It’s safe to say that 2019 was a banner year for Amedisys Inc. (Nasdaq: AMED).
The Baton Rouge, Louisiana-based company doubled down on hospice — announcing a number of deals. On the personal care side, Amedisys entered into and saw success in an innovative partnership with ClearCare Inc.
Over the past few years, Amedisys has also stayed active on the legislative front, mainly with its PDGM reform efforts.
And while it’s still early days for the Patient-Driven Groupings Model (PDGM), which kicked-off on Jan. 1, Amedisys feels confident in its ability to weather the reimbursement storm.
HHCN recently caught up with CEO and President Paul Kusserow to discuss Amedisys’s industry outlook and 2020 plans.
Highlights from the conversation are below, edited for length and clarity.
HHCN: To start, can you recap the 2019 that Amedisys had?
Kusserow: We haven’t announced our fourth quarter yet, from a financial perspective, but I think coming up through the third quarter, we’re feeling good.
I think 2019 was a stressful year because of the potential impact of the full rollout of the proposed rule on PDGM. The fact that the Centers for Medicare & Medicaid Services (CMS) has pulled back considerably on the cut was welcomed by us. It turned out to be a very favorable rule.
Although, I think for parts of the industry, particularly smaller players, it’s going to be quite devastating. Think about the 4.36% cut, the elimination of the rural add-on .. then add the phase-out of the Request for Anticipated Payment (RAP). You have questionable encounters that potentially are going to be part of coding, which I think a lot of people haven’t figured out yet. I think for those people who don’t have the technology, the scale, it’s going to be a difficult 2020. We tried to show that to CMS, and they didn’t listen.
2019 was a stressful year because we spent a lot of time in Washington, a lot of time trying to build support in Congress because CMS wasn’t coming along. We spent time working on a Congressional alternative bill. I’m glad we didn’t have to go to Congress and have them push through a bill on this. That would have been unfortunate. We are glad CMS modulated their rule.
You’re now ranked as the fourth-largest hospice provider in the U.S., according to LexisNexis. That happened fast! Do you see more hospice deals in 2020?
I feel very good about where we are in hospice, along with our abilities to run hospice. We think it’s good business to be in alongside home health. You can look after patients and provide more continuity. We’re continuing to grow, particularly when there was such ambiguity in the market for home health. We were generating a fair amount of cash, we needed to do some acquisitions with our excess cash, and we really couldn’t value anything properly in home health.
We doubled down in hospice. We started up five hospices in the last year. We’re going to continue to buy hospices.
What’s your No. 1 home health prediction for 2020?
I think there will be considerable shakeout in the industry. I don’t think there will be lots of consolidation due to the fact that there are big liabilities when you take over a home health license. It’s called the six-year look-back rule. I think there will be home health agencies going out of business. I’m not sure there will be the consolidation that a lot of people expect. I think there could be home health deserts. I think when that plays through, CMS will have to do some repair work to encourage people to go into places where there could be no access to home health, because they’ve cut too far, particularly with the RAPs.
I don’t think there will be a lot of M&A in home health. I think valuations are going to go down considerably. I don’t think private equity, at least the ones I’ve talked to, are particularly interested in stepping in until things bottom out and there’s a way they can mitigate any liabilities there.
Has Amedisys already started to see acquisition opportunities tied to PDGM, which started Jan. 1?
We’ve seen people that want to be bought. We actually just went into one and took over their patients and a couple of their employees. We got the incremental business, but we didn’t buy anything. We anticipate we will see a fair amount of those within our license areas.
For areas that are outside of our license, we have to buy those assets. Those assets have penalties on look-backs, so we’re nervous about buying a small agency that might have high error rates. We will be careful about those and will have to do a lot of diligence. I don’t think it’s going to be as crazy and as fast as everybody thinks it might be.
How are the first couple weeks of PDGM going for Amedisys?
It’s going quite well, but these are very early days. We’re still working off our pre-PDGM business, so we’ll get more of an idea in February. We have 250 coders who’ve been practicing this for over a year. I think we’re in good shape so far.
How has Amedisys shifted its therapy strategy, if at all?
I think there will be a decline in therapy utilization. We aren’t out looking for PTs now. We want to try to hold on to what we have. We might potentially lose a couple if they don’t get enough work, but we’re trying to keep them full-up with work.
What is your prediction for personal care services for 2020?
We’re optimistic about our potential. We’re excited to see if we can pull off the ClearCare deal and see if we can build a partnership group.
When we first started the ClearCare deal, I thought maybe 40 or 50 agencies in a couple of states would sign up. The fact that over 1,000 have signed up in 49 states — and the conversations we’ve had with these new partners — shows they really want to share what they can do. They really want to show that they’re effective and that a lot more people should be bringing personal care into the mix.
I bought a personal care company at Humana Inc. (NYSE: HUM), and we applied it to our sickest population, the top 2% of our really complex, high-cost population. It worked marvelously. I’m just hoping that at some point, CMS wakes up and understands that personal care, home health, hospice and palliative care all have to be used together. They all have to work with each other to get the maximum value and keep people at home.
At the HHCN Summit in Chicago, you talked about interest from Medicare Advantage partners in the ClearCare network. Where are you at with that and talking to plans?
We’re doing well. Last year, 5% of our Medicare Advantage book of business was risk-based. This year, we will do over 20%. We’ve quadrupled the risk-based business — and this all comes through Medicare Advantage plans. It means we can make incremental money if we perform on certain things. We believe that if we continue to drive our initiatives in hospital readmissions and quality, we’ll have some real opportunities to drive incremental revenues and our Medicare Advantage book of business.
What are the company’s big-picture goals going into the new year?
The big goal for us is to drive consistent growth.
The other one is to make sure the integration of Compassionate Care delivers on the numbers that we put out. We’re confident it will, but the integration of a large company takes several years. We’re working very hard on that. We also have two other hospices to integrate. We also have a pipeline, so I’m hopeful we’ll do more deals this year.
We’re doing some pilots. One of them is with a large Blues plan. We’ll talk about that at earnings. We are also doing a home-dialysis pilot.
What do you think the home health market will ultimately look like at the end of 2020?
I think at the end of 2020, there will be considerably less players, less small players and less access to home health in certain geographies. I think it’ll be interesting to see how CMS reacts to it.