U.S. stocks plunged Monday as investors responded to the global spread of the coronavirus and Saudi Arabia’s surprising oil price cut. Publicly traded home health providers were not immune to the market’s downswing.
By noon, the Dow Jones Industrial Average had plummeted 8% and was well on its way to its worst day since 2008. Meanwhile, the S&P 500 fell more than 7%, contributing to a major sell-off that triggered a brief halt in trading.
“The markets are obviously taking a beating,” Brian Tanquilut, an equity analyst at Jefferies, told Home Health Care News. “What you’re seeing is a lot of profit-taking, a lot of de-risking. And it’s hard to step into a market when you don’t know where the bottom is.”
Addus HomeCare Corporation (Nasdaq: ADUS), Amedisys Inc. (Nasdaq: AMED), Brookdale Senior Living Inc. (NYSE: BKD), Encompass Health Corp. (NYSE: EHC), Humana Inc. (NYSE: HUM), LHC Group Inc. (Nasdaq: LHCG) and The Pennant Group (Nasdaq: PNTG) are among the current publicly traded entities with large home health businesses.
Stock values for those companies were down across the board on Monday, marking the first time home health stocks were universally down since 2012, according to Tanquilut.
Broadly, increased oversight and government investigations caused the 2012 dip.
By end-of-day trading, the stock values for Addus, Amedisys, Brookdale and Encompass Health were down 7.81%, 4.36%, 5.54% and 9.58%, respectively. Stock values for Humana — which operates Kindred at Home and Humana At Home — were down 8.12%.
With its stock down 16.5%, The Pennant Group saw the most prominent dip. With its stock down 5.09%, LHC Group was least affected by Monday’s downturn.
While Monday was a down day, home health stocks likely aren’t going to stay depressed long-term.
“As it relates specifically to home health, we don’t think there is significant risk, fundamentally, to [providers] — or for the hospice companies,” Tanquilut said, noting that providers are buoyed by demand for their services, patient characteristics and the fact that “the home” is the place to be during an outbreak.
Frank Morgan, managing director of health care services equity research at RBC Capital Markets, agreed.
“These companies have dealt with these types of [outbreaks] before, though maybe not at the potential scale [coronavirus] might be,” Morgan told HHCN. “A lot of these companies have plans in place.”
In response to the growing number of confirmed COVID-19 — coronavirus — cases across the U.S., LHC Group, Inc. announced Monday that it has established an internal multidisciplinary task force.
LHC Group operates across nearly three dozen states, plus Washington, D.C.
Broadly, the task force will be dedicated to organizing LHC Group’s resources, sharing information and coordinating with other health care organizations in the battle against the coronavirus.
In accordance with U.S. Centers for Disease Control and Prevention (CDC) recommendations, LHC Group has initiated pre-screening and protection protocols for all of its 32,000 employees this week, according to the company. It is also working to ensure its workforce is well-supplied.
“As the CDC has previously stated, the home environment is the best setting for the isolation and recovery of patients exposed to or currently experiencing symptoms of COVID-19,” Dr. Benjamin Doga, LHC Group’s lead medical director, said in a statement. “For more than two decades, LHC Group’s home healthcare providers have dealt with infectious diseases as part of their everyday duties. Home health clinicians are highly skilled and experienced in providing physician-led care in the home setting and are uniquely positioned to help patients, families, communities, the healthcare industry and our nation effectively deal with the control of infectious diseases like COVID-19.”
In terms of a continued market impact tied to the coronavirus, LHC Group and its industry peers may have to watch out for changes in hospital behavioral, according to Tanquilut.
Home health providers receive many of their patients following a hospital discharge, so any change in hospital procedures could have an indirect consequence.
“Down the road, if there are supply-chain challenges with medical supplies — masks, gauzes, caps, gowns — is that something that could force hospitals to delay procedures?” Tanquilut said. “If hospitals start delaying procedures, even if we’re only talking about delays, that could have a downstream impact on home health care.”
At the same time, home health providers may ultimately end up with more capacity if doctors decide to avoid skilled nursing facilities (SNFs).
“With skilled nursing providers, you have lots of people in one location,” Morgan said. “The average nursing home in the U.S. is probably 100 beds. When you get that many people in one location, that creates additional problems for you. You don’t only have the people who are there, but visitors coming and going as well.”
On its end, Birmingham, Alabama-based Encompass Health is also keeping a close eye on how the coronavirus is spreading. In addition to its roughly 330 combined home health and hospice locations, Encompass Health runs 134 hospitals.
It’s not unusual for Encompass Health to prepare for possible viruses, particular in its hospital settings, CEO Mark Tarr said during the company’s recent investor day. COVID-19’s apparent severity, however, warrants “increased attention.”
The number of known coronavirus cases in the United States hit 655 as of 5 p.m. CT Monday, according to a New York Times database. At least 26 patients with the virus have died.
“Communication is key for any organization right now, as much as to eliminate what is not accurate as much as it is to identify what is accurate relative to the definition of COVID-19, what’s involved to the coronavirus, in general,” Tarr said.
Beyond communication, Encompass Health is educating staff on travel restrictions and making sure its supply chain remains strong.
“We feel real good about where we are and hope that, just from a macro standpoint, that the whole news on the virus gets better than it’s been in the last few days,” Tarr said.