Following a Medicaid rate increase in California, Aveanna Healthcare (Nasdaq: AVAH) leaders predict hundreds of families will move children out of children’s hospitals and into home-based pediatric care and reverse years of caregiver shortages.
Aveanna execs aim to raise caregiver wages ahead of the new rate, then ramp up recruiting in January to meet ramping need, Aveanna CEO Jeff Shaner said during the Jefferies Healthcare Services and Technology Conference on Sept. 15.
“Seven, eight, nine months from now, we will be talking about hundreds of families that have been pulled through the hospital, in a great way, to the home,” Shaner said. “Everyone wins when something like California happens, and we’re excited to be a part of it.”
Atlanta-based Aveanna Healthcare provides home health, hospice, private duty nursing and medical solutions across 39 states.
Aveanna’s California business suffered for almost five years like other private duty nursing (PDN) providers, Shaner said, due to rates staying stagnant for eight years as well as the COVID-19 pandemic. Aveanna had dropped down to roughly 50% of its authorized hours being staffed, which was “very low” for the company.
Part of what made California’s operating environment difficult, Shaner said, is that the state pays for PDN services directly through Medicaid rather than through managed care organizations (MCOs). Since there are no MCO partners in California due to the patients having Medicaid, providers find themselves scared.
“You really cannot compete as you try to help families in hospitals,” Shaner said. “You’re honest with them. You’re like, ‘We probably will not be able to find a nurse. It might take us months.’ No one is winning.”
However, California increased its 2027 budget to include a “significant investment” in pediatric PDN following dedicated advocacy within the state, Shaner previously said on the Q2 earnings call. The change is slated to go into effect Jan. 1, 2027.
California’s rate increase will lead to outsized impacts compared to other states. While Georgia, where Aveanna is headquartered, has one children’s hospital, California has 13. The difference means a larger pool of hospitalized children who could transition to home-based care once staffing improves. As a result, Shaner said, “There’s a lot of work to be done between us and our peers to pull these patients through.”
The workload includes Aveanna increasing its fill rate percentage by increasing wages, a goal for the company in Q4, Shaner said. Aveanna will then apply new wage rates and spur recruiting to effectively care for new patients in January.
Aveanna’s home health and hospice segments are approaching $300 million in annualized revenue — comprising 12% of Aveanna’s total revenue — and reaching between 15% and 16% in organic growth, Shaner added.
The company envisions increasing the number of Medicaid participant-directed services states in which it operates from 32 to 40 within the next few years, Shaner said.
Companies featured in this article:
