LHC Group CFO: Historic Home Health Consolidation Opportunity Remains ‘Compelling as Ever’

Since the worst stretch of the public health emergency, LHC Group Inc. (Nasdaq: LHCG) has seen a decrease in weekly COVID-related missed visits and improved its average daily census. It has also added thousands of new physician referral sources, a win for the company considering many institutional sources are at a standstill. 

Those are just a couple positives highlighted by the Lafayette, Louisiana-based company during a Thursday earnings call on its second-quarter financial results.

“We’ve learned a lot about the resiliency of our organization through this public health emergency,” Chairman and CEO Keith Myers said during the call. “[We] have incorporated best practices adopted during this period into our care model and operating strategies.”


Since the end of June, LHC Group’s weekly COVID-related missed visits decreased from a high of roughly 8,600 to less than 300. Meanwhile, the company has seen a 9.3% increase in new referral sources compared to the same period in 2019.

“The momentum we established with new physician referral sources in January and February accelerated in April, hitting double-digit growth in both May and June,” Myers noted. “[That resulted] in nearly 4,000 new referral sources in the second quarter.”

Similar to LHC Group, many other home health providers have worked to expand relationships with physicians over the past few months, partly due to the realization that community-based referrals often mean a lower resource use and higher margins.


The company touted a number of other positives, too, including a proven ability to draw high-acuity patients away from skilled nursing facilities (SNFs), which will likely continue after the public health emergency ends.

“When we measure the number of SNF-diversion patients we’re taking, it’s not in the thousands,” Bruce Greenstein, chief strategy and innovation officer, said during the call. “But what’s happening is, we take in dozens and dozens [of patients]. We’re also bringing in new patients that would not have come to us otherwise.”

Still, LHC Group faced certain challenges and operational realities in Q2.

The cost of COVID-19

Overall, LHC Group incurred $27.3 million in COVID-19 costs related to personal protective equipment (PPE) and employee-compensation initiatives, including bonuses, increased pay and paid-time-off replenishments for front-line caregivers.

LHC Group also had to implement a number of cost-containment initiatives, including cutting non-essential travel and expenses. It also had to institute employee flexing, furloughs and other measures in some cases.

A home health, hospice and personal care services provider, LHC Group currently operates in 35 states and Washington, D.C. Overall, it posted net revenues of $487.3 million for the second quarter of 2020, down 5.9% from the same period a year ago.

The company’s home health business line brought in nearly 70% of that revenue total.

In terms of volume, its average daily census climbed from a low of 74,936 during the week ending April 18 to approximately 82,000 during the week of June 27. Its average daily census reached pre-COVID levels by the week of May 31, hitting 83,061 last week.

“This improvement has come despite some of our states being slow to fully lift bans on elective procedures,” Myers said.

All in all, organic growth in admissions for home health locations declined 4.7% for the quarter due to low points in April and May. The company fared better in June and July, with organic admissions growth up 7% and 8.5%, respectively, compared to the same periods last year.

That’s a good sign for the post-acute care provider, Jefferies analyst Brian Tanquilut told Home Health Care News.

“Volumes have recovered,” Tanquilut said. “If you look at their admission trends, it shows their average weekly admissions bounced back. That’s obviously a good sign that shows things are starting to recover.”

It’s also notable that LHC Group had a strong showing in states that have been highly impacted by the COVID-19 emergency. 

“They gave us the extra detail that they are showing pretty healthy growth in Florida, Texas and a few other states,” Tanquilut said. “It’s interesting, given that COVID-19 has obviously picked up in those markets in the last few weeks.”

To help offset COVID-19’s impact, LHC Group utilized the accelerated and advanced payment program from the U.S. Centers for Medicare & Medicaid Services (CMS). It received $310.7 million in funds under that program in April.

The company also received $88.7 million from the Provider Relief Fund, recognizing $44.4 million.

“[LHC Group] benefited from CARES Act grants. That helped them a little bit during the quarter as well,” Tanquilut said. “That probably holds true for a lot of providers.”

Consolidation opportunities

LHC Group’s joint venture partnerships with hospitals and health systems — a calling card for the company — has positioned it to play a meaningful role in the nation’s response to the public health emergency, according to Myers.

“While challenging, the COVID pandemic has provided a unique opportunity to highlight our clinical capabilities, how tightly integrated we are with our partners, how seamlessly we collaborate, and the extent to which they are leveraging our unique experience and capabilities to improve health outcomes, efficiency and patient satisfaction,” he said.

The company finalized a joint venture with Orlando Health — a not-for-profit health care organization that operates in nine Florida counties — on Aug. 1.

The deal is expected to bring in annual revenue of $3.5 million.

On the M&A front, LHC Group expects an acceleration of activity in terms of new hospital joint ventures and hospice acquisitions. It also still anticipates accelerated home health consolidation due to the Patient-Driven Groupings Model (PDGM) and the elimination of Requests for Anticipated Payment (RAPs). 

“It has not been on the front page with all the challenges and priorities we have needed to focus on throughout the pandemic, but historic consolidation opportunity within the highly fragmented home health industry is still there — and as compelling as ever,” President and CFO Joshua Proffitt said.

While PDGM has had a bigger impact because of the coronavirus, LHC Group remains confident in its ability to operationalize and mitigate the financial effect of the model moving forward.

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