Though hospice is a smaller segment for Aveanna Healthcare Holdings Inc. (NASDAQ: AVAH), it remains a stronghold in the company’s strategic growth plans and a key to leveraging its value proposition among payers.
Aveanna’s home health and hospice segment has had mixed results thus far this year, but saw recent improvement, along with its other service lines, last quarter.
The Atlanta-headquartered company has locations in 33 states. It provides home health, hospice, private duty and personal care. Aveanna also provides medical solutions and durable medical equipment, among other adult and pediatric health care services.
“Our home health and hospice business has been fixed internally. Clinically we’re strong, financially we’re strong, and we are disciplined to grow this business,” Aveanna CEO Jeff Shaner said in Thursday’s earnings call. “Our disciplined approach to home health is fundamentally rooted in the fact that we understand we cannot chase low margin business and try to make it up with volume in home health.”
Aveanna’s overall revenue reached $478.01 million in the third quarter, a 7.9% rise from the prior year’s same period.
The company’s home health and hospice service line brought in $52.98 million, a 6.3% year-over-year increase. Its private duty segment brought in the largest portion of Aveanna’s revenue at $384.75 million, a rise of 8.2% compared to Q3 in 2022.
Financial results for home health and hospice improved during the third quarter compared to the Q2, during which revenues dipped 15.8% year over year.
Its home health and hospice segment has seen greater turbulence compared to its other business lines during the pandemic. Aveanna had a total of 9,300 home health and hospice admissions in the segment during the third quarter, a 17.7% dip compared to the prior year’s same period.
Staffing challenges were among the most significant headwinds during the pandemic, though the company is beginning to see signs of recruitment and retention rates normalizing, according to Shaner.
“We’re starting to see improvement in the overall labor market,” Shaner said. “For the first time since COVID hit, Q3 acted like it had for the last 20 years pre-COVID. The last eight to 10 weeks for us have been really nice from a recruitment and hiring perspective, but also people who are current workers … wanting to work more hours. So it’s nice to see the business beginning to get back. Our business is showing signs of recovery, our home and community-based care will continue to grow.”
Gross margins for home health and hospice segment were 47.9% in Q3, driven by a strategy of “right-sizing” its clinical capacity, according to Matt Buckhalter, interim CFO and principal financial officer.
“We have achieved our goals of right-sizing our margin profile and enhancing our clinical offerings,” Buckhalter said in the earnings call. “We are committed to a disciplined approach to growth while shifting our capacity to those payers who value our clinical resources.”
Additional factors propelling positive trends in its home health and hospice business include a focus on cost-effective care delivery as well as having a diverse payer network, Buckhalter indicated.
Aveanna recorded a $105.1 million non-cash goodwill impairment charge in Q3, a move that demonstrates its “renewed focus on payer relationships,” he said.
“While our cost management initiatives mature over the next several years, we believe this is the right long-term growth strategy and we hold a strong belief in this business and its lasting value proposition,” Buckhalter said. “Our home health and hospice platform is dedicated to creating value through operational effectiveness and delivery of exceptional patient care.”