The 3 Top-Of-Mind Focus Areas For Amedisys CEO Paul Kusserow In 2023

Paul Kusserow was away from his role as CEO of Amedisys Inc. (Nasdaq: AMED) for just seven months.

After stepping down officially in mid-April, he was back at the helm by mid-November, after Chris Gerard – his replacement – was terminated without cause. He remained chairman during the hiatus.

But now he’s back in the weeds, trying to steer the ship of a company with a stock price that has decreased by about 70% since its all-time high point in Jan. of 2021. As he does so, he’ll be taking on some of the major issues he believes are tied to earnings, including managed care negotiations, optimizing the company’s business mix and staffing turnover, among a couple others.


His work life has likely gotten much more hectic since he returned to the CEO role, yet it hasn’t been a negative experience.

“Actually, it feels really good, to be honest with you,” Kusserow told Home Health Care News, in regards to being back.

The Baton Rouge, Louisiana-based Amedisys provides home health, hospice and personal care services in 36 states and the District of Columbia. It also providers high-acuity care in the home through its subsidiary, Contessa Health. Overall, it has 21,000 employees and 547 care centers within its network.


Last week, HHCN sat down with Kusserow to chat about his return, Medicare Advantage, recruiting and retention, M&A and the future of the home health landscape.

That conversation is below, edited for length and clarity.

HHCN: Before we get into the weeds on some of the goals for this year, I did want to ask you – just from a personal perspective – how does it feel to be back?

Yeah, it actually feels really good, to be honest with you. In a weird way, I think what’s interesting to me is, while there are some short-term headwinds in the industry, the overall prognosis is really, really good – stronger than I’ve seen.

My feeling is that there’s fundamentally three challenges the industry has to think about. One is labor and staffing. And I think that’ll get sorted out post-COVID and post-recession. We’re already seeing stabilization there. But I think it’s going to separate out really good and strong employers, which we’ve been working on being since I’ve been here for the last eight years.

If you continue to be a great place to work and focus on high quality, people will want to work with you and come to work for you. So I feel strongly about Amedisys’ position there, as well as other high-quality home health entities. Quality is going to win. And that’s why we’ve been so obsessively focused on being the best quality and understanding you can’t deliver the quality unless you have great people.

The second is managed care. Managed care, I think, has hit a tipping point. The industry really has to start to think through how it is going to deal with managed care, and Medicare Advantage in particular. And I think managed care has some pressures as well. And it’s starting to acknowledge those pressures.

I was at the J.P. Morgan Healthcare Conference last week and met with a lot of payers. They’re looking for capacity from the industry, they want to lock that in. And I think they realize the old per-visit model of grinding down people to very low rates, and then assuming that everybody’s going to respond to those poor rates, is an era that is ending. And I think they understand that.

They’re seeing an inability to get home health, and therefore a lot of their members are having to go into more expensive institutions, or they’re having to be discharged or go without care, which causes readmission risk. So, I think payers are rethinking their relationship with providers.

In between that is the conveners. I’ve met with some conveners and am continuing to meet with them. I have been encouraged by conveners’ understanding that the way they’re going to win is not just being a delegated risk entity in home health, but moving into helping their clients – i.e., the payers – with overall post-acute care and access to care. And the way they’re going to get that is by making it more attractive for home health agencies to want to deal with Medicare Advantage plans. So, I think there’s a lot of work to be done for advanced-thinking conveners. I think there are some conveners that still haven’t left the beach on the price delegated risk model, and I think they’ll either have to evolve or they’ll go out of business. Delegated risk models only work when there’s an ability to commoditize those folks they’re negotiating with, and I think we’re coming to an end of commoditizing home health players.

So I think home health is going to have more leverage than it thinks it has right now. And I think that’s going to be to Amedisys’ advantage as well as the industry’s advantage.

I think the third thing is regulatory risks. And I’m very much looking forward to seeing how CMS made its calculations on the budget. We’re going to be active with the rest of the industry in pushing against any further cuts, and making sure that the market basket is real.

This time, a 4% increase was not real. Considering that Social Security was given an 8% increase because of cost of living and we got 4%, to me, is ridiculous. We’re going to have to be more aggressive in our lobbying, we’ve got some good advocates in Congress, so I feel very good about that. Those are the three headwinds that we’re dealing with.

The prognosis, though, is what you’ve got with the aging population. That desire to be taken care of in the home, the economics of home care, the appropriateness of home care with a chronically ill population, and 90% of that population being chronically ill.

It makes sense to take this this portion of the population and work together with payers and the government to keep them in home, and get them out of institutions. That’s where the world is going. And I think, ultimately, it favors us. If you look at how the rest of the world’s health care systems work – in my time off, I spent time studying this – they do a lot more work in the home and a lot more work outside of hospitals and a lot more work in clinics, with nurses and physicians, and that’s one of the reasons why their outcomes are better, at a lower cost. There’s much less hospitalizations, where we’re a hospital-centric country and acutely driven in what’s become a chronically ill population. So, it’s a mismatch. And the only way you can solve that problem is to manage chronic illness outside of institutional settings, which is home health.

Due to the regulatory environment and rate cuts, is there anything you’re adjusting operationally at Amedisys?

Yeah, I think we have four initiatives that we’re focused on this year. First is making sure we have enough labor, and we have been really good at this. This has been an obsession of mine since I walked in the door eight years ago. I think we have a lot of the right things in place to continue to drive being a great employer, and to continue to drive an emphasis on recruiting good people, and onboarding them well, and then providing good experience in their first year, which is key for all home health agencies. And then making sure we close the backdoor on turnover.

Everybody has engagement scores and all these fancy things. But the real way you judge if you’re a good employer is if people stay with you. And if they want to stay with you. We’ve become very sophisticated in staffing. But that’s more so to do with the fact that there’s less labor out there.

And I think the recession will help us, because nursing, in particular, works counterclockwise. When it’s a great economy, nurses tend to leave the workforce. When it’s a bad economy, they tend to come back, and I think it’s largely because the workforce is still predominantly women. That’s something that we’re focused on, too.

We’re focused on making sure that our mix is optimized. Again, we’re now in a labor-constrained environment, so we have to optimize our mix of who we can best take care of. And the best way we believe we can do that, particularly with Medicare Advantage, is by doing case-rate deals. Where we are able to manage our own utilization, and then redeploy what we save by being the most effective utilizers in an episode, and then redeploying it back to that client.

We can actually increase our capacity with specific payer clients quite considerably, sometimes between 20% and 30% goes back to them, because we can drive our own efficiency versus having an external force do it like a convener, where they don’t get the excess capacity and it goes elsewhere.

We believe the case-rate model is the way to win on that, the problem is case-rate models are very sophisticated to manage. The average home health agency probably doesn’t have that level of data of discipline in the organization to be able to drive that. Also, since you’re taking risk on a case rate, you fundamentally become a risk-based entity. If you can’t manage utilization for that risk, you’re going to lose money and go out of business quickly. So again, where we’re all moving to is value-based and risk-based work, particularly with an increasing dominance of Medicare Advantage. And if you don’t have those skill sets, that’s where you’re going to see people lose out.

So, I’d say, one, optimizing mix, but also taking more risk and being paid for that risk.

We’re in 38 states, and have about 550 care centers in those states, so we’re a very big organization. I try to spend a week per month out in the field, understanding how we’re working, and I really noticed there’s a lot of activities that don’t relate to what is most important in our care centers.

One is recruiting and retaining the best workforce, two is delivering the best care to our patients and three is optimizing the mix of our business that’s coming in so that we can take great care of those patients that we choose to take care of, and get paid appropriately for it.

Everything outside of that, we’re trying to find ways to use our scale to centralize it. We expect to find cost efficiencies in the centralization and hopefully this focus on these three main things will drive better results in those three focus areas – labor, patient care and mix optimization.

So we’ve started those initiatives, largely through intake, but we’ve got other types of functions that we’re looking to centralize and that’ll take costs out of the system and enable better focus. But it has to be from the care centers as well, they have to want to do it. We’re working with them to make sure that we do this in conjunction with the care centers.

I’d say the last focus we have is Contessa Health. I’ve been really pleased with what I’ve seen with Contessa. We’ve got eight clients that we’re working with right now.

Due to the bill that passed in Congress, the hospital-at-home program has been extended for another two years. I think that’s a very good sign. The phone has been ringing pretty consistently.

I’d say there’s two types of folks out there, particularly in referring to hospital at home. There’s those people that want to find a good partner and fundamentally drive better profitability for their hospitals, which they can with the DRGs that we take off their plate and bring into the home. So I think there’s people that understand how the economics of a hospital really work.

I’m an ex-hospital executive, I was at a hospital system for seven years, and nine years if you count my time at the Advisory Board where we were advising hospitals. I understand how the economics of hospitals work, and hospital at home makes tremendous sense. I’d say we’re seeing people that want to do this, particularly in over-bedded hospitals.

But we’re also seeing people that tried to do it on their own, hospitals that tried to do it on their own and fundamentally realized it’s way too complex for them to do on their own, and therefore they’re coming back to us and wanting to form JVs with us. I feel really good about what we have at Contessa. The clients that we have are marquee clients – you can’t do any better than the list of clients that we have. I think the key is to go deeper with these clients. We’ve initiated a lot of this and have worked through some of the initial kinks. Now we want to continue to prove out the model with some of the folks that we have now.

I’ve been out visiting with Contessa and our partners at some of the large systems. And, again, we’ve been very happy with what we’ve seen.

With SNF-at-home, we’ve got three places where we’re doing that. We have one comprehensive deal, which we just announced, which is with the University of Arkansas. That’s been very interesting. That’s all-inclusive, we’re doing a traditional home health and hospice partnership, and we’re also doing hospital, SNF and palliative. Everything we do, we’re doing there. We’re very excited about the prospect of getting that going.

We signed a large palliative deal, and that’s risk-based palliative with a large payer, where we will be taking full risk on palliative care and then getting those palliative folks into hospices as soon as it’s appropriate. We’re very excited about our ability to do that. And that’s a very innovative deal. It’s risk-based care in the home.

What we’d hoped with Contessa was to be highly distinctive, to do things other people don’t do and can’t do. And to move into markets where no one else is, and create these markets. The key for us now is to keep going deeper with our existing client base and selling a couple new clients per year. Bringing in more business to then get to break even, and then starting to make this profitable.

Do you think the managed care situation is going to improve for the entire industry? Or do you think that the payers may pick out a few high-quality, at-scale providers that they’re specifically going to do business with?

Payers wants the easy button. So they’re going to want to pick the larger players who have a lot of coverage either in a state, region or in the country. I think in terms of the players that are out there, there’s really three large players in the industry: CenterWell Home Health, LHC Group Inc. (Nasdaq: LHCG) and us. Those are the three big national players, and even though all of us are quite large, on most Medicare Advantage footprints, we cover between 50% and 60%. We can cover a lot.

I we find a good payer partner, and they want to partner with us long-term and offer locked-in rates, we could, through de novo and M&A, get up to 80% or 90% of their footprint pretty quickly. It’s relatively easy to do that. So we’re obviously having those types of conversations. That’s what payers look for, is that coverage.

I was out talking to hospital systems last week, and their length of stay is going through the roof because they have no place to discharge their patients. That’s really causing tremendous stress to the hospital systems.

Now, initially, you would think that wouldn’t cause much stress to the payers. But it is, because they don’t have choices with home health, they’re having to put them into SNFs, or ERFs, or other more expensive places. Or they’re discharging them without care, which means their readmission risk goes up by about 30%. The payers are starting to see it in their post-acute costs. They’re starting to see it in the readmissions. .

I think they’re going to need to lock in that capacity so that their members will have access to home health so that they can get discharged appropriately and then get into the home. That’s what I think is going to bring payers and conveners to the table more aggressively. Because when I did talk to these large hospital systems, they’re looking for ways to discharge their patients, because the length of stay is just way too long.

How do you see home health M&A shaking out this year, given the regulatory environment in the industry and also the macro economic issues?

My concern is the game that we play with CMS. It is a long, exhausting game, where they come up with proposed significant cuts. The whole industry gets all worked up about it and runs to Washington, D.C. We lobby, lobby, lobby, they get a lot of pressure, and then they come back with something that is just mediocre. It’s not enough for us to get Congress all worked up about it and to pass legislation. But it’s enough to keep us in purgatory. I think we have to get through this dribbling sense of inadequate reimbursement. Ultimately, that’s going to add up.

Clearly the 0.7% increase, at least for 2023, is inadequate, given the inflation rates. And given the fact that the market basket was slightly above what their cut was, which they split in two.

We’re seeing more people come to the table from an M&A perspective. I was looking at our pipeline yesterday, and it’s really, really strong. So it clearly affects our stock and those people that are short-term investors in our company.

But I think for the long term, it bodes very well for us. Again, our balance sheet is unbelievable. We have very low leverage. The prices that we’re engaged in with companies as we’re buying them are much less than what they were two years ago. We feel like there’s a lot of opportunities to go in and continue to build out our map, and to continue to be the easy button in what we think will be an increasingly Medicare Advantage-driven world and a case-rate world.

I have to give Aetna a lot of credit for stepping in and signing up with us on a case-rate model. And I think more payers will start to do that.

Companies that have the sophistication to manage that utilization like we do, they’ll continue to thrive. I think the ones that don’t have the information systems and the ability to ascertain, handle and mitigate risk will be continue to be challenged.

I’d say the government is getting what it wants, which is I think is consolidation. And I think consolidation is continuing to happen, albeit at a relatively slow rate. But it’s definitely happening. And I think it will continue to happen.

I think the other thing that we’ve clearly seen is that, at one point, there were three large players out there. Now there’s one independent, and that’s us. And then there’s some smaller folks under us.

But I think there’s continued interest in the Medicare Advantage world for providing care in the home. There’s a tremendous scarcity value to good assets that managed care can access due to the demand for their Medicare Advantage members to be cared for in their homes.

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