Traditions Health Acquires 4 Agencies; Help at Home Buys Adaptive

Traditions adds to post-acute care platform

Traditions Health is adding to its growing post-acute care business.

The College Station, Texas-based home health and hospice provider announced a handful of new acquisitions at the start of January. Financial terms of the transactions were not disclosed.

In Oklahoma, Traditions acquired two home health agencies: Traditions Home Care and Secure Home Care. The provider likewise inked two hospice agencies in Louisiana: Grace Hospice & Palliative Care and Heritage Hospice.

The new hospice acquisitions mark the company’s initial entry into the Louisiana market.

“I am delighted to grow the Traditions family in Louisiana and to deepen our capabilities in Oklahoma through the addition of eastern Oklahoma’s premier home health agencies,” Bryan Wolfe, president and CEO of Traditions Health, said in a statement. “This announcement is a fitting way to cap off what’s been an exciting year for Traditions Health.”

Overall, Traditions — a portfolio company of PE firm Dorilton Capital — provides post-acute care services to 5,000 patients across 14 states. The provider has been particularly active in the hospice market, with seven hospice transactions since June 2020.

Help at Home lands Adaptive

Help at Home is on the M&A hunt. Its latest purchase comes just a few months after it was acquired by a consortium of private equity buyers.

Earlier this month, the Chicago-based Help at Home reportedly executed a deal for The Adaptive Group, a home health, hospice and home care services provider that operates across the state of Indiana. Financial terms of the transactions were not disclosed.

On its end, Help at Home is a home- and community-based services provider with a 13-state footprint that features 160 total locations. Centerbridge Partners and The Vistria Group teamed up to purchase Help at Home from Wellspring Capital Management in November.

Founded in 2011, The Adaptive Group is made up of Adaptive Companion Services, Adaptive Hospice, plus Adaptive Nursing and Healthcare Services. The provider has 23 locations across the Hoosier State.

“The winning combination of Adaptive and Help at Home not only means that we will be able to set the bar for high-quality care and service excellence in the state of Indiana, but also throughout the Midwest and across the broader United States,” Adaptive co-founder Mike Root said in a press release. “By partnering with Help at Home, we are better positioned to execute on our mission — to positively impact as many lives as possible through the delivery of exceptional, patient-centric home care services.”

Amedisys board approves stock repurchase plan

Amedisys Inc. (Nasdaq: AMED) announced at the end of last year that its board of directors has authorized a stock repurchase program, under which the company may repurchase up to $100 million of its outstanding common stock through Dec. 31.

The stock repurchase program gives Amedisys the green light to repurchase its common stock “from time to time, in amounts, at prices, and at such times as the company deems appropriate, subject to market conditions and other considerations.”

As of mid-day trading Thursday, Amedisys stock was listed at $291.73 per share.

Founded in 1982, the Baton Rouge, Louisiana-based Amedisys has 21,000 employees who work across 516 care centers in 39 states and the District of Columbia.

“Given our strong cashflow and low leverage, we feel it is prudent to have authorization to buy-back shares throughout the course of the year, including shares granted under the company’s Omnibus Incentive Plan as they vest in 2021,” CFO Scott Ginn said in a statement. ‘This will become a recurring part of our capital deployment strategy; however, our first priority is and will continue to be accretive acquisitions in both home health and hospice.”

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National Expansion of Home Health Value-Based Purchasing Model Estimated to Create $6.3B in Savings

In somewhat of a surprise move, U.S. health care policymakers unveiled plans last week to expand the Home Health Value-Based Purchasing (HHVBP) Model, a nine-state Medicare demonstration designed to better align reimbursement to quality of care.

Despite backing from most of the home health industry, the HHVBP Model — first implemented in 2016 — had seemingly hit a speedbump in recent years. Apart from a handful of minor modifications, the model only remained active in Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee.

With more than one-quarter of its home health agencies currently located in HHVBP states, the Baton Rouge, Louisiana-based Amedisys Inc. (Nasdaq: AMED) has been among the biggest supporters of value-based purchasing. The company has persistently urged the Center for Medicare & Medicaid Innovation (CMMI) to expand the model for over a year.

“There’s still a perception out there that there is a high level of fraud in home health care — and that’s simply not true,” Amedisys CEO and President Paul Kusserow told Home Health Care News. “I think having to prove ourselves on the quality front and being willing to take risk on quality is absolutely the right thing for us.”

So far, even just the limited HHVBP Model has been able to achieve overwhelmingly positive results.

Since implemented, the model has contributed to a 4.6% improvement in home health agencies’ quality scores, in addition to average annual Medicare savings of $141 million, federal statistics show. On top of those points, agencies in HHVBP states have been able to significantly lower the costly utilization of hospitals and skilled nursing facilities (SNF).

“This has been extremely good,” Kusserow said.

As part of its push for an expanded HHVBP Model, Amedisys brought in Washington, D.C.-based research and consulting firm The Moran Company. The home health giant asked Moran to dig deeper into past results and explore what a nationwide rollout would eventually look like.

After cranking the numbers, the research firm estimated that a 50-state HHVBP Model would result in about $6.3 billion in savings over a 10-year period, using Congressional Budget Office (CBO) scoring methodology.

“We engaged in a very long dialogue [with CMMI] and exchanged a lot of data to push this forward,” Kusserow added.

Inside the advocacy process

Besides the whopping $6.3 billion in savings, Moran also determined that a nationwide rollout of the Home Health Value-Based Purchasing Model would lead to better post-acute care outcomes for Medicare beneficiaries and more ways for the U.S. Centers for Medicare & Medicaid Services (CMS) to identify high- and low-quality providers.

In many ways, the advocacy efforts around HHVBP were so effective because they were driven by “the power of a good idea,” according to David Kemmerly, the chief legal and government affairs officer at Amedisys. Instead of having to artfully persuade CMS and CMMI to expand the model, his team’s job was more about giving policymakers the objective information they otherwise lacked.

“They have to go make their case with the actuaries before they can expand something,” Kemmerly told HHCN. “So we helped arm CMS with the data and information they needed.”

It took more than facts and figures, however.

To help advance HHVBP, Kusserow communicated regularly with CMMI Director Brad Smith, the former CEO of home-based palliative care provider Aspire Health who joined the CMS Innovation Center in early 2020. Kusserow and Smith had already “known each other a long time,” thanks to their shared experiences in Nashville, Tennessee, and standing as Rhodes scholars.

“When [Smith] went to Washington, he called me up and said, ‘What should I be thinking about?’” Kusserow said. “Obviously, he was asking a lot of people that. I said, ‘I really think there’s something to value-based purchasing in home health. I’d really like you to look at it.’”

At first, CMMI decision-makers were concerned about home health provider buy-in.

While Amedisys and others sought to advance HHVBP, others were slightly skeptical, especially early on. More than a few home health operators believed HHVBP was just another piece of government regulation, with others too preoccupied with the Patient-Driven Groupings Model (PDGM) to worry about alternative payment mechanisms.

On its end, Amedisys worked hard to boost the industry’s understanding and acceptance of HHVBP, Kemmerly said.

“There’s a bit of politics involved,” he noted. “[Smith] asked us early on, ‘Where is the industry on this? And can you bring the industry to the table?’”

Unanswered questions

CMMI and CMS are committed to expanding the Home Health Value-Based Purchasing Model, but there are plenty of questions left to answer and improvements that can be made.

On a basic level, it’s still unclear whether policymakers will try to expand HHVBP through a standalone proposal or through the annual rulemaking cycle. Additionally, it’s not yet known whether that future expansion will be national or more incremental, possibly adding another dozen or so states to the current nine-state mix.

Scott Levy, the senior vice president of government affairs at Amedisys, was in the trenches for most of Amedisys’ advocacy battle on HHVBP. In all likelihood, CMS will pursue a 50-state expansion and implementation through the annual rulemaking cycle, Levy speculated.

“I’m just merely reading between the lines, but our discussions [with CMS] and our data presented to them was all based on the idea of a nationwide expansion,” he told HHCN.

Along with answers to those questions, Amedisys is also pushing for improvements to the HHVBP Model itself.

In 2020, home health providers were exposed to 6% upside and downside risk, depending on their quality performance. That figure increases to 7% and 8% in 2021 and 2022, respectively.

But it’s almost impossible to come close to that full upside or downside as the model is currently structured.

“The upside has been good for us. It’s generally quite positive,” Kusserow said. “But we feel the curve is too clustered toward the center. It is very hard to get the full rewards or to get the full penalties.”

In 2018, the payment adjustment in HHVBP ranged from a 1.5% penalty for providers in the lowest-10th percentile to a 1.5% bonus for providers in the highest-10th percentile, according to an investment note from Bank of America. CMS previously stated that the average adjustment was a 0.85% bump in 2018.

“Companies out there with good technology, good tracking systems, good checklists, good verification processes and very good clinical operations are the ones that are going to continue to do well and thrive under this, for sure,” Kusserow said.

A possible complication to HHVBP expansion plans could have been the transition to a new Biden administration, which is guaranteed to bring changes to CMMI, CMS and throughout the U.S. Department of Health and Human Services (HHS).

Yet the team at Amedisys doesn’t see that as an issue, considering the model’s origins.

“[HHVBP] was actually rolled out by the Obama administration,” Levy said. “It was proposed during the fall of 2015 for a January 2016 implementation.”

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Beyond the Pandemic: 9 Overlooked Stories from 2020

The ongoing COVID-19 pandemic dominated headlines in 2020 — and rightfully so.

But there were plenty of other storylines that defined the year, including the launch of the Patient-Driven Groupings Model (PDGM), the conclusion of a hotly contested presidential election and the execution of multiple industry-shaping transactions.

These are nine of the most overlooked stories from 2020, as determined by Home Health Care News. All of these stories were popular amongst our readers, but HHCN considers these stories “overlooked” because they didn’t capture quite the same attention they would have in any other year.

1. “NAHC’s Dombi: Agencies Aren’t Panicking in the Streets Over PDGM”

It was relatively early into PDGM’s first year, but it nonetheless became clear in March that the overhaul wasn’t as devastating as many initially predicted. “We’ve not heard anything about large closures of agencies or any kind of panic in the streets,” National Association for Home Care & Hospice (NAHC) President William A. Dombi told HHCN at the time. “And strangely enough, the one thing we’re surprised we haven’t heard so far is the cash flow impact.”

Yes, PDGM presented numerous challenges — and the model certainly still has its flaws. For the most part, though, home health providers large and small met those difficulties with a combination of creativity and perseverance.

2. “Late RAPs Could Trigger Immediate 20% Payment Reduction in 2021”

Related to PDGM is the plan by the U.S. Centers for Medicare & Medicaid Services (CMS) to phase out Requests for Anticipated Payment (RAPs) entirely in 2021. While home health operators knew about this plan way back in 2019, new details emerged about stiff financial penalties for late no-pay RAPs moving forward. If an agency submits a no-pay RAP one day late next year, the result could be a 20% reduction to its 30-day payment amount.

3. “Aging-in-Place Company Amedisys to Acquire AseraCare Hospice for $235 Million”

The pandemic may have delayed some home health, hospice and home care M&A activity, but it didn’t stop it entirely. In fact, there were multiple industry-shaping deals that took place in 2020, including Amedisys Inc.’s (Nasdaq: AMED) $235 million deal for Compassionate Care Hospice, announced in April. This was a huge acquisition for Amedisys, which now ranks as a top-five home health and hospice provider in terms of market share. “AseraCare is a great hospice company,” Amedisys CEO and President Paul Kusserow told HHCN. “When we decided that hospice was a business line we wanted to move forward in back in 2016, we actually approached AseraCare. But they weren’t for sale.”

4. “AccentCare, Seasons Hospice to Merge”

Another M&A blockbuster from 2020: the planned merger between AccentCare Inc. and Seasons Hospice & Palliative Care. After joining forces, the combined AccentCare-Seasons enterprise will be among the five largest home health and hospice providers in the nation. “This is incredibly complimentary to our own approach toward strategic markets and being very focused on working with large health systems,” AccentCare CEO Steve Rodgers told HHCN in November.

5. “LHC Group CEO Keith Myers: Change in Washington Won’t Derail ‘Incredible’ Home Health Opportunity”

Over the past four years, the home health industry has steadily advanced its position in Washington, D.C., and within the administration of President Donald Trump. Come January, there will be a new team in the White House that’s led by President-elect Joe Biden. While his administration will bring plenty of new perspectives on health care policy, home health providers will likely maintain their standing.

6. “Caregiver Turnover Rate Falls to 64% as Home Care Agencies ‘Flatten the Curve’”

Turnover remained a trouble spot for most home care agencies, though the overall turnover rate actually improved year over year, according to Home Care Pulse. Better pay and benefits, plus stronger training programs that enable career advancement, are just some of the reasons caregivers are staying in their positions for longer.

7. “Medicare Advantage Startup Clover Health Slated to Go Public in a $3.7 Billion SPAC Deal”

There could be multiple headlines here at No. 7. The main takeaway? This year was the year of the special purpose acquisition company (SPAC), or blank-check company. In October, Clover Health announced it was going public through a SPAC. Most recently, Deerfield Healthcare Technology Acquisitions Corp. (Nasdaq: DFHT) announced it was acquiring CareMax Medical Group and IMC Medical Group Holdings, then combining them in a blank-check company of their own. There were other SPAC plays, too, with 2021 certain to bring several more.

8. “Senior Helpers, BrightStar Are Venturing Out of the Home to Serve Seniors. Here’s Why.”

Home care operators continued to take bold steps in 2020, thinking outside the box and expanding into new services lines. Senior Helpers and BrightStar Care were two good examples of that trend, with each making progress on its home care-adjacent businesses. For Seniors Helpers, that is its Town Square franchising model. For BrightStar care, it’s the company’s senior living franchise strategy. “We saw that many of our clients, as they progressed and had a change in condition, had higher-acuity needs,” BrightStar Care CEO Shelly Sun said during an HHCN event. “The family wanted to be able to move them out of the home to something with more socialization. They were looking for recommendations from us for assisted living facilities or, in many cases, dementia and memory care communities in their area.”

9. “In-Home Care Agencies May Look to Cut Costs by Scrapping Brick-and-Mortar Offices”

To be fair, this one definitely has to do with COVID-19. But it’s somewhat of an overlooked and indirect aspect of the pandemic. In 2020, businesses across industries shifted operations from physical offices to remote setups, typically without any major problems. Moving forward, it will be interesting to see if cash-strapped home care agencies decide to cut costs and jettison the traditional office.

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Home Health Executive Forecast for 2021: Reserving a Seat at the Big Kids’ Table

Going into 2020, many home health executives predicted that the Patient-Driven Groupings Model (PDGM) would kick off a wave of consolidation and agency closures. Others believed the phase out of Requests for Anticipated Payment (RAPs) would have a similar effect.

For the most part, that didn’t happen. The COVID-19 pandemic — and all the policy developments that came with it — reshaped this year in impossible-to-anticipate ways.

As has become an annual tradition, Home Health Care News caught up with 10 industry leaders to chronicle their predictions on the coming year. Despite all the uncertainty still swirling around the public health emergency, these brave CEOs and C-suite executives took a shot at identifying trends, challenges and opportunities that will define home-based care in 2021.

You can find their predictions below, lightly edited for length and clarity.

* * *

In my opinion, 2021 will be the year that 2020 was supposed to be prior to the COVID-19 pandemic. The disruption from the implementation of PDGM and impact from the reduction (and in 2021 the full elimination) of the RAP was largely mitigated by Cares Act funds that helped to support the broader health care space. Once the Public Health Emergency is over and there is no more Cares Act or additional government support, the impact that we thought we would see in 2020 will play out in 2021 – fewer players with more market share.

COVID-19 has also helped to catalyze a number of trends that we have been talking about for years, including: Seniors’ desire, now greater than ever, to be cared for in the home; flexibility from CMS for the utilization of telemedicine in care planning; and reimbursement for higher acuity care provided in the home. We believe these trends will stick well beyond the pandemic and will only continue to highlight just how important and impactful care in the home is to health care costs but also, most importantly, to patient outcomes, quality and safety.

Additionally, the CMMI Value Based Purchasing demo should go nationwide, but might get lost in the transition of administrations. This is an opportunity to drive quality that might potentially be lost.

— Paul Kusserow, President and CEO of Amedisys Inc. (Nasdaq: AMED)

* * *

Successful agencies in 2021 – and the next few years for that matter – will be successful because of a true investment in human capital. The totality of recent changes, as well as those we anticipate in the coming year (No-pay RAP, the current Public Health Emergency uncertainty and eventually OASIS-E) all weigh on the people making our agencies run. And our clinicians are bearing the brunt of this weight. The successful agency is prepared now to invest in talent management, clinical education and professional development, so our clinicians and staff are prepared to face the challenges that continue to come our way and feel engaged in the work.

— Jason Growe, CEO of Apollo Medical

* * *

The pandemic has brought unprecedented challenge and change to the home care market. At Elara Caring, the key lesson learned this year was agility and teamwork. As we look to 2021, we believe clear communication and agility at every level will remain key to success. In addition, the ability to address a multitude of patients’ needs has become even more important in 2020. As a home care company providing a full suite of services – skilled home health, hospice, behavioral and personal care – we believe Elara Caring is well positioned for the year and decade ahead in home care.

We also remain steadfast in our efforts to build one Elara Caring across the 16 states we offer services in. Lastly and most importantly, COVID-19 has brought home care workers to the forefront — and they are more appreciated and desired than ever. We are proud of the work we have done this year to prioritize worker safety and health to ensure our workers and our patients receive the highest-level care.

— Scott Powers, CEO of Elara Caring

* * *

The biggest thing that we will see in home health care is that we’re given a seat at the “big kids table.” The recognition from COVID-19 that the country needs to move away from keeping people in congregate living and post-acute settings combined with the expertise that we have developed through decades of caring for people at home will lead to a much larger role for home health and hospice in the care continuum. Additionally, as we add in the booming wearable and IoT market, these services will transform the delivery of care, giving agencies real-time access to create plans of care that respond to patients’ conditions in a way that more closely resembles a “hospital at home.” This will be a driving force over the next several years to transform where home health care is in the care continuum.

— Beau Sorensen, COO at First Choice Home Health & Hospice

* * *

COVID-19 has accelerated many of the trends that were already underway in health care, particularly in regard to care delivered in the home. We see three factors driving this: increased demand by patients, increased adoption by health care providers and greater flexibility from CMS.

We’ve seen exponential growth in telehealth this year. We’re finding that most Medicare patients are open to virtual care, especially if they already have a doctor they’re comfortable with. This trend is here to stay.

Where I see the most acceleration going forward is in higher-acuity home care. Physicians are starting to embrace the delivery of hospital-level and skilled nursing care in the home. In the past, physicians were more inclined to refer a patient to a facility setting. Now, given the increased risks, physicians are referring more patients into home-based models, which are able to deliver safe and effective care leveraging home visits, virtual care and remote-monitoring technology, often producing better health outcomes for patients. Consumers prefer it, too, as it reduces burdens on caregivers, provides immediate access to their care team, helps them maintain independence and allows them to heal in the comfort of their home.

We appreciate the additional flexibilities CMS extended as a result of the pandemic and encourage them to go even further. Many of the people we serve are low-income seniors who do not have access to devices such as smartphones or tablets. We are taking advantage of recent CMS changes that permit us to loan patients tablets to connect with their care manager or physician, but there are limitations to what we can make available on those devices. We think there’s an opportunity to load the devices with additional content and tools that address mental health and other social determinants, and also allow patients to connect with their loved ones. Isolation was already a big factor for our patients, and social distancing and other limitations on their ability to socialize have only exacerbated this situation; further flexibility would allow us to fully leverage innovation in support of our members’ health.

— Susan Diamond; home care business president, Humana Inc. (NYSE: HUM)

* * *

Just as QR codes are here to stay in the place of traditional restaurant menus, we can expect to see the need for skilled home health and hospice continue to grow, driven by the COVID-19 pandemic. I anticipate strong demand for our services will exacerbate existing staffing challenges, testing our industry’s ability to recruit enough registered nurses to meet increased demand. As clinically appropriate, our paradigm will need to attract experienced RNs who have not previously considered home health and hospice, implement comprehensive orientation and peer mentor programs to support candidates without post-acute experience and new graduates, and continue providing robust offerings to support the paraprofessional nurse. The shift of health care services to the home setting will facilitate the ongoing focus of reducing health care costs while delivering quality outcomes. The value of care delivered at home will be on full display in 2021 and beyond.

— Paul McMullen, COO at Intrepid USA Healthcare

* * *

For 2021, I’m looking forward to gaining traction on tangible change. Home health will continue to innovate, but much of the planning and work has been done in 2020. For 2021, it will be the year of implementation. I believe we’ll see unprecedented speed in bi-partisan Congressional action on the home health reimbursement front. Soon after, we’ll see new government regulation across health care. Don’t be surprised to see a new government agency, czar or department head create rigorous health care accountability measures that will impact our daily delivery of care.

While the nursing shortage will continue, I anticipate increased enrollment in medical, therapy and nursing programs nationwide. We won’t see these new recruits on the front lines for a few years, but they’re going to bring fresh perspectives to home health after living through a world-wide pandemic.

For Josephine At Home, 2021 will be a year of insane growth. We’re excited to be part of the national solution to improve care and patient safety. But this can only happen if home health is an equal partner in the continuum of care. Home health has been providing clinical excellence since its inception. And we’re long overdue to have recognition in the form of comprehensive reimbursement from CMS. From a leadership standpoint, I’ll be focusing on advocating for expanded home health reimbursement on the state and national level. And most importantly, I will be hyper-focused on staffing. A healthy work culture has a positive correlation to optimized patient outcomes. Leaders willing to have difficult conversations, be vulnerable and accept change will find success in the 2021 home health landscape.

— Leslie Palmer, executive director of Josephine At Home

* * *

There was a seismic shift in how Mission Healthcare operated to mitigate the COVID-19 crisis and create a safe environment for staff, patients and families. We will continue to face challenges and changes to the home health landscape well into 2021. First, the pandemic is far from over, and we expect business impact from the coronavirus to linger well into the first part of the year. As cases continue to climb, more people are valuing and shifting to care in the setting of the home as an alternative. Furthermore, home health providers will be a tremendous vehicle for the administration of the COVID-19 vaccine for many patients who are high risk, homebound, and unable to get to doctors or clinics.

Additionally, the largest swooping change of PDGM continues to impact the industry. We will keep our eyes peeled on the way PDGM shakes providers across the country as government programs come to an end, including the sequestration holiday, Cares Act funds, PPP loans, deferred payroll tax and advance payments. PDGM’s intersection with the coronavirus accelerated technology trends and innovation. Our industry is more than ever embracing technology as we enter a new era of health care.

Lastly, M&A activity continues to surge in both hospice and home health as we come out of the pandemic and travel begins to open back up. While the industry has shown signs of a strong rebound, it is certainly not without challenges. Given the rapidly changing market, Mission Healthcare continues to take our COVID-19 response and processes very seriously to adapt to the current environment. The safety and well-being of our patients and colleagues remain our priority.

— Paul VerHoeve, CEO of Mission Healthcare

* * *

2021 will be a tale of two halves.

We expect to see another COVID-19-driven stimulus package in the first half of the year. As that wanes off, we’ll see a glut of M&A in the second half — smaller operators struggling with overbearing regulations, inadequate reimbursements, and increasing labor costs and shortages will look to sell. Many may go out of business.

The need for home-based care is at an all-time high, and it will only grow. We think the HEAT Act will be passed by Congress, driving up telehealth utilization for nursing and therapy visits. Doctors will look to home health care agencies for assisted-telehealth-visits to have eyes and ears on the ground and to help implement remote patient monitoring devices.

Productizing operations using data and proprietary technology will be key to building structurally sound home health care agencies in 2021.

— Raman Brar, CEO of PathWell Health

* * *

As the nation’s COVID-19 response is analyzed, the value of home care as a way for COVID patients to be treated at home — allowing hospitals to discharge COVID patients to open up beds — will become apparent, driving an increased focus on the need for governmental and payer financial support of home care programs.

— Dan Savitt, executive vice president and CFO of the Visiting Nurse Service of New York (VNSNY)

*Editor’s note (Dec. 15, 2020): VNSNY CFO Dan Saviitt will step into the CEO role on Feb. 1, 2021, after the planned departure of current CEO Marki Flannery.

* * *

With the continued push to provide care in the home setting, the home health vertical will be an even more integral factor in the goal to provide our mutual patients with quality care in the right setting. Home health agencies that are innovative in their abilities to combat social determinants of health as well as streamline effective communication pathways with their up- and downstream providers will be the strongest players within their market, ultimately positioning themselves to be strong partners with MCOs, ACOs and acute care.

— Jennifer Levy, chief strategy officer at V&V Management Solutions

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Amedisys Floats Future Innovation Plans, Details COVID-19 Costs

About five months into the COVID-19 crisis, Amedisys Inc. (Nasdaq: AMED) believes that it’s better positioned for the future than it was before COVID-19 landed on U.S. soil.

The Patient-Driven Groupings Model (PDGM) and COVID-19 have presented challenges to the Baton Rouge, Louisiana-based company’s home health business, just like almost everyone else’s. But Amedisys bested its Q2 internal modeling and feels like it’s primed to ride the tailwinds that it’s expecting to take hold on the back half of 2020 and after that.

“Home health admissions and referrals hit a low point the week of April 5,” Amedisys CEO Paul Kusserow said on the company’s Q2 earnings call. “Since that time, I am happy to report that we have seen a steady, V-shaped recovery — a sharp bounce back instead of a prolonged trot.”

Amedisys has 480 care centers in 38 states and Washington, D.C., as part of its overall footprint. For Q2, its home health segment’s operating income was over just over $48 million, a 13.5% drop compared to $55.7 million in the same time period in 2019. 

An “aging-in-place company,” Amedisys simultaneously ranks as one of the largest home health and hospice providers in the country. Its hospice capabilities were bolstered by its $235 million acquisition of hospice giant AseraCare, which closed in early June.

Total home health volume — which includes both admissions and recertifications — was about 98% of the way to pre-COVID-19 levels at the end of Q2. Volumes continue to hold strong, despite recent resurgences, Kusserow said. Total admissions were at about 91% of their pre-COVID-19 baseline.

Other data points that Amedisys is getting back are encouraging, too, according to Kusserow. Its internal numbers are rebounding at a higher rate than many other general COVID-19-related numbers are, meaning the company is gaining ground.

“We have not seen a material recovery in elective procedures,” Kusserow said. “Yet we have seen a significant recovery in our admissions, which means we are winning market share and new referral sources.”

Additionally, Amedisys has been bullish on tailwinds related to skilled nursing facility (SNF) diversion efforts for months now. It is now beginning to see evidence of an increased preference to age in place, leadership believes.

“We believe there is a compelling post-acute market share capture proposition from offering a SNF-at-home product and finding other ways to capture patients that historically would have received care at facilities,” Kusserow said. “Our efforts are underway on this one. And we fully expect to be caring for more acutely ill patients in the home over the coming months.”

Amedisys has been taking on COVID-19 patients “from Day 1.” That has also helped to build new referral and partner sources.

The COVID-19 patients were not enough to offset the admissions dip, however. Admissions were at 74,327 for Q2 2020, down about 9% from 81,763 in Q2 2019.

Kusserow is still optimistic that those numbers are even better than they should be at this point, considering the state of COVID-19.

“Our admissions would also suggest that we are starting to realize that trend of patients wanting to avoid admission into SNFs and other facility-based settings,” Kusserow said. “It is without a doubt [now] that the home is the safest place to care for patients.”

Earnings calls tend to favor the glass-half-full outlook. But analysts likewise appear to recognize the solid Q2 from Amedisys under the circumstances.

New York City-based Jefferies Group, an investment bank and financial services company, had generally positive things to say about Amedisys’ position after Q2.

“Amedisys’ Q2 beat is a positive, as it underscores the merits of its highly variable cost structure, management’s success with cost and operational enhancements, as well as progress with PDGM mitigation,” analysts Brian Tanquilut and Jack Slevin wrote in a note.

At a Bank of America event in May, Kusserow called Amedisys recession-proof and suggested it could even be recession-positive. Thus far, that doesn’t look completely off-base.

In addition to its assertion that it’s gaining market share, Amedisys is also planning on innovating and exploring new areas of business moving forward.

“We’re innovating on new ideas — SNF-at-home, dialysis in the home, telehealth, palliative care and our national personal care network,” Kusserow said. “It is truly an exciting time to be a part of Amedisys.”

Utilizing the CARES ACT

While some health care organizations have chosen to reject CARES Act relief funding, Amedisys has deployed at least a portion of the money it received to help offset COVID-19-related costs. In total, Amedisys received $22.78 million of CARES Act and state grants, according to the company.

In Q2, the company paid out $9 million in employee bonuses, $11 million for PPE and $2 million in quarantine pay, bringing the total of COVID-19-related costs to $23 million. The cost for PPE has been 5 times the normal level, the company said.

Still, Amedisys leadership felt that because it made the decision to take on COVID-19 patients right away, rewarding its workers was the right thing to do.

“Employees are always our most important asset, and patients and their families are the most important commitment,” Kusserow said. “[That has] been at the forefront of our decision-making during this pandemic. As such, I am proud to say that during the quarter, we gave out over $9 million of bonuses to home health, hospice, personal care and all front-line caregivers that have seen patients during the pandemic.”

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