Aveanna Healthcare Holdings (Nasdaq: AVAH) has been bullish on its plans to expand into a leading provider of senior home health services since it went public in April. Prior to its IPO, the company had been more of a pediatric provider, but it has aggressively acquired new assets since, realizing the vision it laid out in the spring.
More than anything, its leaders are happy to be where they are. And when it comes to the home health environment, Aveanna sees the tailwinds far outweighing the headwinds.
“I believe the rate environment is creating tailwinds for us right now,” Aveanna CEO Tony Strange said Wednesday during the J.P. Morgan Healthcare Conference. “People in Washington, D.C., are talking about home care today as a part of the solution – and not a problem. I think only good things are going to come out of that.”
Based in Atlanta, Aveanna delivers home health, hospice and other services to a broad range of patients through locations in 30 states.
Specific legislation – such as the Build Back Better Act, which has been stalled – is of less concern to Aveanna. That’s because, Strange explained, it’s nearly unprecedented to see lawmakers and policymakers on the same page when it comes to home-based care being part of the solution to many of health care’s problems – both before and after the pandemic.
“I think this is evidenced by the fact that the final rule for home health came out even better than the industry expected,” Strange said. “For the first time in decades, [people] are really seeing the value and accretive role that home care can play in the overall cost reductions in the health care equation. And I think we’re feeling that all around.”
In addition to the nationwide expansion of the Home Health Value-Based Purchasing (HHVBP) Model – which Aveanna is confident it will capitalize on – providers saw a 3.2% rate increase in the final rule, far greater than the 1.7% increase initially proposed.
But Aveanna doesn’t completely rely on Medicare-based home health reimbursement, either. The company believes its diversification of payer sources, including a heavier reliance on Medicaid, is one of its strengths.
“We’ve continued double-digit revenue growth, and we have a very diversified and positive payer reimbursement environment,” Strange said. “We just love the diversity that [environment] gives us right now.”
Maintaining a good position
While Aveanna did lower its revenue guidance in Q3 of 2021, it maintained its EBITDA guidance.
Through tighter expense management and taking a “disciplined approach” to managing its gross margins, the company believes it will stay on track through the course of 2022.
Those expenses have been heightened, of course, by near-term labor struggles. The company has offered bonuses and other incentives to workers, though many of those costs have already subsided, Strange said.
“We, along with every other health care provider, are engaged in hand-to-hand combat over every single nurse and caregiver,” he said on the company’s last earnings call.
The reduction from 10-day quarantines to 5-day quarantines for COVID-19-infected workers hasn’t had all that much of an effect on its labor situation. Strange said it has not had “a material impact, one way or the other.”
Even with the Omicron-induced surge, the company doesn’t believe those hiked costs will be a long-term issue.
“We believe not only that we can weather the storm that we’re in with this pandemic,” Strange said during the conference. “But also that when we come through the other side, we’ll be well positioned.”
It’s not as if growth has stalled, either. In fact, Aveanna closed on multiple significant deals during the fourth quarter.
“By protecting the margins through the pandemic, we’ll be well positioned to pick up the pace and start back on our path to growth [moving forward],” Strange said.
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