is no longer a tradable stock and was delisted effective Feb. 22, 2023.

Meanwhile, Amedisys Inc. (Nasdaq: AMED) had a terrific January, climbing 15.7%. It also beat Street expectations for the fourth quarter after Paul Kusserow returned to the CEO role.

The company recently divested its personal care division to the Massachusetts-based HouseWorks, and also announced a risk-based, in-home palliative care deal with BlueCross BlueShield of Tennessee.

Amedisys is positioning itself as a value driver for managed care, and is taking a hard stance on how it will contract with those health plans. It’s making deals with the ones that recognize its value, and promising to not work with those that do not recognize that value in contracts.

“I think home health is going to have more leverage than it thinks it has right now,” Kusserow told Home Health Care News. “And I think that’s going to be to Amedisys’ advantage, as well as the industry’s advantage.”

Post-Acute Care Index

After a rough December that saw its stock price dive by nearly 10%, Addus (Nasdaq: ADUS) turned things around in January. The company’s stock rose 8% month over month.

The biggest gainer in the greater post-acute space in the month, however, was the Pennant Group (Nasdaq: PNTG), which rose more than 17%.

The company is theoretically more insulated from looming home health rate cuts than others due to its senior living portfolio, but it has said that it would like to expand its home health reach.

In essence, Pennant is still bullish on the home health market, and in its ability to grow, both organically and through acquisitions.

“On the final rule, the negative behavioral adjustments represent a headwind for providers in our industry,” Pennant COO John Gochnour said during the company’s third-quarter earnings call. “Pennant’s home health and hospice segment began in, and has thrived through, periods of uncertainty and reimbursement cuts — much like today — thanks to the scalability of our operating model built on local leadership, our commitment to maintaining a strong and flexible balance sheet and our opportunistic approach to acquisitive growth.”

The S&P 500 rose 8% and outperformed the post-acute and home health indices in January, but some companies — including Amedisys and the Pennant Group — outperformed the market.

Quote of the Month

“CMS is committed to protecting people with Medicare and being a responsible steward of taxpayer dollars. By establishing our approach to RADV audits through this regulation, we are protecting access to Medicare both now and for future generations. We have considered significant stakeholder feedback and developed a balanced approach to ensure appropriate oversight of the Medicare Advantage program that aligns with our oversight of Traditional Medicare.” – Chiquita Brooks-LaSure, CMS Administrator

Read the Full Article Here: CMS Issues Final Rule for MA Risk Adjustment Audits

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:

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)

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

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 February 2023 | Stoneridge Partners)

Recent Transactions From Around The Country

• The Brentwood, Tennessee-based health care system Lifepoint Health has acquired Cornerstone Behavioral Health El Dorado
• The electronic medical record (EMR) company Careficient Inc., has acquired Net Health’s home health, hospice, home care and palliative business, as well as its revenue cycle monitoring (RCM) products
• Quipt Home Medical Corp.’s acquired Great Elm Healthcare, expanding its footprint to 26 U.S. states
• Open Systems Healthcare, which provides in-home care in the Lehigh Valley and Reading area, has sold some of its operations to a larger rival.

View Stoneridge closed transactions on our website

Home Health Index February 2023 | Stoneridge Partners

From Joe Lynch, Publisher of “Home Health Index.” Joe 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