Encompass Health (NYSE: EHC) has made a minority investment in predictive analytics firm Medalogix.
Regulatory changes and staffing shortages driving the need for increased efficiency in home health and hospice motivated the investment, according to Encompass Health Chief Strategy Officer Luke James.
“As we look out into the future, [we’re excited about] having a direct seat at the table as decisions are made around where Medalogix’s limited resources should go around improving current products and developing new ones,” James told Home Health Care News.
While James declined to share the dollar amount of the investment, he said the move gives Encompass Health a seat on the Medalogix board, as well as the ability to be involved in the ongoing development of technology — an area the company has already dabbled in.
Encompass Health is the largest owner and operator of in-patient rehabilitation facilities (IRFs) and the fourth-largest provider of Medicare-certified home health services in the United States. While the overall company is based in Birmingham, Alabama, its home health and hospice segment is headquartered in Dallas.
Meanwhile, Medalogix is headquartered in Nashville. The predictive analytics firm uses data to inform, improve and individualize home health and hospice services. Since 2012, the company has launched at least four product lines, all of which are aimed at reducing hospitalizations and improving patient care.
Even before the investment, Encompass Health and Medalogix have been collaborating for years.
In fact, Encompass Health even helped Medalogix develop it’s newest Care platform, which provides solutions to guide utilization and care plan development under the upcoming Patient-Driven Groupings Model (PDGM). In addition to its Care platform, other Medalogix products include Touch, Nurture and Bridge, the latter of which helps home health providers identify when patients are nearing the final days of their lives.
“In a lot of ways, it’s really just a continuation of our relationship,” Medalogix President and CEO Elliott Wood told HHCN, describing the partnership as “operational” and non-exclusive.
The investment does not restrict Medalogix from working with other providers or offering its products to competing home health and hospice agencies. Currently, 30% of the home health industry’s total patient volume moves through the Medalogix Care platform annually, Wood said.
Encompass Health’s investment in Medalogix comes less than a year after Baton Rouge, Louisiana-based Amedisys also bought a minority stake in the predictive analytics company, which had previously closed funding rounds of $300,000 and $5 million, respectively.
“Amedisys really set the stage last year,” Wood said. “It created a template more or less to think about how we could potentially align ourselves with our strategic customers.”
Coliseum Capital Management is Medalogix’s majority owner and institutional investor.
Encompass Health’s strategic alignment comes at a time when the company has been bulking up on its home health and hospice lines.
The company’s planned $217.5 million acquisition of Birmingham-based Alacare Home Health & Hospice, for example, is roughly double the top-end amount Encompass Health previously told investors it planned to spend on its acquisition pipeline in 2019.
However, the transaction wasn’t specifically a motivator for in the investment.
“Regardless of whether we’re doing larger home health and hospice transactions or not, we’re going to need to continue to get better at what we do and leverage technology in new and different ways,” James said.
AccentCare and Elara Caring are among the other noteworthy Medalogix clients. Both home health providers are actively using Bridge to streamline hospice admissions.
In 2017, AccentCare transitioned more than 500 of its home health patients into the hospice setting thanks to Bridge, company executives previously told HHCN. That contributed to AccentCare’s home health mortality rate dropping to below 1%.
PDGM, Medicare Advantage (MA) and staffing challenges all played large roles in Encompass Health’s decision to invest in Medalogix.
“With PDGM, we’ve got to get utilization right,” James said. “It’s very penalizing to waste visits, which is something we’ve always tried not to do. As better products come out — and in this case the Care tool — that’s going to allow us to be much more efficient.”
Medalogix’s Care tool — which is being used by both Amedisys and Encompass Health — uses analyzed claims data to create patient-specific recommended care plans focused on improving outcomes. Additionally, the recommendations provide the basis for inter-disciplinary collaboration and ongoing cross-functional case management throughout an episode of care.
Often times, this leads to more efficient treatment and more personalized care — which isn’t just a bonus when it comes to PDGM.
“Medicare Advantage plans are looking for home health providers to do more than they’ve done in the past,” James said. “We all know staffing’s going to continue to be a challenge … and we’re going to need to be more efficient at what we do in the future.”