Acquisitions brighten results
Publicly traded long-term and postacute-care operators are seeing the stress of Medicare reimbursement cuts balanced by the benefits real- ized from acquisitions.
Companies that operate in the home health, hospice, nursing home and rehabilitation space found that strategic buys helped boost revenue despite pressure from payers and limited growth in volume, according to their first-quarter earnings reports.
In home health, a 2.3% Medicare rate cut that went into effect in January had a negative impact on earnings for companies in the sector.
Although admissions were a bright spot, revenue from each completed episode of care decreased compared with the same period in 2011. Admissions at Amedisys, Baton Rouge, La.; Almost Family, Louisville, Ky.; and LHC Group, Lafayette, La., increased 3.3%, 4.6% and 5.7%, respectively, while revenue per episode of care declined 5.7%, 3.4% and 1.6%.
The jolt left providers looking to add more commercial payers to the mix, said Kevin Campbell, an analyst at Avondale Partners. The sector also experienced across-the-board declines in recertifications, or approved extensions of home-care services, which limited the number of completed episodes of care.
In an interview last month, Amedisys CEO Bill Borne noted that the home health sector is bracing for further cuts as part of a “rebasing” of payment rates under the Patient Protection and Affordable Care Act. “What we’re looking to do is expand our continuum of care services,” Borne added, pointing to opportunities in transitioning hospital patients to their homes as well as an interest in palliative care. “We’ll continue to take advantage of acquisitions.”
In a report on Amedisys, analyst Frank Morgan at RBC Capital highlighted the company’s acquisition last year of Beacon Hospice as boosting its hospice revenue by 80.3% even as its home health revenue decreased about 6%.
Amedisys wasn’t the only company cashing in on consolidation. Kindred Healthcare, Louisville, and Skilled Healthcare Group, Foothill Ranch, Calif., also saw benefits from acquisitions, Morgan said.
Kindred’s 2011 acquisition of Rehabcare added $364 million in revenue, and the company also said it is on track to realize $70 million in annual synergies from the deal.
At Skilled Healthcare, Morgan attributed a 45.1% increase in year-over-year revenue in hospice and home care to last year’s acquisitions of Cornerstone Hospice as well as Altura Home Care and Rehab.
The buys took some of the sting out of an 11.1% cut to Medicare’s skilled-nursing facility payment rates that went into effect in October.
Revenue at Skilled Healthcare, which operates 74 SNFS, declined 1.4% overall, and the company said it has undertaken cost mitigation efforts as a result. Kindred reported a 33% increase in consolidated revenues—primarily due to the Rehabcare acquisition—but its nursing center division saw a 4% decrease in revenue, despite growth in admissions and cost controls.