Aveanna Is Looking To Grow In Its ‘Rightsized’ Home Health Segment Again

Aveanna Healthcare Holdings (Nasdaq: AVAH) leaders believe the company is back at a place where it can bank on near-term growth in its Medicare-certified home health business.

It first entered into a business “transformation” in January 2023, and that transformation is already paying dividends, according to CEO Jeff Shaner.

But much of the turnaround has been led by the private-duty services segment. Now, Shaner sees a path for the company to begin accelerating its home health and hospice lines.

“We’re structured [well] in this current choppy Medicare environment, and I would say we are in a choppy home health and hospice Medicare environment,” Shaner said Tuesday at the RBC Capital Markets Global Healthcare Conference. “So we’re positioned well to now grow this business, grow it to being profitable, while also driving [quality] clinical outcomes on the way.”

Based in Atlanta, Aveanna provides home-based care services to pediatric and senior populations in 33 states. Its segments include private-duty nursing, home health and hospice, and medical solutions.

For context, in the first quarter, home health and hospice revenue totaled $54.6 million, a 2.7% year-over-year decrease.

Aveanna was initially a pediatric home-based care provider, but became a more senior-focused provider around the time it went public in 2021.

The company is leveraging its preferred-payer strategy in all three of its segments. It’s scratching deals with subpar payers, renewing contracts with the plans that recognize its value and allocating capacity to those better payer sources over time.

That strategy is working, as it gained four new “preferred payers” in the first quarter, bringing the total to 18.

In home health care specifically, that means turning per-visit rates for services into episodic rates.

“We pivoted strongly,” Shaner said. “We canceled contracts that were not willing to be episodic in nature, that were pay-per visit. We just reallocated our sales force, focused our business and aligned our clinical capacity – similar to PDS – with those payers who want to pay that episodic rate.”

Aveanna conducts home health and hospice business in 14 states. The goal is to have over 70% of capacity going toward episodic contracts.

That preferred-payer strategy mirror’s the strategy of Enhabit Inc. (NYSE: EHAB), which has taken some hits over the last few years with its payer innovation tactics, but ultimately is now near the other side of turbulence.

“We’ve rightsized the business,” Aveanna CFO Matt Buckhalter said. “And demand outweighs supply. That’s the case in every segment, but in [home health and hospice], the demand for services far outweighs supply. So, we’re being strategic, taking [payers] that value the service the most, and providing them with the best care.”

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