‘Our Business Is Demonstrating Signs Of Recovery’: Aveanna Making Progress On Turnaround Goals, Led By Private-Duty Services Business

Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) continues to chip away at its turnaround goals, with the Atlanta-based company’s leadership team seeing particular progress on its preferred-payer strategy and the industry-wide labor landscape.

Contextually, 2024 marks Year 2 of the home health, hospice and private-duty services company’s strategic transformation initiative. Aveanna went public in 2021 with high hopes, but it has since had to navigate multiple operational challenges affecting its performance.

“As we enter Year 2 of our strategic transformation, we remain highly focused on those initiatives that created positive momentum in 2023,” CEO Jeff Shaner said during the company’s 2024 first-quarter earnings call on Thursday.

Aveanna offers a range of in-home care services to both pediatric and adult patient populations, with its private-duty nursing services arm accounting for the bulk of its business. The company has locations in 33 states.

Shaner and CFO Matt Buckhalter have previously explained how allocating clinical resources to Aveanna’s best payers was among the company’s top priorities. The executives believe their company has made further progress on that front so far in 2024.

“Our Q1 results highlight that we continue to align our objectives with those of our preferred payers and government partners,” Shaner said on Thursday. “By focusing our clinical capacity on our preferred payers, we achieved year-over-year growth in revenue and adjusted EBITDA.”

As another benefit of the preferred-payer strategy, Aveanna has also experienced improvement in its caregiver hiring and retention trends, according to the CEO. By focusing its care capacity on payers willing to engage with Aveanna on enhanced reimbursement rates and value-based agreements, the company is able to invest further in its workforce, Shaner explained.

“While we continue to operate in a challenging labor and inflationary environment, our preferred-payer strategy allows us to return to a more normalized growth rate in our business segments,” he said.

Aveanna’s private-duty services segment illustrates the momentum the company has on building out its preferred-payer roster. In the first quarter alone, Aveanna added four additional preferred-payer agreements, increasing its total to 18.

Ultimately, Aveanna hopes to grow its preferred-payer-agreement total from 14 to 22 in 2024.

As for its home health business, Aveanna’s preferred-payer-strategy goal is to maintain its episodic payer mix at about 70% while returning to a more normalized growth rate, Shaner said.

“In Q1, our episodic mix was 75%, and we achieved positive total episode growth of 1.7% over the prior year’s period,” he continued. “Q1 marked the first time we’ve had sequential and year-over-year episodic growth since we entered the home health market. We also signed two additional episodic agreements within the quarter.”

Aveanna’s overall revenue was $490.7 million for the three-month period ended March 30, 2024, up 5.2% compared to $466.4 million for the three-month period ended April 1, 2023.

That increase was tied to a $22.1 million increase in private-duty-services segment revenue and a $3.7 million increase in medical solutions segment revenue. Revenue gains on the quarter were partially offset by a $1.5 million decrease in home health and hospice segment revenue, however.

In addition to its preferred-payer strategy, Aveanna’s other core focus areas include identifying cost efficiencies within the business, managing its capital structure while producing positive free-cash flow, and engaging its leaders and employees.

“Our business is demonstrating signs of recovery as we achieve our rate goals previously discussed,” Shaner said. “Home- and community-based care will continue to grow, and Aveanna is a comprehensive platform with a diverse payer base, providing a cost-effective, high-quality alternative to higher-cost care settings. And most importantly, we provide this care in the most desirable setting: the comfort of the patient’s home.”

Another highlight from the first quarter that Shaner was sure to mention during Thursday’s call: the hiring of a new chief legal officer. Aveanna announced the appointment of Jerry Perchik to the position in April.

“I would like to take a moment and welcome Jerry Perchik, our new chief legal officer, to Aveanna,” Shaner said. “Jerry has spent the last two decades dedicated to high-quality health care in the home setting. Jerry brings a wealth of experience in regulatory and legal affairs, mergers and acquisitions, and general corporate law.”