Specialist
Former executive at LHC Group Inc
Agenda
- Home health market operating environment, including increasing consolidation and labour shortages
- Integration of LHC Group (NASDAQ: LHCG) and Optum and new positioning, incorporating potential synergies on the hospice and referral side
- Impact of the USD 810m Medicare reimbursement cut for LHC and its efforts around shifting to value-based care
- LHC’s Q2 2022 financial results, highlighting hospice organic growth and revenue decreases in home health
- 12-18-month growth outlook for LHC and the home health market, highlighting potential further JVs and AI opportunities
Questions
1.
Could you outline the home health market and delivery models? There has been significant consolidation, with United planning to buy LHC, the Seasons-AccentCare merger and the Humana-Kindred divestiture, in addition to labour shortages. How do you assess current market trends?
2.
Just to get an understanding, how fragmented would you say the home health market is?
3.
How do you assess United and Optum’s announced acquisition of LHC Group for USD 5.4bn? You mentioned being under Optum’s wing is the ultimate consolidation for LHC. Why is that? Do the synergies align with Optum’s home health segment?
4.
How do you expect the pending merger to strengthen LHC’s positioning in the home health market? Could you provide some broad colour on the home health landscape with AccentCare, Kindred and Amedisys? What 1-2 factors might put LHC ahead or behind other competitive players in this space, given the merger?
5.
You said LHC’s weakness is not having all services under one brand, while the company views this as a strength. Do you agree or disagree? Could you elaborate on the model it’s been using so far and why might it have chosen to change its original strategy?
6.
What integrational challenges might LHC and Optum run into in the near future with the merger?
7.
A specialist in a previous Interview [see Amedisys – Hospice & Home Health Sector Update & H2 2022 Company Outlook – 29 July 2022] said Amedisys stands a good chance of succeeding against Enhabit after spinning off Encompass, due to its multiple rebrandings. Do you think LHC also stands a good chance, and can it capitalise on this opportunity to gain market share against Enhabit, given it had a rocky start on the public market?
8.
Do you think LHC and other legacy home health players are at risk of large managed care organisations and non-traditional primary care providers such as CVS entering into this space?
9.
I read that non-traditional primary care providers will capture around 30% of the US market in the next 30 years. Do you think that’s an accurate assessment or could it be higher or lower than 30%?
10.
How do you think Amazon’s acquisition of One Medical reflects the ongoing consumerisation of healthcare and steady emergence of non-traditional players who have revealed their home health designs? What is the impact on LHC there?
11.
LHC’s net service revenue increased 5.5% YoY at the end of Q2 2022. What are the major contributors to this incremental revenue growth? Has the company performed at par with expectations, and what limiting factors have hindered and could hinder overall revenue growth?
12.
LHC saw admissions dip at the beginning of 2022 as its quarantined clinician rate skyrocketed – 6.5% of its clinicians were in quarantine due to the Omicron variant in January 2022. Despite these issues, organic growth in total home health admissions increased 1.6% YoY. How do you assess the trends in LHC’s admission volumes and CPV [cost per visit]?
13.
When do you expect the labour loss timeline to return to some sort of normalisation? Some have noted that it could take about one year and you said there are some early signs of loosening up on the staffing side already. What do you expect the timeline to look like for returning to some stabilisation with staffing?
14.
Organic growth in hospice admissions increased 5.5% YoY at the end of Q2 2022. What is your understanding of the demand outlook for the hospice industry and LHC’s growth trajectory in this sphere?
15.
Do you expect LHC to increasingly transition from home health to hospice, given the rough environment for home health? A previous specialist predicted Amedisys would be doing this, so what are your thoughts on LHC doing the same?
16.
Could you provide any insight into LHC’s past and future JV strategies, specifically around bringing in referrals? I know the company has more than 80 JVs, with LifePoint, Christus Health and so on. How do you see it strongly improving on the JV front? I think expanding these ventures is its big focus this year, so is there still plenty of ground to cover there?
17.
What was the rationale behind LHC’s most recent partnership with Archbold Medical Center in Thomasville, Georgia? What does the company expect to gain from this and what is so attractive about positioning itself in the Georgia market? Do any other markets look attractive?
18.
You touched upon LHC’s de novo and inorganic growth strategy previously. Do you predict more de novo or inorganic growth? What do you think makes the most sense from a financial and strategy perspective? Which one would assist in driving profitability for the company?
19.
The broader home health market is going through a tough time, with CMS’s [Centers for Medicare and Medicaid Services’] proposed USD 810m Medicare reimbursement cuts. Could you delineate the negative impacts this rule is having on LHC? What are your reimbursement expectations around the company?
20.
Could you comment on LHC’s efforts to drive value-based care – since that’s the direction Medicare is heading in – especially mentioning the CMS HHVBP [home health value-based purchasing] model?
21.
LHC seems to really pride itself on its quality, and has a strong CMS star rating with patient satisfaction scores consistently exceeding the national average. What is your opinion on the quality of care offered by LHC? Is it really as strong as the company would have you believe? What does it do to achieve that quality?
22.
The relationship across Medicare Advantage plans in the home health industry has been pretty rocky, with these plans paying far less for home health services than for fee-for-service Medicare. LHC CEO Keith Myers addresses the strength of the company’s JVs and advancement of managed care with hospitals, but says the “biggest problem is the conveners are in the middle of all this.” He suggested cutting out the middleman. Could you elaborate on the exact problem here? What are the implications for LHC? Do you think the CEO’s suggestion is a good one?
23.
What has been the impact on LHC’s ability to provide care of Congress furthering legislative relief from the delay on the 2% sequestration cuts, and the 3.1% rate cut? Do you think this is a minor attempt to pacify demand or could this lead to some improvements?
24.
How would you assess LHC’s relationship with payers and negotiations on rate structures? Would you highlight any pain points here? Have any decent conclusions been reached that could benefit the company?
25.
How has LHC dealt with the industry-wide labour shortages, given its heavy reliance on contract labour? How hard is the company trying to minimise the use of costly contract labour and migrate away from that dependency?
26.
Do you think EMS [emergency medical services] fill-ins are an effective strategy to compensate for the staffing losses LHC has faced over the last year? I’ve read that some don’t think it’s an effective strategy.
27.
Some bigger companies are in a better position with AI-predicted capabilities, while the smaller ones are still struggling. Where does LHC fit in, and could you provide some colour on the AI advancements?
28.
Could you share 2-3 key insights from our Interview? What best- and worst-case scenarios for LHC and the home health market should investors monitor?
29.
Would you like to highlight anything else around LHC or the home health market?
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