LHC Group ‘Fired Up’ About Growth as Labor Pressures Ease

LHC Group (NASDAQ: LHC) is pushing back against pandemic-associated labor headwinds. With hiring up and turnover down, the company hopes to build on that momentum while pursuing joint venture and acquisition opportunities.

LHC Group enhanced its recruitment and retention strategies during the past two years. The company in 2020 piloted a regional approach to recruitment across each of its service lines, in which dedicated hiring teams focused on acquiring talent in specific geographic areas. 

“On the hiring front, we’ve had five consecutive quarters of all-time highs and gross hiring,” LHC Group President and COO Joshua Proffitt said at the Barclays Global Healthcare Conference. “Our hiring numbers are continuing to have velocity and grow quarter over quarter. With the gross velocity we have as the turnover comes back to normalized levels, we’re not going to let up on the hiring.”

As with many providers, Louisiana-based LHC Group has felt the burn of longstanding staffing shortages that were exacerbated during the pandemic. The company has incurred higher labor costs due to the need to employ more contracted personnel to fill in for staff hit by COVID-19 and its variants.

Employees on quarantine have been a “significant headwind over the life of the pandemic” for LHC Group, Proffitt indicated at Barclays. But with infection rates falling and recruitment and retention picking up steam, the company is now seeing improvement.

“During Omicron, we experienced even more of that headwind than we had during prior delta variants or any other prior waves,” said Proffitt. “We got all the way up to around 6.5% of our workforce on quarantine only eight weeks ago in the middle of January. We’re now down to below 0.5%, which is some of the lowest levels we’ve experienced throughout the entirety of the pandemic.” 

Around 1,325 of the company’s employees were quarantined at the start of this year, with that number “bouncing down” to 102 currently, according to Bruce Greenstein, chief strategy and innovations officer at LHC Group.

During Q3 and Q4 of 2021, LHC Group leaned on contract labor while full-time staff were out on quarantine.

Contractors performed roughly 4% of nursing visits at the close of last year, compared to a pre-pandemic rate of 1% to 1.5%. This raised the cost of labor per patient visit, Proffitt stated. The company has since reduced 70% of its contracted labor utilization.

The staffing gains follow a record-breaking year in 2021 in terms of acquisition volume, which contributed much to LHC Group’s year-over-year growth.

The largest deal was the purchase of home health and hospice operations in 22 states from the joint venture between Brookdale Senior Living (NYSE: BKD) and hospital system HCA Healthcare (NYSE: HCA). The acquisition included 11 hospice, 23 home health and 13 therapy locations; it is expected to generate nearly $146 million annually. 

LHC Group anticipates $92.5 million in annual revenue through last year’s acquisition of South Carolina-based Heart of Hospice, which had locations in Arkansas, Louisiana, Mississippi and Oklahoma, as well as its home state. 

The company has set its strategic sights on “all things end-of-life care,” taking a fresh approach in its acquisition efforts, Proffitt stated in a Q4 earnings call. LHC Group will hone its focus on hospice growth through joint venture partnerships and further acquisitions.

Joint ventures continue to be a cornerstone of the company’s model. They currently have more than 82 joint venture partnerships with roughly 435 hospitals.

LHC Group had “more momentum in JVs” between 2016 and the 2020 start of the pandemic, according to Proffitt. That activity slowed down while the company and its potential health care partners responded to the crisis, he continued.

But now LHC Group is turning its attention back towards those objectives.

“We had so much acquisition activity in the last half of last year, and that’s going to start picking up more steam,” said Proffitt. “I’m probably more fired up and bullish about the long-term growth prospects than I’ve ever been. You’re going to see more and more joint venturing into hospitals and health systems in the near mid- and long-term. We’re seeing a lot of momentum there.”