LHC Group CEO Casts Doubt on CMS’s Ability to Manage PDGM

Home health providers may not be the only ones positioned for a rough January 2020.

LHC Group Inc. (Nasdaq: LHCG) Chairman and CEO Keith Myers cast a small degree of doubt on the Centers for Medicare & Medicaid Services (CMS) and its ability to manage the implementation of the upcoming Patient-Driven Groupings Model (PDGM).

“There were comments made by the CMS team in Baltimore that they weren’t confident they were prepared to manage the implementation of PDGM,” Myers said during the company’s Q2 earnings call Thursday. “Granted, this was in July when they said this. That doesn’t necessarily mean they won’t be ready by January.”


Among its sweeping changes, PDGM halves the traditional home health unit of payment from 60 days to 30 while also eliminating therapy thresholds and introducing 432 total case-mix payment groups. While CMS and its partner contractors have all voiced confidence in their PDGM preparations, any sized implementation speedbump could be devasting.

As LHC Group prepares itself for PDGM, company executives say they believe the payment overhaul will be manageable but that they continue to work with CMS and Congress to make improvements. Specifically, LHC Group stands behind legislative efforts to eliminate PDGM’s widely opposed behavioral assumptions, which could pose an 8.01% cut to providers based on CMS’s latest proposal.

“I have been heavily involved in the industry’s lobbying efforts,” Myers said. “Both the [Partnership for Quality Home Healthcare] and [the National Association for Home Care & Hospice] are in lockstep behind priority legislation to refine PDGM, and we are generating strong bipartisan support.”


On the M&A front, LHC Group has amassed a number of transactions so far in 2019, totaling $81 million in annualized revenue. Transactions include hospital joint ventures and several direct acquisitions.

In July, the company announced its plans to purchase assets from VNA Home Health of Maryland, which has an annual revenue of $35 million. The deal is expected to close in early September.

The company completed a JV with Geisinger Home Health and Hospice in April; it also finalized a partnership agreement with Unity Health to buy and share ownership of two home health providers in Arkansas.

In August, the company finalized its joint venture with Capital Regional Medical Center (CRMC) to purchase the assets of three home health and hospice locations in Jefferson City and Mexico, Missouri, from SSM Health.

Additionally, the company finalized a JV partnership with Atmore Community Hospital and purchased two HCBS locations in West Union and Waverly, Ohio, from Comfort Home Care in separate transactions that were both completed in August.

“In every market we serve, our goal is to co- or tri-locate hospice and other services in markets where we currently provide home health,” Myers said in May, discussing his company’s overarching strategy. “Today, our market platform extends across 35 states and the District of Columbia, reaching 60% of the population aged 65 and over, and we have just begun to tap that potential.”

Looking ahead, LHC Group will maintain a robust M&A pipeline, according to executives.

“We are in growth mode for the balance of 2019 and 2020 as we are confident we will thrive — no matter the eventual outcome of PDGM or other regulatory initiatives,” LHC Group CFO Joshua L. Proffitt said during the call.

In total, LHC Group has acquired or agreed to acquire 15 home health services locations in 2019.

Overall, total net service revenue for LHC Group was $517.8 million during the second quarter of 2019, up more than 3% from roughly $502 in Q2 2018.

LHC Group saw strong organic growth throughout its home health lines of business during the latest quarter, with home health admissions up 9.1%, excluding Almost Family locations. Organic growth in home health revenue checked in at 6.6%, also excluding Almost Family locations.

While the company continues to show solid profitability across segments, Almost Family integration issues have caused more disruption than anticipated, according to William Blair analyst Matt Larew.

“The legacy LHC Group business continues to perform very strongly,” Larew told Home Health Care News. “Almost Family is now above the synergy target that they laid out when they first announced the acquisition. As they finish the conversion of the Almost Family locations to Homecare Homebase, they may expect growth to improve.”

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