Q3 2019 Earnings Call
Greetings and welcome to the Medicis third quarter 2019 earnings Conference call.
At this time, all participants are in listen only mode.
Question answer session will follow the formal presentation.
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Please note this conference is being recorded.
At this time I'll turn the conference over to Nick Moscato, Vice President of strategic Finance.
Thank you may begin.
Thank you operator, and welcome to the Amedisys Investor Conference call to discuss the results of our third quarter at September Thirtyth 2019, a.
A copy of our press release supplemental slides related form 8-K filing with the FCC are available on the Investor Relations page of our website <unk>.
Speaking on today's call from Medicis will be policies arose chief Executive Officer, and Scott, Yes, Chief Financial Officer.
Joining us as Chris or our Chief operating officer, and Dave Kimberly General Counsel and senior Vice President of Government Affairs.
Before we get started with a call I'd like to remind everyone that statements made on this conference call. Today may constitute forward looking statements and are protected under the Safe Harbor other private Securities Litigation Reform Act.
These forward looking statements are based on information available to a medicines today.
Company assumes no obligation to update information provided on this call is reflect subsequent events other than as required under applicable securities laws.
Forward looking statements may involve a number of risks uncertainties, which may cause the company's results are actual outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our forms 10-K 10-Q, an 8-K.
In addition, as required by SEC regulation G., a reconciliation of any non-GAAP measures mentioned during our call today to the most comparable GAAP measures will also be available in our form 8-K.
Thank you and now I'll turn the call over to a medicis CEO Paul Condra.
Thanks, Nick and welcome to the Amedisys 2019 third quarter earnings call I'm very proud of our performance. This quarter as we have once again generated very strong financial results, while continuing to deliver on our four strategic pillars as well as rigorously prepare.
For whatever the new World Post PDG.
We'll be in 2020 again, our strategic pillars define us as a company our success over the last four years is largely due to our focus and progress in these four areas as long as our patience employees and referral sources continue to define success.
Along these same lines will endeavor to make progress on our four pillars. So gross.
Our organic growth in home health was particularly strong as we hit 5% Medicare fee for service growth.
This is our highest quarterly growth rate since Q3 2010.
On the inorganic front, we continue to work a full hospice talk and pipeline, while streamlining our internal acquisition integration and absorption process as we prepare for industry disruption in home health early next year.
We also have continued our de Novo success with seven de Novos. Currently operating ahead of our initial projections and we have an additional four to six de novos targeted for the remainder of the year.
We're continuing to look to build and buy in hospice by Opportunistically in home health once we see what pdgm looks like and build networks to expand our personal care coverage as well as innovate to allow more people to stay in their homes.
Now to people.
We drove total voluntary turnover to approximately 16% down from 17% in the second quarter and for the month of September we achieved a 14.9% turnover rate. This is our best ever.
Let's talk about operational efficiency, we had 41% of our visits completed by Lpms and 43% of our visits completed by Pts phase by the end of the third quarter up from 39% and 42% respectively. During.
In Q3 of last year. This will help continue to drive margin improvement.
And now to quality.
We achieved our quality of patient care Star score Q PC, a 4.27, and we had over 13% of our care centers at five stars, while 90% of our care centers were over four stars are hospice business once again.
Then outperformed the national average in all measurement categories and is at the top of the national players.
Our performance this quarter has allowed us to increase our EBITDA guidance range from 213 to to $16 million to 220 to 23 million the details of which Scott will cover in his remarks, none of these results would be.
Possible without our over 21000 employees unwavering commitment to providing outstanding care to our patients in their homes I want to thank every one of view for helping to deliver such strong clinical operational and financial results again, it all begins with our.
Patients and our culture of caregiving, which puts them first.
As you all know this is the last earnings call prior to PGGM being implemented as such let's discuss the constantly evolving and challenging regulatory and legislative seen our pdgm preparedness and our 2020 areas of focus let's say.
Start on the regulatory front.
The 2020 home health final rule should be released by CMS any day now and until we see and review the actual language in the final rule it would not be useful or wise to speculate about possible strategies from the proposed rule on the legislative front, we continued.
We made great progress signing up co sponsors for our house and Senate bills.
As you will recall this legislation would prohibit CMS for making rate adjustments based on behavioral assumptions and allow only for adjustments based on observed evidence of a change in provider behavior.
As of this call I'm pleased to announce we have 31 bipartisan co sponsors for the Senate Bill representing a third of the total Senate and a third of the influential Senate Finance Committee members.
In the house, we have 130 bipartisan co sponsors representing almost a third of the house and over half of the prestigious ways and means committee members.
As for next steps, we fully expect to see continued and growing support for this legislation from Democrats and Republicans, while we continue to push for a congressional budget office or CEO score on the Bill as you all know policy, making in Washington is an ever changing landscape.
And we must remain aggressive but flexible once seeking solutions, we in our industry collies remained above.
Internally as we have discussed with many of you we have been practicing and drilling for Pdgm since November of 2018, when CMS finalized the 2019 rule with the new payment model. Since then we've had a cross functional team.
Team of over 40 of our best working daily to prepare our business for these pending changes.
As of November 60 care centers will be in Pdgm test mode performing most of the functions required thus far the results we've seen have exceeded our expectations, we've dug into and dissected the behavioral assumptions trained up our centralized.
Coding function implemented pay practice changes that will allow us to better optimize our Lps and PPA utilization and have begun to roll out metal logics care. So that we will have better analytics around individualized patient specific care plans as.
Well as optimizing utilization management.
It has been truly inspiring to see the entire organization rally around our strategies to address the impact of Pdgm and I want to again emphasize our intense preparation scale financial resources and clinical and operational.
Partys position us to successfully transition to the new payment model. However, it manifests itself, regardless of the regulatory or legislative outcome.
Not surprisingly successfully navigating the waters of Pdgm is our biggest initiative in 2020 that said we have a few other operational and strategic initiatives that we will be working on through the remainder of the year and all of next year.
CCH integration and optimization and the clear care Buildout and actualization.
Thus far.
CCH integration has exceeded our internal modeling expectations and we look to continue that trend of staying ahead of projections entering 2020.
As you will recall when we acquired the asset we laid out a margin improvement and growth plan that would require initial investment in the business and cause some initial disruption as we harvest synergies.
Through five full planning, we've been able to mitigate some of the anticipated negative impact 2020 will be a year of continued focus on ramping the business development staff within the CCH care centers and further margin optimization as we work to make.
The growth and margin profile of CCH mirror, the Amedisys legacy hospice business.
Finally last quarter, we announced an innovative partnership with clear care, the personal care industry's leading software platform, representing 4000 personal care agencies across.
Ladies and gentlemen, please standby experiencing technical difficulties.
Please stand by ladies and gentlemen, facing technical difficulties.
Nick Your line is open.
Thanks, Jim Please standby.
Nick Your line is light. Please go ahead.
Finally, im just going to start at the top finally last quarter, we announced an innovative partnership with clear care the personal care industry's leading software platform, representing 4000 personal care agencies across the us our agreement with clear care creates.
An opportunity to establish a partnership between Amedisys and personal care agencies, using the clear care platform in order to better coordinate patient care.
Long term and part of our 2020 focus we will be building a nationwide partnership.
Personal care agencies, and the technology infrastructure needed to offer Medicare advantage plans and others, a true continuum of care by combining home health hospice and personal care services nationwide.
It's very early days and there is a lot of work to do but we're very excited about the numerous opportunities. This partnerships presents us with.
Thus far early results have been extraordinary with 880 personal care agencies, representing 90000 caregivers in every state we operate in having already signed up to participate in the partnership with Amedisys.
As you can see we had another great quarter and have continued our outstanding performance in 2019.
Again.
Thank you to all the Amedisys employees for all you've done to drive. This success you continue to Peru.
No matter, what the circumstances focusing on our patients drives outstanding results.
With that.
I'll turn it over to Scott, who will take us through a more detailed review of our financial performance for the quarter. Scott. Thanks, Paul I'm very happy to report on another impressive quarter results, which once again was driven by excellent financial performance across all three of our segments.
The third quarter of 2019 on a GAAP basis, we delivered net income of one dollar and three cents per diluted share an increase of seven cents on 495 million in revenue, an increase of $77 million or 19% compared to 2018.
For the quarter, our GAAP results were impacted by income or expense items that we have characterized as noncore temporary or onetime in nature slide 14 of our supplemental slides provides detail regarding these items and the income statement line items eight adjustment impacts.
For the quarter on an adjusted basis, our results were as follows.
Revenue grew $77 million or 19% to 495 million.
EBITDA increased $12 million, 25% to 57 million.
EBITDA as a percentage of revenue increased 70 basis points and EPS increased 20 cents, a 21% to $1.15 cents per share.
We're very pleased with our of our Q3 performance. There were a couple of items that I'd like to highlight that positively impact our results.
Our health insurance expense for the quarter was flat sequentially, we typically experience at 10% to 12% increase in Q to Q3 as such our health expense was approximately $2 million below our internal expectations. Additionally reductions in workers' compensation reserves benefited the quarter by approximately $2 million.
Turning to our third quarter adjusted segment performance.
And home Health revenue was 312 May end up 17 may and our 6% compared to prior year driven by 6% increase in same store total volumes.
On a same store basis, Medicare admissions were up 5%.
Episodic admissions were up 8% and total admissions were up 9%.
Medicare revenue was up 2% impacted by Medicare recertification rate of 37.2% 180 basis points lower than prior year and further impacted by an increase in price concessions.
Medicare revenue per episode was up 2%.
Visiting commission cost per visit increased 90 cents compared to prior year, driven mostly by plant salary increases.
Overall costs or visit was up 81 cents compared to prior year on the 3% increase in total visits.
Our gross margin improvement of 110 basis points was driven by volume and rate increases across all payers as well as a 2.8% improvement utilization.
Additionally, our plans shifting clinical mix resulted in a 600000 dollar reduction in cost of revenue for the quarter.
Segment EBITDA was 47 May end up 3 million with an adjusted EBITDA margin of 15.1%, representing a 10 basis point improvement.
Other items impacting the third quarter results about home health segment include.
Non Medicare revenue per visit increased 1.6% and DNA as a percentage of revenue was 24.3% for the quarter, which is up 100 basis points compared to 2018 a.
Shifting our staffing model and raise as Joe approximately seven by 70 basis points of the increase.
Now turning to our hospice segment results, which include our CCH in rose rock acquisitions.
For the third quarter revenue was $162 million 59 million over prior year, an increase of 57%.
Same store average daily census was up 5% and same store admissions were up 4%.
Segment, EBITDA was 42 million up nearly 14 million over prior year, an increase of 47%.
Net revenue per day was up $7, a 96 cents and cost of service for day was up $4.79 from prior year.
Our segment EBITDA margin and operating metric metrics were impacted by the inclusion of the CCH acquisition in our third quarter 2019 results.
Excluding the impact of the CCH acquisition, our hospice 70 about margin was up from prior year.
For the quarter the C say to acquisition added $46 million in revenue.
$7 million, an EBITDA in our hospice segment.
The acquisition added 1.4 million in corporate costs, which resulted in a net 5.7 million in consolidated EBITDA contribution.
Year to date, the CCH acquisition has added revenue of 123 million and 13.6 million and consolidated EBITDA.
We're very pleased with our performance to date and are confident in our ability to grow topline and expand margin.
A personal care segment generated approximately 21 made in revenue with a third quarter and grew billable hours by 2% hiring difficulties driven by the strong economy has limited our growth.
Our results are not comparable to prior year as they all inclusive acquisitions.
We're pleased with our continued progress as our EBITDA margin of the segment improved 410 basis points over prior year.
Turning to our total general and administrative expenses on an adjusted basis total DNA was 150 million or 30.3% of total revenue.
Total DNA was up 70 basis points as a percentage of revenue compared to prior year and sequentially.
Our total DNA expense for the quarter includes approximately $13 million licensees data acquisition, which is comprised of 1.4 million in corporate and 11.4 million in our hospice segment.
Slightly over half of the 70 basis point increase in total DNA expense related to changes in our home health staffing model and raise as a detailed we may purposeful DNA investments in 2019 to prepare the business or pdgm, including pay practice redesign and staffing model changes.
Added sales and support poised for continued growth in all lines of business add resources to pilot innovations and expanded our de novo process.
We generated 47 million in cash flow from operations for the quarter, which puts us at $127 million year to date.
We're on track to deliver in the range of 180 made for the full year 2019.
The DSO was 44.5 days of approximately four days from prior year and 3.4 days sequentially.
It was impacted by approximately three and a half days by the Soviet States acquisition.
We anticipate increase in Dsos upon completion of the conversion of CCH care centers the homecare Homebase.
Excluding the CCH acquisition I DSL was 41 days, which is flat from prior year.
At the end of the third quarter, our leverage ratio is approximately one times and we've accessed a $470 million of liquidity.
On the Novo front, we're very pleased with our progress to date and currently have seven de Novos care Center operating.
Tardy opening additional four to six by the ended the year.
Finally, as you can see on page 16 of our supplemental slide deck, we're increasing our 2019 guidance ranges as follows.
Adjusted EBITDA of $220 million to $223 million and adjusted EPS of $4.32 to $4.39.
As I mentioned Q3 benefited from approximately $4 million as a result of lower health in workers' compensation costs. However, we have not reduced our total health costs expectations for the year and expect to shift and the timing of costs. The shift combined with our normal Q4 seasonality result in approximately a $6 million sequential increase in health costs in Q4.
Our updated guidance ranges include the saw this cost shift.
Entering the fourth quarter areas of focus that will ensure we continue our strong performance are as follows continue Medicare admission volume growth trends.
Hospice AIDC growth minimizing CCH disruption and managing the impact to performance lights are ongoing preparation for PDGF.
Relay the Pdgm in 2020 modeling as we continue to update our analysis with 2019 episode data the Amedisys specific impact of Pdgm, including the market basket update is a negative 6.8%.
Of that 6.8% current view is that we can offset approximately 50% or the impact via behavioral changes while mitigating the remainder.
The mix of cost levers, including optimizing clinical mix and utilization.
We'll continue to refine our view throughout the remainder of the year and and we'll reassess the modeling upon release of the final rule.
This will conclude our prepared remarks, operator, please open line for questions.
Thank you at this time will be conducting a question and answer session.
To ask your question. Please press star one from your telephone keypad and the confirmation tone indicate your line is in the question Q.
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One moment, please so we pull for questions.
Thank you first question comes from the line of Brian Tanquilut with Jefferies. Please proceed with your question.
Hey, good morning, guys.
Moreover, our growth.
I am.
Sorry about that just making a joke.
My first.
First question as I think about your comments on organic growth, obviously admissions looked really strong 9% organic.
But how is that translating into the Medicare revenue growth of 2%, we've gotten a lot of questions on that and I think investors would really want to see what the moving parts are in terms of your view on the delta between admissions and revenue growth.
Brian This is Scott I'll get to take that appreciate the question.
Yes, I think Thats great question. If you if you look at the numbers certainly we're excited about the topline add make growth on Medicare approximating five 5% there that's our best since 2010, so very pleased with that so thats certainly helping our growth. We also did see increase in revenue BREP set of roughly 1.9% down slightly we think that somewhat as.
We move through Pdgm blue roughly run at about 2.8% in prior quarters. So those are things that are helping us on the on the good side that was somewhat offset as I said in my comments, we did see.
The increase in price concessions year over year about $2 million. Some that's timing related so that certainly has helped us but the rest is really driven by a decline in recert rate, which weve experienced throughout the year.
Roughly down 180 basis points year over year, so you're seeing that kind of pull down.
Some of those volume numbers, Chris I don't know if you want to add some more clarity there, yes, hey brands, Chris. So so first some some raw numbers on the recert rate.
In the total volume if we looked at our total Medicare volume for the quarter. On admits are estimates were up 1900 24 five minutes, but our research decline as Scott mentioned was down it was down 889. So we only had a net of 1035 new episodes.
Q3 versus Q3 of last year, that's a roughly 1.4 pursued year over year volume growth on the Medicare side.
It's strictly a resort issue, what we noticed as we had a real strong reasor year last year, so 39% was or reasor rate in Q3 last year 37.2 this year.
We noticed this going into the year each of our three quarters. So for this year have been lower year over year versus last year. So we're getting a little bit also of acute simulation effect.
Research there were light in Q2, the carry you to Q3 and the revenue is recognized in Q3 is catching up the good news is is that we know what it is it's a turtle. It's nothing external is driving it it's more around clinician capacity in focus we didnt go in a lot it or agencies. This year in terms of staffing model redesign pay practices.
Ages PD June preparation.
Focused in on it were chipping away, we think we'll call back some more of.
This quarter and.
We think we'll get to where the revenue top side is reflective of the total volume as well.
Then just Brian just from just from my perspective.
I will take admission growth any data the year.
We can fix the recert issue.
And I think the whole idea of are being able to produce results, which we haven't been able to produce since 2010 on the topline is extraordinary I think the issue is often there is a seesaw effect when you drive admissions and have very strong admissions or what it does from the utilization of resources that pushes Uri.
Search down slightly so I think as we balance this out we'll be able to.
Push.
Have more modulator growth on both sides.
Thanks for that and then I guess is shifting to Pdgm, obviously, the rules coming out soon I guess, Chris if I may ask.
What exactly are you doing in terms of prep work I know you said in the prepared remarks, it's hard to strategize, but I know you guys have already been.
Doing pilot programs underground and then I guess probably related to that for Scott.
How are you thinking about this limited the starting rate.
One of your competitors talked about their impact yesterday. So just wanted to hear your perspective on how we should be thinking about the rate.
Based on the current rule as proposed thanks.
Yes, I'll start with the right and then let Chris Dodd more into our preparation for largely as a cinema prepared comments where are all in rate, which is net of the.
The good Guy, we're getting on market basket, which is for US is roughly 1.5% and inclusive of behavioral assumptions that CMS has made where our starting point is that 6.8%. So thats a negative 6.8% impact if you think about it on a 3000 average revenue per episode unit roughly $200. So thats kind of how we're starting there.
And as I said in the comments as well, we think we can offset about half of that are about 3.4%.
Through our behavioral changes, which is a combination coding co morbidity as well as LUPA. So that leaves us another 3.4% to overcome and we're still feel very confident in the cost levers we have around visits for episode and then around LPN oriented PTP Ta conversions you saw that in this quarter that we took the half of it.
As it out we were.
Really proud that we were able to focus on that and get those numbers moving so I think that bodes well for our future development around that.
So I think it leaves us good opportunity. If you think about one visit just roughly and if you could kind of wait that down from.
What's true variable you're talking about $70. There and then if you're talking about each move one move in a ELP LPN and oriented PTP, Jay that's probably $20. Each so if you think of the $200 on the top said and we offset half of that behavioral and then you've got thats a combination between of another.
$110 coming out of the cost side. So I can give you kind of a view of where we would expect to get that coverage from.
And so all else from from an operational perspective again, we've been working on this since November of last year. We've had a group of 40 professionals in the organization that are constantly meeting in working through those what we've done specifically as we started off on tackling the coating side as well.
Initially looking at our episodes and identifying episodes and have an opportunity for coding.
We've been able to really kind of.
Really configure kind of our coating process. So that we're fully done on that.
The co morbidity side, we're fully collecting the information there. So there's really not much work to be done there as well and then on the on the loop of management.
Working through then we'll have that kind of fully laid out by the use of this year and then last piece would be on the questionable encounters which those are basically episodes that you in today's environment don't have a grouping home to morals environment, we've been able to focus on that we initially start off with around 30% of our episodes and we've got that down 2.3.
The pursuit of our 2019 episodes and now we're still we're looking for whom Forbes. So we've done a lot there made a lot of progress there and then the two cost levers.
Scott Mooching or visits per episode as you can see we're already down one half of busy year over year in Q3 and are moving our mix of our per professionals LP units to rooms, and Ptcs and ptcs to closer to a 50 50 mix.
Specifically, what's happening to drive that is better scheduling on our board more focus there and we've talked a lot about a pay practice choose that we're we're in the middle of today, there will be going through this year that we think will unlock the rest of the the runway for us to be able to get to that 50 50 mix.
And I think the other piece, Brian that's important is about 20% of our helped by the end of this year, 20% of our.
Care centers will be doing a lot of the PGGM it will be like they're living in the Pdgm world.
So we've we're up to.
I think about 50 care centers that are going to be up in doing this so we feel good about how thats working.
And we've learned a lot we've been doing.
We've been doing a fair amount of these since may so we've we've learned a lot in the process, particularly on how to refine the coding, but we've also looks.
We've been able to drive our utilization down in this area as well as.
A lot of.
Work has been done on the hiring of LP ends and PPA ways that have been beneficial from a cost perspective, so we feel with 20% of our business already actually in the in the in the worst case Pdgm World running affectively, well, we feel good where we're at and we again.
Thank our 40.
People enough for getting us there so early and rigorously putting us through the paces. So that we've been able to deliver as we're going to.
These really good results. So we feel good about it.
Last question for me, Paul because I think about CCH and the hottest business hospice and delivering good results driving upside is that mostly CCH in how should we be thinking about your ability to continue delivering that kind of performance out of hospice.
I think I think CCH is on plan. So we feel good about I mean, we're still sticking to.
We are ahead of plan on the synergies I think as you saw we basically delivered our results were I think overall 13.8 million in.
On the under the third quarter, So we beat already our projections for the year.
CCH, so we feel good about it.
We feel good about the synergy harvest that's coming in so the 34 to 36 million of next year, we feel very good about so.
We just want more hospice so were.
We've had to walk away from a couple of big deals, but we still have a really nice pipeline. The de novo's are growing very well.
So we continue to do that were particularly ceding our de novo's around we're Chris use to play in Texas, We feel we like that space. So.
We feel very good about that and I think we feel good that remember that Thirtys 34 to 36 is basically just synergized, it's not at our margin it's not at our our growth rate. So when you add all that together you've got to.
You've got significant growth there.
2021, yes, just real quick on Hostas performance I would say that certainly we want to continue to our we have seen a little slowdown we guided to roughly 7% on ADMET growth to see Thats, a little slowly numerous and tough comps there back our legacy segments still performing exceptionally well at the margin lines within our segment thoughts about.
Ccas delivered.
Roughly 5.7 million that the segment level really deliveries about 7.1, which on 40 646.5 main in revenue there at about 15.6% of EBITDA contribution. So you can see when you look at that blend perspective.
Our legacy did great actually increase both EBITDA margin and gross margin. So we're pleased with the from the cost side certainly working on the growth piece of that we're happy with our performance.
Thank you guys. Thanks, Brian appreciate it.
Thank you next question is from the line of many of the rule at William Blair. Please proceed with your question.
Hey, Matt how are you doing.
Hi, good morning.
Chris I wanted to follow up a little bit on Medicare ADMET strength.
Can you just wondering if you could just give us a sense.
Particular pocket.
Geographic regions, you're seeing strength the referral sources, what's driving that it looks like non Medicare revenue was still up 16%. So it didnt appear to come at the expense growth and ADMET Delta elsewhere, just wonder if you could go a little bit more into that.
Yes, thanks, Matt So we've we've obviously focus on on our AR.
Organic growth on the Medicare side for quite some time and we've been pretty clear about our strategy out to compete on the street, giving our reps out there train calling on the right accounts, if the right frequency and also just working through any kind of operational issues that we have in some of our locations.
So proud to say that the way were structured regionally historically, we've had some over performers out shine or overshadow some of our underperformers that get us to sum total growth.
Today, we're really seeing we're seeing growth across all of our regions.
The organization so.
I don't think it's anything, particularly or other than us just really being committed to our strategy.
Selling on quality, most making sure that we have the best.
Best reps out there selling a great product, which is our service and I think is starting to getting some traction for so we have several we now are looking at you know we're looking at seven straight quarters of organic growth on the Medicare fee for service side. So we're real excited about that we want to continue to push for that.
Okay, and then I just want to follow up on the clear care partnership play given some of the.
Hi levels statistics in terms of signs, but you could you give us a sense for how you expect this influence that contribute to that business and what kind of timeline, we might see for.
The sign ups the precision agency is actually contributing to potentially topline growth for you.
Yes, I think I'm going to let him that I'll give you the topline on that and then I'll turn it over to Chris because it's reporting into him I think the.
I think the initial pieces, what we hope for and what we're testing out we still.
Have to rollout our test piece of this so we're still signing people up.
And I think the are are simple philosophy. There is the best way to to be in this business is utilizing a network sort of approach and and so thats what were trying to migrate towards the idea of courses that we actually what we see everyday is a desire to.
To to move back and forth between personal care and home health and personal care in hospice and we want to establish those that ability to do that so we can provide continuous care for our patients and that was so initially we think we'll start to see that in cross referrals, we've already seen referrals on both sides. So were.
Encouraged by very early days very small amounts, but we're encouraged by that the other thing we've been encouraged by is.
In an ability for us to have the full care continuum, hopefully integrated we haven't built the integration tool for that so that's what we're working on now how to Lincoln.
Clear care with our homecare Homebase.
And utilize the data as well and then that's going to get us.
Our next question comes from the line of just the Bowers with Deutsche Bank. Please proceed with your question Hi, Justin.
Hey, Paul and team good morning, everyone.
I appreciate the the pre call music I don't need that second cup of coffee after that.
Very much.
So you guys had a.
Tough comp.
On Medicare same store revenue I mean your 10%.
At this time last year and.
Admissions are are at record levels.
So.
Is it fair to just in terms of trajectory of.
Same store growth the next couple of quarters.
What seems like research will maybe pick up a little bit is is it fair to say, maybe we've kind of hit the lows in terms of.
As comp season, as as kind of the volume pulls through.
We've kind of maybe hit the trough in terms of Medicare same store revenue and then how should we be thinking about the recert rate over the next couple of quarters and I do appreciate especially is.
GM kicks in that.
The admissions matter more but.
The recert rate is picking up a little bit and just wondering if.
We should how we should be thinking about that.
Yes, Hey, just as Chris.
Thanks for the comments, yes, it was a tough tough comp, but what we're looking at is as we identified kind of a dip in our research and Q2.
We've been we've been focusing on that making sure that we have the capacity.
With our clinicians for the admissions in the Recertifications, we saw a tick up as a percentage of Fleeted episodes. In Q3, we anticipate an additional kind of pick up in Q4, I think we'll get back to kind of what will be normalized states.
Our total growth total volume being in the Medicare volume being that 5% to 6% range. In this should reflect be reflective in revenue prior to really pdgm impact when I look at Q1 Q2 of next year.
We don't we don't anticipate pdgm to impact our recertification rates.
Negatively or positively.
So I think your question is should we see kind of Q3 is as the trough in those kind of coming back to where our topline revenue is reflective of our total volume growth I would say yes.
Okay got it and then just one quick follow up I appreciate the additional disclosure on the net effect.
Do you guys are seeing which versus kind of my older data looks like a 140 basis point improvement.
Scott It sounded like in your prepared comments that that's.
Really just kind of looking at your your your current mix 2019 is that is that a fair am I understanding that correctly I.
I think Thats fair I mean, when it first data first came out around the modeling that we use in 2017 data. So you continually have new episodes coming through yet other changes to reimbursement coming through with the 2018 final rule to 2019 final rule. So thats what were seeing there I think it's.
This has been pretty close to our modeling kind of a from early in the year.
Some small movements, but it's been pretty stable floors.
Okay. Thank you and great execution this quarter, Greg. Thanks, just appreciate it.
Thank you.
The next question, it's from the line of Joanna Gajuk with Bank of America.
Good morning. Thank you so just couple Hello.
So just couple of follow ups. So first I guess just stamp pdgm.
So I appreciate the commentary of a high yield.
And the vision offsetting.
The different pieces. So how should we think about how quickly it's going into effect.
I guess when you when you start reporting this quarter sounded pdgm. It sounds like you couldn't have everything in place essentially by the end of the year.
So I guess.
Hi person goes live.
Hi, gentlemen, just live on PTT yen, so the cash and just see how how this plays out right away lately.
Anticipating might bump up plus Q1, Nina there's still.
Some things they will.
Maybe not fully in place and then Nina Bye. Thanks say media everything has to play so any commentary on kind of into.
I'll stop there I think you've got a joint I know what Chris go into the details, but I think the way you're thinking of it is I think the coding piece will largely be under control. Chris has been in are excellent coaters have been.
Really getting this under control, but I think the migration from getting a full visit possibly visit the half out.
And and then getting the LPN RN and the PPA PTC ratios to an optimal place. So we're able to pull those savings out all care centers will probably be the first two quarters, but they can I think you're right. So I think if you're if you're looking at our are all of our lever.
As for PDG I'd break it again into two buckets. One is the revenue lever, which are behavioral adjustments related to that seem to be a real adjustments the assumptions assume as laid out we will be done with any kind of material changes going into one 120 with us. So thats coding. This co morbidities and that is you're kind of loop of management.
If you will so that's about half of our mitigation strategy. The other two will actually ramp throughout the year, which shows the.
Which is the visits per episode in I failed to mention earlier on is that part of is going to be around what's driving our management of that is our middle Logisticare launch.
Paul mentioned, 20% of our locations will be on middle largest care rolling into January we don't have a full rollout plan until August so it's going to ramp throughout the year.
So when you look at a one visit per episode reduction in 2020, the best way to look at it is less than one in the first after the year getting to one in the middle of the year exiting next year, it's probably closer to one one and one in half.
In toward the whole year looks like.
Net one reduction.
Same goes for the other cost lever, which is.
LPN Center is.
And.
Hey practice is happening right now that is one of our biggest barriers to move to significant.
Needle that will be done it to this year we should.
Queen January in July of next year, an acceleration of us moving closer to that 50 50.
Ratio and when we exit next year and should be even be more heavily weighted to pts and lpms and it is to organs and NPT. So.
Our next question from the line, Kevin Ellich with Craig Hallum. Please proceed with your question.
I guess, what's your preference I mean, given the potential changes we can see there from Medicare Orient Legislatively would you rather have the impact all at once in 2020 or would you have it would you have to have it spread out over.
Couple of years kind of phased in what's best for the company and then what's best for the industry and how that how do we think about that.
But therefore for the larger players we do think it'll provide some opportunity for M&A.
But.
It's really five hits Youre getting here.
You are getting the 8% you're getting the rural add on elimination.
You're getting the rapid elimination youre getting double billing, our youre getting questionable encounters that you have to code down to and fix that so it's really not just over a two whammy deal with a five whammy deal and when you add all that together, it's going to be devastating and we just our belief is that we're we've prep for this so we.
Feel really good about at all in if it's the perfect storm.
But we think for the rest of the industry and for the chaos that'll that'll sort of hurt People's Health, We think a phase and is going to be much better because use they still have to contend with all the other things that's part of PGGM.
Thank you.
Recently, we have time for one additional question, Steve It's coming from the line of John Ransom with Raymond James.
Hey, John I, just once you know this this was a record for me very backend.
Thats another record for me getting back in the queue. So.
I think star one button, let's start one button is going to be replaced.
So just to avoid kind of what happened. This today and this quarter can you help us a little bit with segment EBITDA modeling for Fourq you I know you had some seasonal cost in hospice, but how are you thinking about segment EBITDA in fourq versus Threeq you.
Thanks for taking us up on the Scott.
Yes, I think we important you got to think about still the normal.
We haven't done a lot of energy from a as we give guidance around breaking down the segment performance as you think about what we normal seasonality deal with.
I talked earlier about the $6 million that increase in health.
Over 50% of that probably goes through the home health line, so you'll see some pressures there.
Thats normal tenants other than the outsized $2 million that kind of shifted on us you'll see that base.
Similarly with workers comp. So you see those kind of moves go long to the the segment, we do generally see a little higher growth in Q4.
Fleet stabilize the reset rates I think that will bode well for us.
So I think that you had kind of cell C. A similar we kind of see it as a kind of a flattish type views on end from Q3 to Q4.
Yes, with typical other cost issues facing us and then we'll get a full quarter raises.
Our plan, but that they'll hit us that's probably about 1.6 this may and.
Additional into Q4, so kind of looked like normal patterning patterning. If you look at our charts in the back what kind of dead on that that normal progression.
Thank you.
All right I'll now turn the call back over to Paul escrow for closing remarks.
Thanks, Rob and I want to thank everybody, who joined us on our technologically challenged call today. Thank you for for that I would also like to thank again all of our people who delivered incredibly good results keep doing what you're doing keep taking care of the people who need us the most.
We hope that everyone has a wonderful day.
And a happy Halloween Tomorrow, and we look forward to updating you on our ever evolving progress and purposeful work on the road or during our next quarterly earnings call. Early next year. Thank you everybody take care.
Thank you everyone. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.