Home and hos­pice care has ‘a very good de­mo­graphic wind at our backs’

Modern Healthcare - - Q & A -

In De­cem­ber, Paul Kusserow started as pres­i­dent and CEO of Amedisys, a Ba­ton Rouge, La.based com­pany that pro­vides in-home nurs­ing care, phys­i­cal ther­apy and hos­pice care across the coun­try.

Af­ter long­time CEO Bill Borne stepped down in 2014, the com­pany’s board co-chair called the search for a new leader a “course cor­rec­tion.” In Oc­to­ber, Amedisys agreed to pay the fed­eral gov­ern­ment $150 mil­lion to re­solve al­le­ga­tions that it sub­mit­ted false billings to Medi­care and had “im­proper fi­nan­cial re­la­tion­ships” with doc­tors. Last year, the com­pany was ru­mored to be a takeover tar­get. Kusserow pre­vi­ously served as vice chair­man of Align­ment Healthcare. Be­fore that, he served as a se­nior vice pres­i­dent at Hu­mana and as se­nior vice pres­i­dent for cor­po­rate strat­egy at Tenet Healthcare Corp. Mod­ern Healthcare re­porter Steven Ross John­son re­cently spoke with Kusserow about the com­pany’s man­age­ment shake-up, its ex­pan­sion strat­egy and its moves to­ward risk con­tract­ing. This is an edited tran­script.

Mod­ern Healthcare: Amedisys has gone through a big tran­si­tion. What was the think­ing be­hind the lead­er­ship shake-up?

Paul Kusserow: I came on board as a con­sul­tant in early 2014 to look at the com­pany’s strat­egy. I came back as the CEO in De­cem­ber. We needed to up­grade oper­a­tions and ex­e­cu­tion and we needed to set the strat­egy, which I’m re­spon­si­ble for with Chief Strat­egy Of­fi­cer Steve Seim, who came from Hu­mana. We needed to bring in some peo­ple who could ex­e­cute.

We were lucky enough to get ahold of Dan McCoy, who was the head of oper­a­tions for Wel­lPoint/An­them. I was able to bring in Marty Howard from Deloitte to serve as CIO. We brought in Larry Per­nosky from Hu­mana, where he headed hu­man re­sources oper­a­tions. Then I was able to bring in Dave Kem­merly for gov­ern­ment re­la­tions and as in­terim gen­eral coun­sel. It’s im­por­tant that we have a closer re­la­tion­ship with the gov­ern­ment. I feel very, very lucky to have this team.

MH: What mes­sage do these moves con­vey to share­hold­ers?

Kusserow:

The share­hold­ers should be ex­cited about this level of tal­ent. We signed up for good, but not ex­trav­a­gant salaries and a lot of risk-based eq­uity. We’re bet­ting strongly that the com­pany is go­ing to do well. We be­lieve that if we can ex­e­cute on our emerg­ing strat­egy, we can grow the com­pany and be­come re­ally dif­fer­en­ti­ated in the home health and hos­pice world.

MH: Where is the com­pany right now in terms of its fi­nan­cial re­cov­ery?

Kusserow: It’s in the early stages. Our stock has gone from a low point of about 12 to the high 20s. We con­sol­i­dated or closed 50 fi­nan­cially un­der-per­form­ing care cen­ters. We cut back on un­nec­es­sary cap­i­tal ex­penses. We think there’s con­sid­er­able mar­gin left. We also be­lieve that from a topline growth per­spec­tive, there’s still tremen­dous po­ten­tial or­gan­i­cally, as well as growth from an M&A per­spec­tive.

We have a very good fi­nan­cial sit­u­a­tion on our bal­ance sheet now. So we have a lot of ca­pac­ity to do deals. I’m a deal guy and we have a good team. We be­lieve we also have a very good de­mo­graphic wind at our backs, that the home health busi­ness is go­ing to grow at a good clip, and that we can grow be­yond that.

MH: What’s your short-term and long-term M&A strat­egy?

Kusserow: We’re look­ing cur­rently at what we call tuck-ins. These are gen­er­ally smaller home health and hos­pice op­por­tu­ni­ties that are avail­able within our ex­ist­ing mar­kets. We’re also look­ing at mid-size home health and hos­pice com­pa­nies that are in ge­o­graph­i­cally fa­vor­able places.

Then we’ll go back into the mar­ket, look for big­ger things and look for strate­gic ad­ja­cen­cies. We’ll look at some other busi­nesses that could en­hance our home health and hos­pice busi­nesses. We’ve iden­ti­fied a cou­ple of cat­e­gories that we think would be ad­di­tive, such as pri­vate care.

MH: What are your pre­dic­tions about con­sol­i­da­tion in your in­dus­try?

Kusserow: We think con­sol­i­da­tion will con­tinue to hap­pen in the busi­ness.

The rate re­duc­tions the fed­eral gov­ern­ment has put into place on an an­nu­al­ized ba­sis are go­ing to con­tinue through 2018. That’s go­ing to have an im­pact on smaller, par­tic­u­larly in-home health and hos­pice or­ga­ni­za­tions. The other thing we’ve seen is more qual­ity star mea­sures. These mea­sures will force more con­sol­i­da­tion among the smaller play­ers. As the mar­ket be­comes more fo­cused on qual­ity, the larger play­ers will do bet­ter.

We be­lieve trans­ac­tion prices will start to come down in the next cou­ple of years. We think the op­por­tu­ni­ties in the mar­ket are go­ing to be re­ally good in the next two to three years.

MH: What ef­fect did Amedisys’ set­tle­ment over the Medi­care billing fraud al­le­ga­tions have on the com­pany’s fi­nan­cial per­for­mance?

Kusserow: I wasn’t with the com­pany when that mat­ter was re­solved. My un­der­stand­ing is the com­pany didn’t ad­mit any wrong­do­ing. It had a dis­agree­ment with the gov­ern­ment, paid a large fine and started to take the nec­es­sary mea­sures to get fi­nan­cial per­for­mance im­prov­ing.

We’ve de­liv­ered quite ex­cel­lent re­sults since. We’ve paid down a lot of our debt and our bal­ance sheet is in won­der­ful shape. We an­tic­i­pate we’ll take more cost out of the sys­tem, par­tic­u­larly since we an­nounced that we’re get­ting out of the soft­ware busi­ness. From a mar­gin per­spec­tive, we ex­pect things to con­tinue to be very, very strong for the rest of 2015 and 2016.

We be­lieve that pro­vid­ing care in the home to the most vul­ner­a­ble pop­u­la­tion is go­ing to al­ways be a very strong mar­ket. Our belief is that the def­i­ni­tion of home health will ex­pand. We be­lieve home care can be used proac­tively for peo­ple with chronic ill­ness to pre­vent hos­pi­tal­iza­tions. And we be­lieve we can ex­pand the level of ser­vices we can pro­vide in the home.

A lot of new tech­nolo­gies and new ser­vices are com­ing out that are start­ing to drive care into the less-acute ar­eas. We an­tic­i­pate this will be a huge wind­fall for us.

MH: What are some ma­jor chal­lenges Amedisys faces mov­ing for­ward?

Kusserow: We want the gov­ern­ment to un­der­stand that if you pay for non­med­i­cal things, such as ac­tiv­i­ties of daily liv­ing, you can change peo­ple’s health sta­tus and look af­ter folks holis­ti­cally.

This in­dus­try wants to take more fi­nan­cial risk. But if we’re just tak­ing bits and pieces of risk rather than look­ing at things holis­ti­cally, it’s very dif­fi­cult. The rules, which re­ward frag­mented and botched hand­offs, need to be changed.

MH: Is Amedisys ready to take on full-risk con­tracts? If not, what is your timeline for that?

Kusserow: We are em­brac­ing risk ar­range­ments. A lot of our new ex­ec­u­tives come from the man­aged-care busi­ness. Medi­care Ad­van­tage growth is out­pac­ing tra­di­tional Medi­care, so we be­lieve this is go­ing to be more of our mix of busi­ness.

The key to han­dling fi­nan­cial risk is good data. If you have data on peo­ple through­out the con­tin­uum, you tend to do a lot bet­ter be­cause you know the whole story. Thus far, no one in the post-acute world re­ally has that. So we’ll be a lit­tle cau­tious un­til we find a way to piece to­gether all the data. Piece­meal care never re­ally works from a risk per­spec­tive.

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