Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) is progressing with its preferred-payer strategy and strategic transformation, despite the challenges it has faced since going public in 2021.
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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