Home Health Index June Update

While the home health and post-acute care indices were marginally up in June, the S&P outperformed both by a significant margin.

There was plenty of regulatory and dealmaking news in the month, and that news likely affected stock prices in June and will most likely continue to affect stock prices moving forward.

First and foremost, the Centers for Medicare & Medicaid Services (CMS) released its proposed home health payment rule late in the month, which would — if finalized — reduce aggregate home health payments by 1.7% in 2025. CMS also proposed more permanent cuts to the Patient-Driven Groupings Model (PDGM).

This is now three consecutive years where CMS proposed cuts to home health payment.

There is some optimism that cuts can be mitigated through Congress or through legal action before Mom-and-Pop agencies suffer even more, yet much remains up in the air.

“Home health cuts were expected from providers, but the prospect of a third straight year with meaningful reductions in payment spells trouble,” says Joe Lynch, Partner and Managing Director at Stoneridge Partners. “It’s bad news for the public companies, of course. But they’ll likely be able to deal with the impact better, due to their scale. On the other hand, smaller providers will be affected more severely.”

The home health index was up 0.38% in June, while the post-acute care index was up 0.66%. Comparatively, the S&P was up 4.89% month over month.

Home Health Index

The home health proposed rule is a sign that CMS is not giving up on its theories and methodologies, despite vehement disagreement from providers.

Because fee-for-service revenue is generally the firm leg that providers stand on, there’s risk of industry destabilization.

After all, Medicare Advantage (MA) plans — which are becoming a larger payer source to home health providers by the day, due to MA penetration — generally pay far less for home health services.

Meanwhile, there was significant news regarding Amedisys Inc. (Nasdaq: AMED). The company agreed to offload a number of locations to VitalCaring. That deal is contingent upon the deal closing between UnitedHealth Group (NYSE: UNH) and Amedisys. At the same time, Amedisys likely decided to offload these locations in the first place to satisfy regulators concerned about antitrust in the wake of the UnitedHealth Group deal.

Once that divestment deal was agreed to, Amedisys’ stock went up. In June, Amedisys was up just slightly, but it continued to climb in the first days of July.

Meanwhile, Enhabit (NYSE: EHAB) continues to battle with the activist investor AREX Capital Management. The latter wants to replace the former’s board, citing financial underperformance.

Enhabit was down nearly 3% in June.

What comes next is the all-important August annual meeting. That’s where the showdown between Enhabit, which wants to keep its current board, and AREX Capital will come to a head.

Enhabit released some of its earnings somewhat early in July as a way to point to its recent progress.

“Overall, the second quarter of 2024 is on track to mark Enhabit’s third consecutive quarter of business stabilization and successfully positioning the Company for profitable growth,” Enhabit CEO Barb Jacobsmeyer said in a statement. “This momentum underscores the strength of our strategy, disciplined approach to debt reduction and commitment to stockholder value creation.”

Post-Acute Care Index

The Pennant Group (Nasdaq: PNTG), which has consistently and steadily risen over the past year, was down slightly in June.

But that was not due to lack of activity.

In fact, the company is headed eastward for the first time after agreeing to a partnership with Connecticut-based Hartford HealthCare.

Pennant will take over Hartford’s home health and hospice operations, which will greatly expand its footprint. The company previously did not have locations east of Wisconsin.

“We have deep admiration for Hartford HealthCare and the commitment to home-based care it has long demonstrated through HHCAH,” Pennant CEO Brent Guerisoli said in a press statement. “We are thrilled to collaborate with Hartford HealthCare and contribute home health and hospice expertise to Hartford HealthCare’s impressive integrated care system. Hartford’s selection of Pennant is an honor and testament to the effectiveness of our unique operating model that empowers local leaders to transform operations and provide life-changing service in their communities.”

Pennant continues to remain extremely acquisitive.

The same goes for Addus Homecare Corp. (Nasdaq: ADUS), which was up slightly in June, and BrightSpring Health Services (Nasdaq: BTSG), which was also up about 1%.

Aveanna Healthcare Holdings (Nasdaq: AVAH) has been less acquisitive in comparison to its post-acute index peers, but was up the most in June – by 5.75%.

Quote of the Month

“We know nature plays an important role in human health, but behavioral health and health care providers often neglect to think about it as an intervention.” Lead Researcher Joanna Bettmann, a professor at the University of Utah College of Social Work.

Read the Full Article Here: Natural Medcine: Head Outside for Better Mental Health

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 June 2024 | Stoneridge Partners)

Recent Transactions From Around The Country

• NeuroFlow acquired Owl, a provider of measurement-based behavioral health care.
• Bristol Hospice has acquired Mississipi-based Mid-Delta Hospice.

SOLD by Stoneridge!!!

• Stoneridge Partners is proud to announce the successful sale of a Home Hare Agency in Kansas
• Stoneridge Partners is proud to announce the successful sale of a Healthcare Company in Pennsylvania

View Stoneridge closed transactions on our Website.

Home Health Index June 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.