With the U.S. presidential election, a second potential rate cut from the Federal Reserve and the home health final payment rule all nearing, October was a waiting game for the companies on the post-acute care index (PAI) and home health index (HHI).

Now that those three are in the rearview mirror, providers will begin to feel their impact — positive or negative. But more than anything, they will gain far more certainty heading into the final months of the year.

The Centers for Medicare & Medicaid Services’ (CMS) final rule comes with an estimated aggregate increase to 2025 home health payments of 0.5%, or $85 million, compared to 2024 aggregate payments. More permanent cuts, however, are on the way.

Though providers have suffered payment cuts in traditional Medicare for three straight years, the final rule did end up more positive than the proposed rule in June, which included a 1.7% cut to aggregate payments.

The election of Donald Trump to the presidency could affect the Medicare and Medicaid payment environments in both home health care and home care. It also could impact pending regulation, such as the 80-20 provision included in the Medicaid Access Rule.

“The buyer-seller gap in home-based care has been closing, and will continue to close in the remaining months of the year,” says Joe Lynch, Partner and Managing Director at Stoneridge Partners. “Certainty always bodes well for M&A, and there is far more certainty now than there was in the summer.”

The home health index was down 2.8% in October. The post-acute care index had an uncharacteristically poor month, down 6.7%. Comparatively, the S&P was down 1%.

Home Health Index

October was a noisy month for UnitedHealth Group’s (NYSE: UNH) planned takeover of Amedisys Inc. (Nasdaq: AMED). In late October, Bloomberg reported that leaders of each company would be meeting with the Department Of Justice (DOJ) to discuss whether a lawsuit would be filed to block the deal or not.

That meeting was then postponed until after the Nov. 5 election. With new DOJ leadership set to be ushered in after the new year, it’s still unclear whether the current regime will go ahead with a lawsuit.

Amedisys stock was down slightly in October, by 2%. It’s now been almost a year and a half since UnitedHealth Group first agreed to acquire Amedisys in June of 2023.

Enhabit Inc. (NYSE: EHAB), meanwhile, has a new CFO. Crissy Carlisle — who has served as CFO of the company since it spun off of Encompass Health (NYSE: EHC) – will be replaced by Ryan Solomon on Dec. 9.

“Ryan’s experience in the home health and hospice space, along with his proven track record as a chief financial officer and his accomplishments in financial, operational and strategic leadership, make him ideally suited to serve as Enhabit’s next CFO,” Enhabit CEO Barb Jacobsmeyer said in a statement. “Ryan’s deep understanding of how to link financials with performance drivers aligns well with our objectives. The Enhabit team has worked hard to stabilize the business, and we look forward to benefiting from Ryan’s fresh perspectives to build on our momentum as we advance our position as a leading national home health and hospice provider.”

Enhabit was down 12.78% in October as it looks to kickstart a turnaround heading into 2025.

Post-Acute Care Index

Year to date, BrightSpring Health Services (Nasdaq: BTSG) is up over 70%. The company has been one of the more active acquirers during an M&A downturn, and plans to do more of the same in the near-term future.

BrightSpring CEO Jon Rousseau said on the company’s third-quarter earnings call that home health and hospice acquisitions offer a “high return on investment” for the company.

“From an acquisition strategy perspective, I think it’s going to be consistent with what we’ve done over the past couple of years,” Rousseau said. “On the provider side, it’s been rehab, home health and hospice, and then home-based primary care as well. We currently have three or four very small tuck-ins for home health and hospice, which are high returns on investment. On the de novo side, it’s really on home health, hospice and rehab.”

Addus Homecare Corp. (Nasdaq: ADUS) and The Pennant Group (Nasdaq: PNTG) are the other public home-based care providers that have continued to acquire during the downturn.

As competition intensifies for high-quality assets with interest rates coming down, these companies will likely reap the benefits of remaining aggressive during a quiet period.

Addus specifically is waiting for its $350 million purchase of Gentiva’s personal care assets to close. After that purchase, Addus will expand its footprint, as the company prioritizes operations in solid home-and community-based services (HCBS) markets.

“We believe our personal care segment benefits from both scale and broad geographic coverage in the states where we operate,” Addus CEO Dirk Allison during the company’s third-quarter earnings call. “This is particularly true in managed Medicaid states, and as a result of the final Medicaid access rule, if and when it may be implemented, this scale and coverage allows us to spread our costs over a larger revenue base and provides Addus with the opportunity for meaningful advocacy with the states in which we operate, while also promoting a more favorable hiring and retention environment.”

Addus expects the Gentiva deal to close during the fourth quarter.

Quote of the Month

“We see on a daily basis with all of our members, it makes a difference when home health shows up, but we don’t necessarily agree that this is going to solve the issue. We’re concerned that CMS is going in the wrong direction. We hope that CMS will continue to look at this issue, and evolve a little bit in their thinking of how we address the referral rejections and lack of access.” – Katy Barnett, Director of Home Care and Hospice Operations and Policy at LendingAge

Read the Full Article Here: CMS Home Health Admission-To-Service Policy Misses The Heart Of Providers’ Capacity Issues

See Stoneridge’s Latest Blog:

Read the first in a series of articles that will provide a unique and in-depth dive into home health and hospice valuations to provide answers to two of the most important questions that owners want to know, “What is the value of my business” and “How much will it sell for?”

Read the Full Article Here: Home Health & Hospice: How Valuation Works in M&A

November is Home Care & Hospice Month

Stoneridge would like to take the time to recognize and celebrate the millions of people who offer the best health care in the country. You make an everlasting impact, and we thank you for your service!

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:

• Addus (ADUS)
• Amedisys (AMED)
• Aveanna (AVAH)
• Brightspring (BTSG)
• Brookdale Senior Living Inc. (BKD)
• Enhabit (EHAB)
• The Pennant Group, Inc. (PNTG)

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 October 2024 | Stoneridge Partners)

Recent Transactions From Around The Country

• Texas-based New Day Healthcare LLC acquired Intrepid USA’s hospice operations in Missouri and Texas
• Eden Health of Northern Nevada, dba Eden Hospice, acquired A Plus Hospice Care

SOLD by Stoneridge!!!

• Stoneridge Partners is proud to announce the successful sale of a Minnesota behavioral health agency

View Stoneridge closed transactions on our Website.

Home Health Index October 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.