Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) has maintained a disciplined approach to raising wages since it went public.
Its gross margins are driven by the difference between the hourly rate it’s paid and the wage it pays its caregivers, like many other home-based care providers. And a company policy has ensured it has kept its eyes on gross margins as pay rates skyrocketed over the course of the pandemic.
The company’s CEO, Tony Strange, detailed that policy Tuesday at the 2022 Global Healthcare Conference.
“One of the things that we’ve been pretty disciplined about is making sure that as the rate comes in, then we pass wages along to the caregivers — and not getting one in front of the other,” Strange said. “Because our direct expenses go in the form of wages to the caregivers. Once we put that wage through, there’s no such thing as temporary. We’ll never get it back.”
That’s how Aveanna has kept its gross margins consistent, Strange said, even when its peers have had more volatility.
Although raising wages remains a key to getting caregivers and retaining them, the company avoids putting the cart before the horse.
Based in Atlanta, Aveanna delivers home health, private-duty and hospice care services to a broad range of patients in 30 states. Though it is now heavily invested in the senior home health space, it began as one of the nation’s largest at-home pediatric care providers.
Strange mentioned on the company’s first quarter earnings call last week that strong reimbursement rates – in nearly half the states the company operates in – have been a welcome change so far this year for the company.
On Tuesday, he reiterated that the company is optimistic about more reimbursement rates coming back higher during the second half of the year. Because of that, he expects higher wages to be passed down to employees.
“What we will do is, we’ll be a little bit more aggressive as we get rate changes,” Strange said. “We’ll pass those wages down to the caregivers to try to solidify them and even bring some back some that might be working in settings where they can make more money today.”
Elsewhere in the company’s employee strategy, Strange said that a company-wide program that offered former employees a one-time bonus to come back to work for Aveanna had moderate success. However, following the Omicron surge and with a little hindsight, Strange said he’s not sure the juice was worth the squeeze.
“While we did have moderate success, I don’t think we would go back and re-implement that same program,” he said. “We may do other things, but [after we just] finished a pretty deep dive into our work pool, we’ve learned that right now caregivers that have left the home care space — specifically private duty — have left for more wages. [Even though] they like our job better, they like the flexibility our job gives them and they would love to come back, they’re not going to come back for less money.”
Aveanna’s home health and hospice growth can be, in part, tied back to its purchase of Five Points in Georgia in 2020.
When asked about the company’s continued growth in the senior home health space — which includes the recent $345 million Comfort Care Home Health deal — Strange said the timing on transactions is key to the company’s success.
“If you remember back in 2020, the [Patient-Driven Groupings Model] was just being implemented,” he said. “We wanted to make sure that we understood PDGM and understood how PDGM was separating winners from losers. So once we understood that business, we understood exactly what we needed to go look for in terms of acquisitions. That’s when we made the decision to get back into the business.”
Aveanna also announced this week that after implementing Homecare Homebase (HCHB) as its sole back-office software system, it will also use the home health software platform Medalogix.
Nashville-based Medalogix is a predictive analytics company that works with some of the largest players in both home health care and hospice.
On its end, the Dallas-based HCHB works with over 200,000 users to serve more than 800,000 daily patients. It offers in-home care providers cloud-based solutions aimed at the operations, compliance and financial parts of their businesses.
On Tuesday, Strange reflected on the importance of implementing Homebase Homecare into Aveanna’s portfolio.
“We do believe that Homecare Homebase will help us drive efficiencies as we go,” Strange said. “Our gross margins in home health and hospice are good today. However, I do believe Homecare Homebase will grant us some back office efficiencies that allow us to manage cases clinically and operationally as well as bill and collect in a timely way, so we’re pretty excited about it.”
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