Amedisys Inc. (Nasdaq: AMED) — already the second-largest home health provider in the country — is trying to build “an industrial-strength chop shop” to help drive growth, according to CEO and President Paul Kusserow.
With 470 care centers scattered throughout nearly 40 states, the Baton Rouge, Louisiana-based Amedisys currently controls 4.8% of the U.S. home health industry. Despite its substantial size, the company sees ample room for expansion in 2020 thanks to mom-and-pop agencies inevitably exiting the market because of the Patient-Driven Groupings Model (PDGM).
“We believe that this will be an opportunity for the large players to consolidate,” Kusserow said Thursday during a presentation at the 2019 Stephens Nashville Investment Conference. “We are trying to build an industrial-strength chop shop, if you will, for those people that are going to go out of business so we can absorb their patients.”
PDGM is the most significant change to the home health landscape in two decades. Among its key components, the federally mandated overhaul shifts therapy utilization away from volume-based payment, establishes new 30-day billing periods and creates a total of 432 case-mix groupings.
On top of those three overarching points, PDGM — as finalized at the end of October — also presents a 4.36% assumption-based behavioral adjustment.
“We’d really like to take this 20-year opportunity to consolidate and grow,” Kusserow said. “And the bigger we are, the more it’s going to help grow in the Medicare Advantage world.”
Due to the challenges PDGM presents, some industry insiders predict that roughly 30% of home health agencies could exit the market next year. That figure may ultimately end up even higher, however, because the Centers for Medicare & Medicaid Services (CMS) is simultaneously phasing out home health pre-payments starting in 2020 as well.
Pre-payments — or Requests for Anticipated Payment (RAPs) — have traditionally allowed home health providers to receive up to 60% of their reimbursement on the front end of an episode of care. Many existing small and mid-sized providers use RAPs to stay in business, meaning they’ll soon have to find new sources of cash or credit lines to help them operate.
But as much as 70% of providers don’t have access to financing or cash beyond one month, according to Kusserow, citing external estimates Amedisys has reviewed.
“[PDGM and the RAP elimination] are going to be extraordinary if you don’t have the technology, if you don’t have the size, if you don’t have the coding, if you don’t have the back-office capabilities, if you haven’t been practicing for nine months to a year,” Kusserow said. “You’re going to have a very, very hard time making it through this.”
On its end, about one-fifth of Amedisys locations are already operating under PDGM requirements.
The home health, hospice and personal care giant has shared its preparation strategies repeatedly, providing additional insight during Thursday’s Stephens presentation.
Instead of PDGM’s behavioral adjustment leading to a 4.36% cut, Amedisys is expecting something to the tune of 3.15%, according to Kusserow.
The company anticipates being able to offset that with behavioral changes that include efficiencies in coding, LUPA management and co-morbidities.
Apart from effective coding, a pivotal part of Amedisys remaining profitable under PDGM will be making sure its clinicians are operating at the tops of their licenses. Typically, LPNs are about 30% less expensive than RNS, while PTAs are about 35% less expensive than PTs, the CEO said.
Internally, LPNs currently accounts for about 43% of Amedisys’s nursing staff. Meanwhile, PTAs make up about 41% of its therapy staff.
Eventually, the company expects both departments to be close to a 50/50 mix, a level similar to some of its other industry peers.
“We would like to — and we believe — that we can get there by the end of next year,” Kusserow said. “We think we could get beyond that even.”