Lafayette, Louisiana-based LHC Group (Nasdaq: LHCG)—a champion of joint ventures with hospitals and health systems—is seeing a bright future beyond fee-for-service with growth prospects to potentially double the size of the company to $2 billion.
Specifically, the home health care provider is eyeing the benefits of Medicare Advantage, CEO Keith Myers made clear during a presentation on Tuesday at the Jefferies Healthcare Conference.
Despite recommendations from the Medicare Advisory Payment Commission (MedPAC) to cut home health care reimbursements, LHC Group is bullish on the long-term prospects of home health as the health care landscape shifts toward value-based purchasing and more seniors become covered under Medicare Advantage.
“There’s potential to get reimbursed [in Medicare Advantage] more than fee-for-service if you deliver exceptional quality,” Myers said.
For one, the home health care company is already reaping the benefits of being involved in Medicare Advantage with one of its joint venture partners, Ochsner Health System, a non-profit, academic health care delivery system with seven hospitals and 35 health centers located throughout Southeast Louisiana.
Under its contract with Ochsner, the health system takes full risk for its 55,000 patients and LHC Group is paid its cost of care on an interim basis. LHC Group is paid more based on its performance.
“We reduced rehospitalization rates, improved customer satisfaction, reduced hospital length of stay and reduced SNF usage,” Myers said. “[It came out to] $3,200 of value per discharge for Ochsner. The pool that we get our second payment is the pool of that value. We don’t get paid until they’ve already made money. [It’s] above the standard fee-for-service rate.”
Overall, Myers sees health systems taking a harder look at home health, and noted that the home health industry is gaining “traction” as a partner compared to just a few years ago. And, as Medicare Advantage continues to become a larger market share in many states, home health agencies involved could see more opportunity.
Rosy Outlook
LHC Group is likely to continue on its projected pipeline of hospital joint ventures that Myers laid out during the company’s most recent earnings call with analysts. Currently, LHC Group has 23 potential deals in the works, with only three that are not with hospitals or health systems, he said Tuesday. Additionally, only three of these deals are with large, single-site hospitals; the rest are with multi-site hospital systems, he said.
LHC Group has engaged in two recent joint venture transactions, including one with Lifepoint and one with Baptist Memorial Health Care.
On the regulatory front, Myers is optimistic about the changes that have already taken place with a new CMS administration, led by Administrator Seema Verma and Health and Human Services Secretary Tom Price, M.D.
“I believe we have a more open ear at the current CMS administration than I’ve seen in a decade,” Myers said. “Dr. Price has been a great champion for home health and his senior staff is hearing us. [Though,] it’s hard to tell exactly what they’re going to do.”
Myers sees home health gaining more focus from payers, health systems and hospitals, and he believes that will lead to more growth for LHC Group and the home health care industry as a whole.
“What excites me the most is the broad awareness of all parties of the value of home health,” he said. “Within LHC Group, we’ve gotten to the point that we are over a $1 billion company. We have the systems and processes that are sophisticated and scalable. We have the metrics to be a $2 billion company.”
Written by Amy Baxter
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