The Centers for Medicare & Medicaid Services (CMS) home health final payment rule came in much more positive for providers than the proposed rule.

Providers will receive a 0.8% aggregate increase to payments in CY 2024, which will have a material and beneficial impact on the bottom lines of publicly traded home-based care companies.

At the same time, CMS is still implementing permanent, negative behavioral adjustments. CMS is also claiming it overpaid providers by billions of dollars over the last few years, and that it plans to claw that money back at some point.

The top home health companies will continue to advocate against CMS’ methodologies in hopes that Congress will step in to mitigate future cuts. But for now, a 0.8% increase for CY 2024 is at least better than the 2.2% aggregate decrease that was proposed.

“Providers that budgeted for the proposed rule got a boost from the final payment rule,” says Ben Bogan, partner and managing director at Stoneridge Partners. “M&A should tick up as buyers have more certainty on what payment will look like, at least for the next year.”

The S&P was down 2.2% in October. The HHI was down 5.52%, while the PAI was down 0.3%.

Home Health Index

The final rule’s impact will be felt more in November and December, but it’s already evident how it will affect dollars and cents for Enhabit Inc. (NYSE: EHAB) and Amedisys Inc. (Nasdaq: AMED).

Specifically, the change between the proposed and final rule is a $26 million boost for Amedisys and a $18 million boost for Enhabit Inc. (NYSE: EHAB).

That was much needed for Enhabit, which was down 34.43% in October. The company is undergoing a strategic review that could result in a merger or sale.

Conversely, Amedisys was down just 2% in October. UnitedHealth Group’s (NYSE: UNH) acquisition of the company is still pending, and that deal likely won’t reach a result until next year.

While Enhabit’s stock price has declined significantly since its IPO in June of last year, the recent turbulence was likely driven by the company entering into a limited waiver agreement with Wells Fargo Bank (NYSE: WFC).

That turbulence abated a bit toward the end of October, as Enhabit had the chance to explain itself. The company also scored new Medicare Advantage contracts in the third quarter and had a solid streak of hiring: 166 new net nurses, a number that pleased its leaders.

“Our home health team continues to do a great job managing productivity and optimization of our clinical staff,” Enhabit CEO Barb Jacobsmeyer said during the company’s third-quarter earnings call. “Our cost per visit increased 1.1% year over year. Improved nursing productivity and optimization offset the impact of merit and market increases for clinical staff.”

Post-Acute Care Index

The PAI had another lackluster month as well. The Pennant Group (Nasdaq: PNTG) was down 2.39%. Addus Homecare Corporation (Nasdaq: ADUS) was down 7.97%.

Aveanna Healthcare Holdings (Nasdaq: AVAH) was up 13.7%, but accounts for a small percentage of the overall PAI. Its stock price rose from 1.19 to 1.38.

Relatively new to the public market, Aveanna is trying to gain its footing by shifting its clinical capacity to “preferred payers” across all of its segments. In essence, they will accept patients under payers that reimburse fairly for home-based care services.

“Our preferred payer relationships benefited from accelerated caregiver hires of approximately three times more than our other payers, and we continue to experience staffing rates approximately 20% to 25% greater with significantly higher patient admissions,” Aveanna CEO Jeff Shaner said on the company’s third-quarter earnings call. “These positive labor trends have continued into the fourth quarter, and further validate our preferred payer strategy. Preferred payers reimburse us a fair rate, and we pay market competitive wage rates, while also earning value-based payments for achieving positive clinical outcomes and improved caregiver capacity.”

The Pennant Group, though down slightly month over month, has continued to acquire home health and hospice agencies on a regular basis.

Like other prominent home- and community-based services (HCBS) providers, Addus is still waiting on what could be a very impactful final rule from CMS. If CMS goes with its early 2023 proposal, providers would be mandated to direct 80% of reimbursement for HCBS toward caregiver wages.

“At this time, CMS continues to review the more than 2,000 comments submitted to the proposal before issuing a final rule,” Addus CEO Dirk Allison said on the company’s third-quarter earnings call. “The comments submitted to CMS, including those from a broader array of state Medicaid agencies, overwhelmingly call for the administration to rescind the part of the proposed rule requiring that 80% of the Medicaid payment providers go to direct caregiver wages.”

Quote of the Month

“Families don’t fully understand hospice and the scope of hospice, what it provides. There’s also a lack of clarity on disease progression and prognosis, caregiver burden, distress, or difficult to manage symptoms. You also have caregivers’ reluctance to administer morphine, and the response time of the hospice when compared to 911, and the family’s difficulty in accepting the patient’s own mortality. What’s interesting here when you look at these items is that some of them are within the control of hospice.” – Sara Sprague, Manager of Clinical Quality Improvement, for Providence Hospices of Orange County in California

Read the Full Article Here: Education, Care Coordination Key to Preventing Unnecessary Revocations of the Hospice Benefit

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:

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:

• Aveanna (AVAH)
• Amedisys (AMED)
• Addus (ADUS)
• The Pennant Group, Inc. (PNTG)
• Enhabit (EHAB)
• Brookdale Senior Living Inc. (BKD)

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

Enterprise Value (EV)

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

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 October 2023 | Stoneridge Partners)

Recent Transactions From Around The Country

• Texas-based Choice Health at Home LLC has acquired Lumicare Hospice, growing its presence in two current markets while establishing services in a new state.

• American Health Staffing Group has acquired PediaStaff, a leading provider of pediatric therapy and educational staffing services, to expand its specialized healthcare staffing offerings.

• Pediatric Home Service based in Roseville, Minn., has acquired Apple Homecare Medical Supply based in Richardson, Texas, Vertess has announced.

• The Ensign Group, Inc., the parent company of the Ensign™ group of companies, which invest in and provide skilled nursing and senior living services, physical, occupational and speech therapies, other rehabilitative and healthcare services, and real estate, announced that it acquired the real estate and operations of Champions Healthcare at Willowbrook.
• The Pennant Group Inc., announced that it has acquired Guardian Hospice and Guardian Hospice of Oklahoma (“Guardian”), which provides skilled hospice services in Grayson, Fannin, Collin, Cook, Denton, and Hunt counties in Texas, and Bryan, Choctaw, Atoka, Pushmataha, Johnston, Coal, Marshall, Murray, Pontotoc, and Love counties in Oklahoma.

SOLD by Stoneridge!!!

• Stoneridge Partners is proud to announce the successful sale of a Home Healthcare Agency in Virginia.
• Stoneridge Partners is proud to announce the successful sale of a Home Healthcare Agency in Florida.

View Stoneridge closed transactions on our website

Home Health Index October 2023 | Stoneridge Partners

From Ben Bogan, Publisher of “Home Health Index.” Ben 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.