LHC Group Inc. (Nasdaq: LHCG) has turned its cornerstone joint venture strategy up a notch in the early part of 2019, a decision that helped propel the Lafayette, Louisiana-based home health giant to a steady first quarter. JVs will continue to play a leading role as LHC Group readies itself for the Patient-Driven Groupings Model (PDGM), company executives say, as will the recently unveiled value-based primary care initiative.
Announced by the U.S. Department of Health and Human Services (HHS) in conjunction with the Centers for Medicare & Medicaid Services (CMS) in April, the Primary Cares Initiative (PCI) creates five new payment models that incentivize primary care providers to keep patients at home, reducing hospital utilization and total cost of care in the process.
Broadly, PCI calls for better alignment and coordination throughout the continuum of care, meaning home health and hospice could be the glue holding the initiative together.
“More details will come out over the next few months, but this initiative reinforces what LHC Group has been saying all along — that care delivered in the home will have a preeminent role in value-based models moving forward,” LHC Group Chairman and CEO Keith Myers said during the company’s Q1 earnings call with investors on Thursday.
PCI’s value-based payment models will start to roll out in 2020 and continue into 2021.
Firing up the JV engine
On the joint venture front, LHC Group has already acquired or agreed to acquire 18 home health, hospice, or home- and community-based services locations since the start of the year.
All hospital JVs, the acquisitions represent roughly $44 million in total annualized revenue.
The company completed a JV with Geisinger Home Health and Hospice in April — and has another JV with Geisinger subsidiary AtlantiCare expected to close by June 1. More recently, LHC Group plans to enter into a JV agreement with SSM Health, a multi-state health system based in St. Louis.
The company also finalized JV plans with Unity Health in January.
“Our first quarter provides an excellent example of how we continue pursuing growth in different ways, leveraging our commitment to quality as an established national platform that spans the full continuum of post-acute care,” Myers said. “Our joint venture activity has been our most active growth front to date this year.”
Looking ahead, LHC Group’s close ties with hospitals will likely give the provider a competitive advantage under PDGM, currently structured with higher levels of home health reimbursement for patients coming from institutional settings.
“I can tell you that we meet weekly on PDGM — and we will be prepared no matter how the final rule develops,” COO Donald Stelly told investors during the call.
HCBS lags behind home health, hospice
Total net service revenue for LHC Group checked in at $502.6 million during the first quarter of 2019, up more than 72% compared to the same period a year ago. Growth was partly driven by admission gains for the company’s home health and hospice lines, which saw organic growth of 5.7% and 6.2%, respectively.
In addition to its JV strategy, LHC Group is also working to create density in its target markets, co-locating home health and hospice services — or tri-locating both with home- and community-based services as well.
When creating density, LHC Group typically solidifies its home health presence first, then shifts focus to hospice and home- and community-based services.
While home health and hospice continue to be bright spots for LHC Group, its home- and -based services lagged somewhat in the first quarter, though the service line has “much opportunity left on the table,” according to executives.
“Overall, home health organic revenue growth was strong, and the company made significant profitability gains in home health and hospice,” William Blair analyst Matt Larew wrote in a note shared with Home Health Care News. “Revenue missed our target on lighted community-based services, though guidance is moving up to account for the first phase of Geisinger.”
LHC Group’s hospice business accounted for more than 10% of its total revenue in Q1 2019. The company expects hospice revenue to remain solid despite proposed rate cuts for certain care levels in 2020.
In its proposed payment rule released in April, CMS called for a 2.7% cut in payments to hospice providers for routine home care, with corresponding 2.7% rate increases for continuous home care, in-patient hospice care and in-patient respite care.
“While the majority of our hospice revenues fall under the [routine home care] category, the impact to LHC Group is slightly positive, according to the CMS impact file,” Myers said.
In other regulatory news, LHC Group stands behind legislative efforts to scrap PDGM’s widely opposed behavioral assumptions, he added. That includes H.R. 2573, which House lawmakers introduced on Wednesday.
LHC Group’s stock was up 4.36% at market close Thursday, trading at $115.06 per share.