Amedisys Caps Off Aquisition-Filled Year, Increases Home Health Volume 6%

Amedisys Inc. (Nasdaq: AMED) beat Wall Street expectations for the fourth quarter of 2018, a fitting end to what was an overwhelmingly positive year for the Baton Rouge, Louisiana-based home health company.

More than four years removed from when its turnaround efforts began, the once-struggling Amedisys is now focused on growing its hospice and personal care lines through its in-house acquisitions process, while preparing for the looming Patient-Driven Groupings Model (PDGM), refining its risk-sharing arrangements and improving upon its employee retention rates.

“We generally try to avoid hyperbole on these calls,” Amedisys CEO and President Paul Kusserow said during a Thursday morning conference call with investors and analysts. “But it would be inaccurate not to describe our performance in 2018 as tremendous.”


Partly thanks to a home health segment that returned to growth and exceeded margin expectations, Amedisys saw its 2018 net service revenue increase by roughly 10%, jumping to about $1.66 billion compared to $1.51 billion in 2017. Its net income on the year checked in at $119.3 million, an increase from the $30.3 million the company netted in 2017.

Overall, Amedisys treated about 400,000 patients in 2018, making more than 10 million visits across its home health, hospice and personal care lines.

In terms of its building momentum for its home health business, Amedisys increased its total same-store volume by about 6% in Q4 2018, including both admissions and re-certifications. At the same time, the company was able to increase revenue per episode by about $33, while keeping its total cost per visit largely flat by making sure clinicians work at the top of their license.


Moving forward, Amedisys will specifically push for fee-for-service home health admissions growth, Kusserow said. The company’s Q4 Medicare fee-for-service growth checked in at above 3% over the same period a year prior.

In comparison to home health, total same-store volume growth for Amedisys’ rapidly expanding hospice line was 12% during the fourth quarter of 2018 compared to Q4 2017. Although the company only increased its personal care clients served by about 3% on a year-over-year basis, it saw billable hours rise by about 14%.

“We are very pleased with the progress our personal care team has made integrating the four assets we have acquired since 2016,” Kusserow said. “We plan to continue to scale, grow and expand the business, both organically and inorganically across our footprint.”

M&A pipeline and risk-sharing arrangements

Last year, Amedisys closed on the acquisitions of Christian Care at Home, Bring Care Home and East Tennessee Personal Care. The company finalized its $340 million acquisition of Compassionate Care Hospice in February, quickly following that up with a definitive agreement to acquire Tulsa, Oklahoma-based hospice provider RoseRock Healthcare.

The acquisition of RoseRock Healthcare — “a very strong hospice asset,” according to Kusserow — will help Amedisys solidify its position as an end-of-life care powerhouse.

As a result of the New Jersey-based Compassionate Care Hospice deal, Amedisys is now the third-largest hospice provider in the country.

“Capital deployment on hospice acquisitions remains our first priority, as we look to replicate our RoseRock process and success with other tuck-ins in our pipeline,” Kusserow said. “We will also continue to focus on tuck-ins and expansion opportunities in personal care and strategic home health assets.”

Despite its numerous 2018 acquisitions, Amedisys has maintained a low net leverage ratio. Additionally, upon the closing of Compassionate Care Hospice, Amedisys announced it had expanded its borrowing capacity by $175 million to $725 million, consisting of a $550 million revolving credit facility and a $175 million term loan.

That means there’s plenty of dry powder to spend on M&A, Kusserow said, noting that Amedisys is looking to increase its de novo activity in 2019 as well. Amedisys will continue to source deals internally to avoid “nosebleed” private equity multiples, he added.

Apart from M&A, the home health company also remains active on the risk-sharing front and is currently engaged in pilots across 15 states.

For the most part, the plots revolve around lowering hospital readmission rates, though “a couple” relate to medication adherence, according to Kusserow.

“The interest level has increased considerably from a variety of folks — not just payers, but [stakeholders] in other types of risk relationships,” he said. “We’ve seen a lot more of that activity. We’re having a lot of bigger discussions with health systems themselves, retailers, specialty folks that are out there — all of them looking to get involved in risk.”

Amedisys’ relationship with Nashville, Tennessee-based predictive analytics firm Medalogix has enhanced the company’s risk-sharing ability, Kusserow noted. The company invested in Medalogix in August.

Amedisys’ regulatory agenda

While Amedisys is committed to preparing for the PDGM, the company continues to work with others throughout the home health industry in opposing the use, scope and impact of the overhaul’s behavioral assumptions.

The opposition includes the support of recently introduced legislation in the U.S. Senate that requires the Centers for Medicare & Medicaid Services to base Medicare reimbursement rates on observed evidence and data.

The legislation — S. 433 — also includes provisions that alleviate aspects of the Medicare homebound requirement.

Instead of advancing PDGM as is, CMS should consider expanding its Value-Based Purchasing Model (VBPM), Kusserow said. VBPM is currently underway in nine states.

During the fourth quarter of 2018, Amedisys received about $250,000 in bonus payments from CMS. It received a VBPM bonus of about $1 million on the year.

“Great care equals great business,” Kusserow said. “We … continue to believe and advocate that this demo should be expanded nationwide, institutionalized as a better way than PDGM for CMS to generate significant taxpayer savings and to drive quality patient outcomes.”

New bonus program

Among its other 2018 accomplishments, Amedisys was also able to slash its turnover rates. The in-home care industry routinely cites staffing as its No. 1 challenge.

From 2017 to 2018, Amedisys’ total voluntary turnover fell from 22% to 19.8%. Its full-time voluntary turnover currently sits at 16.8%.

To reward top employees and high-performing care centers, Amedisys has launched a cash bonus program, which it plans to expand over time. In its most recent quarter, the company paid out bonuses to 33 5-star home health centers, representing 640 clinicians, plus another 10 centers that performed highly in Consumer Assessment of Healthcare Providers and Systems (CAHPS) metrics.

Amedisys was up 1.61% nearing close of market Thursday, trading at $124.62 per share.

“AMED delivered another quarterly beat,” an investment note from Stephens analysts states. “[Home health] Medicare growth continues to struggle, though that is not really a surprise. [Home health] non-Medicare continues to show excellent growth, and hospice delivered another double-digit top-line performance.”

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