LHC Group Inc. (Nasdaq: LHCG) established its first home health joint venture with Louisiana’s Opelousas General Hospital in 1998. Since then, LifePoint Health, Christus Health and several other hospital chains have joined the in-home care company’s JV network as well.
Overall, the Lafayette, Louisiana-based LHC Group now has 82 unique joint venture partnerships, collectively covering upwards of 435 hospitals. Despite these numbers and its proven JV track record, however, the provider still sees plenty of ground to gain.
“We’ve got a long history of doing this,” LHC Group President and COO Josh Proffitt said Thursday at the Barclays Global Healthcare Conference. “And doing it with excellence.”
LHC Group delivers home health, hospice and personal care services across roughly 900 locations in 37 states and the District of Columbia. Building off those three core services lines, the company has been steadily working to position itself as a “full continuum of care,” with the home at the very center.
Historically, much of its JV growth – including the system-wide partnerships with LifePoint and Christus – came from 2016 to right before the COVID-19 pandemic, according to Proffitt.
“It wasn’t just JV momentum,” he said. “But it was very large systems, both regional and national, that were picking up a lot of momentum to move into the home and prioritize health care delivery in home.”
That interest was understandably put on the back burner with the pandemic, Proffitt noted, as all health care stakeholders turned their attention to solving a global health care crisis. But so far in 2022, the JV momentum has returned.
“We had momentum, pre-pandemic, that was really solid,” he said. “The pandemic put a highlight on the importance of [home health care]. And now coming out, I mean, the phone is ringing.”
On Tuesday, for example, LHC Group announced the signing of a definitive agreement to form a new home health JV with Archbold Medical Center, a health system made up of four hospitals and three nursing homes.
The partnership will include two home health locations serving Georgia’s Thomas, Brooks, Grady, Colquitt, Mitchell, Decatur and Seminole counties. LHC Group anticipates incremental annualized revenue of about $5 million from the JV, which is expected to close on May 1.
In total, there are just under 6,100 hospitals in the U.S., with about two-thirds of all community hospitals affiliated with a larger health system, according to the most recent American Hospital Association statistics.
Those numbers suggest that LHC Group has an active JV with less than 10% of the overall hospital market.
Chief Strategy and Innovation Officer Bruce Greenstein, also speaking at Barclays on Thursday, cited that point to further underscore the untapped upside of the provider’s long-standing strategy.
“And while hospitals now are thinking about home health more than ever before, still, a large portion don’t have their own home health division at all,” Greenstein said.
In some cases, hospitals are interested in forming home health JVs to fill in service gaps or reinforce existing operations. In other cases, they’re hoping to turn around failing programs.
“A large portion, whether the hospital operators like to think about it or not, is running a losing operation,” Greenstein said. “They’re not able to take their own referrals, or they’re losing money on a quarterly basis.”
Furthermore, the JV relationships often open new financial opportunities outside of fee-for-service structures for LHC Group.
“We have several of our joint venture partners that take full-cap risk from large plans,” Greenstein said. “And they incent us to change the equation of what proportion [of patients] go to SNFs, what proportion comes to home house. And that’s been very successful.”
Market presence
Generally, LHC Group doesn’t pick and choose its joint venture partners based on its current market presence.
If LHC Group is interested in launching a de novo in a given area, for instance, it will weigh existing provider density, Certificate of Need (CON) regulation and the level of home health competition. With its JVs, those factors aren’t as important.
“A JV market is a different market than a freestanding market, for sure,” Proffitt said.
Greenstein echoed that idea.
“When we get a lot of requests to go somewhere where we don’t have a location, if there’s no conflict with another partner, we’ll usually take the meetings and potentially move in that direction,” he said.
In addition to boosting business, the LHC Group executives also stated that the hospital-home health partnership push will contribute to industry-wide consolidation.
“That consolidation will be through M&A. It’ll be through de novos. It’ll be through market-share gains,” Proffitt said. “One that’s more unique to us is our joint venture strategy. You’re going to see more and more joint ventures with hospitals and health systems.”
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