Amedisys (NASDAQ: AMED) has been among the many home health and hospice providers taking financial and operational hits as the coronavirus pandemic continues its spread. Despite facing headwinds, the company remains steadfast in its position on hospice as it seeks to further build up its presence in the market.
Another recent uptick of cases stemming from the delta variant has further pressed hospice providers’ financial and operational concerns. The pandemic has billowed back against the hospice industry at large, with many providers seeing lags in patient admissions and dips in average daily census growth as skilled nursing and long-term care facilities shut their doors to minimize spread and risk. This along with ongoing industry-wide staffing shortages and high turnover during the pandemic has many hospice providers continuing to feel the brunt of COVID-19 pummeling their bottom lines, including Baton Rouge, La.-based Amedisys.
“The second quarter of 2021 was an eventful quarter for Amedisys. The lingering and prolonged effect of COVID-19 continued to impact our hospice business’ ability to grow at previously projected rates,” said Chairman and CEO Paul Kusserow during Thursday’s earnings call. “We have identified the issues which are twofold — business development and staff recruitment and retention — and have implemented plans to accelerate performance in the second half of the year. That said, we have revised our full year guidance to reflect these impacts.”
Amedisys reported an earnings jump of a little more than $79 million, increasing up to more than $564 million in revenue during the second quarter of 2021, compared to $485 during Q2 last year. The company’s hospice business accounted for $186.9 million in Q2 this year, marking a jump from $167 million during the prior year’s second quarter.
Last quarter had the company combating employee turnover amid rising demand for end-of-life and serious illness care, with Amedisys reporting that it would be doubling down on staff recruitment and retention efforts needed to sustain and grow its business. The second quarter of 2021 brought continued challenges to the company as another wave of COVID-19 flooded the nation.
Amedisys reported in its earnings statement that the pandemic placed pressure on the company’s ability to hire and retain employees at the level needed to achieve its growth targets.
While the company detailed facing multiple hospice-related challenges, one of its major public competitors, LHC Group (NASDAQ: LHCG), reflected positively in regards to its hospice line on a Thursday earnings call of its own. LHC Group executives reported that its merger-and-acquisition activity hit an all-time high this year, with the segment remaining a heavy strategic focus heading into 2022 as well.
Despite the pandemic’s impacts and disruption to employee turnover and hiring processes, the company remains focused on growth opportunities in hospice.
“We feel good about what we’ve done in hospice,” said Kusserow. “We went out about two years ago and started buying up hospices, going from the eighth-largest to the third-largest hospice and spending about $700 million to build up our presence.”
Amedisys reported that the recent acquisition of Contessa Health is a significant opportunity to grow its hospice segment, despite pandemic headwinds. The company agreed to purchase the Tennessee-based company provider of hospital-at-home and skilled nursing-at-home services for a total consideration of $250 million, according to a Securities and Exchange Commission filing in a deal expected to close Aug. 11, bringing higher acuity home-based care under Amedisys’ wings.
COVID-19’s tentacles have reached into operating metrics that typically forecast growth and cost projections for both organizations, according to the company. Closing Aug. 1, Amedisys aims to continue to invest in Contessa’s future home health as well as new areas of care such as palliative care and primary care while also expanding its technology base to allow for even more and new cross functional risk arrangements across the home health spectrum, according to Kusserow.
“[The Contessa deal] expands Amedisys’ home health and hospice M&A pipelines to include new or enhanced joint ventures and acquisitions with partner health systems,” said Kusserow. “It accelerates admissions, expansions and growth opportunities for our core Amedisys home health and hospice businesses to seek care coordination and preferred provider arrangements with current and future hospital at-home and [skilled nursing facilities (SNF)] home hospital partners. We are thrilled to get this deal closed and we’re already working hard to capitalize on the tremendous growth and new frontier opportunities.”
With the transaction’s multiple at 3.9 times 2022 revenue, compared to 6x for similar companies, the deal makes Amedisys among the first in the home-based care space to offer hospital or skilled nursing at home on a national scale.
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