In April, the home health index was already a little bit lonely.
LHC Group no longer has a stock ticker next to its name now that it’s part of UnitedHealth Group’s (NYSE: UHG) Optum, and thus is no longer a part of the index.
Now, April looks like it could be one of the last months ever in which another legacy home health provider, Amedisys Inc. (Nasdaq: AMED), was a genuine part of the index. In the first week of May, Option Care Health (Nasdaq: OPCH) and Amedisys announced a planned merger that valued the latter at $3.6 billion.
Though Option Care Health and Amedisys shareholders — as well as regulators — still have to approve the deal, the companies expect to close in the back half of 2023.
But if another home health company does exit the public market, it could be representative of an overall trend in the industry at large. The payment landscape — both in traditional Medicare and Medicare Advantage (MA) — is uncertain, which could be a major reason why providers are willing to join forces with deep-pocketed partners.
“There’s undoubtedly labor pressures, but that has always been the case to some extent,” says Ben Bogan, partner and managing director at Stoneridge Partners. “Now, even the largest providers are struggling to navigate an increasingly difficult payment landscape that doesn’t seem to be easing up any time soon.”
The HHI was up 5.82% in April, while the PAI was up 8.45%. It was a good month for both, as the S&P was only up 1.46% during the same period.
Home Health Index
Amedisys was up 9.18% in April. Enhabit Inc. (NYSE: EHAB), on the other hand, was down 11.93%.
Since Enhabit’s IPO last year, the company’s stock price has been cut in half, from $25 per share to $12.25 per share.
At the middle of Enhabit’s woes are MA contracts. Enhabit had started to deny coverage to patients under MA plans that were paying what its leaders considered unfair rates. The company is announcing new deals with MA plans by the quarter, but in the interim, the financials remain rocky.
“To date, we have visited branch operations and sales teams covering 159 branches,” Enhabit CEO Barb Jacobsmeyer said on the company’s first-quarter earnings call. “We believe it’s important to take time to sit down and be transparent as we present not only how, but why, we must deselect certain payers and replace them with the new regional and national agreements.”
Beginning May 1, Enhabit has a new, more favorable deal with an unnamed national MA plan, as well as two unnamed conveners.
Post-Acute Care Index
While Enhabit is working on its payer innovation, it is also working on another key focus area: staffing.
That is precisely what has been holding Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) – which had its IPO in 2021 – back for the past couple of years.
“As a reminder, we do not have a demand problem,” Aveanna CEO Jeff Shaner said during the company’s first-quarter earnings call. “[Staffing] represents the primary challenge that we are aggressively addressing in 2023, to see Aveanna resume the growth trajectory that we believe our company can achieve.”
Aveanna was up 18.27% in April, but that only represented a 19-cent increase in its stock price. On its first day on the public market in 2021, its stock price was $12 per share.
Aveanna operates more in the Medicaid space, as does Addus Homecare Corporation (Nasdaq: ADUS). Addus was down a whopping 23.44% in April.
That could be due to the Medicaid proposed rule that the Centers for Medicare & Medicaid Services (CMS) recently released, which would mandate that 80% of all payment for home- and community-based services be spent on the workforce.
The proposed rule will likely be altered before it is finalized, but it has caused some concern for providers in the space.
Provider leaders argue that the threshold is nonsensical, mostly because Medicaid programs vary significantly state by state. They also wonder whether training costs will be included in that 80%.
“This proposed rule has a stated goal of improving access to services for Medicaid beneficiaries, which we strongly support,” Addus CEO Dirk Allison said on the company’s first-quarter earnings call. “But while we agree with the goal of broadening coverage, we question the specific approach proposed and the target threshold, as there are inherent challenges at setting a one-size-fits-all minimum percentage.”
Quote of the Month
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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:
*NOTE: LHC Group was officially delisted from the Nasdaq when UnitedHealth Group’s (NYSE: UNH) acquisition of it was finalized. While LHC Group is now gone from the HHI, Enhabit has been added in the past year. The numbers below are reflected as such.
- Amedisys (AMED)
- Enhabit (EHAB)
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*
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:
- Aveanna (AVAH)
- Amedisys (AMED)
- Addus (ADUS)
- The Pennant Group, Inc. (PNTG)
- Encompass Health (EHC)
- Enhabit (EHAB)
- 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 May 2023 | Stoneridge Partners)
Recent Transactions From Around The Country
- HouseWorks acquired Care and Help Home Care, a Pennsylvania home care company
SOLD by Stoneridge!!!
- Stoneridge Partners is proud to announce the successful sale of a home health care agency in Colorado
- Stoneridge Partners is proud to announce the successful sale of a therapeutics agency in New York
View Stoneridge closed transactions on our website