Amedisys (Nasdaq: AMED) teased it, and now the company is unveiling it. The company, which has been working with Medicare Advantage (MA) plans on better contracts, has struck a deal with CVS Health’s (NYSE: CVS) Aetna.
“We are in active discussion with other plans for similar contracts or other value-based models,” Amedisys CEO Chris Gerard said during Thursday’s Q3 earnings call. “The remaining plans that have been unwilling to engage in models like this should take note. In a world where clinical capacity is at a premium, we will not work with payers who fail to see the value that we deliver and the quality outcomes we provide for their members.”
Gerard drew a hard line Thursday, going as far to say conveners that do not see the value in value-based models are “short-sighted” and simply want to “take a fee, drive visits down and increase administrative burden, thus negatively impacting patient access to appropriate and timely care.”
The Baton Rouge, Louisiana-based Amedisys provides home health, hospice and personal care services in 38 states and Washington, D.C.
Amedisys’ many partnerships and collaborations were touted by Gerard on Thursday, namely the recent partnership with Aetna.
The contract with Aetna will reimburse Amedisys for home nursing services using a case-rate system, according to Gerard.
As broader MA enrollment grows and contributes more of the volume growth for home health providers, Amedisys is stressing the importance of having contracts with key payers that pay adequate rates.
“To summarize how case rate works, forward-thinking plans such as CVS/Aetna pay us a flat rate per admission,” Gerard said. “We then provide the highest-quality, most optimal care to each patient from the time they are admitted until they are discharged from our service. In order to assure positive outcomes for CVS/Aetna members, we will tie a portion of our case rate to specific quality metrics, such as rehospitalization rate and timely initiation of care.”
Amedisys continues to be one of the more bullish home health providers in terms of MA plans, even though Gerard said that reimbursement returns are not where he thinks they should be.
Especially if these contracts become more commonplace, the entire home health industry – but especially providers like Amedisys – will be far better off.
“If you look at the fastest growing part of our home health side of the business, it is in our MA per visit business mix,” Gerard said. “It’s about $300 million a year in revenue, where we do about 2.4 million visits per year, but our average reimbursement is woefully low at $131 per visit. That’s where our fastest growing market is, but at the same time, the economics don’t look good. That’s why I’m really excited about our deal with CVS/Aetna.”
In the first full month of the Aetna contract, Amedisys saw referrals from Aetna double, and admissions triple.
“I see a great opportunity for us to move more contracts to a case-rate model,” Gerard said. “With the rest of our business, we’re going to aggressively go after these plans and we’re going to take a firm stance. We cannot continue to dedicate our clinical capacity to treating these patients if we’re not going to get paid fairly and cover our costs.”
According to analysis done by investment banking firm Jeffries, the Aetna contract should boost Amedisys’ non-episodic rates, margins and overall growth.
“Just as important is the leverage the contract provides Amedisys to negotiate better rates with other MA payers, particularly at a time of limited quality home nursing capacity,” a Jeffries report read. “Longer term, we see meaningful margin expansion and growth within the MA book for Amedisys.”
Year-over-year Q3 revenue for Amedisys rose from $1.65 billion in 2021 to $1.67 billion in 2022. Income, however, fell from $157.5 million in 2021 to $125.5 million in 2022 year over year.
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