Capacity Constraints Prove Costly for LHC Group – Home Health Care News

Capacity Constraints Prove Costly for LHC Group – Home Health Care News

Foto-Rabe/Pixabay | CC0
Foto-Rabe/Pixabay | CC0
LHC Group Inc. (Nasdaq: LHCG) executives believe that almost all of the company’s problems are short term in nature. Nonetheless, those problems cost the business significantly in the fourth quarter and in early 2022.
Capacity constraints and high labor costs were major headwinds for LHC Group, as they were for most of the other large home health players. And the bottom line cost was notable: Those constraints cost approximately 2,500 admissions and a loss of $13.8 million in revenue.
“Our challenge right now is certainly not demand,” Chairman and CEO Keith Myers said on LHC Group’s fourth quarter earnings call Thursday.
Still, the percentage of LHC Group’s home health and hospice workers in quarantine has stabilized considerably, from nearly 6.5% in home health in mid- to late-January to just 0.6% as of Feb. 18. Meanwhile, opportunities for growth and policy tailwinds together create a strong outlook for the company, Myers explained.
“There’s an increasing demand for our services, with new physician referrals at an all-time high for us, along with an increasing number of existing and potential partners reaching out to us to manage their post-acute programs,” he said.
Based in Lafayette, Louisiana, LHC Group provides home health, hospice, home- and community-based services (HCBS), and facility-based care. Its 30,000 employees deliver care in 37 states and the District of Columbia.
There are three major factors contributing to LHC Group’s rosy outlook, Myers said.
For starters, many of the flexibilities granted to home health care companies during the public health emergency (PHE) have been helpful operationally, and Myers doesn’t believe they’ll be drawn back after the pandemic subsides. Waivers from the U.S. Centers for Medicare & Medicaid Services (CMS) regarding the homebound requirement, remote certification of home care and telehealth, as well as the continued legislative relief from the 2% sequestration cut, are examples.
“Notably, CMS is giving consideration to making many of these waivers permanent reform,” Myers said.
Additionally, LHC Group is confident that staffing shortages will improve as recruitment and retention efforts are stepped up, while fewer workers go on quarantine due to COVID-19 exposure.
Finally, the company is gearing up to deliver on deals from a robust M&A pipeline and grow “each segment” organically as well.
LHC Group’s net service revenue totaled $583.4 million in Q4, a nearly 10% increase year over year. Overall, the company brought in about $2.22 billion in revenue in 2021, an over 7% increase from the $2.06 billion it brought in the year prior.
In 2021, home health care represented about 70% of its revenue, while hospice and HCBS represented about 14% and 9%, respectively.
Although stated differently, LHC Group execs more or less said they are happy to control what they can control in the future.
COVID-19, while its effects can be mitigated, is an example of that. As are the more macro-level staffing trends.
“Home health care has so much momentum, … and there’s a lot of positive attributes of being part of this particular segment of health care,” LHC Group President and COO Joshua Proffitt said on the earnings call. “Over the next three to five years, there’s a real good path to sustainable employment growth for us. … So I really think it’s just the macro environment [to worry about at this point], and I like our chances in competing in that world.”
Meanwhile, a hybrid of macro and micro trends are colliding for LHC Group. As William Blair analyst Matt Larew pointed out on the call, 2021 was the first year that the company had more non-Medicare home health admissions than it did Medicare admissions.
Overall, non-Medicare admissions have doubled for the company over the last three years.
“As part of our contract discussions and new arrangements, we’ve been … having more and more productive conversations with payers,” Proffitt said. “Recently, we’ve been sitting at the table having even more fruitful conversations around the future of how we get reimbursed.”
Bruce Greenstein, LHC Group Inc.’s chief strategy and innovation officer, recently discussed problems the home health industry is having when it comes to contracting with Medicare Advantage (MA) earlier this month at Home Care 100.
“We are getting our clocks cleaned,” Greenstein said. “And we just tend not to talk about it.”
There are a few ways in which LHC Group wants to grow in the coming year. While it expects COVID-19 to still have an impact in the near term, by 2023, the company believes the coast will be mostly clear.
In 2021, the company was still busy in M&A, totaling nearly $300 million in acquired revenue.
In the future, it’s looking to acquire in areas where it doesn’t have a dense presence. That includes states like New York, New Jersey, Michigan, Wisconsin and Iowa.
Texas is another state that LHC Group is looking to move further into, despite its hesitation to do so in the past.
“With home health, we’re now in a neighborhood of 65%, in terms of the [U.S.] population that we’re licensed to serve,” Myers said. “We’re identifying counties. … We’re also looking at how much volume payers – that pay us episodically – now have in those markets.”
The company is also trying to grow its billable hours in HCBS. The workforce has been more affected in that service line than others, the company said, but it nonetheless wanted to focus on more growth there.
The Choose Home Care Act is likewise on LHC Group’s mind, as it has been for a while now.
Myers mentioned that the Congressional Budget Office was finally moving towards giving the bill a score, a major step for the legislation.
“That score is expected in a matter of days,” Myers said.

Before becoming a reporter for HHCN, Andrew received journalism degrees from both University of Iowa and Northwestern University. The former, believe it or not, was more fun than the latter.
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