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, OraSure Technologies, Inc. OSUR and Orthofix International N.V.
OFIX. All the three stocks sport a Zacks Rank #1 (Strong Buy).source: Healthnews
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