The hospice space — and the health care system at large — is in a state of flux, driven by value-based reimbursement models, an expanding home-based care continuum and industry-changing transactions.
Halfway through the year, Hospice News’ “Four Providers to Watch,” exemplify the ways that hospice operators are trying to not only to keep up with, but get ahead of these changes.
This is the first of two articles that will highlight organizations that are innovating, as well as those whose activities could signal or shape the industry’s future. A forthcoming second story will focus on nonprofit providers.
Amedisys: A journey toward integration
Amedisys Inc.’s (NASDAQ: AMED) trajectory in 2023 is a tale of three companies, and they should be watched for three reasons.
For one, the Nashville-based home health provider, one of the nation’s largest, recently came under new leadership with the appointment of CEO Richards Ashworth.
In addition, the company’s innovation arm Contessa Health continues to make new inroads to expanding emerging high-acuity care models like hospital-at-home services, exploring new payer and provider partnerships and making big investments in palliative care.
And last but certainly not least is the bid by Option Care Health (NASDAQ:) to acquire the company, with closing expected in the second half of this year.
All of these factors herald big changes for Amedisys and the hospice community at large. One of these changes is the ascendancy of value-based payment models.
Ashworth, for example, became the company’s president and CEO in March. Among the considerations behind that choice was his experience in working with payers outside of traditional Medicare.
A pharmacist by trade, Ashworth most recently served as president and CEO of Tivity Health (NASDAQ: TVTY), a wellness solutions company that contracts with Medicare Advantage plans, where he was credited with achieving a 300% shareholder return.
Before that, he was president of Walgreens Co., a component of Walgreens Boots Alliance (NASDAQ: WBA).
Amedisys will be leveraging Ashworth’s experience working with MA in the coming years, as more of its home health, high-acuity and palliative payer mix shifts towards managed care.
“The other thing [in choosing Ashworth] is Tivity. One of the things that I think is really important is that they depend on payers, and their understanding of how payers work,” Amedisys Chairman Paul Kusserow told Hospice News. “Understanding how to deal with payers is increasingly important, understanding how payers think about what they’re looking for. I think we have the solutions for them.”
Understanding how to deal with payers is increasingly important, understanding how payers think about what they’re looking for.
-Amedisys Chairman Paul Kusserow
Value-based payment is also a major impetus behind Contessa’s rising profile, as well as the Option Care deal.
Contessa’s hospital-at-home, skilled nursing-at-home and palliative care services are reimbursed almost exclusively through risk-based reimbursement models, including MA.
And it’s growing; the subsidiary brought in $5.9 million during the final three months of last year, up from $2 million in Q4 2021. Amedisys expects Contessa’s revenue to triple in 2023 with palliative care as the main accelerator, the company’s executives have said in earnings calls.
To reach those thresholds, Contessa is earnestly seeking at-risk payer contracts for its palliative care program. Earlier this year, it penned an agreement with Blue Cross Blue Shield of Tennessee. This is in addition to its many joint ventures with health systems, many of which include palliative care.
“I think from an Amedisys standpoint, we can kind of take anything and everything that can be done in the home, and we can be the primary contact for providers, for physicians and for health systems – and, ultimately, for payers – in a way that benefits everyone,” Ashworth told Hospice News in March. “We have a tremendous opportunity for growth [with Contessa], and maybe all of that is underpinned by just an inherently fragmented market growing behind us, the tailwind of the aging population.”
AmedisysAmedisys CEO Richard Ashworth
This brings us to the $3.6 billion Option Care deal. Here too, we see the fingerprints of changing reimbursement structures that create a need for providers to build scale, offer a wider continuum of services and diversify their payer mix.
Historically, home-based care and hospice providers have operated primarily within Medicare fee-for-service models. Now, health care companies will have to work with a broader range of entities in order to thrive, including private insurance plans, Medicare Advantage Organizations and Medicaid managed care.
The Option Care transaction, if finalized, will put the combined company in a strong position to do just that.
“We believe the combined company’s capabilities and scale will position us to capture a significant share of the market,” Option Care CEO John Rademacher said in an investors’ conference call. “This transaction will enhance our relationships with payers, health systems and providers, as well as biopharma, which will in turn benefit patients.”
Another important reason to keep an eye on this company is the potential impact it could have on the competitive dynamics in the home health, hospice and palliative care spaces.
This includes a potentially adverse impact on smaller providers and the potential for an even larger fish, such as a payer, to ultimately purchase the combined company.
“If the past is prologue, you would expect to see the integration of payer and providers. We’ve seen a recent significant recognition of non-facility-based care as the best solution to gain control of our escalating national health care expenses,” Mark Kulik, senior managing director for the M&A advisory firm The Braff Group, told Hospice News. “With this merger, they’ve got a real opportunity to integrate more. It would not surprise me if, at some point in the future, we heard an [acquisition] announcement.”
Optum Health: Building a one-stop shop
While on the subject of large payer-provider deals, we have to consider the case of the UnitedHealth Group (NYSE: UNH) subsidiary Optum Health, which earlier this year completed its $5.4 billion acquisition of LHC Group.
Drivers behind the transaction include some of the same trends that underlie the Amedisys, Option Care deal — value-based payment and the rising profile of home-based care.
Parent company UnitedHealth Group is the largest operator of Medicare Advantage plans in the United States, with a presence in 49 states. The insurance giant offers MA plans in close to nine out of every 10 U.S. counties.
With so much invested in risk-based reimbursement, the company has a better opportunity to control and manage that risk if they also own a sizable portion of its provider network.
The company’s home-based care investments are also a savings generator. UnitedHealth Group has seen a more than a 15% reduction in hospitalizations among beneficiaries aligned with value-based payment models, the company’s President and COO Dirk McMahon reported in an earnings call.
“We have an opportunity to more deeply and effectively serve people in their homes,” McMahon said. “Nearly all the patients we’ll add this year in fully accountable, value-based relationships will have access to support through our home-based platform. Consumers value and benefit from services delivered in the home and we’ve expanded our capabilities to serve that need.”
Nearly all the patients we’ll add this year in fully accountable, value-based relationships will have access to support through our home-based platform.
-UnitedHealth Group President and COO Dirk McMahon
Optum is emerging as a centerpiece of this strategy, as demonstrated by its track record on acquisitions.
In addition to LHC Group, Optum also picked up the home-based care providers Landmark Health and Prospero Health, which the parent company is in the process of merging. Combined, Landmark and Prospero offer a range of interdisciplinary services in the home, including home-based primary care and palliative care, among others.
“We are building an integrated care model that holistically addresses an individual’s physical, mental and social needs, changing health care for good,” Optum at Home CEO Douglas Wenners, the founder of Prospero, said in a LinkedIn post.
Another recent purchase was the health care technology and data management firm Change Healthcare for $13 billion. Optum indicated in a statement that the transaction would simplify the core clinical, administrative and payment processes, increasing efficiency and reducing friction.
As large as these deals are, they are likely just the beginning for Optum. More acquisitions are likely coming during the next several years.
“In terms of our ramp-up of capital deployment, we have very substantial continued capacity. And obviously, the marketplace is getting interested in that space,” UnitedHealth Group CEO Andrew Witty said in an earnings call. “The pipeline of opportunities is probably as diverse as we’ve ever seen across a number of key growth platforms.”
Guaranteed: Back to Basics with a Pioneering Approach
California-based hospice startup Guaranteed came on the scene during the summer 2022 and got a jumpstart last November with a $6.5 million seed round led by the investment firm BrandProject.
Founder and CEO Jessica McGlory said goodbye to a career in marketing and advertising to establish the company after becoming a caregiver for her father, who ultimately elected hospice due to a cardiac condition.
During that time, McGlory saw strained hospice clinicians do their best to care for him in spite of what appeared to be overwhelming workloads.
“The home hospice aides and the nurses were working so hard to try to give my dad the best experience. But they were so overworked, their caseload was unmanageable,” McGlory told Hospice News at the time of the seed round. “There was no way that they were going to be able to do all that they wanted to do.”
Two years after her father passed away, she conceived the idea of Guaranteed, which operates in Los Angeles County and surrounding regions with plans to expand to the Philadelphia area.
McGlory’s idea was to return hospice to its mission-focused roots, leveraging technology for the timely identification of patient needs and reduced burden on staff, as well as developing a culture that has an emphasis on supporting employees as well as family caregivers.
When a patient comes into their care, Guaranteed also does a “family admission.” Each family member identified by the patient receives their own care plan that includes caregiver and bereavement support services.
“We are reimagining end-of-life health care and death education. We listen, seek feedback, and take steps to improve every single day — it’s not our goal to be the new kids on the block who think they know everything,” McGlory told Hospice News. “This philosophy has given us the opportunity to resonate with people far outside of our service area due to a desire from many to see innovation occur in the critical hospice space.”
Guaranteed Founder and CEO Jessica McGlory
The company, one of the rare hospices that is led by a woman of color, is also heavily focused on health equity.
Guaranteed seeks engagement with underserved communities and hires from those labor pools. The company is also seeking expansion opportunities in rural markets, again with a mind toward improving health equity.
The capital that Guaranteed has raised in its seed round is a point of distinction. Companies founded by women garnered only 2.1% of the total dollars deployed by venture capital firms in 2022, according to Pitchbook.
Moreover, companies with black founders secured less than 2% of all 2022 VC investment funds, Crunchbase reported. Overall, VC investment in black-owned startups dropped 45% that year.
“Guaranteed is set to continue building out the hospice model of the future and grow our footprint in the greater Los Angeles area. We are growing our community-building efforts and hiring our team as our hybrid hospice model evolves to include a more robust platform and AI features,” McGlory told Hospice News. “Ultimately, it comes down to our commitment to providing incredible patient care, introducing new ways for family members and caregivers to receive support, and developing our partnerships to ensure we live up to our name.”
St. Croix Hospice: Regional powerhouse with local roots
Minnesota-based St. Croix Hospice is in a growth spurt that has lasted several years and shows no signs of slowing down.
Case in point, the company plans to open a “double-digit” number of de novos this year. So far it has a good head start. Between the start of 2022 through May of this year, St. Croix Hospice has opened eight locations. In April, it opened two in a single week, one in Iowa and one in Wisconsin.
As of autumn 2019, the hospice operated close to 30 locations throughout six Midwestern states. Since then that number has more than doubled to more than 60 operations in 10 states.
The company has come a long way since CEO Heath Bartness founded it in 2009. At the time, he was running two nursing homes and began seeking a better way to care for residents as they entered their final days.
St. Croix HospiceSt. Croix Hospice Founder and CEO Heath Bartness
Seeking greater collaboration between hospice clinicians and the nursing homes’ in-house staff, he “begged and pleaded” to the facilities’ owners to let him start a hospice to serve their residents, he said.
“Initially, I saw it as a facility partner. I thought that there had to be a better way to do this. There’s got to be a different level of coordination and collaboration,” Bartness told Hospice News. “Our goal and ambition was to have 50 patients. We thought that if we had 50 patients, we kind of made the big time. Today we’re taking care of over 4,200 patients a day. And it certainly isn’t on my shoulders; it’s the amazing people we’ve hired.”
The company is currently backed by the private equity firm H.I.G. Capital, which acquired the hospice from The Vistria Group in 2020. Even with the PE backing, St. Croix Hospice’s growth has been fueled primarily by its own service revenue rather than its investors, Bartness indicated.
Despite the sprawling footprint, St Croix Hospice is focused on ensuring that its local operations remain rooted in their communities, according to Bartness. Though they are expanding in number, it keeps its offices small and hires locally.
The operator’s locations are generally led by clinicians who receive corporate support on human resources, marketing and other business functions, Bartness said.
“They’re tremendous clinical leaders. That’s why we have so many offices — because we’ve been able to get out there and hire people in these rural communities, oftentimes to care for their neighbors,” Bartness said. “I was in Iowa last week doing some town halls, and I told them, ‘This is your hospice. This is your community. I certainly I’m involved, but this is yours. So treat it as you would if you owned it.”