Buoyed by the Centers for Medicare & Medicaid Services’ (CMS) recent decision to delay the home health groupings model (HHGM), executives at Kindred Healthcare, Inc. (NYSE: KND) say they see growth ahead in the sector.
After taking a financial hit amid the recent natural disasters, Kindred expects annual revenue and admissions growth of 3% to 5% per year going forward, along with potential acquisitions of existing companies, executives said on the company’s third quarter earnings call with analysts and shareholders.
“We feel so bullish still about our organic growth opportunities in this space,” Kindred CEO Benjamin Breier said on the earnings call Tuesday.
Breier praised CMS’ decision to delay HHGM, saying the plan—which could have slashed up to $950 million in reimbursements during 2019 alone—“never really made sense” in a landscape where more and more providers and residents have recognized an overall desire to remain at home, equating it to robbing “Peter to pay Paul.”
Still, Breier warned that the fight over updated payment models isn’t over.
“We look forward to an ongoing, close engagement and collaboration with CMS and Congress to develop a reformed model that strikes the right balance in promoting high-quality home health care in a fiscally responsible manner,” Breier said.
“There are clearly going to be ongoing discussions … with both CMS and actively with Congress around developing a system of payment and regulation for the home health space in the future that meets the needs that the government feels are appropriate from a regulatory and reimbursement perspective,” he added later in the call.
Louisville, Kentucky-based Kindred reported positive results for the third quarter, beating analysts’ estimates on revenue and turning in a smaller loss than expected—$18 million versus $1.48 billion in total revenue, or a loss of $0.11 per share.
Kindred at Home, the company’s home health arm, saw admissions growth of 0.5% in the third quarter and a same-store admissions gain of 0.9%—lower-than-expected numbers that Breier blamed on the effects of Hurricanes Harvey and Irma.
Breier emphasized that the company expects those growth rates to return to the 3%-to-5% range seen before the hurricanes, and also touted Kindred at Home’s 17% growth in non-Medicare episodic admissions. The division also lowered labor costs by 3.7% per visit as compared to the prior year.
“This area had been a significant challenge for us,” Breier said of the labor costs. “We’re very pleased to have made this meaningful progress.”
Despite the positive trends and upbeat call, Sheryl Skolnick, managing director of U.S. equity research for Mizuho Securities USA, told Home Health Care News that she’s still waiting to see proof of ongoing performance.
“I’m skeptical on the home health volume growth until I see evidence of it resuming at that pace,” Skolnick said.
Kindred’s stock closed Tuesday’s trading at $8.40, a jump of $2.40 or 40%; KND slid about 4% in after-hours trading from that closing peak.
Written by Alex Spanko