Earlier this month, Aveanna Healthcare Holdings (Nasdaq: AVAH) announced plans to acquire Thrive Skilled Pediatric Care for $75 million.

This acquisition enhances Aveanna’s presence in several states where it operates and extends its footprint into two additional states.

The Wakefield, Massachusetts-based Thrive operates 23 locations across Arizona, Georgia, Kansas, New Mexico, North Carolina, Virginia and Texas. It focuses primarily on skilled private-duty nursing services but also offers pediatric therapy, licensed health aide services and certified nurse assistant services. This expands Aveanna’s private-duty services, home health and hospice care, and medical solutions in 27 states.

Home Health Care News spoke with Aveanna CEO Jeff Shaner about this acquisition, future M&A plans, the impact of potential Medicaid cuts and the value of home-based care.

Below is that conversation, lightly edited for length and clarity.

HHCN: The Thrive Skilled Pediatric Care acquisition signifies Aveanna’s return to M&A. How does M&A align with Aveanna’s overall strategy, and what are your plans for future growth?

Shaner: Thrive fits Aveanna incredibly well from a cultural standpoint, with a commitment to clinical excellence and compliance. Furthermore, 100% of Thrive’s services, revenues and hours provided align perfectly with Aveanna’s private-duty services segment, our largest segment. Approximately 80% of our revenue comes from the private-duty service segment, making it a complementary business.

Melinda Phillips is the CEO of Thrive, and I’ve known her for nearly 25 years. She manages an outstanding business that shares a cultural affinity with Aveanna — individuals with deep compassion and enthusiasm for their work.

The geographic expansion benefits us in New Mexico and Kansas, which is encouraging. New Mexico was one of the top five states where we wanted to extend our Medicaid services. Feedback from our [managed care organization] payers regarding our existing services in states like Georgia, Arizona, North Carolina, Virginia and Texas has positively influenced our preferred payer strategy. Therefore, I reiterate that we have checked all the boxes. Integration is expected to go smoothly and will be a successful process.

This was not a spontaneous M&A opportunity for us. We have been collaborating with Thrive for nearly two years, so this initiative has been on our minds for some time.

Regarding the broader M&A strategy, I would say M&A is not our core strategy; caring for pediatric, adult and geriatric patients remains our core mission. However, enhancing our growth profile through add-on acquisition strategies, primarily in our Medicaid business, private-duty service business like Thrive, and home health and hospice businesses, is our focus in 2025 and 2025. Eventually, we will acquire in the enteral nutrition business. We’re going through a modernization effort with that business in 2025.

Given the uncertain macroeconomic landscape, why is now the right time for this acquisition?

Like any company and nearly any business sector, particularly health care, we face some uncertainty. As a domestic company, all our revenue is generated within the country, which insulates us from the broader global economic headwinds.

However, the uncertainty regarding Medicaid and federal funding prompts us to reconsider any long-term investments and ensure we have strategically contemplated the reasons for such investments.

Uncertainty is detrimental to the markets. It negatively impacts health care and affects all companies. However, when I put on my long-term hat, which is our responsibility as CEOs, we are tasked with considering the future five to ten years ahead and ensuring that we steer our company toward a long-term objective. Ultimately, I find reassurance that core Medicaid and Medicare services at home are not going away; they are crucial to the solution for the previous administration, the current administration and future administrations.

Thrive made complete sense, and a home health acquisition would also be logical because we are the most cost-effective, patient-preferred health care setting. Continuing to lean deeper into our home care strategy is the right approach for the long term.

Why expand your pediatric service line, specifically?

We believe we are the nation’s largest provider of pediatric services today. We take great pride in that, but our payer partners want us to be in states where we currently do not operate. Kansas serves as a prime example. One of our largest payers, a national Medicaid [managed care organization (MCO)], inquired about Kansas; until now, we have been unable to assist them. This illustrates our preferred payer partnership as we collaborate with national payers. They ask us for support in many states, not just those we serve. This is guiding our growth strategy to align ourselves with our preferred payers in our current and future states. We have set our sights on approximately another half dozen states we want to cover from a pediatric perspective. We aspire to operate in about 40 to 41 states where the relevance to our preferred payer and government affairs strategy aligns best.

What types of acquisitions might enhance your current portfolio?

We are focused on home health and hospices, and we’ve been looking at acquisitions that would complement our current geography.

By complement, I mean states like Ohio, Indiana and Nebraska, which align with our upper Midwest strategy, distinct from California, Oregon or Washington. We want to be thoughtful in the home health and hospice sector, complementing our current service locations and densifying our services. This is where the majority of our focus lies.

Additionally, our most significant business remains Medicaid and similar services. We still operate in a few states, such as Ohio, Tennessee, Kentucky and West Virginia, where we currently don’t provide Medicaid services. Over the next two to three years, we would like to expand into those geographies.

What plans do you have for developing your service lines over the next one to three years?

As a primarily Medicaid-driven company today, we’d like to better balance the geriatric division of our business over the next three to five years. This segment accounts for about 11% of our revenue, and we intend to increase that to 20% and eventually 30% within the same timeframe.

Since 2018, our strategic initiative has been to remain dedicated to long-term growth in the home health and hospice sectors. I believe that over the next three to five years, we will continue to develop, expand, and enhance our geriatric service line, focusing mainly on home health, hospice, and enteral nutrition.

We’re among the few providers offering enteral nutrition daily through a medical solutions division. We are passionate about this business, as it complements our pediatric and some geriatric patient populations. We operate in approximately 30 states and hope to continue scaling this segment over the next three to five years alongside the core growth of both pediatrics and geriatrics.

So again, I believe all three business lines will continue to evolve and grow. We appreciate the diversification and the geographic expansion of not only being a pediatric company but also a geriatric company. It’s important to understand how these payers differ and how they consider both reimbursement and our strategic vision for these businesses over the next five to ten years.

What regulatory changes do you foresee having the most significant impact on Aveanna?

I don’t think we see the regulatory changes, but we do feel the uncertainty surrounding reimbursement. Our greatest challenge is the unpredictability of state and federal regulators regarding their future budgets. Because we’re primarily a Medicaid company, much of our reimbursement comes directly from the state or through an MCO. They need to anticipate their future federal reimbursement to make informed decisions about rates or programs for future enhancements.

That’s where our headwind lies as a company, particularly in 2025: the uncertainty that governors and state governments face regarding federal matching or reimbursement for Medicaid services in 2026 or perhaps 2027.

And that’s where we get caught up in this noise: if we’re asking for a program enhancement, growth of a Medicaid program, or additional reimbursement, we can feel the anxiousness of state leaders, the governor, and the Medicaid departments regarding their commitment when they don’t know what future reimbursement will be.

We believe that our greatest inherent risk lies here. However, the idea of the PDGM clawback has been around for four or five years. We stand united with Dr. [Steven] Landers, the [National Alliance for Care at Home], and our peers regarding the concept of a clawback; this [patient-driven groupings model (PDGM)] overhang presents an opportunity to eliminate it with this administration, or to work together and develop a solution that benefits all parties. 

The continued existence of this PDGM overhang in the home health industry is unfortunate, as it impedes essential investment in improved clinical care and resource allocation. Consequently, the M&A market in that sector has nearly come to a halt. Together with our public and private peers and The Alliance, we are dedicated to finding a solution to remove the burden of the clawback concept.

What is your perspective on how providers should respond to the current regulatory climate?

You need to understand that sometimes you are in a cycle that lasts two to five years, but it will turn around. When you’re experiencing an upcycle, which may last two, three or four years, it will eventually turn and go back down as well. Therefore, a pep talk I give myself and the industry is to keep thinking about the future and continue doing what’s right for patients.

Keep making the right decisions for your employees and good choices for your stakeholders and shareholders. Eventually, good things will happen. We are in the most cost-effective, patient-preferred health care setting that will always prevail. It’s hard to maintain this perspective when there is noise all around you, but when I step back and reflect in the mirror, I remind myself that everything will be okay. I’m in the right health care space. I recognize that it’s challenging to be patient in times like these. Still, the best approach is to keep leaning in, take care of patients, provide excellent clinical outcomes, and do what’s right for your employees, your patients and their families.

What are the main operational challenges affecting Aveanna? What measures are you implementing to tackle them?

First, there remains a significant shortage of caregivers. The post-COVID decline in nurses, therapists, qualified clinical caregivers and clinicians affects daily operations. I believe this represents a long-term challenge that the industry will face for the next 30, 40 or even 50 years. Therefore, it’s crucial to address this issue and ensure we align our capacity with partners who appreciate our services and are willing to collaborate with us.

The second thing is that we’re all at the forefront of this new era of artificial intelligence, facing the need to be efficient and effective in the back office — both in branches and throughout corporate infrastructure. This will help us lower costs on the backend, including care and overhead expenses. It’s crucial for us, both as a company and as a country, to afford health care in the future. Therefore, we must continue to find ways to adapt as AI rapidly grows, recognizing that what was impossible yesterday is possible tomorrow.

We must stay focused on rethinking our approaches and not settle for the traditional ways of doing things. We should continue to innovate in the back office and encourage our partners, vendors, and business associates to reconsider how to become increasingly efficient every day.

These two factors are connected to labor constraints and the ongoing challenge of hiring enough qualified personnel, which is essential for achieving efficiency and effectiveness in both hands-on care delivery and all our back-office operations.

What tailwinds is Aveanna experiencing, and how can you capitalize on them?

Our payer partners have been fantastic in both government and Medicaid state offices. We discussed Georgia and Massachusetts this past year. We talked about Oklahoma the previous year, where state governments are deeply engaged with us to help lower the total cost curve and reduce the total cost of care. Some of our tailwinds have come from our government partners, as well as our preferred payer strategy, which continues to provide significant support, allowing us to staff more hours, provide more care and hire more qualified caregivers due to the way they compensate us, particularly under the value-based agreements we operate.

Our company’s ability to grasp and embody the preferred payer and government affairs strategy has created the greatest tailwind for Aveanna, and we expect this to continue over the next couple of years. We are committed to the strategy that not every payer can be our partner; sometimes, it’s impossible to make a payer a partner if they are uninterested. However, those payers who invest in us, understand our story, value caregivers and clinicians, and ultimately wish to collaborate with us on achieving better outcomes while offering value-based bonuses for those results are where we find our tailwinds, and that’s where we will focus our efforts.

What emerging industry trends are you currently watching?

I think I’d go back to the impact of AI over the next three to five years. I don’t believe AI will replace a nurse in that time frame. A nurse will still be a nurse. But everything that a nurse or a therapist does at home will be supported by the rapid growth of AI, technology and information.

Everything we’ve seen and heard over the last 50 years will be replicated in technology in the next five years. It’s about being incredibly efficient, having data at our fingertips and supporting caregivers in the home. Whether through virtual doctors in the home assisted by technology or nurses meeting with families to put eyes on patients, we will have support through AI that enhances our planning questions and infrastructure. I believe this rapid growth will revolutionize not only home care but all of health care in the next three to five years. It’s going to be exciting and scary, but it’s going to be fantastic. It will change the way we think about the business.

What are some aspects we aren’t paying enough attention to in the industry right now? What should we be focusing on as a sector?

This industry was underpinned by incredibly passionate and compassionate nurses and administrators who believe deeply in humans, relationships and caring for people in their homes.

When a hundred years of health care passes, we will look back and think about the nurse who knocks on the front door and walks into the home; it will still be the same experience. It still brings a smile to the patient’s face when they see their nurse; they’re just ecstatic. They’re so excited, you know, it’s their friend, their confidant, but also their connection to health care.

As great as AI is, and as much as we want to discuss the future, the compassion and passion of a caregiver connecting with a family in a one-on-one setting makes this truly special. That is what counts. Having the time to spend with a patient, whether they are 99 years old or just one, and making them feel special during that 45 minutes or one hour, whatever time is available, creates a unique connection.

This still makes our industry great. When speaking with governors, which we often do, or when communicating with federal senators and state congresspeople, conveying that special bond resonates with them. They light up and may share personal stories, like how their sister or mom experienced hospice care, recounting how compassionate the hospice nurse was. That’s what this business is truly about. When we perform our jobs well and eliminate distractions, we enable the right caregiver to be with the right patient at the right moment, leading to something truly special. I think this has always made our industry remarkable. It is what makes it exceptional today, and hopefully, 100 years from now, it will continue to define this industry as great.