Why Amedisys Is Bullish on Its Medicare Advantage Strategy, Contessa

When it comes to home health providers, it’s safe to say that the proposed payment rule is the talk of the town.

And Amedisys Inc. (Nasdaq: AMED) is no exception.

“The topic on everyone’s mind has been the proposed home health rule for 2023,” Amedisys CEO Chris Gerard said during the company’s second quarter earnings call Thursday.

The U.S. Centers for Medicare & Medicaid Services (CMS) released its proposal for home health care last month. Since its release, the proposed rule had garnered a severely negative reaction from home health stakeholders.

Amedisys took aim at the proposed rule’s 4.2% reduction to home health payment rates.

“The methodology and data that CMS is using is woefully inadequate to capture the true inflationary impact that providers across all of health care are experiencing in providing care throughout the country every day,” Gerard said.

Amedisys — like many other industry peers — also took issue with CMS’ assertions of overspending on home health care, and referred to the budget neutrality methodology employed by the agency as “extremely flawed.”

For Amedisys, vocalizing the company’s displeasure with the proposed payment rule is not enough. The company has a plan in place to directly address CMS.

“As we have in the past, Amedisys has been prepared to engage with CMS directly, and alongside our colleagues in the home health industry,” Gerard said. “To propose cuts based on behavior adjustments is unsound. We’re working on a comment letter that will thoroughly outline our position around the assumptions, our experience throughout the first two years of PDGM and the impact of the ongoing pandemic.”

On the legislative side, Amedisys had been in discussions with congressional members regarding a plan to prevent CMS from instituting the proposed cuts for months.

The result of these talks was the introduction of the Preserving Access to Home Health Act. The bill was introduced by Sens. Debbie Stabenow (D-MI) and Susan Collins (R-ME) on Monday. The companion bill was introduced in the House Thursday.

“Now that the bill has been introduced, we – along with the industry – will continue explaining to staff and members of Congress the impact of the proposed cuts on home health agencies, patient access and the need to pass this legislation by the end of the year,” Gerard said.

Contessa continues to progress

Aside from Amedisys’ efforts around the proposed payment rule, the company also walked through the progress Contessa Health has made.

“We continue to be pleased with the progress Contessa, our higher acuity segment, is making as it’s generating meaningful growth in Q2 and positioning itself for material ramp for both admissions and revenue for the second half of 2022.” Gerard said.

Total admissions in Q2 for hospital- and SNF-at-home was 345. This represents 35% year-over-year growth for Contessa.

Even with this promising growth, Gerard noted that this performance was behind budget due to delays in closing scheduled partnerships. He also noted that Contessa was still moving towards closing these partnerships.

Contessa’s at-home palliative care model has also made strides, hitting 131% of budgeted engaged member months in the second quarter.

The company is also working on taking on more risk on this side of the business.

“Contessa continues to focus on finalizing health plan contracts with managed care organizations to shift volume into the full-risk bucket,” Gerard said.

Medicare Advantage strategy

During the call, Amedisys also touched on growing Medicare Advantage enrollment and the impact this was having on the company’s strategy.

“The Medicare fee-for-service population is declining … and Medicare Advantage penetration is 53% and accelerating,” Gerard said. “This is a lot of the rationale behind us acquiring Contessa, and now on the home health side it’s really driving a little bit of a pivot in strategy for us. How do we lean into Medicare Advantage in a way that is not a vendor-payer relationship, but more of a partner relationship?”

The company has settled on a case-rate model, which removes the need for a convener to control and do utilization management of the business, according to Gerard.

Overall, revenue checked in at about $566 million for Amedisys, a 2% year-over-year increase. Home health revenue totaled $349 million, a $1 million decrease from the previous year.

Hospice revenue increased, meanwhile, by $7 million to $198 million in Q2.

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