The average age of an Amedisys Inc. (Nasdaq: AMED) patient is about 78. The current age of the oldest baby boomer is about 77, which suggests that a whole new population could be entering its census in the near-term future.
On top of that, elective procedures are returning to pre-pandemic levels, representing about 8% of the company’s home health admissions. While Amedisys CEO Chris Gerard is unwilling to suggest that there may be even more pent-up demand on its way, ticking that number up further, some insiders believe there could be.
“We saw them come back pretty strongly at the end of last year, then they slowed down a little bit when Omicron came through,” Gerard said Tuesday during a presentation at the BofA Securities 2022 Healthcare Conference. “We’re not hearing anything that would suggest we’ll go much more than that [8%]. But we think it’s gotten right about to pre-pandemic levels.”
In addition to demographic tailwinds and an expected 5% year-over-year increase for its home health admissions, any forthcoming pro-home-related legislation would essentially be icing on the cake for Amedisys.
Take the Choose Home Care Act of 2021 and the extension of the Acute Hospital Care at Home waiver, for example. Given Amedisys wide range of capabilities in the home – especially after its acquisition of Contessa Health last year – both pieces of pending legislation would benefit its business.
Having said that, to some extent, all of that would be extra icing on the cake. Amedisys has not built in that legislation to its expectations for the future.
“Neither one of those were built into the rationale in our model, in terms of when we acquired Contessa,” Gerard said. “So in the event that the waiver does become permanent, we see that as nothing but upside and opportunity for us and in the event that [those] do come through.”
Contessa was also a strictly strategic business decision when it was done, with no expectations of monetary upside in the near-term future. For instance, its drag on Amedisys’ balance sheet will be about $26 million this year, according to Amedisys CFO Scott Ginn.
But Contessa’s pipeline of partnerships has brought some benefit to Amedisys. Certain partners have expanded their relationship with Contessa and Amedisys to include other service lines since the acquisition.
Amedisys also contends that its core M&A pipeline remains strong, despite some analyst concerns last year that the Contessa deal would get in the way of that pipeline.
Any hold up in that pipeline has to do with documentation, Ginn said.
“We still have an active pipeline and are pushing it pretty hard, and we expect to see some more come through in the second half of the year, as sequestration is beginning to fall off right now,” Ginn said. “We’re always looking at deals. I tell people, ‘We’ve got to kiss a lot of frogs.’ A lot of deals we’ve looked at can’t get through … because we have to make sure their documentation is strong.”
External struggles
Those issues include things like COVID-19, of course, which caused 7% of Amedisys’ clinicians to be forced into quarantine basically “overnight” in the first quarter.
In turn, that led to very high contract labor costs, as home health agencies had to compete with others for workers, including hospitals.
Those COVID-related costs are still being considered one-time costs, though defining them as such has proved unpredictable.
After surviving the Omicron surge in the first quarter, another unpleasant external force has surfaced in the second quarter – inflation. Amedisys spends about $4 million per month on fuel, meaning it’s affected greatly by rising prices.
“We’ve added a stipend for our clinicians to help them out through this,” Ginn said. “It’s based off the change in the prices, so it’ll flex back down.”
The post Signs Suggest Elective Procedure Admissions into Home Health Are Reaching Pre-Pandemic Levels appeared first on Home Health Care News.
