Inflation Forcing Caregivers to Choose Wages Over Mission, Home-Based Care Providers Say

Strong reimbursement rates for Aveanna’s services in nearly half the states the company operates in have been a welcome change so far this year for the company.

Its turnover and retention rates have also been in line with company projections, despite ongoing labor issues.

“Although we continue to face near-term caregiver supply constraints like many other health care providers, we have moved past the near-term impact from Omicron,” Aveanna’s CEO Tony Strange said on the company’s first quarter earnings call Thursday. “The demand for our services has never been higher and we remain optimistic about Aveanna’s long-term prospects.”

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Based in Atlanta, Aveanna Healthcare (Nasdaq: AVAH) delivers home health, private-duty services and hospice care to a broad range of patients in 30 states. Though it is now heavily invested in the senior home health space, it began as one of the nation’s largest at-home pediatric care provider.

In Thursday’s first quarter earnings call, the company reported that revenue came in at $450.5 million, an 8% increase year over year. Two major acquisitions — including the $345 million Comfort Care Home Health deal — drove the revenue growth.

The overall bump in revenue was attributed to a $35.1 million increase in home health and hospice earnings.

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Even though the company has been able to benefit from Medicaid reimbursement rates rising in many states, it will continue to talk to its payers, with the goal of hiking rates further to bring more caregivers back to work following the Omicron surge, Strange said.

An optimistic tone was struck when discussing the future of the company’s home health sector. Strange said that while its private-duty segment of the company is more affected by labor constraints and continued difficulties related to Omicron, home health care has been able to avoid substantial losses.

“Our home health business, while they’re not immune from some of the labor constraints that we’ve been talking about, is less impacted by some of those [issues],” Strange said. “We think we’ll continue to see a very positive rate environment for the foreseeable future.”

Today, wages are the most important thing prospective employees want addressed, Strange said. However, he said that wages and mission were tied for the top priority for employees a year ago.

But due to the ongoing pandemic and recent inflation issues, Strange believes that mission has taken a backseat.

“I think nurses migrated to the places where they felt connected to a mission,” he said. “I think that was always on our side. The job that we have to offer is a very compelling and desirable job. However, with this new inflation trend we have, I think mission has taken more of a backseat and folks are chasing wages. Until we can be in the same place with wages as hospitals, surgery centers and skilled nursing facilities, I think we’re going to be operating at a disadvantage.”

First quarter home health revenue was driven by 14,300 admissions – 61% of which were episodic – Aveanna COO Jeff Shaner said during the call.

“While our episodic admission mix was down slightly, we are focused on maintaining this rate in the 60% to 65% range,” Shaner said. “I am pleased with our admission volumes in both home health and hospice and our team’s ability to fight through a difficult Q1 labor market.”

Revenue per episode for the quarter was $2,898, down 1.5% from Q4. This shift reflects the impact of Aveanna’s Comfort Care episodic patient base.

Along with retention rates being high, Strange said the company’s “reliance on contract labor and overtime has subsided appropriately.”

Looking ahead, Strange also announced the company has completed its transition in using Homecare Homebase as its only software system for employees.

“That is a major, major lift and we’re going to continue to get some of the synergy realization from that system between Q2 and Q4 of this year,” Strange said. “Getting our home health and hospice divisions on one set of systems [was important] and we think we’ll continue to see gross margin improvements [because of that].”

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