After consecutive months of record-breaking gains, the home health index slumped slightly during the month of August. Stoneridge Partners’ Home Health Index, which tracks the average market value of the top three largest public home heath care companies—Almost Family (Nasdaq: AFAM), Amedisys Inc. (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG)—dropped 1.13% from the previous month.
From May through August, the index had achieved four consecutive months of new, all-time highs. Year to date, the index is up 12.83%, and has risen 9.79% for the trailing 12-month period. By comparison, the index rose 2.8% in July, and surpassed its previous all-time high.
“After recent all-time highs, the home health index slumped slightly at the end of August, but valuations remain strong,” Rich Tinsley, president and CEO of Stonebridge Partners, said of the index’s reversal. “The publicly traded home health companies have been highly acquisitive throughout 2016 and are keeping an eye on new regulations coming down the pike.”
By comparison, the S&P 500 contracted just 0.12% during August.
All three home health companies saw their share prices decline in August. LHC Group saw its share prices drop 0.29% from the previous month. Year to date, the company’s stock is up 0.07%, according to Stoneridge Partners. Almost Family’s stock declined 1.27% during the month, though it remains up 4.08% year to date. Amedisys saw the biggest drop during the month, with a 1.73% decline in share prices. However, the stock has been a big gainer and is up 36.19% year to date.
Addus Homecare bucked the trend and saw its share prices rise 2.22%. Addus is not tracked on the index because little of its revenue comes from Medicare.
Reeling Over Regulations?
The index decline comes as the Pre-Claim Review Demonstration from the Centers for Medicare & Medicaid Services (CMS) has come into effect in Illinois. While the demonstration has only rolled out in Illinois thus far, the impact has been far-reaching, with rumors and reports swirling that the process is filled with hiccups. The reports led two U.S. Senators from Florida to pen a letter to CMS urging the agency to delay the implementation in their state. The demonstration is scheduled to roll out in Florida, Massachusetts, Michigan and Texas periodically over the coming months.
LHC Group, based in Lafayette, Louisiana, has long-touted its ambitious acquisition pipeline for the year, has since toned down its plans as a result of pre-claim. A significant chunk—roughly half— of its potential deals were in states that are expected to be affected by pre-claim, and the company is holding off, according to CEO Keith Myers .
Almost Family, which has exposure in three of the five pre-claim states, has generally been more optimistic, as executives have voiced support for the initiative. The Louisville, Kentucky-based company has been very acquisitive in the last year and reported record revenue at the end of the second quarter of 2016.
Amedisys has also been bullish in attitude toward pre-claim, though executives conceded they were unsure what the long-term impacts could be.
Written by Amy Baxter