Home Health Index January Update

A new year has arrived for the publicly traded post-acute care companies. Yet, most of the challenges remain the same.

Home health providers are adjusting to a landscape of Medicare Advantage (MA) penetration and constant tinkering of the fee-for-service structure from the U.S. Centers for Medicare & Medicaid Services (CMS), all of which undercut provider stability. In general, post-acute care providers are dealing with difficult payment dynamics.

Providers that deal heavily in the Medicaid home- and community-based services (HCBS) space, such as Addus HomeCare Corporation (Nasdaq: ADUS) and Aveanna Healthcare Holdings (Nasdaq: AVAH), are also awaiting a potentially monumental regulatory change. Proposed as the “ensuring access to Medicaid services” rule, CMS is considering implementing blanket wage mandates for HCBS workers.

Staffing, of course, remains a pain point for all home-based care providers, but there are signs that the labor market is softening.

In January, the home health index and post-acute index were mostly quiet, with the former down about 1% and the latter down 3.25%.

“While certain pain points do remain, there seems to be a bit more certainty in 2024 compared to recent years,” says Ben Bogan, partner and managing director at Stoneridge Partners. “Providers generally know what to expect, outside of impending final rules from CMS, and we are forecasting solid M&A activity in 2024 as buyer interest looks strong coming into the new year.”

Home Health Index

Enhabit Inc. (NYSE: EHAB) took longer than usual to announce its fourth-quarter earnings call in 2024 – that date was finally set for March 6.

By then, it’s more likely than not that there will be a resolution to the company’s strategic review, which was originally announced late last summer. The most probable outcome is a sale.

The last time the public heard from Enhabit leaders was their third-quarter earnings call, where they stated that their business was turning around.

“The strongest value proposition in our negotiations with payers continues to be our low 30-day hospital readmission rate, which is 20% better than the national average,” Enhabit CEO Barb Jacobsmeyer said during the call. “Our payer innovation team has continued to succeed in demonstrating this value proposition to Medicare Advantage payers. Since the inception of the payer innovation team last summer, we have successfully negotiated 48 new agreements — two-thirds of which are episodic rates.”

In January, Enhabit’s stock price fell by 2.5%, its second consecutive month-over-month drop.

Its home health peer Amedisys Inc. (Nasdaq: AMED), meanwhile, has already agreed to be acquired by UnitedHealth Group’s (NYSE: UNH) Optum.

That agreement was announced in June, but there seems to be some regulatory holdup. It’s still unclear whether the deal will be finalized by the second quarter of 2024.

Amedisys was down slightly in January, by less than 1%.

Post-Acute Care Index

Aveanna’s stock dropped significantly during its first couple of years on the public market. But the company underwent a turnaround recently that boosted its stock price modestly.

Even outside of the stock number, the company’s leaders are optimistic about the future.

“We took a very detailed, strong, honest look at ourselves about 15 months ago,” Aveanna CEO Jeff Shaner said in January at Home Care 100. “We didn’t necessarily like everything we saw. I had to make some very honest assessments of where we were as a company, and where we wanted to be. But, 15 months later, we can exhale now as an organization. Because we know where we’re going.”

Aveanna was down 16% in January but is still up considerably – by close to 100% – year over year.

The only company on the PAI that was up in January was The Pennant Group (Nasdaq: PNTG). Up over 7%, the company has been steady for the last couple of years.

On the other hand, Addus was down about 7% in January.

Quote of the Month

“One of the great confusions when seeking access to government health benefits is the similarity between the words “Medicare” and “Medicaid.” Even seasoned professionals in the field sometimes slip and use one word instead of the other. There are major differences between the two programs and one area where this becomes very clear is in the provision of home care services.” – Janet Colliton, Certified Elder Law Attorney practicing in Pennsylvania

Read the Full Article Here: Planning Ahead: Medicare, Medicaid or Hospice for at-home 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:

*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 24 months of Post-Acute Care Index performance.

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 January 2024 | Stoneridge Partners)

Recent Transactions From Around The Country

• Legacy Care Partners Acquires Superior Home Health and Superior Hospice of Texas Legacy Care Partners.

• Nautic Partners has completed the acquisition of Angels of Care from Varsity Healthcare Partners.

SOLD by Stoneridge!!!

• Stoneridge Partners is proud to announce the successful sale of two separate Home Care agencies in Pennsylvania.

View Stoneridge closed transactions on our website

Home Health Index January 2024 | 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.