LHC Group Sees Progress with ACOs, Direct-Contracting Entities

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LHC Group Inc. (Nasdaq: LHCG) continues to make progress with its accountable care organization (ACO) relationships while making inroads with direct-contracting entities (DCEs), company leadership said Thursday. At the same time, the Lafayette, Louisiana-based home health giant is building more new referral channels. 

Those and other home-based tailwinds have LHC Group’s leadership team bullish about the business going forward.

“We really feel like we got a lot of good tailwind momentum in all of our channels of growth,”

LHC Group President Joshua Proffitt said during investment banking company Jefferies’ London Healthcare Conference. “Our organic growth, historically, has been at 6% to 8%, year over year. I’m pretty bullish right now that [it] could be 8% to 10% in the next three years.”

LHC Group is a provider of home health, hospice and personal care services. Its 32,000 employees deliver care in 35 states and Washington, D.C.

While its home health segment represents its primary service line, the company has emphasized growth in its home- and community-based services department over the past few years.

That’s in an effort to reach that “tri-level of care” in the home, LHC Group CEO Keith Myers said, also speaking at the conference. That tri-level represents home health, hospice and personal care.

“We’re really trying to create a health care ecosystem within the home environment,” Myers said. “It’s like a health system in the home, as opposed to a health system within four walls.”

Reaching that tri-level care has become a trend in the industry. Frisco, Texas-based Addus, for instance, has traditionally been a personal care services powerhouse, but is now investing heavily in home health and hospice in markets where it’s already present.

On LHC Group’s end, its organic growth in admissions has persisted through the COVID-19 crisis, Proffitt said.

“Once we got past that first real dip in the April and May timeframe, … we’ve outpaced our peers in admissions growth,” Proffitt said.

The company recorded 36,786 admissions in October, up from the 27,984 it recorded in April.

LHC Group believes that 2020 would have been a historical year for consolidation due to the implementation of Patient-Driven Groupings Model (PDGM) had it not been for COVID-19. The relief that came out of the public health emergency has camouflaged struggling providers that may have been looking for a buyer, Myers believes.

Proffitt echoed that idea.

“There’s just a lot of market-share gains to be had through market disruption,” Proffitt said. “We’re going to see more acquisitive growth than we’ve seen over the past several years, just because of all the market dynamics in play.”

But the lessons learned from COVID-19 have also been beneficial to LHC Group.

It hasn’t just been about internal learning when it comes to areas like infectious disease protocols. It’s also been about external learning and outside sources realizing the value of home-based care, which has led to more referral sources.

Elsewhere, Proffitt also expressed his excitement on new contracting entities that are forming, particularly on the Medicare side.

“Historically, there’s been this discussion around Medicare Advantage (MA) [plans] … and about how you are doing on contracting with those,” Proffitt said. “But I would tell you, there is more and more contracting ability — even to become preferred providers in the Medicare side of the business — that is really exciting right now.”

Most notably, those contracting opportunities include DCEs, an area where LHC Group is very involved.

“Those are actually directly narrowing networks and contracting on the Medicare business,” Proffitt said. “And they will put in performance measures where you can earn up to even greater than the Medicare rate if you achieve certain quality outcomes.”

In addition to DCEs, Proffitt said that the amount of ACOs LHC Group engages with is steadily growing.

When LHC Group acquired Almost Family in 2018, it simultaneously bought Imperium Health Management, one of the country’s largest ACO management firms.

“I believe that there is an acceleration, in terms of years, that the coronavirus pandemic has brought to shifting more volume into the home, in general,” Proffitt said. “So you’ve got all those macro dynamics in play that lead to this real bullish outlook on growth.”

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