Home Health Index August Update

In August, companies on the post-acute and home health indices generally fared very well, with only one, Enhabit Inc., stumbling significantly.

Home health providers are working towards better payer strategies in Medicare Advantage (MA), as the Centers for Medicare & Medicaid Services (CMS) continue to discuss cutting core home health payments. With MA penetration expanding, providers no longer have the sturdy fee-for-service payments to fall back on. Thus, they are hunting for the right payer partners, and in doing so, they’re hoping to get payments for MA members closer to that of traditional Medicare payers.

This is not an easy task, particularly as MA plans face a turbulent payment environment of their own.

“MA has steadily become a much bigger revenue source for home health providers over the last decade or so,” says Joe Lynch, Partner and Managing Director at Stoneridge Partners. “Those plans tend to pay from 20% to 40% less than traditional Medicare for home health services, and providers have to find a way to make up that gap.”

The home health index was down 1.7% in August, while the post-acute care index was up 5.37%. Comparatively, the S&P was up 2.48% month over month.

Home Health Index

Amedisys Inc. (Nasdaq: AMED) hasn’t moved much over the past two months, as its shareholders await the possible closing of the UnitedHealth Group (NYSE: UNH) deal.

In August, Amedisys stock stayed steady at about $98 per share, which is $3 under the $101 per share agreed-upon purchase price.

The general belief is still that UnitedHealth Group’s Optum will finalize its acquisition of Amedisys by the end of the year.

Enhabit Inc. (NYSE: EHAB) stock, on the other hand, fell significantly. The company’s stock has been volatile over the last few months. It was down over 17% in August. In July, it was up 14%.

In early August, the company announced that it had terminated its contract with UnitedHealthcare, the largest MA payer in the country.

In September, the company offered further details on why it came to that decision.

“It’s important to remember that the reason we created our payer innovation strategy, about two years ago, was because at that time we had United as a large payer and then a few regional smaller contracts that had come along with acquisitions over the years,” Enhabit CEO Barb Jacobsmeyer said recently at the 2024 Wells Fargo Healthcare Conference. “Those combined contracts had us at about a 40% discount to Medicare. Obviously, that’s not sustainable. We started the payer innovation strategy to have more and better contracts.”

Walking away from a large payer like UnitedHealthcare is a tough sell in the near-term, but long term, the decision likely makes sense. Jacobsmeyer has shared that the company’s better MA contracts are now either at, or around 15% below, fee-for-service rates.

That’s compared to the UnitedHealthcare contract, which, as Jacobsmeyer mentioned, was 40% below fee-for-service rates.

Post-Acute Care Index

For the second month in a row, both Aveanna Healthcare Holdings (Nasdaq: AVAH) and The Pennant Group (Nasdaq: PNTG) made significant gains, up 34% and nearly 15%, respectively.

In July, Aveanna was up over 50% and Pennant was up by 28%.

Aveanna has been right sizing its home health business over the last year, but its personal care services business has been performing well consistently.

Like Enhabit, Aveanna has been focusing on negotiating better deals with payers in both segments over the last couple of years. That effort is finally leading to some wins.

“Our ongoing enhanced payer partnerships allow us to provide more care to a greater number of patients through investment in our caregivers,” Aveanna CEO Jeff Shaner said during the company’s second-quarter call. “The key to our current and future success continues to be our dedicated team of Aveanna leaders and caregivers who consistently deliver exceptional care daily.”

Pennant leaders, meanwhile, said that the company’s home health and hospice growth was significantly ahead of expectations on their recent second-quarter earnings call.

“We’re significantly ahead of where we expected to grow,” Pennant President and COO John Gochnour said on the call. “Our hospice census has increased by 30%, home health census by nearly 30%; and senior living business revenue is up by 16%. It has been an outstanding start to the year. Our trends remain strong, and our focus is on continued execution.”

Addus Homecare Corp. (Nasdaq: ADUS) was up by 9.6% in August, and BrightSpring Health Services (Nasdaq: BTSG) was up by 1.29%.

Quote of the Month

“Hospice is in a period of disruption. We’re going to be paid differently. It’s billing differently, or how you’re providing care may be different under a certain model. We’re going to have to figure out how to be ready to adapt, to be successful in any payment model and be able to be in multiple payment models — whether it’s an [Accountable Care Organization (ACO)] , Medicare Advantage or a different structure.” – Kristen Yntema, President & CEO, AuthoraCare Collective

Read the Full Article Here: Hospice Executives: Value-Based Care, Regulation Will Shape Hospices’ Future

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 August 2024 | Stoneridge Partners)

Recent Transactions From Around The Country

• Agape Care Group, a portfolio company of Ridgemont Equity Partners and the premier provider of hospice and palliative care across nine states, acquired select Crossroads Hospice locations in Oklahoma, Missouri, Kansas and Georgia.
• Advance Home Health Care LLC acquired Mobile Nursing Services LTD.
• Help at Home, a national provider of in-home personal care services, acquired several Georgia-based homecare organizations: Care By Your Side, One Care Health and AAMedcare.

SOLD by Stoneridge!!!

• Stoneridge Partners is proud to announce the successful sale of a Florida home care agency.
• Stoneridge Partners, Ben Bogan and Ted Cohen, provided sell side M&A advisory services in the Community Based Care (CBC) and Hand ‘n Heart transaction. Read more here

View Stoneridge closed transactions on our Website.

Home Health Index August 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.