The Centers for Medicare & Medicaid Services (CMS) announced at the end of May it was seeking public input on a new proposal to bring back a slightly different version of pre-claim review, which the home health industry fiercely contested and fought back when first introduced two years ago.
Well, it turns out that proposal didn’t really deter investors.
Despite the threat of pre-claim coming back and other regulatory challenges looming, home health stocks performed strongly in June, according to the latest Home Health Index (HHI) by Stoneridge Partners. Updated monthly, HHI monitors the market values of Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHC Group).
The index jumped up by about 12% in June compared to the previous month, vastly outperforming the S&P 500, which dropped by 0.94%.
International trade conflict is among the reasons for S&P 500’s relatively weak showing.
“There’s a lot of uncertainty out there for investors right now in terms of policy,” Stoneridge Partners President Rich Tinsley said in the HHI announcement. “Despite what’s going on internationally, though, investors seem pretty confident in the home health industry domestically.”
Baton Rouge, Louisiana-based Amedisys’ stock rose by 13.08% in June compared to the previous month.
Lafayette, Louisiana-based LHC Group’s stock increased by 10.50%.
Year-to-date stock values for Amedisys and LHC Group are up 64.48% and 39.33%, respectively.
So far in July, stock prices for both companies have been overall boosted by CMS’ proposal to increase Medicare payments to home health agencies by 2.1%, or $400 million, in calendar year 2019. That’s true even as the agency has released the groundwork for sweeping payment reform proposed for 2020.
June stock prices for Frisco, Texas-based Addus HomeCare (Nasdaq: ADUS) dropped by 2.66% compared to the previous month, according to the HHI.
Stoneridge Partners does not include Addus in its HHI because the provider receives most of its revenue from Medicaid rather than Medicare.
Although pre-claim didn’t deter investors much in June, it may in the future if CMS moves forward with plans to launch a demonstration in Illinois and, later, Ohio, North Carolina, Florida and Texas. In 2016, pre-claim contributed to M&A activity coming to an abrupt stop, while also presenting several administrative challenges for providers.
CMS’ rollout of pre-claim review in Illinois led to a roughly $100 million reduction in home health spending, according to National Association of Home Care & Hospice President Bill Dombi. That spending reduction does not account for patients who may have ended up receiving care in higher-cost settings as home health services were scaled back, however.
Written by Robert Holly