There are certain headwinds affecting all home-based care providers right now, whether it be in payment, staffing or otherwise. Amid those challenges, the largest companies are all taking slightly different approaches to growth.

Enhabit Inc. (NYSE: EHAB), for instance, grabbed the attention of home health providers everywhere last week when it announced that it had terminated its contract with UnitedHealth Group’s (NYSE: UNH) UnitedHealthcare. That move fell in line with its overarching “payer innovation” strategy.

Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) is also focusing on its “preferred-payer” strategy, which includes drawing a hard line on rates – as Enhabit is doing – but also advocating for proper reimbursement from states in home- and community-based services (HCBS).

Leaders from Amedisys Inc. (Nasdaq: AMED) have been quiet over the last year, given the pending UnitedHealth Group acquisition. But, when it comes to its payer strategy, the company’s numbers tell a story worth paying attention to.

Elsewhere, Addus Homecare Corp. (Nasdaq: ADUS) is taking advantage of the headwinds. High interest rates and payment uncertainty across home-based care has led to a slow M&A market, allowing the company to pounce on acquisition targets with little competition.

The Pennant Group (Nasdaq: PNTG) has done the same.

All of the aforementioned companies’ strategies differ to some extent, and yet all are in place to achieve growth during a somewhat turbulent time for home-based care.

What’s behind those strategies is the topic of this week’s exclusive, members-only HHCN+ Update.

Finding the right payers

Aveanna and Enhabit are both trying to turn around their businesses. Each saw their share price tumble after going public, and each has addressed that issue – at least in part – by revamping their payer strategies.

Enhabit’s payer innovation strategy has been well documented, and I covered its decision to walk away from UnitedHealthcare in last week’s HHCN+ Update.

“After over nine months of unsuccessful negotiations with UnitedHealthcare, we submitted our termination notice on August 1,” Enhabit CEO Barb Jacobsmeyer said last week. “We will dedicate our clinical resources to fee-for-service Medicare patients, and those members of the 68 favorable contracts. We remain committed to providing our strong quality of care to UnitedHealthcare members, if at some point they decide to contract with acceptable rates.”

Similar to Enhabit, Aveanna is taking back its most vital resource: frontline workers.

“By focusing our clinical clinical capacity on our preferred payers, we achieve solid year-to-year growth in revenue and adjusted EBITDA,” Aveanna CEO Jeff Shaner said on the company’s second-quarter earnings call. “We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts to those payers willing to engage with us on enhanced reimbursement rates and value-based agreements. While we continue to operate in a challenging labor and inflation environment, our preferred payer strategy allows us to return to a more normalized growth rate in our business segments.”

Aveanna posted solid year-over-year growth in all three of its segments – private-duty services, home health and hospice, and medical solutions – in the second quarter.

Enhabit has touted its 68 “favorable” non-Medicare agreements. Aveanna, too, is taking stock of the payers and states that are willing to pay it an adequate rate for home-based care services.

Aveanna said that no single payer makes up more than 10% of its business, which lends itself to a healthy business. At the same time, that means work is cut out for the company when it comes to renegotiating higher rates for services.

As seen above, Aveanna is set to triple and nearly triple its preferred payers and value-based care arrangements, respectively, by the end of 2024.

Traditionally, one concern in home-based care has been that at least one provider will be willing to accept substandard rates, making negotiations for the rest of providers tougher.

Now, though, the larger companies are leading by example.

“As we continue to grow, we are accelerating our preferred payer strategy and medical solutions by aligning our capacity with those payers that value our services and appropriately reimburse us for the care we provide,” Aveanna CFO Matt Buckhalter said on the call. “We continue to fight through a difficult labor environment while keeping our patients’ care at the center of everything we do. It is clear to us that shifting caregiver capacity to those preferred payers who value our partnership is a path forward.”

Amedisys is likely to be joining a payer itself by year end. But it has clearly been focused on winning better MA business over the last couple of years. In the second quarter, its non-Medicare home health revenue grew by 24% year over year.

Another study published this week suggested that MA members utilize home health care less than their traditional Medicare counterparts. While there’s likely a lot of reasons for that, it’s probably not a good long-term strategy for MA plans to cheap out on home health care, an essential and less costly service.

‘Bold’ M&A

One of the other most enlightening admissions of this past earnings season came from Addus, which suggested its recent M&A activity was partly made possible by less competition – particularly of the private equity variety.

Last year, Addus acquired Tennessee Quality Care for $106 million, enhancing its value-based care capabilities in the state. This year, it agreed to acquire Gentiva’s personal care assets for $350 million, allowing it to enter multiple new states.

Over the past two to three years, M&A has reached historical lows in the home-based care space. Activity across home health care, home care and hospice has fallen off a cliff since there was the flurry of activity in 2020 and 2021.

“Realistically, over the last 12 to 18 months, we’ve not seen a lot of competition out there,” Addus CEO Dirk Allison said on the company’s second-quarter earnings call. “There’s been the occasional smaller strategic player that’s bought a few deals on a localized basis. From a PE standpoint, it’s really been very slow as far as competition for the last bit. Now, obviously, if rates come down in September, as everybody’s expecting, there’ll be a point where PE will come back in and that’s fine. It’s been a market in which up until the last year or so, we’ve always operated with competition from those folks.”

The Pennant Group (Nasdaq: PNTG) has joined Addus in bucking the downward M&A trend. It has executed a slew of transactions over the past couple of years, including a large deal for Signature Healthcare assets in its current footprint, as well as a deal that will place it on the East Coast for the first time.

“This period of expansion provides insight into our potential as a provider of choice in our local communities, a best-in-class operator across our industries and a disciplined – yet bold – growth company with the sophistication and adaptability to become a key solution in the health care continuum,” Pennant Group CEO Brent Guerisoli said on the company’s second-quarter earnings call. “Since the beginning of the year, we have entered into the Muir Home Health joint venture; closed an additional two home health and two hospice transactions; initiated a management agreement with Hartford HealthCare; announced the largest acquisition in our history with the Signature transaction; and completed three senior living deals.”

Most of the largest home-based care providers recognize the need for two things in this market: better contracts with all managed care partners, and scale that will allow them to sustain success in the face of stroke-of-the-pen risk.

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On Thursday’s second-quarter earnings call, the company reported its overall revenue at $505 million, a 7% increase compared to the same time last year. This growth was driven by a $30.2 million increase in private-duty services (PDS) and a $3.6 million increase in the medical solutions segment.

However, these gains were partially offset by a $0.8 million decrease in home health and hospice (HHS) segment revenue. Nevertheless, the company is progressing in closing the revenue gap in the HHS segment, as it reported a $1.5 million decrease in the same segment in the first quarter.

Aveanna CEO Jeff Shaner credited the higher revenue to an improved payer rate environment and the company’s cost-reduction efforts. He acknowledged that while the industry benefits from significant demand, the key to sustained improvement is recruiting and retaining high-quality caregivers.

“Our ongoing enhanced payer partnerships allow us to provide more care to a greater number of patients through investment in our caregivers,” Shaner said during the call. “The key to our current and future success continues to be our dedicated team of Aveanna leaders and caregivers who consistently deliver exceptional care daily.”

Navigating legislative headwinds

The company’s goal for 2024 was to implement a legislative strategy to improve home- and community-based services (HCBS) reimbursement rates in specific states, focusing on Georgia, Massachusetts and California. These states contribute to approximately 15% of Aveanna’s PDS revenue.

The company aimed to increase the number of PDS preferred payer agreements from 14 to 22 by 2024; as of now, they have achieved 19.

“We have achieved double-digit rate improvements in Georgia and Massachusetts, effective in the second half of 2024,” Shaner said. “Our strategy involves partnering with state legislatures and governors to address deficiencies in private-duty nursing wages. Our goal is to adjust reimbursement rates to enhance access to care for patients with complex medical conditions.”

California continues to be a challenge for Aveanna in PDS. Shaner commented that the company had made strides with Gov. Gavin Newsom, Medi-Cal and the state legislature, demonstrating the importance of PDS rate investment and how it supports lower health care costs, improved patient satisfaction and quality outcomes.

“During the most recent legislative session, we successfully secured an increase in the Medi-Cal PDS rates, despite the challenges posed by the projected California budget deficit,” Shaner said. “The increased PDS rate will come into effect on January 1, 2026.”

He also mentioned that this rate increase is dependent on passing a voter referendum on the upcoming November 5 election ballot, known as Proposition 35.

“Although Prop 35 is significant for us, it doesn’t change how we think about California,” Shaner said. “We are committed to California for the long term and will continue to push our preferred payer strategy and advocate for a meaningful rate lift on the Medi-Cal side.”

Maintaining focus

Regarding home health care, Shaner mentioned the company’s goal for 2024 to maintain an episodic payer mix above 70% while returning to a more normalized growth rate. In the second quarter, the episodic mix was at 76%, which represents a 4.5% growth compared to the prior year period.

“As we enter the second year of our strategic transformation, we are maintaining a strong focus on the initiatives that generated positive momentum in 2023 and are continuing this momentum into 2024,” Shaner said. “Our efforts will continue to center around four primary strategic initiatives. First, we will enhance partnerships with the government and preferred payers to expand caregiver capacity. Second, we will seek out cost efficiencies and synergies to capitalize on our growth. Third, we will manage our capital structure, prioritize cash collection and aim for positive free cash flow. Last, we will engage our leaders and employees to effectively deliver on our mission.”

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Broadly, Medicaid is a state and federal partnership. The federal government sets rules and parameters. The state takes those parameters and implements their own programs within the framework that the Centers for Medicare & Medicaid Services (CMS) provides.

However, the federal guidance around state rates is minimal, according to Damon Terzaghi, senior director of Medicaid advocacy at the National Association for Home Care & Hospice (NAHC).

“What we always refer to, when we’re talking about Medicaid payment policy, is section 1902(a)(30)(A),” he said during a presentation at NAHC’s Financial Management Conference, which took place last week. “[It] basically says that CMS, the federal government, does not have statutory authority to tell states what they must pay for programs, for services and those sorts of things.”

Hospice is one of the few exceptions. It is one of the programs that has a federal minimum payment rate.

In general, the Medicaid program has a history of under-reimbursing for services in comparison to Medicare and private insurance.

“It has led to a lot of challenges and concerns around whether they’re truly meeting that access-to-care requirement,” Terzaghi said.

Terzaghi noted that these problems eventually led to the “Ensuring Access to Medicaid Services” rule.

“You can draw a direct line from the [Armstrong v. Exceptional Child Center] Supreme Court decision, through various iterations of CMS rulemaking, straight to this access regulation where CMS says, ‘We can’t tell you a minimum payment rate, providers can’t sue, [but] we can start to put a framework around what equal access looks like,” he said.

One of the main positives of the rule is that it’s now a regulatory standard for states to have rates high enough to attract a sufficient workforce to deliver care.

There are a handful of ways that different states approach payment. Fee for services is one of the most common ways that HCBS are reimbursed through Medicaid.

There are some states that adjust payment rates to keep pace with cost-of-living differences based on geography.

In addition to geographic adjustments, some states do acuity use adjustments.

“In the Medicaid program, frequently there’s a comprehensive functional assessment of need, for individuals before you start delivering these in-home care services, so we’ve seen more and more states start to tie reimbursement to acuity,” Terzaghi said.

There are also bundled payments, which groups services together, and then providers receive a single rate.

“The states are trying to give some flexibility to meet the individual where they’re at, as opposed to having a more regimented prior authorization process,” Terzaghi said.

Managed care

Managed care organizations (MCO) get paid a per member, per month risk adjusted rate from the state.

It’s important for providers to understand that operating in a state that has managed care doesn’t mean that every home- and community-based service is under the MCO.

“I’ll use Georgia as an example, it’s mandatory managed Medicaid, except if you are using an LTSS service, for example, or if you have private-duty nursing that falls under the GAPP program, which falls outside of the MCO,” Jim Melançon, senior vice president of government affairs at Aveanna Healthcare, said during the presentation.

Melançon noted that managed Medicaid is the predominant service delivery model that most states are following.

Ultimately, providers should pay attention to services covered in their states, how rates are established and their state’s budgeting process.

“The market is going to dictate what the rate is going to be for your workers, and that’s what you will – as a provider – have to look at,” Melançon said.

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If there were ever a time for Medicare Advantage-related troubles to cool off in the home health care space, now would be it. And, heading into the summer, some of the largest home health providers in the country are scoring demonstrable wins that could lead to future success.

Virtually no one has the MA game figured out entirely, and it’s hard to imagine a day where that even becomes achievable. But there are certainly signs that the worst just may be behind providers, at least in a good portion of U.S. counties.

For one, MA plans are not in a strong financial position currently, at least for the most part. Providers are in a better position than they were three to five years ago to persuade the plans to pay more fairly for services, even if plans are less well off.

In value-based care, and in work with managed care companies in general, success begets success. Home health providers now can show their work, to one plan after another.

Instead of a woe-is-me approach, the largest providers – like The Pennant Group (Nasdaq: PNTG), Enhabit Inc. (NYSE: EHAB) and Aveanna Inc. (Nasdaq: AVAH) – are taking a more hard-lined approach.

That’s not possible for every provider, for certain. But the public companies are contributing to a new tone setting: pay fairly, or else.

“I think the payers are recognizing that this is not a commodity business, that there is a real need to partner with high-quality providers in the communities,” Pennant CEO Brent Guerisoli said Wednesday. “That’s also why these discussions have gone favorably for us, because they recognize the value of [partnering with] a quality provider.”

The latest slate of earnings calls and investor presentations from home-based care’s publicly traded providers came with a few key learnings, mostly centered around MA.

Those learnings are the topic of this week’s members-only, exclusive HHCN+ Update.

MA penetration

A better MA landscape may not just be driven by providers taking a more hard-lined approach in negotiations.

In fact, Addus HomeCare Corp. (Nasdaq: ADUS) CEO Dirk Allison said during the company’s first-quarter earnings call earlier this month that there may be a “leveling off” when it comes to MA penetration.

For the first time ever, in 2023, there were more Medicare beneficiaries under an MA plan than traditional Medicare.

That penetration occurred rapidly, according to data from Kaiser Family Foundation. For instance, in 2023, about 51% of beneficiaries were enrolled in MA. Just five years earlier, only 37% of beneficiaries were enrolled in MA.

“We continue to be affected by the movement of Medicare beneficiaries from Medicare fee-for-service to Medicare Advantage, but we feel we may be seeing a leveling off of this shift in the markets we currently serve,” Allison said. “We are continuing to work with our Medicare Advantage payers to obtain higher rates.”

The rapid penetration that took place from 2013 to 2023 led to the assumption that MA plans would continue to gain market share, and quickly. But that doesn’t seem like a sure thing anymore.

Now that the Centers for Medicare & Medicaid Services (CMS) has pulled back on MA rates, plans have less of an ability to expand and offer supplemental benefits that differentiate them from traditional Medicare.

For two years in a row, CMS has finalized unsatisfactory – from the MA plan perspective – payment rates. In 2025, plans will see a 0.16% decrease to core payments.

“As we think about the decisions for ‘25 bids, we do intend to exit some counties,” Humana Inc. (NYSE: HUM) CFO Susan Diamond said earlier this week. “When we thought about the framework of how we make those decisions, a primary input was the profitability of the plan.”

Humana CEO Bruce Broussard also added that supplemental benefits would be “less and less offered” moving forward.

So, in addition to exiting some markets, Humana – along with other insurers – are opting for profitability over growth. That could mean less stark penetration in the coming years for MA.

That would be a positive trend for home health providers. Although traditional Medicare payment is being cut, it still pays far better compared to MA plans.

MA isn’t going away, and will be a larger part of home health business for the foreseeable future. But providers are still making adjustments to account for that. If the firehose is turned down – even for a year or two – it would be of benefit.

Positive steps with plans

Over the last few years especially, providers have been constructing strategies to deal with MA penetration.

Those strategies are finally being implemented, and even if they’re still in their infancy, they’re certainly better than grasping onto what’s left of fee-for-service Medicare business.

Outside of home health care, Addus is also toying with a value-based care strategy that includes more personal care for MA beneficiaries.

“[We have] a small contract, and instead of gain-share, we’re taking some risk,” Allison said Wednesday. “Now, it’s very minimal. We’re only taking risk for our part, for our hours. We wanted to — I won’t say experiment — but we wanted to enter into a contract with a payer that we could partner together to determine if adding personal care hours can help reduce overall medical loss ratio for their patient base. We’re excited about that. We’ve only been in it less than a few months.”

Data doesn’t always persuade lawmakers. Instead, stories do. That’s not as much the case with MA plans, where data remains king.

Providers have caught up there, too.

As Enhabit shifts its home health mix to include more – and better – MA contracts, it is championing its 30-day rehospitalization rate, which is 20.5% below industry average, according to the company.

The new face on the public market, BrightSpring Health Services (Nasdaq: BTSG), said on its first-quarter earnings call that its home health services were also helping drive hospitalizations down significantly.

“Our medication management program … has demonstrated a 73% reduction in hospitalizations when utilized together with our home health,” Jon Rousseau, president and CEO of BrightSpring, said during the company’s first-quarter earnings call earlier this month.

Pennant was ahead of the game in MA, having recognized the need to take on MA beneficiaries long before a crisis arose.

Now, it is in the position to tell plans to pay up. Pennant President and COO John J. Gochnour said Wednesday that the company had achieved per-visit pay bumps from MA plans over the last two years that were above any increases it saw over the previous ten years before that.

Specifically, those rates have climbed anywhere from 10% to 15%, according to Gochnour.

It’s tough to say that the tide is turning in the MA-home health provider relationship. Providers are still struggling mightily to deal with the landscape shift.

But in a generational war like this one, all battle victories are worth taking stock of.

“Because, in the end, they still save money, right?” Gochnour said. “Because we’re the lowest-cost setting. And they make the right investment, we reduce hospitalizations, we reduce the overall cost of the care, and it’s a win-win for both.”

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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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Contextually, 2024 marks Year 2 of the home health, hospice and private-duty services company’s strategic transformation initiative. Aveanna went public in 2021 with high hopes, but it has since had to navigate multiple operational challenges affecting its performance.

“As we enter Year 2 of our strategic transformation, we remain highly focused on those initiatives that created positive momentum in 2023,” CEO Jeff Shaner said during the company’s 2024 first-quarter earnings call on Thursday.

Aveanna offers a range of in-home care services to both pediatric and adult patient populations, with its private-duty nursing services arm accounting for the bulk of its business. The company has locations in 33 states.

Shaner and CFO Matt Buckhalter have previously explained how allocating clinical resources to Aveanna’s best payers was among the company’s top priorities. The executives believe their company has made further progress on that front so far in 2024.

“Our Q1 results highlight that we continue to align our objectives with those of our preferred payers and government partners,” Shaner said on Thursday. “By focusing our clinical capacity on our preferred payers, we achieved year-over-year growth in revenue and adjusted EBITDA.”

As another benefit of the preferred-payer strategy, Aveanna has also experienced improvement in its caregiver hiring and retention trends, according to the CEO. By focusing its care capacity on payers willing to engage with Aveanna on enhanced reimbursement rates and value-based agreements, the company is able to invest further in its workforce, Shaner explained.

“While we continue to operate in a challenging labor and inflationary environment, our preferred-payer strategy allows us to return to a more normalized growth rate in our business segments,” he said.

Aveanna’s private-duty services segment illustrates the momentum the company has on building out its preferred-payer roster. In the first quarter alone, Aveanna added four additional preferred-payer agreements, increasing its total to 18.

Ultimately, Aveanna hopes to grow its preferred-payer-agreement total from 14 to 22 in 2024.

As for its home health business, Aveanna’s preferred-payer-strategy goal is to maintain its episodic payer mix at about 70% while returning to a more normalized growth rate, Shaner said.

“In Q1, our episodic mix was 75%, and we achieved positive total episode growth of 1.7% over the prior year’s period,” he continued. “Q1 marked the first time we’ve had sequential and year-over-year episodic growth since we entered the home health market. We also signed two additional episodic agreements within the quarter.”

Aveanna’s overall revenue was $490.7 million for the three-month period ended March 30, 2024, up 5.2% compared to $466.4 million for the three-month period ended April 1, 2023.

That increase was tied to a $22.1 million increase in private-duty-services segment revenue and a $3.7 million increase in medical solutions segment revenue. Revenue gains on the quarter were partially offset by a $1.5 million decrease in home health and hospice segment revenue, however.

In addition to its preferred-payer strategy, Aveanna’s other core focus areas include identifying cost efficiencies within the business, managing its capital structure while producing positive free-cash flow, and engaging its leaders and employees.

“Our business is demonstrating signs of recovery as we achieve our rate goals previously discussed,” Shaner said. “Home- and community-based care will continue to grow, and Aveanna is a comprehensive platform with a diverse payer base, providing a cost-effective, high-quality alternative to higher-cost care settings. And most importantly, we provide this care in the most desirable setting: the comfort of the patient’s home.”

Another highlight from the first quarter that Shaner was sure to mention during Thursday’s call: the hiring of a new chief legal officer. Aveanna announced the appointment of Jerry Perchik to the position in April.

“I would like to take a moment and welcome Jerry Perchik, our new chief legal officer, to Aveanna,” Shaner said. “Jerry has spent the last two decades dedicated to high-quality health care in the home setting. Jerry brings a wealth of experience in regulatory and legal affairs, mergers and acquisitions, and general corporate law.”

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Thanks to impactful, large-scale transactions over the last decade, the collective face of home-based care has changed forever.

Traditional providers in both home health care and personal home care have merged. Payers became involved in the home-based care space like never before. Of late, retailers have too.

But it’s often easy to forget how the current landscape became what it is.

Below, Home Health Care News takes a look at some of the most important and impactful deals in home-based care over the last decade – deals that explain, in part, where the home health and home care industries are today.

‘Big time’ provider deals

This past decade’s first blockbuster remained one of the most impactful throughout the last 10 years.

In 2014, April Anthony’s Encompass Home Health & Hospice was acquired by HealthSouth Corporation for $750 million. HealthSouth took a swing at home health and hospice, merging an in-patient facility business with a post-acute care business.

Four years later, HealthSouth would rebrand completely, taking on the home health and hospice entity’s name. Encompass Health Corp. (NYSE: EHC) still exists today, but is again without post-acute care capabilities.

The HealthSouth-Encompass deal is like a few other deals in home health care, in that it set off a domino effect and a winding life cycle of a home health entity.

Anthony left Encompass Health in 2021, and after her home health and hospice company operated as a segment within the larger organization for nearly a decade, Encompass Home Health & Hospice was spun off into its own public company: Enhabit Inc. (NYSE: EHAB).

That happened in 2022, and two years later, Enhabit may land in the hands of a different owner after it concludes its own strategic review. Anthony now runs VitalCaring, which is backed by her, The Vistria Group and Nautic Partners.

Over the decade, larger health care organizations like Encompass Health have also bundled up services, and also unbundled them.

For instance, Brookdale Senior Living (NYSE: BKD) had one of the largest home health footprints for a long time. After COVID-19 woes, however, it offloaded that to a health system eager to get into home health care: HCA Healthcare (NYSE: HCA). LHC Group would later acquire some of the assets jointly owned by Brookdale and HCA Healthcare.

Ascension Health, too, teamed up with TowerBrook to buy the home health and hospice provider Compassus in 2019.

A theme that has been a mainstay, and will likely remain a mainstay, is health systems changing course on their strategic planning – and deciding whether to own home health care themselves or focus on core operations and partner with home health care instead.

“You’re seeing a lot of these facility-based providers divesting or spinning off assets,” Chaz Bauer, director at Fifth Third Securities, told Home Health Care News. “They realize they have fundamentally two different businesses. They’re very related and intertwined. But fundamentally, you have these facility-based businesses that are very centralized models, very capital intensive. Whereas home-based care businesses, they’re very decentralized; they’re very capital-light. Part of the motivation there – in unbundling – is they can unlock value for their shareholders by splitting those businesses.”

But then there’s the M&A that has come from within the home health sector itself.

For instance, “the merger of equals” that turned LHC Group into a true home-based care powerhouse.

In late 2017, LHC Group agreed to merge with Almost Family in a $2.4 billion transaction. A straight line can be drawn from that deal to UnitedHealth Group’s (NYSE: UNH) acquisition of LHC Group, which was finalized in 2023.

LHC Group and Almost Family’s merger is not an anomaly, either. Not long after, Great Lakes Caring, National Home Health Care and Jordan Health Services combined in a three-way merger to create another one of the largest home health companies in the U.S.: Elara Caring.

That deal was powered by the PE firms Blue Wolf Capital Partners and Kelso & Company.

PE money in home-based care has turned a lot of sizable providers into powerhouses. The aforementioned PE firms – Blue Wolf, Kelso, Vistria and Nautic – have all played a part in that, in the transactions mentioned already and otherwise.

That will also continue, particularly as some of the holding periods of the largest companies turn over. There’s also a chance, however, that PE firms direct more attention to other parts of home-based care – like personal care – given the uncertainty surrounding home health payment rates.

In home care, Vistria and Centerbridge Partners uplifted Help at Home, turning it into one of the largest providers of home- and community-based services (HCBS) in the country.

Waud Capital recently acquired the large home care franchise Senior Helpers. Wellspring Capital Management acquired Interim HealthCare’s parent company Caring Brands International in 2021. Last September, The Halifax Group acquired Comfort Keepers from Sodexo.

PE has always been involved in home care. Bain Capital’s 2018 creation of Arosa, one of the largest non-franchised home care companies in the country, is one past example.

In the future, it’ll be interesting to see if PE will drive more large-scale, impactful deals like it has in home health care over the last decade.

Payers enter the fold

Any commentary on the biggest deals in home-based care over the last decade needs to note increased payer involvement.

Enter Humana Inc. (NYSE: HUM).

When people think of the company’s home-based care investments, most go straight to its takeover of Kindred at Home.

But let’s take a step out of the last decade, just for a second.

In 2011, Humana acquired the home-based care provider SeniorBridge, which was doing just $72 million in annual revenue at the time. When that deal was announced, it was not exactly frontpage news. But one could argue that kickstarted a chain of investments that changed the M&A landscape in home-based care forever.

“SeniorBridge fills a growing market need and is consistent with Humana’s focus on delivering clinical care for seniors in their homes,” Michael B. McCallister, Humana’s chairman and CEO at the time, said in a statement. “Acquiring SeniorBridge will immediately expand Humana’s existing clinical capabilities with the addition of SeniorBridge’s national network of 1,500 care managers. The company does a terrific job of reducing hospital readmissions and emergency-room utilization, all while helping seniors achieve lifelong well-being.”

Humana’s home-based care thesis was already there, but the SeniorBridge deal was likely the deal that set the stage for what eventually became CenterWell.

“The deal was a game changer. I was initially surprised by the size of the transaction. It was pretty small by Humana standards,” Mertz Taggart Managing Partner Cory Mertz told HHCN. “It didn’t take long for Humana to tout the savings SeniorBridge created for their membership, saving it billions of dollars within the first couple years of the deal, by keeping their members at home and out of the hospital.”

Nearly 13 years later, Humana is one of the largest home health providers in the country through CenterWell Home Health.

The company, with the help of the PE firms TPG Capital and Welsh, Carson, Anderson & Stowe (WCAS), acquired and merged Kindred at Home and Curo Health Services. Yet another home health and hospice powerhouse was formed, this time under the watch of one of the largest payers in the country.

In 2021, Humana opted to take over a remaining 60% of the enterprise (it had previously owned 40%), which was worth over $8 billion at the time.

In 2022, it divested the hospice and home care operations of Kindred to Clayton, Dubilier & Rice (CD&R). Those divested assets became what is now known as Gentiva, led by David Causby, the former CEO of Kindred at Home.

The home health assets Humana held onto are now under CenterWell Home Health. CenterWell, overall, includes primary care, pharmacy and home health services.

In 2024, most large payers – namely the ones with large MA memberships – have some sort of home-based care capabilities. That was not the case when Humana acquired SeniorBridge way back when.

“This has been an ongoing development, and it’s really just vertical integration,” Bauer said. “The thought is: why not get into that downstream, and then be able to more directly control those costs and quality outcomes on the payer side?”

The other heavily involved payer is the only one that has a leg up on Humana in MA: UnitedHealth Group.

UnitedHealth Group’s Optum already had a variety of health care provider assets, but it decided to make its first big home-based care splash early in 2022 when it announced the $5.4 billion acquisition of LHC Group.

While payers liked the thought of vertical integration, large providers like LHC Group were also recognizing an existential threat to home health business: MA penetration. More MA beneficiaries meant fewer traditional Medicare beneficiaries, which meant a less sturdy financial leg to stand on.

UnitedHealth Group further cemented its interest not long after, when it made a $3.3 billion all-cash offer for Amedisys. That deal was agreed to in June of 2023, but is still pending.

Though UnitedHealth Group may have to divest some Amedisys assets to finalize the deal, the company will most likely have the largest home health market share when that deal closes. Estimates suggest Optum will have about 10% of the U.S. home health market under its belt.

Not only are payers now involved in the home health industry, but they are also creating scale.

“You can make an argument that Optum acquiring LHC group, and now Amedisys, is a scale transaction, like ones we’ve seen before,” Bauer said. “Because it puts together two of the largest providers to make an industry leader.”

New kids on the block

Like payers before them, another group of companies is now firmly involved in home-based care investment: retailers.

In fact, they’re so invested, they may not be labeled as just retailers five to 10 years from now.

CVS Health (NYSE: CVS) has a new health care services segment dubbed CVS Healthspire. Walgreens Boots Alliance (Nasdaq: WBA) has the same with its U.S. Healthcare segment.

Both of those segments are arguably the future of their respective parent organizations. And both include home-based care services.

Payers and retailers have different business models, but tend to want the same thing: pharmacy, primary care and home-based care services.

In 2020, Walgreens made an over $1 billion investment in VillageMD, a home- and community-focused primary care provider. After subsequent investments, it has backed VillageMD with over $6 billion.

After that, Walgreens found its next health care services asset in the health-at-home solutions platform CareCentrix. Though he is no longer in the position, CareCentrix’s former CEO, John Driscoll, was the initial leader of Walgreens new U.S. Healthcare segment.

“We continue to see strong results and potential for growth from our partnership with CareCentrix. Our full acquisition further accelerates our transformation to become a consumer-centric health care company, leveraging innovative platforms that extend our capabilities into fast-growing segments of health care,” former Walgreens CEO Roz Brewer said at the time. “CareCentrix is key to offering services to our patients at every stage of the care continuum, and to driving long-term, sustainable growth as part of our U.S. Healthcare strategy.”

Not to be outdone, CVS Health agreed to acquire the home- and value-based care enabler Signify Health in 2022 for $8 billion. Shortly after that, it got its primary care provider, too, with the over $10 billion acquisition of Oak Street Health.

While none of these assets are traditional home health or home care assets, this retailer involvement represents a seismic change in U.S. health care – and home-based care is a major part of it.

These companies could go after more assets in the future, or they could become major partners for those traditional providers.

Honorable mentions

It’s impossible to highlight every deal, but there are some that don’t fit perfectly into “themes” that are still worth mentioning.

The home care technology company Honor acquired the home care franchise brand Home Instead in 2021, for instance. In lieu of strictly partnering with providers to see its vision through, Honor opted to purchase Home Instead to speed up the process. The jury is still out on that deal, however.

Prior to agreeing to become a part of Optum, Amedisys also made plenty of deals that turned it into a multi-billion-dollar business.

It acquired the hospital-at-home platform Contessa Health in 2021 for $250 million.

It acquired Compassionate Care for $340 million in 2018, and AseraCare Hospice in 2020 for $235 million. Those two deals significantly bolstered its hospice arm.

Modivcare (Nasdaq: MODV) entered into the personal care game in a real way with its $575 million acquisition of Simplura Health Group in 2020 and its $340 million deal for CareFinders Total Care in 2021.

BrightSpring and PhaMerica completed a merger in 2019 that eventually led to today’s BrightSpring Health Services (Nasdaq: BTSG), which is now a public home-based care company.

Finally, Aveanna (Nasdaq: AVAH) – formerly a pediatric provider – entered into the home-based senior care world with its $345 million acquisition of Comfort Care Home Health in 2021 and its acquisition of Accredited Home Care for about $200 million later that year.

Addus Homecare Corporation (Nasdaq: ADUS) has executed several high-profile transactions of its own, most recently acquiring Tennessee Quality Care in a $106 million deal.

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Amedisys Inc. (Nasdaq: AMED) veteran Paul Kusserow is serving as Careforth’s chairman of the board.

Boston-based Careforth is a family caregiver support platform. The company recently announced that it was able to lower adverse health event occurrences and keep seniors out of costlier settings.

Currently, Kusserow also serves as Amedisys’ chairman of the board. He is also the chairman of the board of directors and co-founder of Healthpilot Technologies.

Aveanna Healthcare appoints chief legal officer and secretary

Aveanna Healthcare Holdings (Nasdaq: AVAH) has named Jerry Perchik its chief legal officer and secretary.

“I am pleased to announce the appointment of Jerry to the Chief Legal Officer and Secretary role,” Aveanna CEO Jeff Shaner said in a press statement. “Jerry has a strong background in corporate law and a wealth of healthcare industry and regulatory experience. I have known Jerry for more than a decade and have great trust in his leadership and counsel. It is a pleasure to welcome Jerry to our Aveanna family, and I look forward to partnering with him as we continue to grow and execute our strategic plans.”

Based in Atlanta, Aveanna provides home health, hospice and pediatric care services across 33 states.

Perchik has over 15 years of corporate law experience – in the health care industry – under his belt. Most recently, he served as chief legal officer for MedQuest Associates.

“The Board of Directors is delighted with the appointment of Jerry Perchik to lead our legal affairs team,” Rod Windley, Aveanna’s chairman of the board, said in the statement. “Having worked with Jerry in the past, I have great confidence in his legal expertise, regulatory knowledge, and corporate leadership. We believe Jerry will be a terrific addition to the executive team at Aveanna as we continue our mission to revolutionize the way home care is delivered, one patient at a time.”

New director of home care services joins Androscoggin Home Health Care & Hospice

Androscoggin Home Health Care & Hospice has appointed Mathew Collins as its director of home care services.

The Maine-based Androscoggin is a nonprofit operator that employs 500 workers across all 16 counties in the state.

Before taking time away to complete an MBA and additional certifications, Collins was administrative director of the palliative care service line at Northern Light Health.

New Day Healthcare promotes from within

New Day Healthcare has promoted Debbie Weber to the role of senior executive vice president of hospice operations.

“This elevation of Debbie, who is a tried-and-true executive, positions us to expand our

footprint at an accelerated pace,” New Day CEO G. Scott Herman said in a press release. “Debbie has a track record of growing significant multi-site, multi-state markets, on scale. She will oversee a hospice average daily census in the high hundreds, across four states and that size organization falls into the upper tier of mid-size providers and has us positioned for expansion.”

New Day now has close to 30 locations across Texas, Missouri, Kansas and Illinois. The company offers a variety of home-based care services. New Day serves nearly 110,000 patients annually.

Prior to her promotion, Weber led operations at the New Day company Phoenix Hospice.

Tomorrow Health builds its executive growth leadership team

Tomorrow Health has added three new leaders to its executive team.

Tomorrow Health is a New-York-based startup that enables home-based care through technology and other means. It does so via a network of providers, health systems and health plans.

The company has hired Gabriela Perez as chief growth officer; Craig Thompson as general manager and senior vice president of sales; and Peter Saul as director of provider growth.

“The expansion of our growth team comes as we aim to capitalize on significant demand from enterprise partners to enable high-quality home-based care,” Vijay Kedar, founder and CEO of Tomorrow Health, said in a press statement. “Having Gabriela at the helm of a dynamic, relentless team – alongside Craig and Peter — will allow us to accelerate partnership with health plans, providers, and suppliers to deliver high-quality care to the patients who need it most.”

Perez previously served as chief commercial officer at Big Health. Most recently, Thompson was an advisor at Getlabs, and Saul was national accounts director at Butterfly Network Inc.

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As Aveanna Healthcare Holdings (Nasdaq: AVAH) enters the second year of its strategic transformation, these are the four primary strategies the company is focused on.

In 2023, Aveanna implemented a new strategy centered around enhanced partnerships with payers and governments. The purpose was to further drive value-based care while simultaneously righting the ship after a choppy entrance into the public market.

Aveanna CEO Jeff Shaner has pointed out that the company isn’t operating in a vacuum and that transformation wouldn’t be achieved overnight.

“While executing the above key strategies, we still believe it is important to set expectations that acknowledge the environment that we are operating in, and the time it will take to fully transform our company to sustain growth,” Shaner said during Aveanna’s fourth quarter earnings call on Thursday.

Based in Atlanta, Aveanna provides home health, hospice and pediatric care services across 33 states.

Shaner noted that by focusing its clinical capacity on preferred payers, Aveanna achieved year-over-year growth in revenue and adjusted EBITDA.

Aveanna’s 2023 goal was to double its private-duty services with preferred payers from seven to 14. In Q4, the company added two additional preferred payer agreements and reached this goal.

On the home health front, Aveanna’s goal was to improve its episodic payer mix by 10%, from 60% to above 70% by the end of 2023. The company signed eight episodic agreements, and improved its episodic mix from 60% at the end of 2022 to 74% in Q4.

Aveanna also saw improvement in caregiver hiring and retention by aligning with payers willing to engage with the company on enhanced reimbursement rates and value-based agreements, according to Shaner.

“While we continue to operate in a challenging labor and inflationary environment, our preferred payer strategy allows us to return to a more normalized growth rate in our business segments,” he said on the call. “Since our third quarter earnings call, I am pleased with the continued progress we have made on several of our rate-improvement initiatives with both government and preferred payers, as well as the continued signs of improvement in the caregiver labor market.”

With Aveanna’s private-duty services business, the company had a goal of increasing rates by double-digit percentages across various states, especially in California, Texas and Oklahoma. These states represent 25% of the company’s total private-duty services revenue.

At the end of 2023, Aveanna obtained double digit private-duty services rate increases in eight of its states, including Oklahoma.

The company also achieved “rate wins” in an additional 11 states. The combined 19 states represent 55% of Aveanna’s private-duty services footprint.

While the company has made significant progress with state legislatures, Shaner believes that Aveanna still has work to do.

“As an example of the work ahead, our PDN rate request was not included in the California governor’s proposed budget,” Shaner said.”We believe that we made significant strides with the governor, Medi-Cal department, leadership and California legislature demonstrating the importance of PDN rate increases, and how they support an overall lower health care cost, improve patient satisfaction, and quality outcomes. However, it is clear that we need to further accelerate our preferred payer strategy and government affairs efforts to continue to advocate for children with complex medical conditions.”

Overall, Aveanna’s Q4 2023 revenue was $478.8 million, a 6.1% increase compared to $451.1 million for the same period the prior year.

“We experienced revenue growth in two of our operating divisions led by our private-duty services and medical solution segments,” Matt Buckhalter, CFO of Aveanna, said during the call.

Full-year revenue for 2023 was nearly $1.9 billion, compared to nearly $1.8 billion in 2022. This was a 6% increase.

Aveanna’s payer strategy will be critical throughout the remainder of 2024, partly due to the fact the company’s payer mix is skewed heavily toward government payers, according to Stephens analyst Scott Fidel.

“AVAH generates a significant percentage of revenue (~90%) from government payers,” Fidel and colleagues wrote in a Thursday note. “AVAH could experience pressure on revenues/adjusted EBITDA from unanticipated changes in government reimbursement rates.”

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Home-based care providers have faced many headwinds over the past few years. They’ll continue to do so in 2024.

But uncertainty has also plagued providers, and there may be less of that this year.

Providers know the threat of fee-for-service Medicare cuts. They know Medicare Advantage (MA) penetration is an unstoppable force. They know staffing woes will be a mainstay, even if the labor market nominally improves.

Last week, at Home Care 100 in Scottsdale, Arizona, I had the chance to catch up with over a dozen home-based care executives. I listened to panels. I had on- and off-the-record conversations.

What follows won’t be a complete emptying of my notebook from the conference, but it will be a good summation of most of the reporting I’ll publish on Home Health Care News over the next month or so.

These thoughts pertain to value-based care, M&A, a big-name turnaround and more. They’re the topic of this week’s exclusive, members-only HHCN+ Update.

Ordinary issues

Home health providers have faced extraordinary issues for so long that they’ve rendered those challenges ordinary.

My “What are your biggest challenges?” questions were frequently met with, “Well, you know” responses.

“A lot of headwinds,” Visiting Nurse Health System CEO Dorothy Davis told me at the event. “It would be nice to talk about the wins rather than the headwinds, but that’s become pretty common.”

Based in Georgia, Visiting Nurse Health System provides home health and hospice to more than 7,000 patients across the greater Atlanta area.

Because those headwinds have been so constant and prolonged, providers are beginning to make strides against them. Like the process of grieving, they’re not getting over the issues necessarily, but they are learning to survive despite them.

“We’re really focused on standing up value-based care,” Alivia Care CEO Susan Ponder-Stansel told me. “We really believe that that’s going to be the way that you succeed financially, and also succeed in being able to deliver better outcomes to seriously ill patients.”

Jacksonville, Florida-based Alivia Care provides home health, hospice and palliative care services across North Florida and Southeast Georgia. The company also operates its own Program of All-Inclusive Care for the Elderly (PACE), which is one of the more proven value-based care models in senior care.

In 2022, Ponder-Stansel told HHCN that her organization was embracing the “learning curve” of getting into value-based care. This was right around the time the Centers for Medicare & Medicaid Services (CMS) first proposed a significant rate cut for home health providers.

But, eventually, that learning curve bears fruit. And it has done so for Alivia Care in PACE, but also in all of its service lines.

While certain providers have offloaded certain service lines to hone in on core competencies, Ponder-Stansel believes that all of those different types of care are necessary to truly go at risk, including primary care – through partnerships or otherwise.

“I think that when you’re in any kind of value-based situation, you need all the components: private duty, Medicare-certified home health, hospice, adult day care, etc. We have all of these parts of care,” she said.

Outside of the services lines, both Ponder-Stansel and Andrew Molosky, the CEO of Chapters Health System, believe that a top-down understanding of value-based care is non-negotiable.

In other words, it’s not just about “moving to value-based care”; it’s about ingraining a culture and understanding around value-based care – and determining what exactly that means for each organization.

“I think the first relationship that you must establish – and this sounds a little hokey – is a pretty good internal harmony with your employee base, your stakeholders, your board, your governance, structure, whatever that might be,” Molosky told me. “Because nothing will waylay an organization faster than when you have people viewing the priorities differently.”

The Tampa, Florida-based Chapters Health System is a community-based nonprofit organization. It provides types of home-based care services to nearly 120,000 patients.

Buyers and sellers

As providers come to grips with their operating realities, their leaders seem to believe that the M&A market will open up, too.

While some offered caveats, nearly every leader I talked to believed that transactions would increase in 2024. To be fair, 2023 had quarters with historically low activity. But, at some point in the near-term future, consolidation is likely to become even more of a feature of the home health landscape.

“I do think you’re going to see some more activity with the bigger companies this year than we saw last year,” Elara Caring CEO Scott Powers told me. “I think interest rates are going to help with that. And I think private equity is going to get a little more involved in some of these deals.”

One of the largest home health providers in the country, Elara Caring provides care to more than 60,000 patients across about 200 locations. It offers home health care, hospice, personal care, palliative care and behavioral health care.

Outside of interest rates, one of the micro trends that has been holding home health M&A back over the last two years is the disconnect between peak multiples in 2020 and 2021, and what buyers are willing to offer now.

“The big question mark right now is what multiples are going to look like,” VitalCaring President Luke James told me. “I think we’re going to see a couple of deals that reset the market, especially for sizable transactions.”

VitalCaring, also based in Dallas, will likely be a part of that resetting. The company, led by April Anthony, is growing steadily. It has dozens of home health and hospice locations in six Southeastern states.

James believes that hospice valuations will remain at bay, but that home health multiples will continue to come down until buyers gain a greater appetite for seller targets.

At the same time, those 2020 and 2021 multiples are already baked in. Financial backers looking to offload an asset in 2024 or 2025 could have a hard time making a desired return on investment.

“Even if those businesses doubled in size, if they’re only able to sell for 11 or 12 times, you’ve got to make up a lot of ground versus where they enter those businesses,” James said. “It’ll create pressure. Where are those sellers? How low are the sellers willing to go to get a deal? Or how high are those buyers willing to go to satisfy their return metrics?”

An Aveanna turnaround

Aveanna Healthcare Holdings (Nasdaq: AVAH) went public right before the markets came tumbling down, in April of 2021.

It has undergone extreme staffing headwinds and also leadership changes. And yet, almost three years later, it’s still standing.

That led to a seemingly chipper Jeff Shaner – the CEO of Aveanna – in Scottsdale last week.

Based in Atlanta, Aveanna provides Medicare-certified home health care, personal care and pediatric care across 33 states. Through acquisition, the company went from being a primarily pediatric care provider to a senior care provider in just a matter of years.

Though it is not near its initial stock price of close to $12 per share – it sits at about $2.50 per share right now – it has climbed significantly over the last year. In January 2023, the company’s stock price was sitting around $1. That led to speculation that it would not even make it on the public market for another year.

Shaner is now around to tell the turnaround story.

“We took a very detailed, strong, honest look at ourselves about 15 months ago,” Shaner said. “We didn’t necessarily like everything we saw. I had to make some very honest assessments of where we were as a company, and where we wanted to be. But, 15 months later, we can exhale now as an organization. Because we know where we’re going.”

That’s significant. Aveanna boasts one of the strongest home-based care footprints in the country. Historically acquisitive, it has been quiet during recent years. Perhaps that could change in 2024.

The obstacles remain. But providers, such as Aveanna, could be starting to find their way.

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