Similar to its peers, Amedisys Inc. (Nasdaq: AMED) is biding its time until it ramps up on M&A activity and goes after the droves of mom-and-pop agencies likely to struggle with the perfect storm of industry-shaping regulatory changes looming in the not-so-distant future.
And in some ways, the Baton Rouge, Louisiana-based home health, personal care and hospice giant is like a kid counting down the days until Christmas to open its presents. In fact, the company even has a wish list of home health targets, according to CEO and President Paul Kusserow.
“We’re going after 2,000 targets,” Kusserow said Thursday at the National Investment Center for Seniors Housing & Care (NIC) fall conference in Chicago. “There will be a land rush on these mom-and-pops.”
The Patient-Driven Groupings Model (PDGM), a potential phase out of Requests for Anticipated Payments (RAPs) and changes to rural add-on payments are among the key drivers of that land rush, which is likely to kick off in earnest within the first few months of 2020. Depending on how PDGM ultimately looks and what happens with RAPS, some home health agencies could see cash flow losses as high as 26% moving from December to January — and up to 43% from January to February.
The most recently proposed version of PDGM includes assumption-based behavioral adjustments that could pose a more than 8% Medicare payment cuts to agencies next year.
Meanwhile, the Centers for Medicare & Medicaid Services (CMS) is trying to get rid of RAPs — or home health pre-payments — because of fraud concerns. Currently, many small home health businesses depend on RAPs to pay their employees and keep the lights on while waiting on full episodic reimbursement from CMS.
“CMS is going … after elements of the home business to change it, moving fundamentally from a per-visit type of reimbursement to a [value-based] reimbursement,” Kusserow said. “The effects of some of the things [CMS is] going to do are extraordinary, in the sense that it will push a lot of mom-and-pop home health agencies out of business.”
“If you want to go for it, you can do [deals] on the cheap probably in February or March of next year,” he added.
For those familiar with the industry, Kusserow’s statement that Amedisys has its sights set on 2,000 home health targets should be somewhat astonishing.
Today, there are roughly 11,500 existing home health agencies out there. If Amedisys is truly going after 2,000 of those, it means the company considers more than 17% of the industry up for grabs.
“We think it’s going to be a very dynamic environment out there,” Kusserow said.
Founded in 1982, Amedisys is now about five years removed from the launch of a strategic turnaround, led by Kusserow. Currently, the company has more than 21,000 employees who deliver care across 471 care centers within 38 states and the District of Columbia, making it one of the biggest players in the home health space.
Due to the highly fragmented nature of the industry, however, Amedisys only controls about 4% of the overall market.
Although Amedisys has plenty of dry powder to work with, it’s not entirely focused on acquisitions, according to Kusserow.
The company has gotten “really good” at building home health businesses from scratch, he said, noting that Amedisys does 12 to 15 startups per year. Generally, each startup takes about six months and costs the company about $500,000 to get up and running.