Aveanna Healthcare Holdings Inc. (NASDAQ: AVAH) has seen improvement within its hospice and home health segment. The company anticipates this momentum to continue despite ongoing inflation and labor headwinds.
The last two years have brought some turbulence in Aveanna’s hospice and home health admissions and revenues. The end of 2023 saw revenues start to normalize, with the company seeing further growth on the horizon this year, according to Aveanna CEO Jeff Shaner.
“The business we’re most proud of is the rebound of our home health and hospice business,” Shaner said in today’s earnings call. “A year and half ago we were in a difficult spot in our home health and hospice businesses. It’s taken us two years to get back to our 50% [gross margin] target, we’re really proud of the home health and hospice team for how hard they worked to get it there.”
Atlanta-headquartered Aveanna provides home health, hospice, personal care and private duty services across 33 states. The company also provides medical solutions and durable medical equipment, among other adult and pediatric health care services.
Aveanna’s overall revenue reached $47.8 million in the fourth quarter of 2023, a 6.1% year-over-year increase. The company’s private duty service line made up the bulk of its bottom line, reaching nearly $38.5 million that quarter.
Aveanna’s hospice and home health segment brought in more than $54 million in Q4, a 1.1% decline compared to the previous year’s same period. The company’s home health and hospice revenues declined year-over-year by 6%.
Dips in admission volumes are at the heart of the segment’s revenue challenges. Aveanna saw a total of 9,200 home health and hospice admissions in 2023’s fourth quarter, which was up sequentially from Q3, but represented a 16.4% year-over-year drop.
Gross margins for the home health and hospice segment were 50.9% in Q4, a sequential rise from 47.9% in Q3. Aveanna is continuing to focus on “right-sizing” its strategic home health and hospice growth strategies in terms of cost saving initiatives and improved clinical capacity, according to Aveanna CFO Matt Buckhalter.
“We’re pleased with our gross margin, demonstrating our continued focus on cost initiatives to achieve our targeted margin profile,” Buckhalter said. “We’re continuing to right-size our approach to growth in the near term. As we enter 2024, we believe our admission growth will normalize back in the 3%–5% range. We’re committed to a disciplined approach to growth. Our home health and hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care. We hold a strong belief in this business and its lasting value proposition.”
Other factors affecting revenue in Q4 included ongoing inflation and labor pressures impacting hospice providers nationwide.
High labor costs have hindered hospice and home health growth at Aveanna. The company has also invested “significant dollars” in recruitment and retention efforts to boost clinical capacity, Shaner previously stated. While workforce and wage pressures continue to have an impact, Aveanna anticipates progress, largely tied to having a diverse payer network, he indicated.
“While we continue to operate in a challenging labor and inflationary environment, our preferred payer strategy allows us to return to a more normalized growth rate in our business segments,” Shaner said. “Where we sit today entering 2024, we are just focused on growing the business and producing great clinical outcomes. Our home health and hospice team [has] absolutely turned that business around for us and have got us in a great place. Turning around our home health and hospice business was one of our top five priorities in the company.”
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