Back to top

Image: Bigstock

Amedisys Strong on Strategic Buyouts, Hospice Market Trends

Read MoreHide Full Article

On Mar 10, 2016, we issued an updated research report on Baton Rouge, LA-based Amedisys Inc. (AMED - Free Report) . The company provides home health and hospice services throughout the U.S. to a 360,000 and growing chronic, co-morbid, and aging American population.

Amedisys ended 2015 on an outstanding note with its fourth-quarter financials squarely beating the Zacks Consensus Estimate. In Home Health, the company continued to generate strong organic growth through Medicare and non-Medicare segments. However, reimbursement pressure and competitive headwinds continue to hamper the stock.

Over the long term, the home health industry is poised for tremendous growth, driven by an aging U.S. population, patients’ desire for independence, and home health as a cheaper care modality. Amedisys should continue to benefit from the aging demographics of the U.S. population and the need for higher acuity patients to be taken care of in a home nursing environment. 

Recently, the Wall Street Journal published an in-depth article on hospice benefits, with particular focus on the increased Medicare expenditure for the same. The article also emphasized on factors driving growth in longer length of patients’ stay in hospice care. Both these facts reflect higher revenue opportunities for hospice care providers like Amedisys.

Currently, the company is developing and acquiring new business lines that will complement its existing home care and hospice business and help seniors manage their health more effectively and stay in their homes longer. In line with this strategy, the company has closed 2 significant acquisitions over the past three months – the Infinity HomeCare acquisition on Dec 31, 2015 and Associated Home Care acquisition on Mar 1, 2016. With the company’s strategy currently aimed at expanding its capabilities of care that can be delivered at home, the Associated Home Care is Amedisys’ first acquisition in the personal care space. Also, this buyout is expected to expand Amedisys’ strong home health and hospice presence in Massachusetts.

On the flip side, with few barriers to entry in the market for home health and hospice, Amedisys primarily faces tough competition from local privately and publicly-owned and hospital-owned health care providers. It competes based on the availability of personnel, the quality of services, the expertise of visiting staff and the price of services. In addition, it competes with a number of non-profit organizations that finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions that are unavailable to the company.

The company also faces significant reimbursement pressure. On Oct 30, 2015, CMS issued its 2016 final rule for home health. Although Amedisys is currently working through the details to determine the company specific impact, management assumes the net effect of 1.4% reduction in Medicare payments to the home health industry for the calendar year 2016.

Amedisys currently carries a Zacks Rank #2 (Buy).

Key Picks in the Sector

Some better-ranked stocks in the medical sector are Hill-Rom Holdings, Inc. (HRC - Free Report) , OraSure Technologies, Inc. (OSUR - Free Report) and Orthofix International N.V. (OFIX - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Published in