More than two years ago, the stock price for Amedisys was above $300, and its market capitalization hit $10 billion.
Fast forward to Thursday, when the Baton Rouge home health giant’s stock closed at $80.47 per share — and its market capitalization around $2.6 billion — a day after it announced it will be acquired in a $3.6 billion all-stock deal by Illinois infusion therapy company Option Care Health.
It’s a stunning finale for a company that swelled into one of the nation’s largest home health care providers since its inception in the 1980s — and whose financial performance has been solid in recent years.
“It’s just kind of a sad way for it to end because it was such a great company for Baton Rouge and Louisiana,” said Peter Ricchiuti, a Tulane University finance professor who tracks Louisiana’s publicly traded companies.
“They’re in a great business and they’re very well run,” added Ricchiuti, a former Amedisys board member. “Things have slowed down a bit and they’ve had some speed bumps, but I don’t think this is the way people thought the ending would go.”
Executives said the combined company will provide a better platform for a wider delivery of care and a stronger value for shareholders with a potential $9.7 billion market capitalization, according to Securities and Exchange Commission filings. It will continue to maintain “substantial operations” in Baton Rouge and Nashville, though its headquarters will be in Option Care Health’s home of Bannockburn, Illinois.
Analysts, however, seem to be skeptical of the deal. In a conference call Wednesday, they peppered Amedisys and Option Care Health executives with questions about the timing and strategic purpose of the merger.
Given that the deal won’t close until later this year — and must still be approved by shareholders — Ricchiuti said he wouldn’t be surprised to see sustained pushback from investors, especially as the stock price for both firms dropped Thursday.
“I think there’s going to be a lot of discontent with this deal,” he said.
A decades-long rise
Founded in 1982 by Bill Borne, Amedisys slowly but surely grew into a home health and hospice care behemoth with roughly 20,000 employees in 37 states.
It went public in 1994, narrowly avoided bankruptcy, then grew through a series of acquisitions in the 2000s. It also paid a $150 million fine after a 2011 federal investigation found the company gamed the Medicare bonus system. It moved its leadership team to Nashville in 2015, though it kept substantial operations in Baton Rouge.
All along the way, revenue grew to $2.21 billion in 2021, and Amedisys’ stock closed at $314 per share on Jan. 25, 2021, according to Nasdaq data.
Things have been a bit more turbulent after the 2021 high.
After leading the company from 2014 to 2022, Paul Kusserow handed the CEO reins to Christopher Gerard, Amedisys’ chief operating officer. But Gerard was unceremoniously fired in November for reasons that were never explained.
By that point, the company’s stock price had fallen to about $86 per share, even though Amedisys ultimately hauled in $2.22 billion in 2022, an even higher mark than 2021.
Ricchiuti said the situation may have snowballed for Amedisys when Medicare, which makes up three-fourths of the firm’s revenue, began reviewing its reimbursement rates, a common practice that can still unnerve medical providers.
“What they had going forward wasn’t very good for Amedisys,” he said. “They were lowering how much the reimbursement would be and things like that.”
He added that the Amedisys stock price was, at one point, roughly 45 times the company’s earnings in recent years. “There might have been unrealistic expectations from investors,” he said.
Analysts question timing
Option Care Health’s net revenue of $3.94 billion in 2022 dwarfed Amedisys’ haul. While Amedisys’ stock price closed Thursday at roughly $80 per share, Option Care Health’s stock fell from $32.79 Wednesday to $27.50 Thursday.
The deal didn’t come out of nowhere. The two firms teamed up in 2021 to deliver COVID-19 infusion therapy to vulnerable populations. However, “there doesn’t seem to be any leverage in this deal,” Ricchiuti said.
Analysts are already showing some skepticism of the merger.
In a conference call Wednesday, Amedisys President and CEO Richard Ashworth said the company’s services “are an excellent strategic fit” with Option Care Health and that the combined companies would have generated a combined $6.2 billion in revenue in 2022.
He said Amedisys has a “pretty good density of patient” in need of Option Care Health’s infusion therapy services.
“It’s clear to us that our organizations have highly complementary capabilities and possess impressive cultural overlap on the core values that matter most — providing quality care and taking care of our caregivers,” Ashworth told analysts, according to a transcript of Wednesday’s conference call.
David MacDonald, of Truist Securities, asked executives why the deal made sense now. Brian Tanquilut, an analyst at Jefferies, questioned the merger’s timing ahead of potential changes in Medicare and “the ongoing shift” to Medicare Advantage reimbursements within home nursing.
In response, John Rademacher, president and CEO of Option Care Health, said the two companies determined they “need to have more scale and play a more important role in the home.”
Mike Shapiro, Option Care Health’s chief financial officer, said the two companies realized there’s room for “collaboration” in the health care spaces they occupy.
“I think it clearly spills over … into especially like the Medicare Advantage population,” Shapiro said.