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Amidst growing financial pressures on both Medicaid and Medicare home health reimbursement, Aveanna Healthcare (Nasdaq: AVAH) is demonstrating resilience through strategic rate negotiations and a continued focus on preferred payer agreements.The Atlanta-based provider of pediatric and adult healthcare services reported strong Q3 revenue and outlined plans for continued growth, despite broader uncertainty in the industry.
Financial Performance and growth Strategies
Aveanna reported Q3 revenue of $621.9 million, representing a 22.2% increase compared too the same period last year. A significant driver of this growth was the private duty segment, which generated approximately $514 million in revenue – a 25.6% year-over-year increase. The company attributes this success, in part, to securing favorable Medicaid rates in 10 states and establishing eight new preferred payer agreements for private duty services (PDS).
“As we reset our legislative goals for 2026, we’ll probably still set a goal of it being double-digit rate wins,†a senior official stated during the company’s Q3 earnings call on Thursday. While anticipating that future PDS rate wins may be smaller than those achieved over the past two and a half years, the company expressed confidence in its preparedness.
Looking ahead to 2026, Aveanna anticipates rate increases in the range of 2% to 3%. The company is actively pursuing additional preferred payer partnerships in the fourth quarter to further solidify its position.
Pro tip: Securing preferred payer agreements is crucial for Aveanna’s continued success, providing stability amidst fluctuating government reimbursement rates.
Expanding service Offerings and Geographic Reach
Aveanna Healthcare provides a comprehensive suite of services, including nursing, rehabilitation, occupational nursing in schools, therapy, day treatment for medically fragile individuals, and home health and hospice services. The company currently operates in 38 states, serving both pediatric and adult populations.
The home health and hospice segment contributed approximately $62.4 million to Q3 revenue, marking a 15.3% increase year-over-year. A key strategy within this segment has been focusing on relationships with payers who offer episodic reimbursement, which has allowed Aveanna to optimize its margin profile and enhance its clinical offerings. “With episodic admissions well over 70% we have achieved our goal of right-sizing our margin profile and enhancing our clinical offerings,†according to a company release.
Did you know? Episodic reimbursement models, were payment is tied to specific episodes of care rather than volume, are becoming increasingly popular as a way to control costs and improve quality in home health.
Despite concerns surrounding the proposed 2026 Medicare rate cut, Aveanna leaders do not foresee a significant impact on their business. The company has actively engaged with legislators, describing conversations as “productive,†and expects the final rule, anticipated to be announced in the coming weeks, to be “somewhere close to neutral to zero.â€
However, the uncertainty surrounding the final rule has prompted a pause in acquisition strategies across the home health sector, and Aveanna is no exception.“We’ve not been in a position today where we’ve been ready to pull the trigger on a home health or hospice asset pending the final rule,†one analyst noted. “For all of us, it’s just getting certainty. Just give us a certain answer that we can read into the future with this administration,and then we’re ready to go to work.â€
Aveanna remains on track to complete the integration of Thrive Skilled Pediatric Care by the end of 2025. The company anticipates pursuing additional acquisitions similar to the Thrive deal in 2026, with a focus on expanding its Medicaid business into new states.
Reader question: What impact will the final Medicare rate rule have on Aveanna’s acquisition strategy? The company is clearly waiting for clarity before making any significant moves.
A senior financial officer expressed optimism about the company’s ability to attract caregivers and meet service demand, provided they secure acceptable reimbursement rates. aveanna’s strategic focus on rate negotiations, preferred payer agreements, and targeted acquisitions positions the company for continued growth in a challenging healthcare landscape.
