Positive reimbursement environment, diverse payer mix creating tailwinds for Aveanna

Aveanna Healthcare Holdings (Nasdaq: AVAH) has been optimistic about its intention to become a leading provider of home healthcare services for seniors since its IPO in April. Prior to its IPO, the company was more of a provider of pediatric services, but it has been aggressively acquiring new assets since, realizing the vision it outlined in the spring.

More than anything, its leaders are happy to be where they are. And when it comes to the home healthcare environment, Aveanna sees tailwinds far outweighing headwinds.

“I think the rate environment is creating tailwinds for us right now,” Aveanna CEO Tony Strange said at the JP Morgan Healthcare conference on Wednesday. “People in Washington, DC, today talk about home care as part of the solution – not a problem. I think only good things will come out of it.

Based in Atlanta, Aveanna provides home health, hospice and other services to a wide range of patients in 30 states.

Specific legislation — such as the Build Back Better Act, which has been blocked — is of less concern to Aveanna. That’s because, Strange explained, it’s almost unprecedented to see lawmakers and policymakers on the same page when it comes to home care being part of the solution to many care problems. healthcare – before and after the pandemic.

“I think that’s demonstrated by the fact that the Final Rule for Home Health came out even better than the industry expected,” Strange said. “For the first time in decades, [people] really see the value and the accretive role that home care can play in reducing the overall costs of the health care equation. And I think we feel that all around.

In addition to the nationwide expansion of the Home Health Value-Based Purchasing (HHVBP) model – which Aveanna is confident it will capitalize on – providers saw a 3.2% increase rate in the final rule, well above the 1.7% increase originally proposed.

But Aveanna also doesn’t rely entirely on Medicare-based home care reimbursement. The company believes its diversification of payment sources, including a greater reliance on Medicaid, is one of its strengths.

“We continued to deliver double-digit revenue growth and we have a very diverse and positive payer reimbursement environment,” Strange said. “We love the diversity that [environment] gives us at this time.

Maintain a good posture

Although Aveanna lowered its revenue guidance for the third quarter of 2021, it maintained its EBITDA guidance.

With tighter expense management and a “disciplined approach” to managing its gross margins, the company believes it will remain on track through 2022.

These expenses were increased, of course, by short-term labor struggles. The company has offered bonuses and other incentives to workers, though many of those costs have already come down, Strange said.

“We, along with all other healthcare providers, are engaged in a hand-to-hand fight for every nurse and carer,” he said on the company’s latest earnings call.

The reduction of quarantines from 10 days to 5 days for workers infected with COVID-19 has not had much effect on his work situation. Strange said it had no “material impact, one way or another.”

Even with the Omicron-induced push, the company doesn’t believe these high costs will be a long-term problem.

“We not only think we can weather the storm we’re in with this pandemic,” Strange said at the conference. “But also that when we cross to the other side, we will be well positioned.”

It’s not like growth has stalled either. In fact, Aveanna completed several significant transactions during the fourth quarter.

“By protecting margins during the pandemic, we will be well positioned to pick up the pace and get back on the path to growth. [moving forward]”said Strange.

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