Amedisys makes progress in terms of turnover and revenue stability

Amedisys Inc. (NASDAQ: AMED) is seeing glimpses of an improvement in the labor force that contributed to income inequality in 2022.

The company has reduced its nurse turnover rate to around 20%, above the industry average, said Brian Tankvilut, an equity analyst at investment banking firm Jefferies Financial Group. Jeffreys recently hosted a dinner with Amedisys executives in San Francisco.

Amedisys looks forward to further success on the labor front on the horizon.

“The gradual decline in turnover will be driven by macro factors (countercyclical nature of the nursing staffing), modest rate increases (3% increase at the end of 2022) and initiatives (operational adjustments focused on lifestyle and performance) aimed at increasing the attractiveness of work in AMED,” said Tankilut in a note. “As the broader demand for home care remains robust, increased physician capacity should lead to incremental growth.”

Labor shortages were the main reason for the capacity shortages that Amedisys and many other service providers faced in 2022. According to WellSky’s CarePort, abandonment rates among hospice providers have reached an all-time high of 41%. Before the pandemic, the baseline hovered around 25%.

Labor shortages slowed Amedisys’ hiring in the third quarter of 2022, hurting the company’s bottom line. Combined with inflation and the return of the Medicare sequestration, this resulted in slower-than-expected growth in the third quarter of 2022.

Amedisys’ net services revenue rose to $558 million in the third quarter of 2022 from $533.5 million in the prior year quarter, but revenue fell short of Wall Street’s expectations and forced the company to cut its 2022 guidance. What’s more, adjusted earnings per share (EPS) hit $1.15 in the third quarter, down 24.8% year-over-year.

A tumultuous year for the company hastened Kusserov’s return to the company’s CEO post following the departure of former CEO Chris Gerard early in the fourth quarter.

At the Jeffreys Dinner, Kusserow also expressed his views on the future of home care companies as payer interest in the space grows, Tankvilut said.

With interest in large-scale home health assets growing among strategic buyers, few large home health companies are likely to remain independent, Kusserov said.

His remarks come after large transactions between payers and providers that have taken place over the past two years. These include the acquisition of Humana, Inc. 100% stake in Kindred at Home for $5.7 billion and the upcoming purchase of LHC Group (NASDAQ: LHCG) by UnitedHealth Group (NYSE: UHN) subsidiary Optum Health for $5.5 billion.

“As [Amedisys management] discussed the home healthcare landscape beyond [near-term] work-payer mix issues, they noted that they believe there is a lack of quality home health care opportunities, as well as a high level of interest from potential strategic buyers in their own large home care companies…”, said Tankvilat in a note . “Managed care companies are showing growing interest in partnering with or potentially owning home care operators to lower the cost of caring for patients with chronic conditions.”

One unresolved question about the impact of such transactions is how the hospice will ultimately fit into the picture.

Deals like this allow payers to capitalize on the growing demand for home care and move more patients into cheaper settings. They also provide an opportunity to better manage the financial risks associated with value-based reimbursement.

However, because hospices currently have limited access to risk-based models, payers who purchase these assets have their eyes set on their home healthcare business.

Last summer, for example, Humana sold a 60% stake in its Kindred at Home hospice segment to private equity firm Clayton, Dubilier & Rice for $2.8 billion. Humana retained the remaining 40%.

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