Advanced Search

Home Health & Hospice Week

Finance:

Public Companies Review Q1 In 'Year Of Disruption'

Published on Fri May 22, 2020

PPE, lower volume cost chains millions.

2020 was already expected to throw home health into chaos with the Patient-Driven Groupings Model, elimination or significant reduction of RAP payments, and more. Then came the pandemic.

In recent days, heads of publicly traded home health and hospice companies recounted their coronavirus-related trials and successes throughout the first quarter of the year, often including up to now, in their recent quarterly earnings reports and related conference calls.

“It’s a year of disruption,” remarked Amedi-sys Inc. CEO Paul Kusserow.

A number of trends exist across the various companies, including the drastic impact of COVID-19. Executives from publicly traded chains that serve patients from coast to coast outlined these common COVID-19 obstacles that challenged their bottom lines for the quarter ended March 31, and continue to do so today:

  • Reduced volume. Falling referral rates and admissions put a dent in many companies’ Q1 volume statistics. “Due to the pausing of elective procedures and various lockdown orders and visitation restrictions at hospitals, skilled nursing facilities, ambulatory surgery centers and many physicians’ offices across the country, we had less direct access to referral sources and care coordi­nators,” reported Josh Proffitt, Chief Financial Officer for LHC Group Inc., in the Lafayette, Louisiana-based chain’s May 8 earnings conference call. “Home Health admissions were averaging around 8,800 per week from January 1 through March 14. On April 13th, we hit our low point in Home Health admissions of 6,169,” he illustrated.

LHC saw a 5.6 percent decline to its average daily census, from a high of 100,030 on March 9 to a “COVID-19-induced low” of 94,476 on April 18, Proffitt recounted.

Encompass Health Corp. reported a 5 percent decline in its home health “starts of episodes,” which includes starts of care and recertifications, in March compared to the January and February average of about 28,000, said Encompass CEO Mark Tarr in the Birmingham, Alabama-based chain’s April 29 earnings call. “And they’re expected to decline by an additional 18 percent in April,” Tarr said.

From March 11 to May 11, The Pennant Group Inc. saw an 8.2 percent decrease in its home health census, said Daniel H. Walker, CEO of the Eagle, Idaho-based company that spun off from The Ensign Group last year.

Hospice business seemed to take a lighter hit. VITAS Corp. parent Chemed Corp. noted its rate of admission growth slowed under COVID-19. “As we began to experience disruption ... in the second half of March, admissions increased to [a] modest 1.1 percent for the month when compared to the prior year,” said Chemed CEO Kevin McNamara in the company’s April 29 earnings call. Hospital referral admissions typically represent about 50 percent of VITAS’ total admissions and are “our key portal for identifying terminal patients,” McNamara told analysts. “More than half of our admissions come from hospitals, which are totally screwed up right now,” he said later in the call.

Still, from March 11 to May 11, Pennant saw a 3.1 percent increase in hospice ADC, Walker noted.

  • Missed visits. Along with declining referrals, missed visits took a toll on volume, multiple companies noted. LHC “created a new code in our electronic medical records and immediately began to monitor and track missed visits due to COVID-19,” Proffitt said. “The number of Home Health visits missed related to COVID-19 started to become evident the week ending March 14 when we had 412 missed visits. It quickly increased and hit its highest point the week ending March 28 resulting in 8,585 missed visits,” he described.
  • Increased LUPAs. As patients refused visits and facilities — particularly assisted living facilities — refused home care workers entry, low utilization payment adjustment rates began to creep up. “At the end of the month of March, we started to see a pickup in LUPAs because we couldn’t get into facilities … or patients would decline visits,” Pennant COO John Gochnour said in the May 14 call. “That resulted in some episodes ending early. It resulted in a significantly increased LUPA percentage.”

Encompass Home Health and Hospice CEO April Anthony said its pre-COVID-19 LUPA rate of 8 percent shot up to 14 percent during the pandemic.

LHC usually runs a LUPA rate of “between 8 percent and 9 percent of total home health admissions … saw this number spike to 12.5 percent during the week ending April 4,” Proffitt said.

LUPAs were already increasing under PDGM, pointed out Amedisys COO Christopher Gerard. “Clinicians that have been working in this industry for years have been accustomed to a four-visit-over-60-day-episode threshold for LUPA, and now it becomes a threshold every 30 days, and it’s a two-to-nine-visit kind of range,” he said. The LUPA rate was “spiking coming out of PDGM.”

  • Increased costs. COVID-19 brought with it many surging costs. Chief among them is for personal protective equipment (PPE).

Encompass has paid “premium prices that are as much as 15 times our normal pricing” for PPE, Tarr said.

Amedisys spent an extra $200,000 on PPE in Q1, said Kusserow in the Baton Rouge, Louisi­ana-based chain’s May 8 earnings call. “We are paying nearly five times more for PPE than pre-COVID-19 prices,” Kusserow reported. But it’s not just the inflated price that’s affecting the cost, he added. The quantity of PPE purchased also created significant costs — as it will continue to do in Q2 and beyond.

Bonus: Multiple companies noted that having clinicians fully equipped with PPE, particularly for COVID-suspected or COVID-positive patients, put them at a competitive advantage during the pandemic’s onset.

In addition to PPE, costs rose due to implementing new procedures for screening employees and patients, educating staff and patients, acquiring non-PPE supplies, and adjusting staff pay, among other items. For example, Amedisys spent about $600,000 on increased training in Q1, Kusserow told analysts.

LHC allowed employees to cash in a certain amount of paid time off, said CEO Keith Myers.

The good news is that the industry already seems to be rebounding from the worst of the pandemic’s impact. LHC saw “week-over-week improvement in home health admissions of 6,634 for the week of April 20 and … 6,700 for an 8.6 percent improvement over the week of April 13,” Proffitt highlighted. And on May 6, LHC’s ADC “was back up to 96,182 which represents a 1.8 percent increase in ADC from the April 18 low,” he added.

Pennant is “seeing signs of improvement in our home health census,” Walker maintained in the regional chain’s May 14 call.

Amedisys is “seeing promising signs of volume recovery,” Kusserow said. “However, it’s too early to predict the pace of recovery. There are numerous unknown factors,” he cautioned.

For Encompass, “recent weeks’ trends suggest a leveling off of decline,” Tarr said. In hospice, the company’s ADC “has remained relatively stable, going from an average of 3,677 in January and February to an estimated 3,633 in April,” Tarr pointed out.

For VITAS, “ADC is stabilized,” reported Executive VP Nicholas Westfall.

Other Articles in this issue of

Home Health & Hospice Week

View All