Workforce and patient census are rebounding for the Chemed Corp. (NYSE: CHE) subsidiary VITAS Healthcare, but financial pressure points remain.
The gains have come with significant effort and costs, including the roll out of its recruitment and retention bonus program last July.
Since then, the hospice provider has seen sequential improvements during the last four quarters. The company’s retention program boosted its workforce with an additional 309 health care professionals during Q2. All told, VITAS Healthcare has recruited 784 workers since the bonus program’s launch a year ago, the majority of whom were nurses.
Despite the costs, the labor investments have generated increased clinical capacity, according to Chemed President and CEO Kevin MacNamara.
“This increase in staffing and related patient capacity has been converted into increased admissions and census,” MacNamara said in an earnings call. “[But] one of the biggest limitations to running our business is workforce. We’re prepared for an uptick, but there’s been a lot of effort and expense in developing that workforce.”
In addition to nurses, the retention program also aimed to recruit admission nurses, nurse managers, home health aides and social workers.
Approximately $37 million of the retention program’s fund was allocated towards maintaining existing staffing levels in the second quarter, VITAS Healthcare President and CEO Nick Westfall said.
The company during Q2 poured an additional $6 million to recruit and retain clinical bedside staff, which contributed to an average daily census increase of 1,182 patients compared to the same period in 2022, he stated.
However, it will be some time before VITAS can reap the full potential of its expanded workforce as new employees get up to speed, according to David Williams, CFO and executive vice president at Chemed and VITAS chairman.
“The increase of 309 net professional hires during the second quarter of 2023, think of it as basically underutilized labor capacity, [and] is estimated to have negatively impacted margins in the quarter by approximately 80-basis points,” Williams said.
In the long run, the company expects greater returns on its staffing investments, Westfall said. Associated census increases are anticipated to generate roughly $84 million in annual revenue, he indicated.
VITAS’ net service revenue reached nearly $321 million during Q2, a 7.8% year-over-year rise. The company has brought in $631.3 million year-to-date, up from $572.7 million compared to the first half of 2022.
The company’s average daily census reached 18,392 during this year’s second quarter, a 6.2% rise from the same period in 2022.
Additionally, the company in Q2 saw modest sequential increases in median length of stay, at 16 days, up from 15 days in Q1.
Looking ahead, VITAS will have to contend with a number of headwinds, including “lagging” reimbursement rates, regulatory scrutiny around length of stay, according to Westfall.
The U.S. Centers for Medicare & Medicaid Services’ (CMS) proposed 2.8% rate increase for 2024 “significantly lags [the] reality” of rising care delivery costs, according to Westfall.
Rate hikes have not kept pace with inflation, labor expenses, increased demand or longer stays, he said.
Westfall opined that regulators zeroing in on longer hospice stays should look to the benefits of earlier hospice admissions, according to Westfall.
He pointed to recent data indicating that longer stays can reduce health care costs in the last year of life by as much as 11%, according to a recent study from including the National Hospice and Palliative Care Organization (NHPCO), the National Association for Home Care & Hospice (NAHC), and NORC at the University of Chicago. All told, hospice saves Medicare $3.5 billion annually, the study found.
“The important piece going back to the value of the [length of stay] study is the fact that hospice is one of arguably the only industry that returns money to the Medicare trust fund inside of health care,” Westfall said. “It’s one that we hope CMS and our congressional leadership hears so that they continue to support ongoing reimbursement, because of the value of the benefit for the overall country and to the Medicare trust fund.”
Companies featured in this article:
