Coming off an acquisitive year, LHC Group (Nasdaq: LHCG) is reaping the rewards of its strategic partnerships with health systems and hospitals.
Lafayette, Louisiana-based LHC Group ended 2016 on a high note, just beating analysts expectations in fourth quarter earnings. The nation’s third-largest home health care provider reported a net service revenue increase of 7.5% to $235.4 million for the fourth quarter from the same time period in 2015. For year-end 2016, net service revenue was $914.8 million, up 12.1% compared to 2015.
The earnings report follows a recent joint venture with hospital system LifePoint Health, which will become accretive throughout the year as LHC Group continues to add home health and hospice locations to LifePoint Health hospitals over time. The recently-completed joint venture with LifePoint Health is likely to be emblematic of its future acquisitions, executives stated on a quarterly earnings call.
The company has a “robust” pipeline of potential acquisitions totaling roughly $100 million in potential revenue in backlogged opportunities, executives stated during a quarterly earnings call.
Hospital and health system joint ventures are the company’s bread and butter, so to speak, and the strategy is contributing to its strong growth in admissions in both home health and hospice.
“That’s the history and origins of the company,” Frank Morgan, analyst with RBC Capital Market, told Home Health Care News. “One of their first-ever agencies, if not their first agency, was formed as a joint venture with a hospital. It’s always been their model, always what they’ve done. ..It turns out to be a pretty good way. It seems like it’s worked pretty well.”
LHC Group’s organic growth in home health and hospice admission is vastly outpacing its industry peers. Total comparable-quarter growth in admissions for all services lines for the fourth quarter was 13.2%. For home health, the growth was 10.8%.
LHC Group has increased total admissions at a double-digit pace for four consecutive quarters, while organic growth and home health admissions have accelerated for the past six quarters, executives said during the earnings call.
“Our performance offers further validation of the growing recognition among hospitals and health systems and increasingly among MCO[s] with their home health can be a tremendous asset to their operations through our proven ability to provide high-quality care and to reduce their costs for non-acute care,” LHC Group Keith Myers said during the earnings call.
Bets on Regulatory Changes
LHC Group executives were not so enthused by the repeal and replacement of The Affordable Care Act (ACA). House Republicans introduced their health care plan, The American Health Care Act, on March 6.
“There’s nothing I know of that has a positive impact on us in the newly proposed reform legislation,” Meyers said of the Republicans’ recent health care proposal.
LHC Group was bullish, however, on the transitions happening at the nation’s capitol. Specifically, executives forecasted a reduction in regulations and a lower risk for reimbursement changes.
“I think there’s a real opportunity for us to get some relief from burdensome regulations that cost us a lot of money,” Myers said. “And to home health providers, the elimination of some of these burdensome regulations that really add no value to the system, and do harm to patients, and cost the system by delaying patients downstream out of an inpatient setting to the home health setting. Those would reduce our costs and increase our margins for home health operators without us having to get an increase. That’s what I’m optimistic about.”
Written by Amy Baxter