Aveanna Healthcare Holdings (Nasdaq: AVAH) has paused planned wage increases for California nurses due to uncertainty over the permanence of a state reimbursement increase. The company cited concerns that the funding, currently set to last only until June 2027, might not continue beyond that date. This pause affects the company’s broader strategy to grow its private duty nursing operations across multiple states.
Expansion Plans and Revenue Growth
Leadership outlined a strategy to shift investment toward home health and hospice businesses rather than pursuing large-scale private duty acquisitions. The company plans to focus on smaller deals to enter six new states while building density in its existing markets. CEO Jeff Shaner noted the goal is to connect regional operations and raise a $300 million business unit.
Q3 financial results showed growth in the home health and hospice segment, which generated $72.15 million in revenue. This figure represents a 15.6% increase compared to the same period last year. Overall, third-quarter revenue reached $695.5 million, a rise of 11.8% from the prior year.
Dispute Over California Reimbursement Structure
The delay stems from how California intends to allocate $60 million in state and federal funding. Shaner argued this approach fails to address the long-term wage needs of caregivers.
“We just vehemently disagree with their position,” Shaner said. The company is advocating for the funding to extend past the six-month window to allow for sustained wage increases. Buckhalter noted that the company will be prepared on Jan. 1, 2027, to address retention and engagement payments for the company’s caregivers.
California’s investment in private duty nursing includes approximately $30 million in state funding and an expected federal match of the same amount, for a total of $60 million covering January through June 2027, Shaner said. However, California’s Department of Health Care Services intends to implement the funding as a supplemental hourly payment rather than a permanent increase to fee-for-service base reimbursement rates, Shaner said.
Leadership believes that the only way to fix the hiring trends and the growth trends in California is to fix the wage rate long-term, according to Shaner. “Growing in each state is really tied to [the] reimbursement rate and wage.”
