Buy Almost Family (AFAM) and Amedisys (AMED) on Today's Weakness - Jefferies

Home healthcare names Almost Family (NASDAQ: AFAM) (-10.4%) and Amedisys (NASDAQ: AMED) (-4.3%) were under heavy pressure Tuesday related to potential government reimbursement changes for Home Health. However, analyst Brian Tanquilut believes today's sell-off was overdone given the preliminary nature of the discussions in Washington. Further, the analyst believes Value-based Purchasing (VBP) is likely to be a net positive for high quality providers (AMED, AFAM, LHCG, HLS, KND) that are able to invest in clinical and IT infrastructure to demonstrate superior outcomes and receive incentive bonuses.

"At this point, no formal bills or proposals have been released by the House Ways & Means committee to legislate changes to the home health reimbursement, and any legislation would have to navigate through both houses of Congress before reaching the President's desk," Tanquilut commented.

He added, "From a regulatory perspective, CMS has previously proposed pilot Value-based Purchasing (VBP) programs for home health reimbursement in a handful of states, but ultimately pulled those changes from the 2015 final rule due to industry feedback regarding the proposed structure and quality measurements. Ultimately, we expect CMS to move towards value-based payment concepts in home health, either through regulation or legislation, but the timing of the shift is still to be determined and may not occur until 2020."

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