INDUSTRY ANALYSIS

Post-Acute Care and Home Health Markets

Based on our findings, the EBIDA margin of skilled nursing in the US is 9.4% and the estimated average EBITDA margin of assisted living, independent living, and memory care facilities is 8.11%. It was also found that that infusion centers do not usually publish their margins and that their revenue and expenses are combined with the financials of the hospital’s pharmacy department.

Skilled nursing facilities

  • According to a 2019 industry report, the median EBIDA for skilled nursing in the US for the year is 9.4%.

Infusion centers

  • After an extensive search, it was clear that public information on the EBITDA/EBIDA margins of infusion centers was not available.
  • According to Mark Huizenga Systems Consulting, the accounting systems at hospitals are notoriously complex and are not designed to provide net profit margins for cost centers like hospital outpatient departments. As a result, the two revenue sources; professional services and pharmaceutical products are not merged into one cost center but mapped into the pharmacy department.
  • The above finding is confirmed by another source which states that “infusion center financial reports only provide staffing expenses and professional infusion revenue. The majority of expenses, revenue, and margins are in the pharmacy department combined with all other facility pharmacy business.”
  • However, we did find that an infusion center chair is associated with “$730 direct margin per hour, in which case the potential increase in revenue of six additional hours of infusion chair time per day is $1,632,451 over a year.”

Assisted living, Independent living, and Memory care

  • While we were able to identify that the median EBITDA for assisted living facilities in 2019 was 12.9% and the operating margin of independent living is between 35%-40%, information related to EBITDA or EBIDA for independent living and memory care facilities were not readily available. Hence, we have estimated an average figure for the three types of facilities.
  • An article from Seniorliving.org states that senior living and care corporations primarily include dementia/ memory care, independent living, assisted living, and nursing homes. A breakdown of the EBITDA margins of the 3 largest senior living and care corporations that were identified in this article is as follows.
    • Brookdale Senior Living Inc – 9.54%
    • Genesis HealthCare – 2.89%
    • HCR ManorCare -using the latest available information (since the 2016 spin-off) the EBITDA margin can be calculated as EBITDA/revenue*100%. Therefore, the margin is 11.9% ($465 million/$3.9 billion*100)
  • Based on the above information, we can calculate an average EBITDA for assisted living, independent living, and memory care as 8.11% (9.54%+2.89%+11.9%/3).

Rehabilitation, Physical / Occupational Therapy

  • According to Moss Adams’ Healthcare Providers Market Monitor Summer 2020 report, the average EBITDA margin for the rehabilitation sub-market stands at 11.6%. This figure is an average of the EBITDA margins from 3 “notable” rehabilitation/physical therapy service providers namely; Select Medical Holdings (11.8%), U. S Physical Therapy Inc. (14.1%), and Healius Limited (9.0%). This was the only publicly available information on the EBITDA/EBITDA margins for this sub-market uncovered by research.

Dialysis

  • The 2019 EBITDA margin for dialysis clinics in the US, standing at 21.05%, was calculated from the 2019 EBITDA margins given for Fresenius Medical Care (22.10%) and DaVita Kidney Care (20%), two of the largest providers of dialysis services in the United States. (22.10%+20%/2= 21.05%).
  • Healthcare Appraisers’ 2020 Dialysis Clinics and ESRD report posits that these 2 companies command a full 72% of the dialysis care market in the United States.

Facility-based Hospice / Palliative Care

  • According to Moss Adams’ Healthcare Providers Market Monitor 2020 report, the average EBITDA margin for this category stands at 11.1%. This was the average of the EBITDA margins of 4 hospice/palliative care service providers namely; Chemed Corporation (18.2%), Amedisys Inc. (10.2%), LHC Group (7.9%), and Addus Homecare Corporation (8.1%).

2019 EBITDA of Post-Acute Care Subsector

  • The “delivery systems sector” accounts for 54% of the total healthcare industry EBITDA of $516 billion in the US.
  • Based on this percentage, the EBITDA of the US delivery systems sector in 2016 was $278.64 billion.
  • Post-acute care is part of the delivery systems sector. It accounts for approximately 16.47% of the total delivery systems sector EBITDA.
  • Using this percentage, the EBITDA of the post-acute care sector in the US in 2016 was $45.89 billion.
  • A McKinsey study about the future of the healthcare sector in the US indicates that from 2012 to 2016, the post-acute care sector had a compound annual EBITDA growth of 5%-10%. The projected changes in EBITDA until 2020 was also indicated to be the same at 5%-10%.
  • Using the minimum possible growth rate of 5%, the post-acute care EBITDA in 2019 was calculated as $53.12 billion.

Hospice and Home Care EBITDA

  • According to a 2020 report from Hospice News, the multiples in the hospice and home care services under the post-acute care subsector reached a 26x EBITDA in 2019, “the most significant rise for any health care sector”.
  • These two services account for a total of 7.3% of the total transactions in the post-acute care subsector.
  • If the EBITDA of post-acute care in 2019 was $53.12 billion, therefore the combined EBITDA of home-based hospice and home care services is equivalent to $3.88 billion.

Home Infusion Market

Home Dialysis

  • The U.S. dialysis industry is dominated by three players – Davita Kidney Care, Fresenius Medical Care, and American Renal Associates, together holding about 75 percent of the market.
  • The EBITDA margins attributable to Davita Kidney Care, Fresenius Medical Care, and American Renal Associates in the U.S dialysis market were approximately 20 percent, 17.5 percent, and 15 percent, respectively, in 2019.
  • Therefore, the estimated average EBITDA margin for the dialysis industry in the United States is -17.5 percent ((20%+17.5%+15%)/3).

Telemedicine/Virtual Visits

  • Industry experts estimate that the U.S. telemedicine market is dominated by two large players -Teladoc (TDOC) – 30% and Amwell – 25%, accounting for more than half of the market.
  • The EBITDA margins attributable to Teladoc and Amwell were -1.82 percent and -25 percent, respectively, in 2019.
  • Therefore, the estimated average EBITDA margin for the telemedicine industry in the United States is -13.41 percent ((-1.82%+-25%)/2).

Home Caregiver Visits

  • According to a 2013 industry report, the EBITDA margin for home caregiver visit services in the US ranges between 12 – 15%.
  • The estimated EBITDA multiples for home caregiver services in the United States by revenue are as follows:
  • $1 million to $3 million in annual revenue: 2x to 4x EBITDA
  • $3 million to $5 million in annual revenue: 3x to 5x EBITDA
  • $5 million to $10 million in annual revenue: 4x to 6x EBITDA
  • More than $10 million in annual revenue: 4x to 10x EBITDA

Hospital-at-Home

  • The average home health agency profit margin in 2017 was estimated to be 8.8%.
  • A report by the Centers for Medicare & Medicaid Services (CMS) projects that by 2040, 80% of home health agencies would have negative profit margins.
  • The report based its estimation on the prospect of Medicare’s Hospital Insurance Trust Fund going broke by 2026. This fund helps pay for home health care services, and if it goes broke, the hospital at home segment will be negatively affected.
  • The hospital-at-home EBITDA margin for 2019 is estimated to be 12.78%.

Key Players

  • Amedisys Inc is one of the key players in the hospital-at-home market, controlling 4.8% of the market share. It had an EBITDA margin of 11.5% in 2019.
  • LHC Group is another key player in the hospital-at-home market, controlling 4.27% of the market share. It had an EBITDA of $140.5 million and revenue of $2.08 billion.
  • Encompass Health is also another key player in the hospital-at-home market, controlling 3.7% of the market share. It had an EBITDA of $964.9 million and revenue of $4.61 billion.

Remote Monitoring

  • The remote monitoring EBITDA margin for 2019 is estimated to be 25.23%.
  • Medtronic Plc reported an operating income of $6.268 billion in 2019 before interest and taxes. Its amortization expense for the period was $1.8 billion, and its revenue was $30.557 billion.
  • Honeywell International Inc. reported income before taxes of $7.559 billion. Its interest expense for the period was $357 million, and its revenue was $27.629 billion. The company did not report any amortization expense
  • Boston Scientific reported an operating income of $1.518 billion in 2019 before interest and tax. Its amortization expense for the period was $699 million, and its revenue was $10.735 billion.
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