Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) is still working on executing its transformation strategy — which focuses on preferred payers and obtaining adequate rates from its government partners — while also navigating a tricky labor environment.

For 2024, the company’s goal was to increase the number of private-duty services preferred payer agreements from 14 to 22. The company achieved this goal with the addition of eight additional preferred pay agreements.

“Our Q4, and full year 2024, results highlight that we continue to align our objectives with those of our preferred payers and government partners,” Aveanna Healthcare CEO Jeff Shaner, said Thursday during the company’s fourth quarter earnings call. “By focusing our clinical capacity on our preferred payers, we achieved solid year over year growth in revenue and adjusted EBITDA.”

Atlanta-based Aveanna Healthcare offers a range of pediatric and adult health care services, including nursing, rehabilitation, occupational nursing in schools, therapy services, day treatment centers for medically fragile and chronically ill children and adults, and home health and hospice services. The company has 327 locations across 34 states.

Though Shaner called out the current labor environment as a primary challenge, he also credited Aveanna Healthcare’s preferred payer strategy for the company’s improved retention and hiring rates.

“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,” he said. “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.”

Aveanna Healthcare’s preferred payer strategy has allowed the company to invest in caregiver wages and recruitment efforts.

Since Aveanna Healthcare’s third quarter earnings call, the company has also made strides on a number of its rate improvement initiatives with both government and preferred payers. The company is also seeing signs of improvement in the caregiver labor market, according to Shaner.

The company’s 2024 goal was to improve reimbursement rates in our various states, with a particular emphasis on Georgia, Massachusetts and California. Aveanna Healthcare secured double-digit rate improvements in both Georgia and Massachusetts.

“These states demonstrate our government affairs strategy, to partner with state legislatures and governors to identify shortfalls in private-duty nursing wages and to align reimbursement rates to improve access to care for patients with complex medical conditions,” Shaner said.

Overall, Aveanna Healthcare secured 12 private-duty services state rate increases for 2024.

Despite seeing success, Stephens identified this as a potential area of exposure.

“[Aveanna Healthcare] generates a significant percentage of revenue (~90%) from government payers,” Stephens analysts wrote in the research brief. “[The company] could experience pressure on revenues/adjusted EBITDA from unanticipated changes in government reimbursement rates.”

On the home health side, the company’s 2024 goal was to maintain its episodic payer mix above 70%.

“In Q4 our episodic mix was 76%,” Shaner said. “However, our total episodic volume growth was slightly lower as compared to the prior year period. We ended 2024 with a total of 38 episodic agreements, and are well-positioned for growth in 2025. We are committed to growing our home health volumes, and I expect us to return to positive year-over-year growth trends in the first half of 2025. We will remain focused on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis, and focus on improved clinical and financial outcomes.”

Shaner also outlines the five primary strategic initiatives that Aveanna Healthcare plans to focus on this year.

“First, enhancing partnerships with government partners and preferred payers to create additional capacity and growth,” he said. “Second, identifying cost efficiencies and synergies that allow us to leverage our growth. Third, modernizing our medical solutions business to achieve our top target operating model. Fourth, managing our capital structure and collecting our cash while producing positive free cash flow, and finally, engaging our leaders and employees and delivering our Aveanna mission.”

For Q4, Aveanna Healthcare reported revenues of $519.9 million, a 8.6% increase compared to $478.8 million during the same period last year.

The company’s private-duty services segment brought in $422 million, a 10.1% increase compared to $383 million in Q4 2023. Its home health and hospice segment checked in at $54.4million, a 0.6% increase compared to $54.1 million during the same period last year.

The company anticipates a 2025 revenue range of $2.10 to $2.12 billion.

“We believe this initial [2025] outlook provides a prudent view, considering the challenges we still face with the evolving environment,” Shaner said.