LHC Group Inc. (Nasdaq: LHCG) is coming off a record year in terms of new acquisitions and acquired revenue. The Lafayette, Louisiana-based company will now look to complement those outside additions through strong organic growth in 2022.
Considering today’s supportive policy landscape, stable reimbursement environment and the skyrocketing demand for in-home care from referral partners, that shouldn’t be too difficult to do, according to LHC Group executives.
“Today, in-home health care is universally recognized as the most patient-preferred, most cost effective and safest setting of care,” LHC Group Chairman and CEO Keith Myers said Wednesday at the 40th Annual J.P. Morgan Healthcare Conference. “The pandemic has reinforced this in the minds of patients, families, discharge planners, physicians, hospital partners, and commercial and governmental payers.”
LHC Group delivers home health, hospice and home- and community-based services (HCBS) across the majority of the U.S. In addition to its health care services segments, the company owns Imperium Health, a large ACO management and enablement business.
“Home health care is poised for unprecedented growth over the next decade,” Myers added.
To further drive organic growth, LHC Group plans to continue executing on its strategy of co-locating its hospice and home health footprints, doing the same with HCBS whenever possible.
Currently, the company has 86 hospice locations co-located with a home health office, up from 77 co-located locations in 2020 and 63 in 2019. About 41% of its HCBS operations – or 55 locations – are co-located with a home health office.
“We have a lot of room to grow within our co-location strategy, which is a part of both our organic growth story for the coming years through de novo locations, as well as our targeted and very strategic M&A growth,” President and COO Josh Proffitt said.
Among strategic benefits, that co-location strategy has helped LHC Group secure new referral relationships. The provider, for example, increased its new home health physician referral sources by 23% in the first nine months of 2021.
As LHC Group makes progress on its overlap goals, its leadership team also sees opportunity to gain market share as smaller, capital-constrained operators potentially exit the market. Its well-established joint venture strategy with hospitals and health systems will likewise fuel organic growth.
Same-store growth for LHC Group JV locations averaged 200 basis points higher than non-JV locations from 2016 to 2019. The revenue growth rate for JVs has averaged 10% to 15% in Years 2 and 3.
“We’re well known for these partnerships, and it’s a clear differentiator for us,” Proffitt said. “That was the case well before the pandemic, and it has certainly been demonstrated throughout the past few years.”
Moving forward, additional upside opportunities for LHC Group include the upcoming Home Health Value-Based Purchasing (HHVBP) Model and Choose Home, legislation that has gained significant momentum in both the House and Senate. The rolling extension of the public health emergency, which comes with certain telehealth allowances and other regulatory flexibilities, presents upside as well.
“When you combine our industry leadership in quality and patient satisfaction, which drives unique physician and hospital referral growth, with the fact that smaller competitors are [seeing increased] capital and labor constraints, you end up with the ability to gain market share and to drive very strong organic growth,” Proffitt said.
For LHC Group and all health care organizations, the biggest barrier to growth in 2022 remains ongoing labor shortages. While that remains true, Proffitt said there are notable signs of relief.
Voluntary turnover for all full-time LHC Group employees fell to 16.1% for the 12-month period ended Sept. 30, 2021, for instance. At the same time, the provider experienced three consecutive quarters in which it hired a record number of employees, capped off by more than 300 net home health hires in the third quarter of last year.
“Despite the ongoing challenges of the pandemic, … we do expect to see the labor environment [improve] throughout the course of this year,” Proffitt said. “Maybe not quite as early in the year with the most recent spike, but we do believe that we should see that.”
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