Home Health Index July Update

The home health and post-acute care indices greatly outperformed the S&P in July, an occurrence that’s been rare in recent history.

Despite another home health payment proposal that included cuts from the Centers for Medicare & Medicaid Services (CMS) in June, companies fared generally well on the public market in July. There are a few reasons for this, including the feeling that Amedisys Inc. (Nasdaq: AMED) is getting closer to becoming a part of UnitedHealth Group (NYSE: UNH).

The latter’s takeover of the former has been pending for more than a year at this point, but Amedisys’ stock is nearing the purchase price of $101 per share. Amedisys agreed in June to divest a certain amount of its locations to the home health-provider VitalCaring, in a move likely to satisfy antitrust regulators.

Even beyond Amedisys, public companies have posted impressive gains lately, either due to opportune M&A, or improved underlying metrics.

“Home health cuts are always an undeniable headwind for providers, but they’ve faced them three years in a row now,” says Ben Bogan, partner and managing director at Stoneridge Partners. “CMS, like it has in years past, will likely finalize a watered down final rule. The bigger companies will adjust, while the smaller ones will have to hold on and hope for a better rate environment in years ahead.”

The home health index was up 7.52% in June, while the post-acute care index was up 8.74%. Comparatively, the S&P was down 0.24% month over month.

Home Health Index

The market has responded to Amedisys’ divestment agreement with VitalCaring. While it’s not clear whether regulators are satisfied with the deal — in terms of how it will affect the UnitedHealth Group-Amedisys deal — Amedisys stock has risen steadily since, from about $92 to $98 since June 27, the day before the deal with VitalCaring was announced.

That improvement is, in part, why the home health index had such a good month.

Enhabit Inc. (NYSE: EHAB) also had a solid month. The company was up over 14% in July.

It’s battle with the activist investor AREX Capital Management is likely over. AREX nominated a slew of candidates to replace Enhabit’s board, but only won one spot. Mark W. Ohlendorf, the former CFO of Brookdale Senior Living (NYSE: BKD), is set to join the board.

Enhabit also announced in early August that its CFO Crissy Carlisle would be stepping down.

“The strong start to 2024 extended in Q2 as our teams successfully executed on our operational strategies,” Enhabit CEO Barb Jacobsmeyer said in a July statement. “In our home health segment, our 6.4% year-over-year increase in admissions continues to be driven by non-Medicare admissions, and our teams are doing a good job managing our visits per episode and creating additional capacity for growth.”

Post-Acute Care Index

The Pennant Group (Nasdaq: PNTG) continues to grow its home health footprint. After announcing a partnership with Hartford HealthCare — allowing it to expand into the East Coast — the company announced an agreement to acquire assets of certain affiliates of Signature Healthcare at Home for a combined price tag of $80 million.

“This is a significant acquisition in Pennant’s history,” Pennant CEO Brent Guerisoli said in a press statement. “We are excited to make this investment because of the quality of Signature’s people and operations. Its locations, its philosophy, and its culture are a perfect complement to our existing operations in the Pacific Northwest. A key tenet of Pennant’s disciplined growth strategy is that we make acquisitions from a foundation of strength, where we have solid existing leaders and well-performing operations.”

Along with Addus Homecare Corp. (Nasdaq: ADUS), Pennant has remained one of the more acquisitive home health companies during an M&A downturn. The company was up over 28% in July.

Other movers and shakers:

● Addus was up 4.52% in the month and is set to become the largest personal care provider in Texas after agreeing to acquire Gentiva’s personal care assets. It will also enter into multiple new states thanks to that deal.

● Aveanna Healthcare Holdings (Nasdaq: AVAH) was up over 52% in the month, eclipsing $4 per share.

● BrightSpring Health Services (Nasdaq: BTSG) was up 9%, and recently touted its full-continuum home-based care capabilities as an area ripe for growth.

“We’re really going to start to see the fruits of more and more integrated care in the organization,” BrightSring CEO Jon Rousseau said on the company’s latest earnings call. “We, obviously, have very clinically appropriate home health to hospice transitions, [and] some personal care being delivered to the same patients, therapy as well … but we see an opportunity to really increase that in the future. It takes focus, so we’re investing in an integrated care team to do that.”

Quote of the Month

“We believe we will not end up with this proposed rule as a final rule,” said National Association for Home Care & Hospice (NAHC) President William A. Dombi when discussing the proposed payment rule for 2025 at NAHC’s Financial Management Conference in Las Vegas in July.

Read the Full Article Here: Why Home Health Providers Should Expect To See A ‘Less Draconian’ Final Payment Rule

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 July 2024 | Stoneridge Partners)

Recent Transactions From Around The Country

• HME Home Health has acquired Coast Ability in Sechelt, B.C., its eighth location in the province.
• HouseWorks has acquired the Pittsburgh-based personal care services company Bridge City Home Care.

SOLD by Stoneridge!!!

• Stoneridge Partners is proud to announce the successful sale of a Psychiatry Center in Texas
• Stoneridge Partners is proud to announce the successful sale of a Home Health Agency in Texas

View Stoneridge closed transactions on our Website.

Home Health Index July 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.