At-Home Care Executives Bullish On Payer, Growth Strategies Heading Into Q2

For the last few weeks, we’ve been busy covering the earnings calls of at-home care companies, which have revealed some key trends that providers are facing as they head into Q2.

Specifically, Addus HomeCare Corporation (Nasdaq: ADUS), Enhabit Inc. (NYSE: EHAB), The Pennant Group (Nasdaq: PNTG), BrightSpring Health Services (Nasdaq: BTSG), Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) and other publicly traded companies weighed in on industry issues and developments.

These calls took place against the backdrop of regulatory uncertainty, with the Capitol Hill budget battle and the confirmation hearing of Dr. Oz for CMS chief being among the latest developments playing out in Washington, D.C.

While home-based care executives weighed in on the uncertainty around programs like Medicaid, the cloudy outlook here did not seem to dampen executives’ spirits. There was a sense of optimism around how certain strategies are bearing fruit, as well as enthusiasm about the growth potential for at-home care.

In this week’s exclusive, members-only HHCN+ Update, I delve into some of the main takeaways that emerged during this latest earnings call season and offer key takeaways, including:

— Carefully crafted payer strategies continue to fuel progress at certain home-based care companies.

— Home-based care providers aren’t just leaning on the company’s key growth drivers. Instead, many are fine tuning their growth plans in order to reach new heights.

— In addition to well-known challenges that providers are already facing, companies are also keeping an eye out for possible wrinkles that could negatively impact their businesses down the line.

Precise payer strategies

It’s no secret that home health providers have been struggling with margin pressure related to Medicare Advantage rates. Commentary from Aveanna Healthcare and Enhabit executives provided reason for optimism on this front, as both companies shared some encouraging news related to their payer strategies – notably, their comments suggest how strong payer relationships not only create positive financial trends but can lead to improvements in staffing and clinical capacity.

At Aveanna Healthcare, prioritizing preferred payers agreements is part of the company’s larger transformation strategy. The company first began its transformation strategy, which centers around four primary initiatives, in 2023. Its purpose was to get back on track after a turbulent entrance into the public market.

Based in Atlanta, Aveanna Healthcare offers a range of pediatric and adult health care services. The company provides home health, hospice and pediatric care services. It has 327 locations across 34 states.

Aveanna Healthcare CEO Jeff Shaner once defined “preferred payers” as those “that support value-based care by offering us an above-market reimbursement rate and value-based payments in exchange for proven savings.”

In Q4, the company landed eight additional preferred pay agreements, bumping its overall number up to 22.

In addition to contributing to the financial health of the company, Aveanna Healthcare has also seen other benefits to its preferred pay focus.

“We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts with those payers willing to engage with us on enhanced reimbursement rates, and value-based agreements,” Shaner said last week during its Q4 earnings call. “While we continue to operate in a challenging environment, our preferred payer strategy allows us to return to a more normalized growth rate in our business segments.”

Improvement when it comes to hiring and retention trends is especially important at a time when providers continue to see the negative impact of a challenging labor market.

Similar to Aveanna Healthcare, Enhabit also leaned on its payer innovation strategy. This has become increasingly important as the company navigates choppy waters.

Last year, Enhabit faced a number of public battles amid its move to nail down a strategic direction. One thing that remains consistent is the company’s strategy of creating “win-win” agreements with its payer partners.

“They get access to our high-quality care, superior outcomes and evidence-based specialty programs, and we get access to more members and competitive rates and terms,” Debra Konjanovski, senior vice president of payor innovation at Enhabit, previously told HHCN.

Enhabit has shown a willingness to walk away from high-profile contracts when they no longer serve the company. In 2024, the company terminated its contract with UnitedHealth Group’s (NYSE: UNH) UnitedHealthcare subsidiary, the largest MA administrator in the country. The two companies eventually formed a new agreement later that year.

In Q4, the company’s payer innovation continued to bear fruit. Overall, 48% of Enhabit’s non-Medicare visits are now in payer innovation contracts at improved rates.

Enhabit also credited its payer innovation strategy for the improvement of its clinical capacity. The company negotiated 76 new contracts in the fourth quarter of 2024.

“This, combined with continued staffing and cost disciplines, should allow us to expand home health margins as we exit 2025 despite CMS rate reimbursement increases not keeping pace with our overall market inflation,” Ryan Solomon, CFO of Enhabit, said during the Q4 earnings call earlier this month.

Enhabit operates across 34 states and has more than 10,000 employees. The company’s footprint includes 255 home health locations and 115 hospice locations.

New growth opportunities

The HHCN editorial team often asks providers to identify the main growth drivers that define their businesses. As a result, I’ve become familiar with the primary sources of growth at companies across the industry.

This earnings season, I was particularly interested in the comments about how BrightSpring and Pennant are planning to grow. In the case of BrightSpring, CEO Jon Rousseau was very explicit about leaning more into home-based primary care as a growth avenue and, further highlighting the importance of payer strategies, emphasized how expanding in home-based care can support involvement in shared savings frameworks. And Pennant’s growth strategy for its home health business adds to a trend of health system tie-ups in the space.

BrightSpring is a Louisville, Kentucky-based company that delivers care to complex populations, offering primary care, home- and community-based services, pharmacy services and rehab services to over 400,000 consumers throughout 50 states.

Areas such as pharmacy solutions and community and rehab care have been strong growth drivers for BrightSpring. Still, the company has earmarked home-based primary care as a major future business opportunity.

“Our focus in home-based primary care is, how do we continue to drive that incredibly valuable service to as many patients as we can and get them in the ACO, so that we can drive more and more shared savings,” Rousseau said earlier this month during the company’s Q4 earnings call. “We said before our five- to seven-year goal is how are we serving at least 100,000 or more people? That’s what we’re working towards.”

On its end, M&A has always been Pennant’s bread and butter when it comes to accelerating growth. Specifically, the company’s strategy involves purchasing community-driven home-based care companies with strong ties to their specific markets.

Eagle, Idaho-based Pennant Group is a holding company with independent operating subsidiaries that provide health care services. It has 131 home health and hospice agencies and 60 senior living communities.

During Q4, Pennant zeroed-in on what CEO Brent Guerisoli called “transformative partnerships.”

In January 2024, the company entered into a joint venture with John Muir Health. Partnerships like this reflect the broader trend of home health growth through health system JVs, which fueled the growth of giants such as LHC Group and currently is a cornerstone for Compassus.

Pennant also joined forces with Hartford Health Care at Home (HHCAH), the home health and hospice segment of integrated health system Hartford HealthCare.

Guerisoli referred to the latter partnership as “a foundational relationship for future expansions in the eastern U.S.,” during the call.

Continued challenges

Addus is one of the biggest home-based care providers working in the Medicaid space, so it tracks that possible changes to the program would be top of mind for leaders at the company. But while the program clearly seems to be under threat, even the risks and uncertainty here did not significantly dampen Addus’ outlook, maintaining the trend of generally upbeat messaging with regard to future prospects for at-home care.

Based in Frisco, Texas, Addus delivers home care, home health and hospice services to more than 62,000 consumers through 257 locations across 23 states.

In terms of government payers — which includes Medicaid — Addus has over 300 contracts with federal, state, county and municipal governments, according to the company’s website.

Last month, the U.S. House of Representatives approved a budget resolution. While the proposal doesn’t specifically name Medicaid, experts believe that a reduction in federal Medicaid spending is on the table.

Though Addus CEO Dirk Allison said he believes that the impact to the company’s business will be minimal, he pointed out the few ways they would be affected by cuts.

“The only states we serve that could be impacted by the lowering or removal of the FMAP floor would be California and Washington, [whose] combined Medicaid revenue represents approximately 2% of our total consolidated revenue,” he said during the call.

The Q4 call was also an opportunity for Allison to speak on the value of the Medicaid program more generally.

“Medicaid is a valuable state and federal lifeline to the extremely at-risk population that we serve, which, if cut, could lead to much higher total cost of care for both states and the federal government,” Allison said. “At Addus, we are focused on our strategy of expanding our services to this population as it relates to home care, which we believe remains valuable to both our states as well as Congress and this administration. We are encouraged by the bipartisan congressional comments opposing cuts to the Medicaid program.”

While Addus’ leaders see the company as largely insulated from Medicaid risk, the same cannot be said for every provider that relies on Medicaid. Given that one theme of the recent earnings calls was the ability of at-home care to lower costs and deliver value to payers, I only hope that the government is hearing this message and crafting policy accordingly.