Ac­qui­si­tions brighten re­sults

Modern Healthcare - - THE WEEK IN HEALTHCARE - Beth Kutscher

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.

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