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LHC Group's (LHCG) Latest Tie-Up to Improve Patient Services

·4 min read

LHC Group, Inc. LHCG recently inked a definitive agreement to form a new joint venture (JV) partnership with the University of Maryland Medical System (UMMS). The deal aims to provide improved in-home healthcare services across a large area of the state of Maryland.

UMMS is a private, university-based regional health system focused on serving the healthcare needs of the people of Maryland.

The agreement is expected to be finalized in the fourth quarter of 2022, subject to customary closing conditions. LHC Group will purchase a majority ownership and assume management responsibilities at that time. LHC Group expects incremental annualized revenues of approximately $4.8 million from this JV and anticipates that it will not materially affect its earnings per share for 2022.

The latest agreement is an important stepping stone for LHC Group to solidify its foothold in the global home healthcare space.

Rationale Behind the JV

Following the finalization of the JV, the combined assets will include multiple locations serving 20 Maryland counties, the city of Baltimore and the greater metropolitan area. With the continued surge in demand for in-home healthcare, hospital and home health partnerships are increasingly focusing on delivering patient-centered care in the comfort of the patient's home or residence. These collaborations are a key component in aiding patients to manage their conditions, avoid unnecessary hospital readmissions and achieve the best possible health outcomes in the most cost-efficient manner.

Per LHC Group’s management, the latest JV is expected to expand the availability of crucial healthcare services to the patients’ most preferable setting, which is comfort of their homes. The combined experience and infrastructure will likely enable the company to offer improved, efficient and effective in-home healthcare to more patients.

UMMS’ management feels that the latest agreement paves the way to continue improving access to post-acute care for its patients, an increasingly vital element in the care continuum at UMMS.

Industry Prospects

Per a report by MarketsandMarkets, the global home healthcare market is anticipated to reach $298.2 billion by 2026 from $198.9 billion in 2021 at a CAGR of 8.4%. Factors like rapid growth in the elderly population, rising incidences of chronic diseases and the growing need for cost-effective healthcare delivery due to the increasing healthcare costs are likely to drive the market.

Given the market potential, the latest JV is expected to significantly strengthen LHC Group’s business worldwide.

Notable Developments

Last month, LHC Group announced an agreement to purchase Three Rivers Home Health, a home health provider headquartered in Eastman, GA. The buyout includes nine total locations, thereby expanding LHC Group's service footprint in 36 counties in the Certificate of Need state of Georgia.

The same month, LHC Group announced its second-quarter 2022 results, recording a robust uptick in its overall top line. An increase in the organic growth in hospice admissions were also seen during the same time.

In May, LHC Group announced the finalization of a JV partnership for in-home healthcare services with Archbold Medical Center in Thomasville, GA. The initial agreement was first announced by the two organizations in March.

Price Performance

The LHC Group stock has lost 1.6% over the past year compared with the industry’s 36.8% fall and the S&P 500's 13.1% decline.

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Zacks Rank & Stocks to Consider

Currently, LHC Group carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, ShockWave Medical, Inc. SWAV and McKesson Corporation MCK.

AMN Healthcare, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.7%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has lost 4.8% compared with the industry’s 36.8% fall in the past year.

ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.

ShockWave Medical has gained 26.1% against the industry’s 29.7% fall over the past year.

McKesson, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 13%.

McKesson has gained 64.3% against the industry’s 15.8% fall over the past year.

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