As Amedisys Inc. (Nasdaq: AMED) promoted its new branding and image, its core service line—home health care—dwindled in growth, first-quarter 2017 earnings results revealed.
However, the Baton Rouge, Louisiana-based company saw an overall stellar start to 2017, including an increase in revenue and significant growth in its hospice segment. Amedisys beat analysts’ expectations for the quarter, reporting adjusted earnings from continuing operations of $0.47 per share, a 42.4% increase year over year.
Net service revenue was $370 million for the first quarter, and increase from the $349 million reported during the same three months in 2016. Net income for the first quarter of 2017 reached $15.1 million, compared to $6.2 million in 2016.
Home health revenue reached $271 million for the quarter, down $1 million from the same time period a year ago. The decline in growth was largely due to reimbursement cuts for Medicare home health care, executives said on an earnings call Wednesday.
Amedisys also saw a lack of growth, in part, due to an unexpected loss of between 50 and 60 people on its business development and sales team, CEO Paul Kusserow explained. Those losses offset productivity gains that the company has started to realize since it completed its implementation of software system Homecare Homebase.
Focusing on its ‘Core’
Looking ahead, Kusserow explained that the company will focus on improving in four areas, with growth in its home health—its core service line—being “non-negotiable.”
“We must produce higher consistent levels of growth in home health,” he said. “We get that.”
Over the past year, Amedisys has implemented “Project Redwood,” a strategic initiative to address its high turnover rate. The initiative helped the company reduce turnover among its clinicians, but the loss of sales and business development personnel was somewhat unexpected, executives stated. The reaction has been swift, and recruiting the 50 to 60 employees is a top priority for Amedisys.
“We watch [turnover] very carefully,” Kusserow told Home Health Care News. “The only assets we have are our people. If our people are leaving us, we aren’t doing a very good job. We take turnover very seriously. Our incentives are tied to turnover because it’s important.”
To recruit and retain more employees, Amedisys pushes its high quality care and operations, Kusserow told HHCN.
“We understand that if you want quality people, they are attracted to quality. [We’re’] out looking for sales people,” he said. “They sell quality, and we make it easier for them to sell and meet quotas. Clinicians like to be associated with that. We believe the more quality we create in our organization, the better we will attract people interested in quality who will want to stay with us.”
However, stressing its high quality star ratings and patient feedback may not be enough—Amedisys also revamped its incentive structure for its sales team over the last year, Kusserow said on the earnings call. Those who left the company in the last year were generally considered to be in the “middle” of the sales team, while incentives were only tied to the highest sellers. Changing the incentives let sales and business development employees in the middle know “there is a career for them here,” executives said of the changes.
Besides home health, Amedisys will focus this year on deploying capital to acquisition targets that are the right strategic fit, reduce its backlog of accounts receivable from 2016, and work with the Centers for Medicare & Medicaid Services (CMS) and other payers to “declutter” the delivery of care.
Becoming Boring
Beyond home health, Amedisys’ other areas of business are growing rapidly. Its hospice division has grown in the double-digits for the past eight consecutive quarters, executives stated Wednesday. In the first quarter of the year, hospice revenue increased 17%, while same store admissions rose 20%.
The company has also recently become the largest personal care provider in Massachusetts, and will soon continue expanding its footprint beyond New England with the purchase of East Tennessee Care. Billable hours for personal care grew 50% compared to the first quarter of 2016, Kusserow stated.
Hospice as a sector has been buoyed over the last few years with rate increases, as opposed to reimbursement rate cuts seen in home health care. The Centers for Medicare & Medicaid Services (CMS) once again issued a rate increase for the sector—a 1% or $180 million bump in payments for 2018.
With overall growth and the overhaul with Homecare Homebase fully in place, Amedisys hopes to “become boring,” Kusserow said.
“What we want to do is continue to put our focus on making sure we put the Homecare Homebase implementation behind us and push some growth and emphasize that in home health,” he told HHCN. “We continue to do well in hospice and personal care, and will continue to grow and acquire things. The good thing is that I hope we start to get boring, with the same message, now that we are through the tumult of restructuring and management changes.”
Investors reacted positively to the company’s first quarter results, with Amedisys’ stock rising nearly 3% by end-of-day trading Wednesday—the share price hovered at just over $58.
Written by Amy Baxter
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