LHC Group Inc. (Nasdaq: LHCG) has long been a home health giant attracting plenty of attention. But the spotlight on the company has never been brighter, thanks to UnitedHealth Group’s plan to purchase the provider for $5.4 billion and roll it into Optum.
This week, that spotlight is on the challenges and opportunities that LHC Group has continued to navigate in 2022’s first quarter. The company released its quarterly financial results late Wednesday.
Like many others in the space, LHC Group saw its admissions dip in the beginning of the year, as its quarantined-clinician rate skyrocketed. An astounding 6.5% of its clinicians were in quarantine due to the Omicron variant in January.
“Home health average weekly census declined to a low 83,061 during the week ended January 15, 2022, as the average percentage of clinicians quarantined increased, exacerbating the normal seasonal dip in January,” the company wrote in Q1 supplemental information posted online.
The Lafayette, Louisiana-based LHC Group delivers home health, hospice, and home- and community-based services, as well as facility-based care, across 37 states and the District of Columbia. It employs about 30,000 individuals.
Despite Omicron-related issues, organic growth in total home health admissions increased 1.6% year over year. Organic growth in hospice admissions increased 4%.
“In terms of performance for the key segments, home health revenues were in line with our model, while EBITDA came in +11% above on stronger margins than we modeled,” an analyst note from the private investment banking company Stephens stated. “In hospice, revenues beat our forecast by +4%, but EBITDA came in light on softer margins than we predicted.”
Overall, the company’s net service revenue increased from $524.8 million to $571.5 million year over year, a nearly 9% increase. Home health net service revenue increased from $373.8 million to $387.9 million, a nearly 4% increase.
Outside of the quarantine rate, salary and wage pressures were the biggest headwinds for LHC Group.
“Higher labor costs and capacity constraints caused by the lingering impact of clinicians on quarantine caused significant headwinds for Q1 2022,” the company noted.
Home health salaries and wages – including sign-on bonuses – increased over 5% year over year. Even so, they decreased by 2% compared to the fourth quarter of 2021.
Contract nursing visits still represented 3.3% of all visits, a higher-than-normal number. Again, though, that was still down from 4% in the third quarter of 2021. Thus, the home health cost per visit continued to decline, a good sign for the company moving forward.
“I’m also encouraged by our ability to reduce our reliance on contract labor, which reached an all-time high in the third quarter,” LHC Group President and COO Josh Proffitt told Home Health Care News in January. “Around 4% for our home health visits were being made by contract labor. As we can move that to a more normalized range and kind of migrate away from that dependency, that’s going to be another real lever for 2022.”
Outside of the UnitedHealth Group news, LHC Group also announced this week that it had finalized a joint venture partnership for in-home services with the Thomasville, Georgia-based Archbold Medical Center.
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