Enhancing partnerships with government and preferred payers to create additional caregiver capacity. Identifying cost efficiencies and synergies. Managing capital structure. Engaging company leaders and employees.
As Aveanna Healthcare Holdings (Nasdaq: AVAH) enters the second year of its strategic transformation, these are the four primary strategies the company is focused on.
In 2023, Aveanna implemented a new strategy centered around enhanced partnerships with payers and governments. The purpose was to further drive value-based care while simultaneously righting the ship after a choppy entrance into the public market.
Aveanna CEO Jeff Shaner has pointed out that the company isn’t operating in a vacuum and that transformation wouldn’t be achieved overnight.
“While executing the above key strategies, we still believe it is important to set expectations that acknowledge the environment that we are operating in, and the time it will take to fully transform our company to sustain growth,” Shaner said during Aveanna’s fourth quarter earnings call on Thursday.
Based in Atlanta, Aveanna provides home health, hospice and pediatric care services across 33 states.
Shaner noted that by focusing its clinical capacity on preferred payers, Aveanna achieved year-over-year growth in revenue and adjusted EBITDA.
Aveanna’s 2023 goal was to double its private-duty services with preferred payers from seven to 14. In Q4, the company added two additional preferred payer agreements and reached this goal.
On the home health front, Aveanna’s goal was to improve its episodic payer mix by 10%, from 60% to above 70% by the end of 2023. The company signed eight episodic agreements, and improved its episodic mix from 60% at the end of 2022 to 74% in Q4.
Aveanna also saw improvement in caregiver hiring and retention by aligning with payers willing to engage with the company on enhanced reimbursement rates and value-based agreements, according to Shaner.
“While we continue to operate in a challenging labor and inflationary environment, our preferred payer strategy allows us to return to a more normalized growth rate in our business segments,” he said on the call. “Since our third quarter earnings call, I am pleased with the continued progress we have made on several of our rate-improvement initiatives with both government and preferred payers, as well as the continued signs of improvement in the caregiver labor market.”
With Aveanna’s private-duty services business, the company had a goal of increasing rates by double-digit percentages across various states, especially in California, Texas and Oklahoma. These states represent 25% of the company’s total private-duty services revenue.
At the end of 2023, Aveanna obtained double digit private-duty services rate increases in eight of its states, including Oklahoma.
The company also achieved “rate wins” in an additional 11 states. The combined 19 states represent 55% of Aveanna’s private-duty services footprint.
While the company has made significant progress with state legislatures, Shaner believes that Aveanna still has work to do.
“As an example of the work ahead, our PDN rate request was not included in the California governor’s proposed budget,” Shaner said.”We believe that we made significant strides with the governor, Medi-Cal department, leadership and California legislature demonstrating the importance of PDN rate increases, and how they support an overall lower health care cost, improve patient satisfaction, and quality outcomes. However, it is clear that we need to further accelerate our preferred payer strategy and government affairs efforts to continue to advocate for children with complex medical conditions.”
Overall, Aveanna’s Q4 2023 revenue was $478.8 million, a 6.1% increase compared to $451.1 million for the same period the prior year.
“We experienced revenue growth in two of our operating divisions led by our private-duty services and medical solution segments,” Matt Buckhalter, CFO of Aveanna, said during the call.
Full-year revenue for 2023 was nearly $1.9 billion, compared to nearly $1.8 billion in 2022. This was a 6% increase.
Aveanna’s payer strategy will be critical throughout the remainder of 2024, partly due to the fact the company’s payer mix is skewed heavily toward government payers, according to Stephens analyst Scott Fidel.
“AVAH generates a significant percentage of revenue (~90%) from government payers,” Fidel and colleagues wrote in a Thursday note. “AVAH could experience pressure on revenues/adjusted EBITDA from unanticipated changes in government reimbursement rates.”
Companies featured in this article:
