Last year’s smooth integration of Almost Family — formerly one of the biggest home health providers in the country itself — has broadened LHC Group’s (Nasdaq: LHC) geographic footprint and bolstered its dealmaking confidence.
That will be key looking ahead to 2019, as M&A activity across post-acute care segments is expected to remain robust.
With the merger in LHC Group’s rearview mirror, the Lafayette, Louisiana-based company plans to now focus on shifting more care into the home — and out of skilled nursing facilities (SNFs) and hospitals.
That includes refining SNF-at-home and hospital-at-home programs in key markets, LHC Group CEO and Chairman Keith Myers told Home Health Care News. The company’s other 2019 plans: pushing for more value-based purchasing opportunities and better leveraging tech tools.
HHCN recently caught up with Myers to discuss LHC Group’s outlook for 2019. Highlights from that conversation are below, edited for length and clarity. HHCN plans on publishing forward-looking interviews with other major home health care industry executives in weeks to come.
HHCN: Before we look ahead to LHC Group’s plans in 2019, I wanted to ask about 2018, which was a very important year for your company. Looking back, what stands out to you the most from last year?
Myers: The headliner of 2018, I think, will always be the Almost Family acquisition, which was transformative. We’ve used that word “transformative” in the past with some of our larger transactions that we have done, but Almost Family was truly transformative.
In the context of footprint, it took our footprint from roughly 35% of the population to more than 60% of the population of the United States. We are licensed and positioned throughout 780 locations. That really moved the needle for us in terms of growth opportunities. We have over 32,000 employees at this moment, and we’re hiring staff as the census grows.
The integration … being able to successfully integrate an acquisition of that significance, and do it exceptionally well — was a really big deal for us. I’m a distance runner. If you go out and run 35 miles two weeks before you run a marathon, you feel pretty good about the upcoming marathon. That’s kind of the analogy I use. These $50 million acquisitions we tend to do feel a lot more like tuck-ins after you’ve done one of these.
I was actually just talking to somebody the other day about ultra marathons, where people sometimes run upward of 100 miles at a time. Maybe that’s next for LHC Group. I have no idea how the human body can run 100 miles, by the way.
This human body would do it with a lot of Aleve. But, yeah. Almost Family — that’s been the really big thing for us.
Behind the scenes, nobody paid a lot of attention to this, but we integrated Almost Family while at the same time continuing to operate the core business of LHC Group incredibly well. And staying focused on our corp dev [corporate development] pipeline. The fruits of those efforts are going to show themselves in 2019 beginning pretty early with announcements of more hospital joint venture arrangements and other acquisitions.
It was just a very confirming year. It feels like all the hard work we’ve done over 25 years, to build an infrastructure and discipline around an operating model … that really got tested and got to prove its value in 2018.
What were some of the biggest challenges from 2018?
I don’t know if I’d call these challenges as much as tests. But whenever you get ready to do this type of acquisition, you have all these disciplines and things you think about. You tell yourself that if we ever do something really big, we can’t take our eye off the core business, we can’t take our eye off corp dev or any of those things.
We had to go out and hire [consultant] BRG, bring in an outside firm. That wasn’t cheap, to manage the transition. We’re the only company that I know of in our space that has taken that path in trying to integrate a large transaction. To pay for that, we have to build it into our cost, which means we have to build it into our models when we were pricing Almost Family. We had to have the discipline to say, in the negotiations, that we were going to say “no” to it — if we didn’t build that in.
I’ve seen others fold at that point. You don’t bring in those resources. Then when you try to integrate something that big, your core business suffers.
It wouldn’t be fair to call it a challenge because there was never a point where we were at risk for doing that, but it was a pretty big test in the board room. Nobody ever got deal heat and lost sight of those core fundamentals.
The other thing I would say is leverage. There was some pressure in that to lever the company instead of using stock. We held our ground in staying low-leverage with a strong balance sheet.
Let’s now focus on 2019 and on looking ahead. What goals do you have in mind for the coming year?
With LHC Group and this footprint, there’s a lot of opportunity to grow organically — not only in home health, but in hospice. We’re very focused on hospice and palliative care, which is not considered traditional home health. Palliative care is big in our strategy to move more patients to the home and away from institutional settings.
We’re thinking in terms of SNF-at-home and hospital-at-home, which incorporates more utilization of nurse practitioners, which isn’t just the traditional home health model.
On the other end of the spectrum, it’s the expansion of personal care services in every market we serve. Leveraging lower-cost, non-medical assets to maintain patients at home once we get them stabilized. We want to start thinking about care-at-home as something much broader than just the Medicare-certified home health benefit.
Do you think there will ever come a day where we’ll see a dedicated, full-blown Medicare benefit for palliative care?
I’m very bullish on this. Data, I think, can prove there are savings. On the other hand, I think it’s more likely to come through value-based models, where you get paid for providing palliative care off of a baseline or historical costs and your ability to bring costs down without sacrificing quality or patient satisfaction.
I want to spend more time reporting on hospital-at-home programs in 2019. One of the challenges to those taking off, I’ve been told, is supply chain logistics. There’s not really an existing supply chain to getting necessary equipment delivered in the home on time.
I suppose there are some markets where that can be challenging. We’re doing that in markets like Ochsner in New Orleans. We’re doing it well. It’s a management issue. We’re using more nurse practitioners, we’re using more nursing staff — and there’s a lot more coordination that has to take place.
The baseline spend that we’re working against, you know, creates a huge opportunity to bend the cost curve. There’s enough margin there to cover those additional resources that you need.
Outside of some of the things you’ve already touched on, what’s one important trend that you expect to see happen this year? And I’m thinking of the home health industry more broadly.
I think the main trend is going to be the overall acceleration of moving care into the home. I think there’s movement, too, toward a whole post-acute bundle. That’s going to gain momentum. There is a post-acute TEP [technical expert panel] that was formed — and I’m sitting on that. The first meeting was pretty eye-opening for me.
Demonstrations and the pilots we’re doing in places like Ochsner — pilots done within a health system that has capitated lives — the data and results of those pilots are going to be noticed by all payers. That means Medicare and managed care payers. That will help accelerate that movement of care into the home.
I think it’s going to happen in value-based models, though. I know I’ve said that two or three times now. But it’s a little bit “chicken-or-the-egg.” You can demonstrate your ability to deliver results, but payers want to pay for the value after it’s been delivered — not in advance. We’re prepared to do that.
CMS’ Value-Based Purchasing Model (VBPM), I think, is in nine states right now. Do you see that expanding in 2019?
We’re advocating for it. Other providers like us are doing the same. At the Partnership for Quality Home Healthcare, we’re huge supporters of that. Any opportunity we get to advance policy toward value-based purchasing, we seize those opportunities.
Adam Boehler at CMMI … that’s the only thing he’s focused on. It’s all about value-based purchasing models.
Do you see M&A activity staying fairly robust in 2019?
I do. I look for an acceleration in that. Every time we have a significant change in the reimbursement model, smaller providers tend to have struggles with that. For a lot of people, that’s a catalyst to get them to look at alternatives and other businesses.
We see more joint venture activity and more acquisition activity occurring. We’re preparing for and anticipating a spike in activity.
I want to ask about hospital-at-home again. That’s something I’ve never connected with you and LHC Group about. Can you please provide some more color around what LHC Group is doing in regard to hospital-at-home?
We’ve been providing SNF-at-home for probably four years now in a meaningful way. We haven’t called it SNF-at-home, but we have markets … where we’ve reduced SNF utilization by over 50%. We’ve just called it SNF-diversion of different things like that.
Now what we’re being asked to do by Ochsner — because they’re capitated — is to take patients who would have, in the past, been admitted for an acute stay … intervening proactively and caring for those patients in the home as an alternative to hospitalization. That’s something we can do. It takes additional resources. But if you have a payer who is spending more money caring for patients in an in-patient setting — and they have an opportunity to reduce their spend and an incentive to do that — then they look to home health.
Anything else you’d like to highlight as we project into the next several months and down the road into 2019?
I’d like to just say a little bit about technology. We’ve talked a lot about labor. We’ve talked about the availability of labor. I think you’re going to see us leverage technology more aggressively than we had in the past. That’s going to happen for two reasons.
One is because we’re taking a new look at the world, bringing in people like Bruce Greenstein, who is our chief strategy and innovation office here now. Bruce’s background … I see him bringing a new view to our team. So, think of Personal Emergency Response Systems (PERS) for example. We’ve historically used PERS units on all of our patients. It’s been something that we’ve used as an emergency button, kind of a call button to connect them to a nurse on call if they need something.
We haven’t used PERS as a proactive management tool to manage the more high-risk patients where we’re measuring their activity during the day through the PERS unit — falls and things like that. Or having them used the PERS unit just as a means of contacting their nurse when they feel like they have a question.
That in combination with our Carelink call center — where we have people who follow up with patients and send text messages back to clinicians in the field — I see that as something we’re going to leverage much more.
Plus more expansive telemedicine. The problem with telemedicine in the past was that we’ve had really cool technology that allows you to connect, but there haven’t been clinicians on the other side of the telemedicine device for patients to speak to at a moment’s notice. We’re going to leverage telemedicine in a way where we connect patients with their nurse, so we can have connectivity and continuity of care even when our nurse isn’t in the home.
We think that’s very promising.