Kusserow: As Health Care Environment Changes, Amedisys Evolves

Wheels of change are in motion at Amedisys (NASDAQ: AMED) as CEO Paul Kusserow begins his second term at the helm.

For starters, the company is going full-speed ahead on palliative care, delivered through its subsidiary Contessa Health. Amedisys yesterday announced a partnership with BlueCross BlueShield of Tennessee to cover those services, as well as a forthcoming divestiture of its personal care segment to HouseWorks — excluding its Florida operations.

The Baton Rouge, Louisiana-based home health and hospice provider is adapting to the shifting needs of patients and the health care system, according to Kusserow.

“Our world is rapidly evolving but, mercifully, the trends are moving towards Amedisys and our industry, not away from us. There’s a new paradigm driven by consumerism, demographics, advances in care delivery and the cost of driving care into the home …” Kusserow said in an earnings call. “Change creates opportunity.”

Among the factors driving these changes are the labor shortage, the accompanying limits on clinical capacity, lengthening hospital stays, industry consolidation and the rising prominence of Medicare Advantage, he said.

Since its $250 million acquisition of Contessa Health in 2021, Amedisys has been positioning the subsidiary as a vehicle for innovation, reaching new frontiers in the small but growing high-acuity home care market.

Contessa is also emerging as a growth engine for Amedisys. The company expects Contessa’s revenue to triple this year with palliative care as the main accelerator, largely through joint ventures with health systems and relationships with risk-based payers like Medicare Advantage plans.

“We can solve a lot of the loss issues with two or three more palliative deals. So we’re out pushing those very hard and having a lot of conversations. So we’re hopeful we can do that,” Kusserow said. “We’ve got 12 extremely good partners, 14 all-ins, but 12 really good places to go very deep. We’ll continue to focus on growing those 5 to 10 times what they currently are today.”

The loss issues reflect a tumultuous 2022 for Amedisys, ultimately resulting in a change in leadership at the beginning of Q4. On a yearly basis, net income attributable to Amedisys per diluted share dropped to $3.63 in 2022, compared to $6.34 in 2021.

Like others in the space, the company has contended with reduced capacity due to labor pressures, increased cost-per-day and the return of Medicare sequestration last year, among other headwinds.

For Q4, the company’s net service revenue rose by $2.7 million to $562.0 million, up from $559.3 million for the prior year’s period. Hospice segment revenue fell to $197.6 million in Q4 from $204.9 million in 2021.

Contessa, on the other hand, brought in $5.9 million during the final three months of last year, up from $2 million in Q4 2021.

But on the journey towards growth, labor is the troll under the bridge.

“Growth and people are joined at the hip. Demand for our services is at an all-time high, while access to clinicians to fulfill this increase in demand has been challenged,” Kusserow said in the earnings call. “In order to service the increased number of referrals, we must have the clinical capacity to do so.”

“Those that have the workers will win,” he continued.

To that end, Amedisys is pulling a number of arrows out of its quiver.

The company is arming its clinical workforce with tools to reduce administrative burden, reinforcing their benefits packages and speeding them to the frontlines with streamlined onboarding.

Current trends suggest that the company is most likely on a positive trajectory, according to Brian Tanquilut, equity analyst for the investment banking firm Jefferies Financial Group.

“We maintain our Buy on AMED given our view that with returning CEO Kusserrow’s commitment to ‘beat & raise’ and [management]issuing guidance that looks highly conservative, the stock is poised for upside over the course of this year,” Tanquilut indicated in a note. “AMED has shown progress on the labor front, with room for further hiring/turnover gains, and we see opportunities in [managed care] contract rationalization, centralization of [operating] functions and Contessa that aren’t reflected in guidance/the stock.”