A slew of acquisitions and a leap into innovative investments over the last few years is seemingly paying off for a major home health care services provider. Almost Family (Nasdaq: AFAM) reported record revenue in its recently released quarterly earnings report.
For the second quarter of 2016, the Louisville, Kentucky-based company announced net service revenues of approximately $156 million, a record across all three of its segments—Medicare-certified services (visiting nurse), personal care and healthcare innovations. Its newest segment, Healthcare Innovations, was created to build and separately report on development activities outside the company’s core home health services, such as technology based, patient assessment and analytics tools.
After announcing its Healthcare Innovations (HCI) segment two years ago, the segment is in positive territory even without a boost from ACOs, which share Medicare savings among participating providers. And Almost Family foresees more profits in the future.
“This is the first quarter in which our HCI segment has generated positive earnings without an ACO shared savings payment,” said William Yarmouth, Almost Family chairman and CEO. “In only two years since its inception, the HCI segment has established a meaningful presence with an expectation of on-going profitability.”
The company has been very acquisitive over the last year and a half, and its HCI investments led to $24 million in revenue and positive cash flows in 2015. Year to date, the HCI segment’s net revenues have increased $9.8 million to a record $10 million, compared to $0.2 million in 2015. For the second quarter, HCI segment net revenues jumped $5.5 million to $5.6 million.
Within its Medicare-certified segment (VN), the company’s revenues increased $12.9 million in the quarter, hitting a record high of $110.7 million, up from $97.7 million in 2015.
Total Medicare admissions grew 5% to 23,920, up from 22,782, as the company integrated home health agencies acquired in late 2015 and early 2016. The company has been diversifying its operations outside of the state of Florida, where it currently has its largest presence, over the last few years. Medicare admissions in Florida have increased at a much faster pace than other states in 2015 and the first half of 2016. Same-store admissions grew 3.1% outside of Florida.
“The company is continuing its efforts to improve the performance of its Florida business, however, with its growth and acquisition activity outside of the state, the impact of Florida performance on the company’s operating results is lessening,” Almost Family stated. “Florida operations currently account for apporiximately one-fourth of VN segment revenues as compared to one-third a year ago and one-half three years ago.”
The company has also recently been acquiring more within the personal care space. Its PC segment net revenues increased $10.2 million or 34.6% during the quarter, largely due to recent acquisitions. Net revenues hit a record $39.7 million in 2016 from $29.5 million in 2015.
Regulatory Impacts Uncertain
While much of the home health industry has been up in arms over the Centers for Medicare & Medicaid Services’ (CMS) pre-claim review demonstration, Almost Family executives seemed more optimistic about the potential upside of the new model. Unlike industry group that have urged CMS to pause the demonstration, Almost Family seemed to welcome the opportunity with open arms.
“We feel CMS’ recently announced pre-claim review process, which may initially be somewhat burdensome, if properly implemented should serve to reduce real and perceived payment error rates and help build a relationship of trust between the program and providers that is critical to home health achieving its real potential in the health care delivery system,” Almost Family President Steve Guenther said in a press release. “We support CMS’ program integrity efforts and will continue to work with them to find the best approaches to implementation.”
Almost Family operates home health branches in three of the five states named in the demonstration, including Illinois, which kicked off the pre-claim process on August 1. Following Illinois, the demonstration will roll out periodically in Florida, Texas, Michigan, and Massachusetts over the coming months. Almost Family has more than 250 operations in 16 states, including within pre-claim states Florida and Massachusetts, in addition to Illinois.
However, the company also noted it wasn’t sure how the demonstration would impact its operations or finances as it rolls out.
“The company is currently unable to predict what impact, if any, this demonstration program may have on its results of operations or financial position,” Almost Family stated.
Written by Amy Baxter