Home Health Index February Update

In February, another home-based care provider showed up on the public market stage with big ambitions.

Since Enhabit Inc. (NYSE: EHAB) went public in 2022, no home-based care entity had received a ticker symbol next to its name. That changed at the end of January thanks to the entrance of BrightSpring Health Services (Nasdaq: BTSG).

“Companies were shy about going public over the last couple of years given macroeconomic trends,” says Joe Lynch, Partner and Managing Director at Stoneridge Partners. “And then here is BrightSpring, which is back again after initially canceling plans to IPO a few years ago. We’ll be watching its strategy and performance closely in the near-term future.”

BrightSpring CEO Jon Rosseau laid out lofty plans at the end of February on the company’s first earnings call.

“We have strategically positioned BrightSpring to be a major player in the areas of greatest need in health care and in some of the most exciting growth markets within health care services,” Rousseau said. “I am confident that, in each of these markets, BrightSpring will be among the long-term winners.”

While Rousseau reviewed fourth-quarter earnings and full-year earnings on the call, he also described a company mission that goes far beyond just home and community-based services.

“As we look forward, there is a much bigger opportunity,” he continued. “If we were to serve all of the services and needs that our patients have today, it would more than double the company. There are upwards of over 500,000 additional referrals a year that we could potentially be taking. That’s the goal as we continue to drive more integrated care.”

BrightSpring was down 22.58% in February, but what will be more interesting, and more relevant, is how the stock fares throughout 2024.

The home health index was down 2.3%, while the post-acute care index was down 8.39%. Comparatively, the S&P was up 4.92% month over month.

Home Health Index

The home health index is currently characterized by a potential acquisition and a pending one.

Enhabit Inc. (NYSE: EHAB) is in the final stages of its strategic review, which will likely end up in sale. It was down 12.24% in February.

Meanwhile, Amedisys Inc. (Nasdaq: AMED) was down 2.15%.

UnitedHealth Group’s (NYSE: UNH) Optum is in the process of acquiring Amedisys, with the two parties agreeing last June to an all-cash deal. The timeline, at this point, is no cause for alarm.

After all, Optum’s acquisition of another home health provider – LHC Group – took 11 months in total. Amedisys has until late May to hit that mark.

But there’s something different at play now with the Optum-Amedisys deal. In late February, it was reported that the Department of Justice was conducting an antitrust investigation into UnitedHealth Group.

UnitedHealth Group has been one of the most prolific acquirers in health care over the last decade. Other health care stakeholders have been aware of this trend – and sometimes queasy about it – for a long time. But now the federal government is involved.

It’s unclear how Amedisys will be affected by the deal, but it would be naive to think the deal’s timeline won’t be affected.

If Optum is successful in its acquisition of Amedisys, it would own about 10% of the home health market – making it the largest home health entity in the country.

Post-Acute Care Index

In the post-acute care index, the aforementioned BrightSpring got off to a rocky start.

Elsewhere, Addus was down 0.58% in February, but the company struck an optimistic tone on its fourth-quarter earnings call. Specifically, Addus leaders seemed more optimistic about the Medicaid “80-20” proposed rule that could be finalized in April.

“The contents of a final rule are unknown at this time, and could be significantly different than the proposed rule,” Addus CEO Dirk Allison said on the earnings call. “While we aren’t sure whether this rule will contain the 80% requirement, a different percentage requirement, or ultimately be implemented, we would not be surprised to see the four-year implementation period extended.”

Allison also spoke of a robust M&A plan for the year ahead.

“We anticipate seeing additional acquisition opportunities coming to market over the next several quarters,” he said. “It remains our primary focus to use our financial capacity to acquire strategic operations that align with our overall growth strategy of offering all three levels of home based care in our personal care markets.”

Aveanna Healthcare Holdings (Nasdaq: AVAH) was also down in the month, by 11.57%.

The Pennant Group (Nasdaq: PNTG), yet again, was an outlier. The home health and senior living provider was up 19.52% in February.

Quote of the Month

“There’s a lot of trends [and] we see it from inpatient palliative care, outpatient palliative care, home- based types of palliative care and community-based and clinic-based as well. We’re now seeing a little bit more reach into the skilled nursing facilities that provide palliative care as well. We’ve seen far too many failures and not being able to address people’s palliative care needs. It’s not a one-size-fits-all type of service, but it does meet the needs of patients wherever they’re at in that continuum.” – Gina Andres, Senior Director of Hospice and Palliative Care at Kaiser Permanente

Read the Full Article Here: Palliative Care’s Rising Profile in US Health 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:

• Amedisys (AMED)
• Enhabit (EHAB)

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

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 seven 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)
• Brightspring (BTSG)

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 February 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, a McKinney, Texas-based provider of home health services to pediatric patients with complex medical conditions.
• Frontpoint Health has acquired High Plains Senior Care Group.
• Waud Capital has acquired the home care franchise Senior Helpers.

SOLD by Stoneridge!!!

• Stoneridge Partners is proud to announce the successful sale of a Home Care Agency in Maryland.
• Stoneridge Partners is proud to announce the successful sale of a Behavioral Health Facility in Texas.

View Stoneridge closed transactions on our website

Home Health Index February 2024 | 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.