Aveanna Finding Success In Working With More Of Its ‘Preferred Payers’

Aveanna Finding Success In Working With More Of Its ‘Preferred Payers’

The leaders at Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) believe that the demand for home- and community-based care has never been higher.

“As a reminder, we do not have a demand problem,” Aveanna CEO Jeff Shaner said during the company’s first-quarter earnings call on Thursday.

With this in mind, Aveanna is focused on the labor environment.

“[It] represents the primary challenge that we are aggressively addressing in 2023, to see Aveanna resume the growth trajectory that we believe our company can achieve,” Shaner said.

Based in Atlanta, Aveanna delivers home health, private-duty care, hospice and other services in 30 states.

Shaner believes that the company’s ability to recruit and retain top talent will be highly dependent on rates.

“Our caregivers need to be able to provide for themselves and their families in this inflationary environment, and we must offer a competitive wage,” he said. “Since our year-end earnings call, I am pleased with the progress we have made on several of our rate improvement initiatives with both government and managed care payers.”

Indeed, Aveanna’s goal for its private-duty services business is to execute a legislative strategy that would increase rates by double-digit percentages in California, Texas, and Oklahoma — which represent 25% of the company’s total private-duty services revenue, according to Shaner.

Aveanna was able to secure a double-digit rate increase in Oklahoma, which was retroactive to Jan. 1, 2023.

“Since the Oklahoma rate increase, we have doubled the number of caregivers hired per week in [the state], demonstrating the impact rate increases have on our ability to attract caregivers at the right wage profile,” Shaner said.

The company has also made inroads with the Texas legislature.

“While this rate increase isn’t guaranteed at this stage, early indicators reinforce our optimism that our efforts are gaining meaningful traction,” Shaner said.

Aveanna has also spent significant time with the California legislature and the governor’s office.

“[We’ve been] demonstrating the importance of these rate increases, and how they support an overall lower health care cost, improved patient satisfaction and quality outcomes,” Shaner said. “Based on our actions to date, we believe that we are taking the appropriate steps needed to support our requested increase in this upcoming California budget cycle, which is effective July 1. While there is still much work to be done on the legislative front, we believe that we can accelerate our growth by increasing caregiver capacity, and bringing more patients to the comfort of their home.”

During the call, Aveanna also reiterated its goal of doubling the amount of preferred payers it does business with this year.

At Aveanna, a preferred payer means ones offer value-based payments in exchange for proven savings, according to Shaner.

The company added two additional preferred payer agreements in key markets in the first quarter. Its preferred payer volumes increased to 13% of private-duty services volumes.

“We have a robust preferred payer pipeline, and are very optimistic we will continue to execute on this strategic initiative throughout 2023,” Shaner said.

What’s more, Aveanna is focused on shifting its current labor capacity to payers that “appropriately” reimburse the company for its care services.

“We have begun several initiatives to shift caregiver capacity to our preferred payers to optimize staffing rates, while minimizing days in acute care facilities,” Shaner said. “In the first quarter, our preferred payer relationships benefited from accelerated nurse hires up two to three times more than our other payers. We continue to experience staffing rates 15% to 20% greater with significantly higher patient admissions. The value proposition is straightforward, preferred payers reimburse us a fair rate. We pay market competitive nurse wage rates, while also earning value-based payments for achieving positive clinical outcomes and improved staff hours.”

Overall, Aveanna brought in a revenue of $466.4 million for Q1, a 3.5% increase compared to $450.5 million during the same period last year.

Aveanna experienced revenue growth in both its private-duty services and medical solution segments, which grew by 6.5% and 10.7%, respectively.

On the flip side, the company’s home health and hospice segment declined by 15.8% compared to the prior year quarter.

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