Despite favorable demographics driving home health demand, some of the nation’s largest home health companies have been beset by problems in recent years.
But it appears the tide may be turning, as many of these companies posted good results for the start of 2015 — and Wall Street analysts have responded accordingly.
One such company, Amedisys, has seen share value increase 109% in the past year, according to Ross Capital analysts.
In the first quarter, the home health and hospice care provider achieved revenue growth of 97 basis points, pushing its top-line figure to $301 million.
“The year-over-year increase came on the back of healthy industry conditions which led sales in the home health and non-Medicare businesses to climb by 1.9% and 12.7%, respectively,” analysts say. “The company also attained significant leverage through favorable demographic trends, which helped in attracting more clients during the quarter.”
Favorable demographics, coupled with preferences to age in place, have increased demand for the home health sector, leading to more business for industry agencies.
“The industry is witnessing a shift of treatment from hospitals to homes; the move from treatment to proactive monitoring is bringing up new avenues of revenue generation for health care firms as patients now prefer home services over hospitals due to the convenience, privacy and cost benefits these services offer,” Ross Capital analysts say.
Additionally, macro factors such as an aging population and rising chronic infections are providing another catalyst for the home health market to prosper.
Another home health company, Almost Family (NASDAQ: AFAM), has posted “better-than-expected” first quarter results, prompting analysts to raise the price target to $38, from $32.
“AFAM reported better-than-expected Q1 results on slightly higher revenues and stronger cost controls in VN due to better adherence to agency-level staffing standards which lowered labor costs and improved EPS by $0.08,” Piper Jaffray analyst Kevin Ellich tells StreetInsider.
Home health and hospice provider LHC Group (NASDAQ: LHCG) also reported strong financial results in the first quarter, with $193.1 million in revenue and earnings per share of $0.39, beating analysts’ estimates.
This company’s strategy is to cautiously approach new models of payment and care delivery, such as accountable care organizations (ACOs) and managed care, company leaders said during the first quarter earnings call with analysts.
Whatever the strategy, home health companies are proving not only their importance in the health care continuum, but also their profitability when it comes to Wall Street.
Written by Emily Study