Amedisys Unconcerned Over Looming Proposed Payment Rate, Ready to Take On Medicare Advantage

Amedisys Inc. (Nasdaq: AMED) will soon be in a league of its own, at least to a certain extent.

There are certainly plenty of independent, home-focused companies still on the publicly traded market. But the Baton Rouge, Louisiana-based provider has seen its direct peers go one way or the other over the years, especially of late.

Humana (NYSE: HUM) acquired all of Kindred at Home. Encompass Health (NYSE: EHC) is currently in the process of spinning off its home health and hospice segment to its own entity, Enhabit Home Health & Hospice. UnitedHealth Group (NYSE: UNH) has agreed to purchase LHC Group Inc. (Nasdaq: LHCG).

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“The [UnitedHealth Group-LHC Group deal] didn’t come as a surprise to any of us,” Amedisys CEO Chris Gerard said on the company’s first quarter earnings call Thursday. “We saw what Humana did with Kindred, and other plans were very vocal about wanting to actually get into the provider space in the home. When you step back and look at it, it does make sense, in terms of having that capability.”

Gerard just recently took over the helm from Amedisys Chairman and former CEO Paul Kusserow. He’s stepped into the new position at a company with a newfound place in the home health market, which is shifting its place in the overall health care system.

Amedisys provides home health, hospice and personal care services via its 21,000 employees in 38 states and the District of Columbia. Overall, it has 548 care centers and cares for 445,000 patients annually. It additionally provides hospital-at-home level care via Contessa, which it acquired for $250 million last year.

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Continuing his comments on the LHC Group deal, Gerard remarked that home health acquisitions seemed to be one of the last “levers” that plans are able to pull, so to speak.

At the same time, Medicare Advantage (MA) plans gaining a larger share of beneficiaries – and playing a larger role in home-based care – is one of the inevitabilities companies like Amedisys have to grapple with.

“We know what the penetration of Medicare Advantage is in the senior population, and that’s accelerating,” Gerard said. “We’ve also stated many times that we’ve got to be able to change the relationship between providers and Medicare Advantage in order to really extract the good value out of the care that we drive, and get paid fairly for it.”

MA plans and home health care providers have a tenuous relationship. Unless, of course, one has bought the other. Right now, home health companies are providing care for MA plans at a “significant” discount, according to Gerard.

Recognizing that, Amedisys is both vocalizing their issues with those current relationships and trying to make new ones.

Striking a balance on relationships that satisfies both sides is what the company is trying to do. Not an easy feat, undoubtedly, but one it’s striving for and trying to bring to fruition in the very near-term future.

“Plans are wanting more access to care in the home and there’s still really not fair payment for that, so we’re looking at models out there,” Gerard said. “And we’re hoping to have something announced, hopefully pretty soon, on a new kind of model that actually drives us more into Medicare Advantage, [one] that will allow us to expand our margins on that business and also free up capacity with our existing clinical staff. We’re really close.”

Overall revenue checked in at about $545 million for the quarter for Amedisys, a 1.5% year-over-year increase. Home health revenue totaled $335 million, a 2% year-over-year increase.

Hospice revenue marginally increased, meanwhile, from $191 million in last year’s first quarter to $193 million this year. Personal care decreased by $3 million year over year, from $17 million to $14 million.

Payment rate expectations

Wage inflation, the omicron variant and contract labor were all major tailwinds for home health providers in the back half of the fourth quarter and in the first quarter of this year.

Providers had high quarantine rates and were relying on contract labor – a major expense – in order to staff cases.

Amedisys is looking forward to better – and less – deals with staffing agencies for the rest of the year. And it’s improved on the retention front, according to Gerard.

“2022 is off to a roaring start indeed,” he said.

Having said that, the Center for Medicare & Medicaid Services (CMS) payment rate proposals for other settings have had some home health stakeholders worried over what’s in store for them.

Rates have not been inflation-adjusted. And generally, what happens in the skilled nursing facility (SNF) space is a good indicator of what’s to come in the home health proposed rule.

“The bottom line is we don’t know what’s going to be in there,” David Kemmerly, the

chief legal and government affairs officer at Amedisys, also said on the call. “The SNF rule is interesting to read through, in terms of seeing what that might mean or not mean for us, but we don’t know.”

Still, Amedisys is not troubled by any warning signs that could exist in other settings’ proposed rules.

“We feel like there’s a lot of reasons that we can handle and deal with any behavioral cuts that are proposed,” Kemmerly said. “And historically, between the proposal and the final rule, things change. And so we feel comfortable with the data and we feel comfortable with our position to avoid those cuts if they are proposed.”

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