Home Health Index April Update

Home Health Index April Update

The home health and post-acute care indices were both down in April, which turned out to be one of the more eventful months in quite some time.

Enhabit Inc. (NYSE: EHAB) finalized its strategic review and opted to remain an independent public company. A report surfaced that Amedisys Inc. (Nasdaq: AMED) would be divesting a large portion of its footprint prior to being acquired by UnitedHealth Group (NYSE: UNH). And the long-awaited Medicaid Access Rule was finalized, including the much-disputed “80-20” provision.

The 80-20 provision — which will force home- and community-based services (HCBS) providers to direct 80% of reimbursement to wages — won’t be implemented for another six years. In the meantime, there will likely be legal challenges.

“The implementation gives providers much more time to find out how they are going to approach this,” says Joe Lynch, Partner and Managing Director at Stoneridge Partners. “At the same time, it allows more time for states, providers and other advocates to challenge it, and keep it from being implemented entirely.”

Providers were generally okay with the Medicaid Access Rule, but found that the 80-20 provision overshadowed much of the good included in the rest of the rule.

The home health index was down 1.64% in April, while the post-acute care index was down 3.27%. Comparatively, the S&P was down 5.84% month over month.

Home Health Index

Enhabit Inc. (NYSE: EHAB) concluded its strategic review in early May, which first began in August of 2023. Most were expecting a sale or merger by the end of that, but neither came to fruition.

The company was down over 15% in April, and its stock continued to fall after the announcement.

“We believe macro headwinds including, among other things, uncertain regulatory developments including Medicare reimbursement policies throughout the health care industry and an evolving antitrust landscape, a difficult health care operating environment, and persistently high interest rates ultimately stifled possibilities for a transaction that would enhance shareholder value,” Leo Higdon, the chairperson of Enhabit’s board, said in a statement. “Considering this, and other strategic alternatives reviewed with advisors during the review process, the Board determined the best way to enhance shareholder value at this time is to continue to operate as a standalone business.”

Enhabit left the door open for a sale in its earnings call the following day, saying that the board would continue to consider options best for shareholder value.

But for now, it will remain an independent, publicly traded company.

Meanwhile, a report surfaced suggesting that Amedisys would be offloading part of its footprint to satisfy the DOJ, ahead of it being acquired by UnitedHealth Group (NYSE: UNH).

According to the report, the plan is to divest more than 100 locations.

Post-Acute Care Index

While Addus HomeCare Corp. (Nasdaq: ADUS), Aveanna Healthcare Holdings (Nasdaq: AVAH) and BrightSpring Health Services (Nasdaq: BTSG) were all down slightly in April, one provider, once again, stood out.

The Pennant Group (Nasdaq: PNTG) remains one of the top gainers in the post-acute care space in 2024. It was up over 6% in April. While some of its home-based care peers have struggled mightily with Medicare Advantage (MA) penetration of late, Pennant has not.

“It comes back to this idea that health care is local, and that those decisions are made on the local level,” Pennant President and COO John J. Gochnour said in May at the RBC Global Healthcare Conference. “Our strategy for the last 12 years that we’ve been around as a company has been to meet the needs of the community. So even before some of these changes, we were taking and building a network of insurance contracts. That business is lower margin, but it meets the needs of the community. And if we meet the needs of the community, then we’re going to also receive those higher-margin patients.”

The Pennant Group has been able to draw a harder line in the sand when negotiating with payers, and has achieved per-visit rate increases of 10% to 15% over the last two years, its leaders said.

That’s ultimately enough to create sustainability in its home health revenue mix moving forward.

“I think the payers are recognizing that this is not a commodity business, there is a real need to partner with high-quality providers in the communities,” Pennant CEO Brent Guerisoli also said. “That’s also why these discussions have gone favorably for us, because they recognize the value of [partnering with] a quality provider.”

Quote of the Month

“Prioritizing our mental health is of utmost importance. It shapes how we engage with the world – our community, family, and work. We can only be present for others when we are able to care for ourselves,” – Ann Teng, DO, MPH, Chief Wellness Officer at UHS.

Read the Full Article Here: Prioritizing Mental Health Is Not Selfish

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 Yahoo Finance. 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 April 2024 | Stoneridge Partners)

Recent Transactions From Around The Country

• Nevada-based 1Care Hospice, part of 1Care Health, acquired Reset Behavior Health
• Arden Home Health & Hospice acquired Mid-Delta Home Health
• The Pennant Group, Inc acquired Utah-based South Davis Home Health and South Davis Hospice.

SOLD by Stoneridge!!!

• Stoneridge Partners is proud to announce the successful sale of a Home Care Agency in Kentucky
• Stoneridge Partners, Ben Bogan & Ted Cohen, provided sell side M&A advisory services in the Pennant Group and Nurses on Wheels transaction. Press release

View Stoneridge closed transactions on our Website.

Home Health Index April 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.