Fresh off of its market debut last month, Aveanna Healthcare Holdings, Inc. (Nasdaq: AVAH) is throwing its weight behind home health.
Since going public, the company has made moves to position itself as a major player within the home health space.
Aveanna plans to aggressively pursue home health M&A opportunities, Rod Windley, executive chairman of the company said Wednesday during its first official earnings call.
“We plan to focus our M&A efforts in this segment on traditional home health,” he said. “That may or may not contain hospice, but we believe the likelihood of us acquiring a standalone hospice at this time is somewhat low.”
In general, Aveanna has already been busy on the M&A front. The company completed at least five acquisitions in 2020, including its purchase of Recover Health for about $61 million. Aveanna also acquired home health provider Five Points Healthcare in October for $64.4 million.
“Both Five Points and Recover Health integrations are substantially complete,” Jeff Shaner, chief operating officer of Aveanna, said. “Both teams are now a part of the Aveanna family, and the businesses are trending ahead of our expectations.”
As a strategic move, Aveanna’s focus on home health over hospice makes sense for the company. Windley noted that 95% of revenue from the combined segment was derived from Aveanna’s home health business.
Historically, Atlanta-based Aveanna has specialized in caring for complex pediatric patients — with Epic Health Services and PSA Healthcare under its umbrella. However, its purchase of Five Points Healthcare has placed the company in the home-based senior care space.
Today, Aveanna employs more than 42,000 caregivers who serve over 60,000 patients. The company provides home health and hospice services through 65 locations across 13 states.
During the call, Aveanna leaders also gave insights on how having a diverse payer mix has helped give the company a competitive edge.
“We believe this payer diversity benefits Aveanna in two ways,” Windley said. “One, it gives us downside protection from a significant change or reduction from a single payment source. [Additionally,] it has provided us with a [days sales outstanding] that runs from the high 30s to the low 40s, which is consistently lower than the industry comparables.”
Overall, traditional Medicare makes up approximately 9% of Aveanna’s revenues. Most of the company’s revenue comes from Medicaid and Medicaid-managed care.
Aveanna operates under 36 different Medicaid payment systems and over 200 separate MCO contracts. Plus, private duty services make up more than 6% of the company’s total revenues.
Financial results
Aveanna reported revenues of $417.2 million for the first quarter of 2021, a 17.4% increase compared to $355.2 million for the first quarter of 2020.
Aveanna’s private duty services segment reported $350.8 million, a 9.5% increase from $30.3 million in Q1 2020.
“Our [private duty services] patient profile is such that our relationship with our patient lasts a very long time,” Shaner said. “On average our [private duty] length of stay is approximately five years. This relationship has created a stable revenue and gross margin profile for our [private duty services] segment.”
The company’s home health and hospice segment brought in $31.5 million, an approximately 16% increase from $27.0 million in Q1 2020.
Shaner noted that the home health and hospice segment revenue was driven by 5,800 total admissions — with approximately 66% being episodic admissions.
“Home health and hospice is currently our fastest growing business segment,” he said. “This rapid and accelerated growth has been a point of emphasis for us as we work to expand our national home health presence.”
