Q1 2020 Earnings Call
SEC regulation g a Reconciliation of any non-gaap measure mentioned during our call today to the most comparable gaap measures will also be available in our forms 10-K ten Q and A K. Thank you, and I'll turn the call over to a medicine CEO Paul, Cooper Road.
Thanks, Nick and welcome to the Amedisys first quarter 2020 earnings call before we get started now more than ever. I want to give a heartfelt. Thank you to our caregivers are heroes who without hesitation here for the most frail and vulnerable patients in the country, including those with covid-19 the dedication and courage of our incredible people highlights our unwavering commitment to our mission of caring for patients in their homes and shows that not even home and demek will come between us and delivering the highest quality of care to our patients. I'm truly proud and Amazed by each and every one of you and once again, thank you from the bottom of my heart.
These are unimpressed.
Then at times for our country and for our company and as such we will structure are prepared remarks differently than in the past during this call Scott Ken and I will covering will be covering the following our performance in q1 where we bested our internal expectations and exceeded. Our performance measures in the early stages of pdgm covid-19 has took the focus of many questions, but I do not want to lose sight of the fact that we perform very well in q1 and in the early stages of implementation of PD GM, which is now the medicare payment structure by which we all operate and which was our biggest 20/20 initiative.
Secondly covid-19 for now our new world and how it has impacted our business beginning the second week of March and Trends. We are seeing month through April which are turning positive along with what we are doing for our patients and employees and finally what has changed on the Regulatory and legislative fronts June 3rd post covid-19.
Now I'm going to turn it over to Scott who will run us through our q1 performance and the covid-19 impact on our businesses Scott month.
Thanks Paul. I'm very pleased with both our q1 results which exceeded our expectations in our progress on the implementation, which were made more challenging by covid-19 off for this call. I'll start off by reviewing our financial performance for the quarter and discuss our progress on GM will then hand it back to Paul who will conclude with the impact of covid-19 on our business Trends emerging through April and for discussion of the rest of the year what we're focusing on and what to expect for the first quarter on a gaap basis. We delivered net income of $0.96 per diluted share month or $490 million in revenue and increase is $24 million or 5% compared to 2019. Our results are impacted by income or expense items adjusting our cap results that we have cash does non-core temporary or one-time in nature.
So I fifteen of our supplemental slides provides detail regarding these items in the income statement line items each adjustment impact.
For the quarter on an adjusted basis our results were as follows Revenue growth 24 million or 5% to 492 million ebitda decreased 1.6 million or 3% off 53 million, even as a percentage of revenues increased 90 basis points and EPS decreased $0.06 to $1.05 per share.
His hi.
My key for 2019 comments. There were several items that would impact our progression from Q4 2019 two Q 12020 as compared to Prior year those items total 10 million hours and included an increase in reimbursement in q1 or 2019 for both segments. Totally five million dollars. The addition of c c h on February 1st and a benefit of non-recurring Fleet gains tax additional items impacting your 12020 performance are as follows him right impact was a headwind of approximately six million dollars and covid-19 impacted q1 Revenue by product of seven million dollars. These impacts are all set by eleven million dollars to Quincy production and healthcare workers compensation driven by the seasonality of health insurance claims and reductions in education in a continued shift in clinical Staffing mix.
Both financial performance perspective. We began 2020 focus on growth across all segments successfully implementing pdgm in reaching our two years or six people at Target covid-19 impacts our performance and all three of these measures.
Can you try key cost metrics for q1 home health costs or visit increased 3.9% over prior-year increase was driven by a 2% light two raises 2.5 percentage of the impact of lower volumes or fixed costs and pay practice changes all set by a 60 basis-point reduction relate to a shift in clinician Staffing mix hostas cost per day increase 6.6% The increase is driven by higher cost per day on our Acquisitions is our Legacy costs four days down despite raises in August of 2019. GNA is up a hundred fifty basis points or fifteen point three million of the prior-year increase is driven by eight million dollars of late to Acquisitions the addition of 86 FTE since q1 of 2019 annual raises an additional resources to support our growing hostas segment.
I want to buy a little more color on our observations as we have previously disclosed. Our GM impact was estimated to be 2.8% for the full year of 2028.
A 2020 strategy was focused on behavioral changes on the revenue side and cost reductions Medicaid the impact of the 2.8% reduction in reimbursement. A revenue per episode was down approximately 4% from prior-year. Keep in mind that this Staten flights episodes completed during the first quarter, which means it's slightly over 50% of these episodes were in progress at 12:31 that's completed under a reimbursement these episodes accounted for approximately 1% of our year-over-year decline in Revenue per episode.
March was to be our first month to provide a full view of our progress today or we saw promising signs that are episodes in progress in March the impact of covid-19 to increase lupus in Las building. In this population.
1 packs of this will be seeing our Q2 completed stats.
Remain confident that we conceived our Target improvements and mitigate the impact of Behavioral assumptions. Once covid-19 suicides are two main areas of focus on the cost side or clinical staff. You make a reservation. We've made excellent progress to date in both measures.
On clinical Staffing. When is the quarter with a 45% helping utilization up from 39.2% in the first quarter of 2019 and a 46.3% PTA utilization up from 42.1% in the first quarter of 2019. We're very pleased with the progress. We're making here and on track to achieve 50% healthy and PTA utilization by fourth quarter 2020.
Keep in mind that everyone percent shift and utilization quite so approximately a $450,000 of cost savings.
On utilization winded first quarter and 15.8 visits per episode, which is down 1.4 visits from q1 2019 in one visit from Q4 2019.
Some of the VP decrease was driven by a Christmas visit beginning in the second week of March and increasing through the remainder of the month. We've previously highlighted the rollout of the metalogic care product as part of a GM strategy. As of today. We have 153 care centers on care. How will we decided to pause the implementation do the covid-19 we expect that once we resume truck roll out. We should complete implementation within 12 to 13 weeks another bright spot and PD GM has been our cash flow performance. We generate a cash flow from operations of $6,000 for the quarter beating our internal modeling by nearly two million dollars. The majority of this outperformance was driven by DSO which were 46.6 days during the month up approximately 6 days from key for 2019, but I was 7 days before our original projection. We expect to see a two or three-day increase in Q2 that some of the q1 benefit.
Is related to collections on accounts receivable as of 12:31 and very pleased that cash flow performance and we will update you with the new cash flow projection after the second quarter.
I want to add some additional color around the acquisition from a liquidity perspective while we do expect to see some increases in dsos related to our balance sheet remains strong as we currently have total equality of 478 million dollars as of March 31st with a net leverage ratio of 1.0 times on performance-based is the circuit deal with this have a 225 million dollars to move our leverage to 2.1 times. We're very comfortable operating at that level based on historical cash generation.
Finally in April CMS release the full year 2021 proposed hostice rule was comprised of a 3% Market Basket update offset by forty years productivity adjusted for net proposed rate update of 2.6% CMS. Also propose increasing the cap amount by 2.6%
Sorry, I had to be in line with the 2.6% rate update.
So this is a proposed Rule and not yet finalized positive rate updates and hospitals are increasingly impactful to our business as we continue to grow hostas built organically and inorganically off now turn the call back over to Paul for discussion around covid-19 is impacts our business what we're doing for our patients and employees and our recovery plans. Well,
Thanks, Scott. I'd like to segment my remarks into a few sections first the effect of covid-19 on our business second our response for our patients life voice third legislative and Regulatory developments Force our recovery plans and fifth the aseracare acquisition and hospice in organic bath strategy. Now turning to covid-19 impact on q1 and our April Trends heading into March. We are pleased with our growth performance in both home health and hospice as of March 13th are projected first quarter 2020 Total Home Health admissions forecast was 6.2% off first signs of the covid-19 impact began in the second week of March as we experienced an increase in Miss visits and declines in referral volumes.
As outlined on slide eighteen of our supplemental slide deck all three lines of business witnessed similar Trends. However, the disruption was grainy and Home Health which included a referral low point the week of April 5th, since that time we have seen a steady recovery in referral volumes in all life of businesses and of corresponding drop in missed visits.
In hospice referrals hit their low point the week of March twenty second while hospice admit volumes have significantly improved the slowdown in March will impact leg C and C C h a d c early in Q2, but should recover as our admit volumes continue to ramp up on the cost side during the quarter. We had approximately 1 million in increased costs related to covid-19 including increased training expense of approximately $600,000 warranty pay off of approximately $200,000 and increased costs related to p p e primarily mass of approximately $200,000 and noting that we are paying nearly $5 more for PPE than pre covid-19 prices. These items have been added back to arrive at our adjusted ebitda. We have spent significant effort in dollars.
Sure that we will have the necessary PPE to protect our patients and clinicians Q2 will see a significant impact in both the quantity of PPE purchased as well as an increase in cost per unit as our current trends illustrate. We are seeing promising signs of volume recovery. However, it's too early to predict the pace of recovery. There are numerous unknown factors including the continued increase or decrease in the number of covid-19 cases Nationwide the pace at which elective procedures begin and long-term to normal levels the return of patient confidence to enter a hospital or a doctor's office access to our patients in homes and Facilities particularly something else.
cost normalization
Around p p e and finally any future or prolong shelter-in-place orders.
Let's talk about our employees and patients employees always our most important asset and patients and their families are most important commitment have been at the Forefront of our decision-making this pandemic in order to ensure the safety of our employees and patients in the field. We have made the following protocol changes. We've implemented a new clinical protocol require all clinicians to wear a surgical earloop mask at a minimum on all visits performed.
We've developed a covid-19 positive patient treatment protocol and subsequent PPE policy for clinicians, treating covid-19 symptomatic and positive patients that includes utilizing n95 masks blowouts gowns and face Shields and also requires surgical masks to be worn by the patient.
We have continued to find success in utilizing both traditional and non-traditional suppliers for our needs as a result. We have sourced enough PPE to have four months of vehicle Mass six months of n95 mask one month of gallons with another two months of gallons coming and for all other critical PPE. We have an average of 3 months of inventory on hand and we'll be continuing to Source aggressively. We've also created a centralized distribution center for all cryptic PPE allowing us to flex our inventory on a care center by Care Center basis depending on need and demand lastly. We've established a rapid-response Care Center cleaning and sanitization network allowing us to fully sterilize any Care Center within 24 hours of an employee exposure or an employee whose birth
And covid-19 symptoms. I'd like to take a minute to thank all of our supply chain management and procurement teams that have worked tirelessly to bring us into this position. This has been an extraordinary accomplishment and it's because of your continued efforts that we are able to arm our clinicians with everything. They need to stay healthy and safe while delivering the highest quality Care on the legislative and Regulatory relief front between the cares act the paycheck Protection Program and Healthcare wage enhancement act CMS, 11:35 waivers, the CMS interim final Rule and CMS guidance much has changed almost daily over the past six weeks here are some of the highlights that directly impact our business first. The provider Relief Fund has previously disclosed. We received a cash payment off.
of approximately 100 million
From the provider Relief Fund appropriated by Congress to the Department of Health and Human Services in the cares act our receipt of this cash payment was part of the firm 30 billion in funds distributed to Health Care Providers consistent with the terms and conditions for the receipt of the payment from HHS. We will utilize the funds to replace lost revenue and healthcare costs related to covid-19 and we will properly and fully document the use of these funds in a required quarterly reports to HHS off in order to properly attest to the receipt of our payment. We like our colleagues throughout the entire Health industry are seeking Clarity from HHS regarding the formula utilized to determine our receipt of the funds and the total amount of funds available to be used towards lost revenue and Healthcare expenses related to covid-19 based on the conversation off.
Trade Organization knock and others on our behalf have had with HHS leadership. We expect written clarification in the coming days on the formula and the distribution of funds off at this time. We have fully segregated These funds into their own account and we will not be utilizing any of them until final written guidance is received from HHS again. We expect this guidance to be coming shortly finally on April 24th, 2020 HHS distributed an additional twenty billion dollars in funds to Health Care Providers from the provider Relief Fund. We did not receive nor apply for any additional funds from this second distribution from the provider Relief Fund. Secondly, we have a gas station holiday the suspension of the 2% sequestration from May 1st through December 31st, 2020 will impact a medisys revenue favorably dead.
I approximately twenty million dollars. Next is the advanced accelerated payment program in which CMS was authorized to provide Medicare providers and suppliers life of up to 100% of Medicare payments for a three month. However. We decided not to apply for the accelerated payments primarily because we do not need the funds Northstar Cash balance seriously impaired next payroll tax deferral the cares acts allows employers and self-employed individuals to defer payment of old employer share of the Social Security tax. They otherwise are responsible for paying in 2020 effective for payments due after the fact of enactment all in all this amounts to an approximately fifty million dollar cash impact for a medicine non-physician practitioners.
Nurse practitioners physician assistants and certified nurse specialists may now certify eligibility for home health order Home Health Services stablish and review plans of care and certified and recertify eligibility. This provision is something the industry has sought for a number of years legislatively and it creates the media new referral sources in those states where there has been similar state regulatory relaxations or waivers tied to the public health emergency phone next Telehealth for home health. We are now able to provide Telehealth visits to our patients as long as it is part of a patient's care plan. However, there is still no reimbursement for the health. And therefore these visits do not count towards reaching Home Health Lupa thresholds also required face-to-face visits can be performed via Telehealth bio.
position or nurse practitioner
In home health and hospice Telehealth can now also be used for purposes of patient recertification for hospice. We are pleased with these provisions and we have started to utilize Telehealth when it is clinically appropriate for both our home health and hospice patients while nothing can take the place of Hands-On care that are clinicians excel at providing there are numerous benefits to utilizing Telehealth including lessening of patient anxiety as no one has to physically enter their home protecting both the patient and wash dishes and a television also requires. No PPE which allows us to maximize the use of our current and future inventory. This is not a comprehensive list of all that has come from the cares act and CMS medicare waivers. However, it does capture the provisions that are potentially the most impactful to our businesses. I would like to take a bath
Going to recognize and applaud the White House HHS and CMS for their recognition of home health and hospice as integral Parts in the delivery of care and as a meaningful part of the solution for our country to successfully navigate our way through this pandemic. We are also very grateful for the bipartisan support Congress continues to show to our nation's Health Care Providers during this incredibly challenging moment in our nation's history both the administration and Congress have moved with speed and thoughtfulness and we are hopeful that the implementation of many of these new policies last beyond the term of the public health emergency, as you can see, there's lots of moving pieces given all these factors. We have made a decision to suspend guidance until we have more definitive data that allows us to better model full year 2020 performance our hope is to update you with our new guidance range.
During our second quarter call now. Let's discuss why our future remains so bright.
The home has never played a more prominent role in everyone's daily life. It has become our office our school our playground our Social Circles and where we deliver a package received care as our country starts to open up some of these things may change, but what will remain is that? The home is and always will be people's preference as a place to be for.
More and more seniors selecting home to receive care only helps further solidify the compelling demographic trends that are currently a Tailwind for our company aside from the volume opportunity demographic and consumer Choice are driving many of the changes implemented by CMS and the White House could play an interesting role changing. How can I ask is delivered inside the home initiatives such as Telehealth offer the opportunity for us to even further protect our clinicians and our patients all while delivering care even more efficiently and effectively Innovations such as the use of virtual Care Centers and Rapid adaptation of other collaboration and Care manage technology will help us to optimize our cost structure and continue to evaluate delivery of quality Care the ability for non-physician practitioners to certify the need for home health allows our BDC dead.
to engage
With an ever-expanding complement and alternative to doctors.
So what are we specifically doing now to recover our senses Gap and finish the year strong. We have a two-pronged approach that will drive future growth and market share expansion pack first our rapid recovery strategy. We have rolled out focused area action plans created by RBD roll be peace avp's and account Executives and characterization coordinators ctcss. We've put in place tailored call routing based on referral source segmentation physician-hospital long-term care Ambulatory Surgery centers and other settings, we've continued hiring and onboarding b d f t e s during the Slowdown they're trained and ready to hit the streets. We've also developed patient and family facing talking points for working through objections to home health and hospice out of fear of exposure. And finally we've leveraged the fact that we've been good to Citizens and we have been open to taking covid-19.
Since day one in fact 166 of our home health care centers and 64 of our Hospice Care Centers and all of our personal care center location would have treated covid-19 patience during the pandemic. This has already resulted in new referral sources that were previously not sending us patience with our long-term Market expansion strategy includes hiring of two SV piece of growth to lead our sales efforts in home health and hospice further leveraging our sales analytics capabilities. We continue to Source Home Health rescue opportunities. In fact, we have rescued a Home Health Asset in Lee's Summit, Missouri at the end of 2019 a home health and personal care asset in Western, Massachusetts during March of this year a significant of need giving us access to three counties in, Georgia.
Central and Eastern, Kentucky, and we've also Inked a deal for a JV with the University Medical Center in Lubbock, Texas. Our businesses are seeing the signs of recovery. And when we are all on the other side of this Public Health Emergency, a medisys stands poised and prepared to take additional market share and further distinguish ourselves as leaders in our quest to deliver more and more care in the home.
Finally, I'd like to highlight and emphasize our recent signing of the acquisition which was announced on Monday. April 27th is an extremely high-quality hospice asset that is in 14 States and operates 44 care centers with a census of approximately $2,100 and $170 of dollars in Revenue. This asset is a great addition to our portfolio as noted in our press release. We signed a purchase agreement to acquire a Sarah care for the purchase price offer $235 million dollars and we will use the cash at hand at the time of clothes and funds from our revolving credit facility to fund the deal.
none of the money
We received as part of the cares act will be used to fund this transaction. We have followed a Sarah care for a number of years and have always been impressed with the culture and the quality of their operations team as well as their management.
This along with our complimentary Geographic footprint makes our two organizations a great fit. We expect the deal to close in 30 days, but understand that covid-19 impacts extend the time to close. Once the deal does close Amedisys will operate a hundred ninety Hospice Care Centers in thirty-five States while caring for an ADC of a proximately 14,000 patients. We are very excited to assign this deal and we are very much looking forward to welcoming all the aseracare caregivers into the Amedisys family home since we develop our three-pronged inorganic hospice strategy, which included larger hospice deals tuck-ins and denovo's we have executed on each of these prongs.
Larger hospice deals including Compassionate Care Hospice CCH in 2019, and now a sarahcare in early 2020 hospice tuck-ins including Roseburg in 2019 and Asana Hospice in 2020 Hospice denovo's of which so far. We have launched 8th.
In total or inorganic hospice growth strategy accounts for the addition of over 6000 to our hospice business. I am very proud of the way. We have executed against our service plan. We will now take some time to complete the Integrations and to refine the operations of our newly acquired businesses and make everything one. This will conclude our prepared remarks operator. Please open up the line for questions. Thank you at this time will be a telephone keypad. We ask that you please limit to one question and one follow-up a confirmation tone indicate your line is in the question queue. You may press star to if you'd like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star Keys. One moment, please while we pull up for questions.
Our first question comes from Brian tank will with Jeffries. Please proceed with your question.
Hey, good morning guys. Thanks for all that detail on on your outlook. But I guess the follow-up in that I was just wondering how are you thinking about twenty? Twenty-One earnings power, you know, I was just a kind of like a pre covet Baseline where you were looking at, you know, the Outlook say in March early March of this year. Yeah. Thanks Brian. I'm doing pretty good about it. I think obviously we're starting to we've come back very well and hospice. We're coming out pretty strongly in terms of Home Health. I think the key for us for the remainder of the year is to to get in Q4 to a proper ADC level that pushes us to where we expect it to be off this year. And I think we're we're in we we have good sites to getting there. It's going to be a big left, but we feel pretty confident we can get there. So are most of our folks
Just the most of our energy.
Some of the initiatives I talked about in terms of our hiring of of b d in terms of our, you know, quite considerable hiring, uh, continuing hiring through the pandemic and I'm boarding in terms of biddy. So we feel we feel good about it, but I think the key is how fast what's the market going to look like how fast is it going back to 100% will it pop back to a hundred percent of what it was pre covid-19.
I appreciate that shifting gears to a stearic hair looks like a pretty good asset. You don't mind. Just walking you through how you think about you know, what you can do with that business and what the what's the integration project would look like and you know where the the opportunities are and and kind of like earning power that we should be thinking about for twenty Twenty-One and maybe twenty-two. Yeah, I think I think it's going to be a similar to factory that we talked about before when we did CCH we're going to make sure we we it's it's a really good high-quality asset very good not great quality scores, very nice geography in terms of complementary where we need it to be complementary and also adding on new territories. So we feel very good about that, What you'll see is we're hoping to close on June 1st. Then we're going to be obviously bringing them on to our instance of Homecare Homebase and are already Homecare Homebase, uh wage
Benny which is very good for us which would mean that disruption should be less. Then we're going to need to go in add some sales folks to Spur their growth and Thursday believe the technical integration will go. Well. We'll probably uh need to make some investments in terms of over, you know, in terms of adding growth, uh people there, So we estimate, you know, we will get this up, you know, probably double the ebitda again in the two to three year range, probably more towards the 3-year range. I know Chris. Would you change anything to add on that?
Not not really all I think that you know again just reiterating the there's a lot of similarities in their operating model that that lines up well with ours so, you know, some of the integration wage should be uh, you know much smoother relative to to the CCH integration them being on Homecare Homebase helps a lot but there will still be that kind of integration option. We're going to be pretty methodical with it and you know, but we also you know, it puts us in a lot of new markets very little overlap. So our our strategy lines up just to go deeper and penetrate those markets to expand the the margins over time. So feel good about it.
Awesome. Thank you. Thanks Brian.
Appreciate it.
Our next question comes from Matt LaRue with William Blair. Please proceed with your question. Hey, Matt.
Hi, good morning, and want to ask a little bit about sort of the the Home Health volume Trends on both sides of both thinking about referrals and also patient call off. So on referrals the rep gave us the the chart there on 518, but could you maybe give a sense for best book like in terms of institutional versus Community both, uh on the downswing and then on the recovery page in terms of missed visit just breaking out what's been driven more by restrictive visit policies from sniffing out versus patient-driven call offs in the home.
Right Chris, you want to handle that?
Yep, sure on the first side on the on the volume on home health what we saw was physician referrals dropped off earlier than off tomorrow facility referrals, but they both bottomed out in the same week physician referrals have rebounded, you know faster than the hospital referrals as well. But the hospital referrals are also you know kind of coming up as well as we're starting to see starting to see some electric procedures to come out so all-in-all. I feel like you know, it's the trend is is staying consistent with the trajectory is in the right direction and we're seeing you know referrals from you know, from all of our referral sources, you know, kind of you know by my buckets started to come up one thing I would point out on referrals I think is kind of interesting is is that you know, as we've moved through this we picked up six hundred, you know, unique new referral sources through some of our BD efforts so, you know,
No, we're not certain exactly what the upside potential is there but we have a strategy around trying to you know, cultivate those little bit further and see if those are some new relationships. They can build on our organic growth in a far as as far as the the the patient objections and the facility relations as well. You know, we you know, we saw late March early April kind of the biggest disruption around that we had all these you know, there were pretty locked up. They were concerned about Outsiders coming into the coming in to take care of their patients. We saw that open up a little bit and primarily with the sniff something related to her office. And then the a Elton is are starting to up up as well. And then on the on the patient's objections on the homes, we're we're making good progress there as well in terms of them being comfortable with the fact that our clinicians or donning when they come into the home to make sure that they're safe and our clinicians are safe. So, you know, that's trending Miss business or trending down and access to facilities as trending out.
Okay, thank you. And then just a follow-up. This would be for Scott just in terms of thing about Revenue per episode. Could you just give us an idea of what what did that look like? She can get a sense for what the impact was versus perhaps a lupus bike or change in uh-oh. Mix as covid-19 set and then Thursday we get a sense for what it would look like in the second quarter. Now that the Bowling Green Thumb episodes from December are out of the mix. Thank you.
Right. So if you
If you look you know that we're down about $104 a year over a year and I would say about probably close to seventy percent. That was of was PD GM related. So about $70 of that. We had another roughly $2,000 related to episodes in progress over prior year that that came in slightly below where we thought that was kind of the the bulk of what we did have some covid-19 option and some other life changes just in in in kind of our mixes of the business, but that's what we saw. So we were basically came in at that 4% So I'd say from a you know, x x prior-year number. We were somewhere in that, you know supposed to that to 6 to 8. So right on top where we thought the what we thought our model number was so, you know, those early episodes were slightly below where we are ending Target would be thought were going to make that up into March and that's where it got impacted where we see more Lupe's and then lost billions. Just really pulled that number back. So I'm on us and that's what you'll see more reflective because as I said in my,
Completed stat as as Lupe's ramp up and if you think about you know right now a what a a loop episode could could look like you're talking about, you know, that that reimbursement, you know, if it's going to billing. One. It's probably going to average somewhere around $400 billion. To somewhere around $200. So you can see as those numbers ramp up, you know, that'll that'll pull back our Revenue Agent episode. But we expect more disruption especially in April and May cuz you'll still be seeing some of the facts of you know, these on the back half of those episodes.
Thank you. Thanks man. Our next question comes from Frank Morgan with RBC Capital markets. Please proceed with your question. Hey Frank, good morning. Hey, I guess staying on that topic around the the Lupa rates. So you say that uh, the negative effect of loophole will carry over into the quarter. How much would the as these new cases a month of March in later cases start coming in. I know you talked about behavioral changes that would help on the revenue side. But do you it's just a is the powerful effect of Lupa just more than more than offset any positive effect of Behavioral changes from a billing perspective under pdgm. That's my first question. And then the second Leon it sounds like if I if things if we do have a a 2.0 version is you use the term taking market share. I'm just curious.
How you been able to differentiate yourself? Is it all this, you know investment in p p e r u doing things differently from anybody else in the marketplace that would increase the chances of driving that that market share gain. Thanks. I'll answer the first one. I'm sorry your second one that I want to let Scott who's all things Loop answer that so I think what we've been
Just in general as good citizens. I think the idea that we've been taking a lot of business. We've been our folks have actually been working very hard making sure that contacts are open and making sure that everybody knows we're available. We were very very aggressive as you've seen in terms of PPE we over paid for PPE initially off those prices will come down but we're now ready able willing to go into homes when needed and so we're that's a unique position against some of the moms and pops out there. The other issue is Chris mentioned is clearly our business development folks have been a widening the circle and we've been bringing in other folks who have basically heard of our reputation out there and saying, you know, how long you guys are out there. You're working really hard you're open to 2 to taking care of vulnerable people with covid-19. We'd like to sit down and talk with you. So we think it's going to be you know, we think God
Just by being good citizens.
By being prepared with p p e and by you know having great training for our employees about you know, we've been really drilling everybody on a daily basis and you know and continuing to to work RBD folks which we've been increasing. So we're we're finding new ways to be aggressive and open the door what that's going to mean from a pie perspective is ours is the pies back to back to where it needs to be in terms of where it was pre covid-19.
Last four on the second half of this year. We're we have to really Drive RBD function now that we built it up. So Scott, I'll turn over you on the lupus.
Yeah, right. So just kind of making sure touch on all your points there. But if you think about where we landed year-over-year certainly well ahead on on our Costco metrics or around responding to PGM. So, you know our business per episode or down 1.4. If you think about that relative to let's say we do seventy-five thousand Dead episodes a quarter you got roughly if you look at the variable piece, let's use $70. You're talking about a $70 a $7 a good guy relative to the the the v p e if you think about mix we're continuing to move that we said it was roughly $450,000 for every one point move year-over-year, you know combined help in and PTA. It's it's basically 10.6.8 an LPN and 4.2 on GTA. So they're you're looking on the quarter basis another million. So we're looking roughly eight million dollars on the on the cost side if rate at that 2.8 dead.
Somewhere around 6 million. So we're looking at a positive two million dollar impact Parts at this point, you know, and that's what we're using a lot of our January starts because that's our first full view with that. We think is the cleaning without the impact of covid-19. It'll start to eat into the that good guy though as you move down in the loop of question. You had we moved more into that. As I said, the the average cost reimbursement Loop is either $400 to $200 depending on which building. You're in so that'll that'll eat into that the metric though on visits are going to look better though, right because Lupe's are going to drive down my business per episode. So you'll get a impact there. They don't depending on how long this goes. It'll certainly eat into that but we're going into you know cute, you know believe in where it had about two million dollars off got you in maybe one final on just on the on the financial side that you commented about your your cash flow and how you thought that was better than budget, but it was definitely lower wage.
And like on a trailing four or five quarterbacks.
It working capital was that all just uh build up in a r or what was really driving that and on that subject the does all these government programs in terms of that opportunity for her to acquire because of pdgm the opportunities does that in any way change as a result of of this this government Aid thanks God. Yeah, I'll start with with the ARP. So look at that. You know, we we knew was an impact because the reduction of the rap down to 20% So we expected to get a hit there. So we actually probably thought it would be about six to seven days is worse than we were really did well on cash collections off and what was kind of an our balance sheet as a 12:31. We think DSS will move probably another two but two or three days we're probably ahead of our internal numbers about twenty million. So we feel great about our cash generation in our please me six million dollars is low, you know when you look back at where we've been dead.
You know, we'll see what happens in the queue to but we're certainly on a good trajectory to to have that number of moving into more of a normalized run rate for us.
And then the second question is around and you know nopales had a lot of thoughts on this but you know around the impact and what this does certainly they did throw everyone a Lifeline to this if you think about you know, one of the big impacts we felt it be to our competitors was around the rap elimination. So going to 20% and twenty twenty going to zero and twenty Twenty-One, you know with the ability for the people to get Advanced payments on Thursday that certainly will give them a lifeline and now they got the additional dollars on the cares act. So, you know, I think in the near-term that'll certainly be helpful, but long-term, I think you're supposed to see that I think probably the back half of the quarter when you know, you have to pay some of this money back from I think it becomes problematic. Yeah Frank, I mean one of the things is that PDF is the law of the land now, that's what we run by what's happened with the most severe parts of PD GM is the the industry is artificially been propped up through
You know necessarily obviously in this crisis, but you're getting the you know, the sequestration you're getting the payroll relief payroll tax relief, you're getting a our relief wage is what the real teeth were in PDG em, they're now actually, you know, giving you eighteen and they're giving it to you up front you all would all back. So I think what needs to happen is when all of the stops which we assume will occur in sometime and twenty Twenty-One from the impacts of pdgm will kick in all these all the money will have to be returned. We're assuming that and so I think there will be even more of a severe shake out. My guess is if these if it follows this this way off probably this time next year as you saw we've done some rescues these rescues were done before covid-19.
That this industry is being artists.
We held up and we think at some point it's going to go back to pdgm and then it'll be time to to go back in and and make some acquisitions.
Thank you. Thanks.
Our next question comes from Matthew Gilmour with bared. Please proceed with your question. Hey, Matt. Hey guys. Thanks for the question. I wanted to ask about the the Care's funding and and I was Thursday for Scott, but I was just kind of curious from an accounting standpoint how that would be treated. Will you be recognizing sort of all of the grant money in a second quarter or or just the amount that you can document during the week. That was you know impacted from Lost revenue and cost. Just curious how you're thinking about that.
Yeah, man. Thanks. I'm good question. So we're looking at it kind of really is the third item. So we would take that number into the p&l as we had lost revenue or cost to justify Thursday. So the simple example is if you look at what we disclose for the impact of March, um, you know, 6.5 million on the revenue line we had about a million from the cost side. So that that's 7 and 1/2. We think we would move into the p&l probably another income item type number certainly not a revenues really not Revenue, but that's how we would pull that through but we're going to be very careful with that in our you know, we really need some strong guidance on that and we're anxious to get some more information. We've got some questions out there around it. We certainly don't think we'll have to return it. But just the accounting for it. We got the dollars by tax ID number so, you know, we're going to have to count bored by it, you know certainly by segments. Do we have to go down to the tax ID number? So it's all that's things. We got it worked out in Q2 and looking for some more guidance on but pretty comfortable with the birth.
Overall treatment that it'll be the third item will be sitting on the balance sheet. And as we generate losses from a revenue perspective and additional cost will will bring that in a great that's how I had appreciate it. Thanks by our next question comes from Kevin fischbeck with Bank of America. Please proceed with your question Hey Kevin Hague. Thanks for taking the questions. I guess you talked about so I guess some optimism maybe it's right word for it that maybe we should get back to normal. Can you talk a little bit about the cost? I'd give her guidance already kind of assumed a ramp of the year went on, you know, the middle of the logic rollout was going to you know be ramping up as the year went on you think that the cost sure 4 to 4 should also be more or less, you know where you want it to be or um, it has a really unique we delayed the time for that.
Yeah, we're we're we came into the year with with a PG pdgm prep Assumption of being of Staffing for some rescues. Those are going to be postponed. So we're taking serious looks at all costs items because the world is going to be different under pdgm. So we're we've been spending a lot of time looking at various cost structures. And what are we going to have to do to optimize to get us to the right margin and ebitda levels in Q4? I don't know squad or Chris any any additional comments on that?
It's the skatalites, you know.
You go back and and it's in our old guidance stuff. But if I don't have in front of you but you know, we had some some items out there, you know, he additional spin-on pdgm resources, which a lot of that was metal objects as we mentioned your comments delaying the rollout. So you'll see that the time of that may look different but certainly something we want to roll out we had another four million into novo's and not just because of covid-19 have the aseracare deal will re-evaluate that so it's nine million. So when we recorded our cost to have some of this there is certain variable Nature's within our DNA even from a travel perspective and all that that will certainly come down but as we get the two four and really want to get moving on the Navy see recovery perspective, we're going to you know, probably want to spend some money especially on the sides to really get our numbers up as we bought a 2021 which is a really are year we've been most focused on is we've done all these things to be prepared for it.
Okay, great. And then one of the things that hasn't changed one of the things that hasn't changed is, you know, our initial fact that 2020 is going to be a year of disruption. We we've doubled that nice so clearly it's a year of disruption and then the key thing is how do we and we thought consolidation I think consolidation is going to be delayed a year. So I think 2021 will be the year that we're still looking forward to to get everything working together and I still think that's going to occur. It's just we had double the disruption this here.
So yes, and I have you think about the growth of business during a recession. I guess there's a few things that we found picking up you might have more but that's probably a positive impact on labor cost. I don't know how you think about whether there'll be an impact on volumes at all. Um, you know, obviously senior population seriously you but there may still be some and then Thursday whether you would expect to see a shift towards Medicare Advantage during a recession and how that might impact you so it gets it gets in general. You know, how do you think about the recession impacting both? Yeah. I think the way I look at it is I think again we we are just people we have our assets are people and I think it'll be very good in terms of Range Rover. I think it'll be very good in terms of productivity. I think it'll also give us an opportunity to bring in some top talent in places that have been more highly disruptive dead.
Then also I mean we're getting a lot of people who are quite interested from you know, the the the sniff world the a l f World some of the other specialty surgery world. So I guess we're going to be able to particularly on the BD front to bring some people in to to help us really drive that grow. So we're good there as well as on the clinical front. I think we'll be able to do that off. So I feel I feel frankly and with with increasing Medicare Advantage, we've been growing our average contribution. We've have a really good team and that's been working very well we continue to do that and we're continuing obviously just to take more and more risk, but we want to get paid better and better for it. So I am going to continue to drive the metalogix tools that we have. We're going to continue to to look at, you know, Hospital readmissions things like that that really drive it. So, but we do have to break.
of the out of the Medicare Advantage
Um, you know, uh, 125 per visit versus a hundred and sixty so that's what we're looking to do in the Medicare Advantage world. I don't know Scott or Chris you have any ideas there?
No, not much Paul. It's just that you know, just, you know related to the recession. I would say, you know, the demand for services historical a recession has not gone down or or changed dramatically one way or the other or post-acute services. So I feel like you know, we're still going to see see that demand for the services. So it's really a function of our clinical past due to be able to to grow the business feel good about that. I would say on the smaller part of our business the PCL side, you know, this is really where the corner does a get turned in terms of access to lower-wage Caregivers for the non skilled side. So we expect to see, you know, some accelerated growth by, you know, just virtue of being able to recruit and retain these these caregivers but you know Home Health hospice, you know Post Acute Care has the store historically not been negatively impacted by a recession and so for us it's just dead.
Opportunity, you know to as Paul mentioned, you know kind of bolt on or take take on additional good quality staff as we grow into the future.
Great. Thanks. Appreciate it. Thanks.
Our next question comes from a J Rice with Credit Suisse. Please proceed question. Hi, everybody two quick questions. I guess just following up on that life. You mentioned your Staffing ratios and what you were trying to do the pdgm world of moving more toward alcohol p.m. CPAs sounds like you're on place for that may be a little bit ahead and does the current situation make more of those people available so that maybe you can accelerate that or as is that not realistic. That's a great question. We're way ahead. So Scott, you've got the you've got the percentages, right?
Yes, I do. Yeah, so we're in yeah, we're on our way ahead. We're in great shape on that. I think significantly have you know year-over-year? It's been tremendous and we're ahead of our internal numbers that we need to be a a, you know, I think we want to be thoughtful and how you know, Sesame look at you know, these are how how we impact the people and the numbers over time and and and leave that down to where we need to be. So I think we're pretty happy with schedule. I doubt that. You know, we we kind of slow down on metalogix and got a lot of things going on right now, you know as we evaluate Staffing levels and and make sure we're in the right place. It'll we can take a look at it. But I think are pacing is probably appropriate for where we are now. Just I don't know if you have any other thoughts we're ahead of plan. We we we feel like we will actually hit kind of our targeted mix. Um, we, you know, we have to shift our caregiver mix as well. Basically our employers as well. We've we've actually created some opportunity there, Georgia.
Just are we we've created some.
Some some movement there in terms of more LPNs and more ctas on our on our staff and then you know, the next the next step would be has were recruiting, you know, making or creating the right positions, but you know, I'm happy with our our execution so far feel like you know, we should be able to to reach our goals are an AJR LPNs. Our our wage is 45% and ptas at 46.3. So that's well ahead of where we anticipated. So we'll get to the 50 50 Mark by the end of the year, maybe even surpass it. So we feel good about it off.
Okay, and then my follow-up question, my other question would be around you got this nice chart and on page eighteen shows the month. I miss home visits coming down and peeking sort of it. Like you said the early late March early April, I guess it sounds like to me is I hear you talk there's three of the drivers between what's happened and what needs to turn around one is seeing the referral source, principally Hospital discharges pick back up from elective procedures getting patients comfortable with having the caregiver in the home again, and then you mentioned this increased referral sources both from collisions and now can make a month before as well as using the virtual War. Can you sort of talk about that? Anyway with the driver of the improved trend is it ma'am?
Any of those three buckets that you particularly seeing a a bit of a turn already and maybe talk about the staging of how those might come back patients getting comfortable if you have any thoughts on that and how quick that could happen and then I know a number of states are opening up elective procedures. I don't know what your footprint is exactly on top of those States, but any thoughts about that. Yeah, so I would say on the coming back on basically the rebound patients comfortable with us being in the home would say would be the the driver number one that you can kind of see that evidence by the the significant reduction in missed visits. So we tracked that on on a daily basis and waged seeing this kind of more openness. So I think that that was probably the first thing that we saw come back second would be around Hospital discharges. Well, actually the second would be around Physician Offices into getting a job.
The kind of more flow of patients coming in to see positions and then the hospital discharges is starting to kick up as well. Just just in the last week or two. Did we start to see the elective procedures kind of start to resume? So we we anticipate that to be uh, you know, kind of a an accelerator if you will, you know over over the next several weeks as long as you know, these these patients decide to have these procedures in these hospitals start to start to perform them. We anticipate that that kicking up from there.
Okay. Thanks. Thanks. I do our next question comes from Justin Bowers with Deutsche Bank. Please proceed with your question. Hey, Justin. Hey, good morning, and really appreciate all the additional disclosure that you guys provided around this just going to piggyback on AJ's question a little bit. Um, and in terms of the in terms of the kind of the the covid-19 packs on admissions
How much of that was?
Was related to you know hospital or institution will referrals versus Physician Offices just and then and then secondly, you know, we kind of know what your elective mix is. Were there any other case types or you know modalities that often disproportionately more impacted than others?
And I'll stop there.
Chris you want to have left? Yeah. It's on the second part. We really didn't notice will obviously was the elective procedures in kind of rehab from those procedures or recovery, you know across the all these you know, really really not, you know, a ton of you know, nothing significant than with differentiate one from the other as I mentioned earlier both the physician referrals em, all your referrals bottomed out at the same kind of deficit or or you know, kind of percentage off of a normal run rate just the positions kind of went down sooner and started recovery sooner and then the hospitals went down a little bit later and then and then started to recover a little bit later in you know, the trajectories are kind of similar between the two right now. So, you know, it was a good parts, you know physician referrals kind of kind of, you know, declining, uh, you know through the through the through the bottom as well as the hospitals, you know at the very bottom but you know, they're both dead.
Back up now. Okay. And is your is your mix of volume? Is it is it approximately is it like split fifty-fifty between you know, institutional and Community or or Thursday? It's a little bit more heavily weighted towards institutional. You know, I'd say I'd say 55 to 58% institutional versus Community Bank.
Okay, great. And then just one follow-up in terms of just curious what the dialogue has been with your partners throughout this and you know, if that's accelerated or off slow, you know, some of the initiatives initiatives you guys have underway there and and are there there any opportunities do you think that they can emerge from? You know what we're going through now?
Yeah, other than eight Partners. Yeah, I'd say it's a couple of things number one the dialogue around kind of, you know more Innovative payment arrangement page has not slowed down, you know at all. We we still are at the table, you know, trying to work with Medicare Advantage plans to find ways to partner for kind of new ways to take care of page to where the total cost of care comes down. So, you know that dialogue is not changed. I think getting something executed in this environment is taking a little bit longer than normal and I'd say the other piece is not really, you know with with the you know, inclusion and kind of the the the surgeon surgeon kind of tell telemedicine and Telehealth out there. I think that we're having you know a significant more dialogue around how we can use kind of remote patient monitoring and telemedicine to be able to you know, touch these patients in their homes at a a kind of a lower-cost level, you know dead.
What we have arrangements to get paid for these visits, you know.
Today that that that's really kind of formed over the last six weeks or so, but you know, there's now dialogue around how do we kind of start thinking about you know, using this and in a more longitudinal look at the patient's, you know, I think that'll be a slow process. But but but but opportunity nonetheless and I think some some things that have changed there has been the the plans have an ml our problem. They need to spend the money. So I think they're interested in being more creative about places to to do that rather than write down back to the government. So I think that's that's something we've been seeing
Got it. Appreciate the questions. Thank you.
Our next question comes from John Ransom with Raymond James. Please proceed with your question.
If you think about I mean obviously this year covid-19. And the in the loop of issue of some of the unintended consequences. Is there anything else in the first four months of the year that you'd call out was either a good guy or a bad guy that you didn't it wasn't factored into the planning.
I think our implementation on pdgm was going. Well. I think the I think also the rescues were teeing up very nicely CCH was thinking around we were a little late on hiring sales folks. So I think that was going extremely well. We were looking forward to that clearly for us. We were involved I started to get involved with this Erick are I think a lot of people are saying that was quite unusual timing for us to do this in the middle of a pandemic, but I think I think we you know, they were executing quite well on that. I think the some of the issues when the the wheels came off the off the bus on covid-19. I think the the month the severity of which everything hit particularly in home health in all all sections where we get our business and Community docs and institutions and other poems.
Cute institutions in other hospitals. I mean for the first institution the other Post Acute institutions, I think what's also interesting to us is how quickly we're starting to see some recovery a particularly in hospice again, I don't know would you Chris Our God would you have anything to add on that? Yeah, I think that covers I think we had a lot of good things going on John if you backed up and and kind of looked at where we would have landed. Totally we probably would have been in the fifty five million in ebitda range when you think about the impact so certainly were performing. Well, they said I had on that the LPN RN ratios. I think that was better than we thought anything on the the downside I say I would say that a little behind on the the PD Jim the revenue piece of that. I thought closing that Gap pretty quickly and and the the good guys on visits and on our LPN RN ratios would have made up for that. So no big surprise there. I think you know, yep.
Aseracare deal as I said earlier as we think about denovo's throughout the year, we're reassess and look at the footprint and talk through that but no big surprises certainly did well on the internal cost numbers came out odd below where we pay.
Hollywood
and just kind of thinking about how the industry has changed and sort of a follow-up to our conversation last night. What's your I'd call it intermediate-term intermediate-term. Look for this the demand for therapist.
Chris that's a buddy pass you want to take that one you bet. Yeah. Thanks a lot. There you go. It's it's it's a normal day for me. Yeah. So I mean we were already started in therapy kind of demand coming into, you know, twenty twenty with pdgm home, you know for us, you know, we see that, you know, you know appropriate visit utilization is going to be critical and making sure that we're providing, you know, valuable business to our patients by the bright disciplines. Um, you know, there is a there is absolutely uh, you know, a supply of physical therapist and ptas and uh, you know out there to be harmed we have capacity right now just related to kind of, you know decrease volume numbers, but but it'll be interesting to see I think that you know, as we went into this year. We still feel like the dog
Strategy of round getting to about you know getting a visit per episode out or ahead of that that plan right now, but we got a we got a filter through County and he covid-19.
Yeah, I do. I think that you know, we we were real clear coming into twenty-twenty when covid-19 was not even on the radar that the Lupa management was the area that we had the least visibility on again, you know clinicians have been working in this industry for 4 years have been have have been accustomed to afford visit over 60 day episode threshold for Lupa and now it becomes you know, a threshold every 30 days and it's a 2 to 9 busy kind of kind of rain. So, you know, it's it's just repetition its focus its visibility on scheduling. We have a lot of focus on that right now. So, you know, I feel really good that we're going to be able to you know, kind of, you know be in a normalize range from home before to 4 as as as we continue to kind of operate in in operationalize pdgm and and and run our strategy. So I think you know it is dead.
it is, you know spiking, uh
You know, you know coming out of GM, but we're not we're not necessarily surprised by it. But I know that you know with our team we're we're able to focus on this and we'll be able to to kind of get it took Farms relatively soon. We had to say but we anticipate John that this will be fixed in Q3 for sure. Okay. I mean, I guess for me to say looking at spreadsheets, but it seems more mechanical and training than anything shouldn't be over. Okay. It's more complicated in the sense of faith in the sense of I think there's something like two hundred variations more than two hundred variations on this now. So I think just that whole nature and then the the fact that you know, that would have to two billing periods. So I think is we're getting used to that. It's just settling in and as Chris said, you know going through the the process over and over again, so we and training.
Appropriately so that they understand what how how we need to set up for this. You keep me as let's just assume for the sake of argument that we come out of this thing and there's a bit of a structural reset on the demand side, you know call it fewer electives driven by old people not wanting to lead their house or high co-pay plans or thoughts what-have-you physician nutrition whatever it is. So how should we think about opportunities on the fixed cost side if that were to occur? Let's say you come out of this with a five 10% sort of a cliff and Home Health. It's just it just never comes back for whatever structural reason. What are are there any fixed costs? They could come out of the business or is it just we we should just kind of model out the per visit and keep the fix God. There are costs that can come out and I just got you want to talk a bit about that.
Yeah, we're we're pretty prescriptive and how we staff are Care Centers and and so forth. So it's always based on since we, you know, we we flexed as that needs to go home, you know some comfortable keep that structure intact, and you know, we'll take a look at every every area that we can to keep our business knowing that we have a certain GNA spend that we want to be relative to our Revenue top-line. Thanks a lot. Okay. Thanks, John.
Our final question is from Brian Ross with UBS. Please proceed with your question. Hey, Brian. Hey, thanks for squeezing me here at the end. I missed the earlier part of the call. So, if you've already addressed this but uh, you know, if you stick on the expense side, how do you think about proactively reallocating some of those expense categories that are down substantially right now? Like see any dead, you know, those expense savings primarily being allocated to Business Development and you know, what other areas can you redeploy those savings into mainly BT but it's got off. Yeah. I mean that would be our Focus. I think when you talk about it here through through Paul's comments. I mean, we're all about you know, how do we get out of this? How do we get back on our trajectory off exit? Cuz as I said, it's about twenty Twenty-One. So we need to take some dollars around and make sure we we bolster RBD and our efforts there to to recover more quickly that's going to pay dividends. Yep.
Yeah, we'd spend that those dollars in the appropriate prices. Otherwise, you know will hold on and and and and whether this you know, the good news without cost structure, especially on the home health side, you know, we we saw with our Box come down. It did Flex We
We probably saved about three million dollars in costs cuz we about 40,000 45,000 visits came out. So I don't have a fixed cost structure on the home health side throw, you know that home with that. So we we've got some enough variability near the help us weather the storm and having hospice which more which is a more fixed cost model recover quickly will make us feel a lot better.
Perfect. That's it for me. Thanks. Thanks for holding.
We have reached the end of the question and answer session at this time. I'd like to turn the call back over to Paul clitheroe for closing comments. Great. Thanks Rob. I want to thank everybody who joined us on our call today, and I'd also like to again thank all of our employees were out in the field out in the front lines and and babbling this coronavirus. It's because of your daily actions that we're going through this together keep doing what you're doing taking care of people who need us the most. We hope everyone has a wonderful day and look forward to updating you in our ever-evolving progress and purposeful work on our next quarterly earnings call. So thanks everybody and have a wonderful day.
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