While home health stocks rode M&A momentum and other tailwinds to an overall strong performance throughout much of 2018, the sustained boom period slowed down in September. Amid a broader market dip, that slowdown turned into an abrupt stop last month.
Home health stocks fell more than 11% in October compared to their September standings, according to the latest Home Health Index (HHI) from mergers-and-acquisitions firm Stoneridge Partners. September marked the first time in several months that home health stocks did not post strong growth.
Stoneridge’s HHI is updated monthly and tracks the market values of home health giants Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG). The HHI also follows Addus HomeCare Corporation (Nasdaq: ADUS), but does not include the company in its final analysis.
It wasn’t just home health stocks that hit a slowdown in October, however. The S&P 500 — a basket of the 500 largest U.S. stocks, weighted by market capitalization — was down nearly 7% in October compared to the previous month.
“U.S. markets lost nearly $2 trillion in October, so it wasn’t exactly a great month all around,” Stoneridge Partners President Rich Tinsley said in a statement. “Home health stocks were down even more than the S&P, so the dip could be industry-specific, perhaps, tied to investors’ not-so-optimistic outlook of what policymakers are doing.”
October was the worst month the S&P 500 had experienced since at least September 2011.
Baton Rouge, Louisiana-based Amedisys’ stock dropped 10.04% in October compared to the previous month.
Similarly, Lafayette, Louisiana-based LHC Group’s stock fell 12.67% in October compared to September.
Addus, which gets a significant portion of its revenue from Medicaid sources, had its stock drop by 5.05% in October compared to the previous month.
Despite the down month, the HHI was up more than 77% in October on a year-to-date basis.
At the end of October, the U.S. Centers for Medicare & Medicaid Services (CMS) announced that it was finalizing language for its proposed Patient-Driven Groupings Model, including its widely opposed behavioral adjustment aspect. Although the CMS announcement came late in the month, anticipation may have partially dampened inventor outlook.
CMS also finalized its final home health payment rule for 2019 in October, increasing the Medicare payment rate to home health providers by 2.2% — a projected $420 million.
Amedisys, LHC Group and Addus all experienced year-over-year double-digit revenue growth in the third quarter of 2018, with LHC Group’s net revenue seeing substantial gains due to its merger with Almost Family. Analysts were particularly bullish about Addus’ third-quarter financial results, LHC Group’s strong organic growth and Amedisys’ agreement to acquire Compassionate Care Hospice.
Written by Robert Holly