One of the nation’s largest home health providers, Amedisys, has recovered from a large legal settlement and is positioning itself for success with new payor organizations, company leaders said in announcing fourth quarter 2014 earnings this week.
In April 2014, Amedisys agreed to pay $150 million to the federal government, resolving charges that it provided medically unnecessary services to Medicare beneficiaries and had improper relationships with referring physicians. The settlement was a further setback for an already troubled balance sheet; however, the provider has taken steps to right the ship, including a change in leadership.
“What a difference a year makes,” newly installed President and CEO Paul Kusserow said Wednesday on a call with analysts. “Difficult decisions were made to close or consolidate underperforming care centers, cut costs and [refocus] internally on core operations. Looking back, these decisions have paid off tremendously.”
For the fourth quarter, the home health gross margin was 42.1%, up from 39.4% a year earlier. Same-store Medicare revenue per episode increased $10 year-over-year. Same-store non-Medicare performance was especially dramatic, with revenue up 26% and admissions up 22% year-over-year.
The non-Medicare growth rate was largely driven by changes in contracted payor relationships that took place early in 2014 and is likely to slow to low double-digits in the first quarter of this year, Vice Chairman Ronald LaBorde told analysts.
However, Kusserow emphasized that with the rapid growth of managed care, Amedisys is “aggressively” pursuing “as many contracts as possible.”
“We want to be the choice for managed care,” Kusserow said. “I came out of that background and we have good relationships there and we want to be the solution there, particularly as Medicare Advantage outpaces traditional Medicare growth, we want to be there.”
Under managed care, private insurers receive capitated payments from the government to administer benefits to Medicare and Medicaid beneficiaries. Margins generally are slimmer for providers that have contracted with managed care organizations, compared with traditional Medicare. Amedisys has been working on a strategy to keep margins competitive under managed care by adjusting staff mix and making certain operational adjustments, Kusserow said.
Before joining Amedisys in December 2014, Kusserow was vice chairman of Alignment Healthcare, Inc., an integrated clinical care organization focused on serving Medicare beneficiaries. Prior to that, he was senior vice president, chief strategy, innovations and corporate development officer at health care services and insurance company Humana, Inc.
As a consultant, Kusserow developed a turnaround plan for Amedisys in the months before becoming president and CEO.
Overall, Amedisys reported $74.3 million in earnings before interest, taxes, depreciation and amortization for 2014, compared with $48.9 million in 2013.
With the balance sheet in better shape, Amedisys now is looking at acquisitions in the home health and hospice space, Kusserow said on the earnings call. The ultimate goal is to expand beyond the 37 states where the company currently operates.
He also believes that reimbursements from government programs will continue to evolve, with greater financial risk and reward tied to quality outcomes and lowering the cost of care. Acquisitions could help add capabilities that would be beneficial in this coming “post acute world,” he said.
Written by Tim Mullaney