Amedisys Makes Progress on SNF-at-Home Model, Anticipates Positive 2021 Operating Environment

When there are challenges in any industry, the organizations that hurdle them quickly and efficiently end up gaining an advantage. Amedisys Inc. (Nasdaq:AMED) feels like it has done that.

After a census bounce-back from COVID-19, a successful transition to the Patient-Driven Groupings Model (PDGM) and an identification of new ways to accelerate its home health business in the coming years, the Baton Rouge, Louisiana-based company is optimistic about its position.

“Our performance in Q3 bested our internal modeling and [Wall Street] expectations, and highlights how important essential and resilient home health, hospice and personal care are to the health care delivery system,” Amedisys CEO Paul Kusserow said on the company’s Q3 earnings call Thursday.

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Amedisys is a provider of home health, hospice and personal care services. It has well over 500 care centers in 39 states and Washington, D.C. Its net service revenue for Q3 2020 was $544 million, topping the $494 million it posted in Q3 2019.

While COVID-19 still presents operational difficulties, it has become “business as usual” for Amedisys, according to Kusserow. The company also feels like its value proposition has been bolstered over the last year, with its service lines set up to benefit from considerable tailwinds moving forward.

In home health care, Amedisys’s total admissions grew by 5% in Q3 2020 compared to the same period a year ago, with its overall volume growing by 6%. Operating income increased from $211 million in Q3 2019 to over $222 million for this year’s third quarter.

“It just showed how strong and quickly the business has recovered from the initial impact of COVID-19,” Kusserow said. “We expect these trends to strengthen throughout Q4, setting us up for strong growth in 2021.”

Trick or treat

The 2021 home health final payment rule came out Thursday, hours after the Amedisys Q3 earnings call. Amedisys leadership said they expected it to bring welcomed news, which it did in some regards.

“The rule traditionally comes out around or on Halloween,” Kusserow said, referring to the relatively modest changes featured in the rule. “We don’t expect to be scary this year — a treat, not a trick.”

Between the final rule and a proposed telehealth payment bill for home health care, Amedisys believes potential reimbursement changes will give it an approximate bump of $40 million next year.

The country’s demographics are on the entire home health industry’s side, including Amedisys. But so are the psychographics, Kusserow said. Nine out of 10 of baby boomers want to age in their homes.

“Add economics to that, as home care is what people want,” Kusserow said. “It’s the cheapest type of care, and it’s the most suitable for the types of long-length, chronic illnesses that we will be treating in the future.”

Even COVID-19 — at least for Amedisys — has flipped direction and become more of a tailwind for the company. That’s especially true when it comes to the diversion of patients and residents from congregate care settings into home-based care.

On its end, Amedisys is already looking to conquer the ground that other providers have lost during the public health emergency.

“We are innovating to meet this demand,” Kusserow said. “We’re working to be able to increase our capacity to care for more traditional patients, as well as moving up the acuity scale and focusing on new, sicker patients that had no other options but institutions [in the past].”

The agency already received 1,700 new home health referrals from sources in Q3 that they had not received referrals from last year.

Additionally, Amedisys is working to show patients and referral sources that it can create a SNF-like environment in the home. The company says it has made progress on its SNF-at-home development, with its focus being a package of services combined with traditional home health to treat higher acuity patients in their homes.

The National Association for Home Care & Hospice (NAHC) has been among the organizations vying for a formal SNF-at-home benefit under Medicare.

“SNF-at-home represents an interesting new growth avenue for the company and will be an opportunity for growth even beyond the pandemic,” Kusserow said. “The time to work with referral sources on taking their higher acuity patients is now — and we’re capitalizing on it.”

PDGM success

Amedisys credits its PDGM success to preparation. It internally set up trials and pilots as if the new payment system was underway in fall of 2019.

The company’s success tackling the shift in the home health landscape is another reason that it’s bullish on expanding its brand in the future. While it has dealt with PDGM well, it’s not so sure others have — even if they haven’t shown it yet.

“When the current, temporary COVID subsidies holding the home health market together are lifted, the true impact of PDGM will finally be felt within our industry,” Kusserow said. “We will be ready to continue our organic and inorganic expansion in home health … to capture more and more market share of a still highly fragmented market.”

While PDGM is supposed to be budget neutral per the Bipartisan Budget Act of 2018, spending on home health care has been 21.6% lower than projected, according to an analysis from the health economics and policy consulting firm Dobson DaVanzo & Associates.

If that data holds throughout the year, Amedisys believes that would mean a rate give-back or an increase in the payment rate update for 2022, which is also good news for providers, particularly the ones who have weathered PDGM’s storm in 2020.

“We are thriving in PDGM and have worked incredibly hard at proactively turning headwinds into tailwinds,” Kusserow said. “The growth algorithms we’ve developed for Amedisys in 2021 and beyond are truly exciting. And I believe we have positioned ourselves optimally to fully capture any opportunities that come our way.”

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