Q1 2020 Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Pinot Group first quarter 2020 earnings call.
At this time, all participants so and they listen only mode. After the speakers presentation. There will be a question answer session. So that's good question. During this session you would need to press star one on your telephone.
Do you acquire any further assistance please press star zero.
Now I'd like to hand, a conference over to your speaker today Mr. David Bunker. Thank you. Please go ahead Sir.
Thank you Fred Rica, and welcome everyone. Thank you for joining us today.
Here with me today, I have Danny Walker, CEO, and President John Freeman, our CFO and John Gartner COO.
Before we begin to have a few housekeeping matters.
We filed our earnings press release and 10-Q yesterday. This announcement is available on the Investor Relations section of our website at Www Dot pennant group Dot com.
A replay of this call will also be available on our website until five P.M. Mountain on Friday June 12 2020.
I want to remind anyone that may be listening to a replay of this call that all statements or me as of today May 14, 2020, and these statements have not been nor will they be updated subsequent to today's call.
Also any forward looking statements made today are based on management's current expectations assumptions and beliefs about our business and the environment in which we operate these statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on todays call listeners should not place undue reliance on forward looking statement and.
Encouraged to review our SEC filings for a more complete discussion of factors that could impact our results.
Except as required by federal Securities laws, and its affiliates do not undertake to publicly update or revise any forward looking statements were changes arise as a result of new information future events changing circumstances or for any other reason.
In addition, independent group Inc. is a holding company with no direct operating assets employees. The revenues certain of our wholly owned independent subsidiaries collectively referred to as the service Center.
Provide accounting payroll HR information technology legal risk management and other services to to the other operating subsidiaries through contractual relationships with such subsidiaries.
The words Tennant company, we our and us refer to dependent group Inc. and its consolidated subsidiaries all of our operating subsidiaries and the service center. Our operated by separate wholly owned independent companies that have their own management employees and assets.
References here into the consolidated company in its assets in activities.
As well as the use of the terms, we us our and similar terms used today.
Our not meant to imply nor should it be construed as meaning that the pending group Inc. has direct operating assets employees or revenue.
Were there any of the subsidiaries are operated by the pennant group.
Also we supplement our GAAP reporting with non-GAAP metrics when viewed together with our GAAP results. We believe these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports a GAAP to non-GAAP reconciliation is available in yesterday's press release and available in our 10-Q.
And with that I will turn the call over to Danny Walker, our CEO, Danny fix Derek good morning, everyone and thank you for joining us today to discuss penance first quarter 2020 results before we begin our prepared remarks, we would like to just recognize the incredible commitment encourage of our frontline clinicians caregivers and staff.
Along with the field leaders, who care for and support these courageous individuals on the frontline everyday.
In the face of the ongoing global pandemic. They have spent night and day, serving our patients residents and their families through this chaotic and challenging time.
Good day after day, they've gone above and beyond the call of duty to provide care relief and comfort to the countless individuals that are in our care. We love each of one of you and are honored to be associated with you.
Before I turn it over to Derek and Gen for us for an update on our investment activity a detailed financial results.
Ill comment on uncovered nineteens impact on our operations and results and we will conclude with examples of our leaders exemplifying the best practices of our operating model to show keeps our resilience in the face of the pandemic and why we're excited for the future of dependent group.
Our home health in hospice business continues to achieve solid top and bottom line gains.
Segment revenue increased 23% over the prior year quarter and segment adjusted EBITDAR from operations increased 36.8% over the prior year quarter.
Yielding an EBITDAR margin that improved 150 basis points.
Such margin expansion is the result of our cluster centered operating model that is designed to accelerate the sharing of best practices data and processes, which positions us to be provide tailor made responses to challenges like cobot 19 on a market by market basis.
Excluding the agencies, we acquired since the first quarter of 2019, our total and Medicare home health admissions increased 10, and 8% respectively over the prior year quarter, and our hospice total admissions and average daily census increased 8% over the prior year quarter.
We are excited about the additional organic growth opportunities in our relatively young home health and hospice portfolio.
In our senior living business, we saw good signs of financial cultural and clinical progress our old our occupancy gains across the whole portfolio were a strong were strong at 40 basis points over the prior year quarter, and even stronger at 2200 50 basis points when backing out the three communities acquired over the prior year.
Quarter.
Each of us each of which were substantially underperforming at the time of acquisition and acquired at significantly below average lease terms.
Coupled with a steady increase in revenue per occupied unit the business posted gains in revenue and EBITDAR.
During the quarter, our senior living leaders made a number of concerted efforts to increase occupancy and exercise discipline around expenses.
The early results from these efforts have been positive and we have strong momentum going into the rest of the year.
Now turning to the topic on everyone's mind Cobot 19, certainly impacted our business late in the first quarter and those impacts have continued into the second quarter from March 11th to May 11, The company experienced an 8.2% decrease in home health census, and a 2.5% decrease in senior Vice.
Currency.
That was offset somewhat by a 3.1% increase in hospice average daily census.
So far in May we have we're seeing signs of improvement in our home health census stabilization in our senior living occupancy and continued strength in our hospice average daily census.
As of May 12, four of our senior living communities have experienced cobot positive cases with 10 active cases into different communities.
49 of our senior living communities have not experienced any positive cases.
11 of our home health and hospice agencies have admitted and are currently serving 34 active positive patients.
We have we have seen these trends continue into the second quarter and expect our results to reflect these challenges.
Through though we are moving quickly to offset these headwinds and become better through the process.
At each operation our response to the pandemic was swift locally tailored and evolved quickly to meet the needs of our patients and their loved ones. The unique features of the virus, it's highly contagious nature ability to to be transmitted by asymptomatic patients wide range of symptoms and among others created an under.
Precedented situation that we acquired robust channels of communication across the organization and strong partnerships within the vendor and operator communities are decentralized local approach supported our sort of supported by our service center in professional field resources is designed to respond rapidly in situation.
Like this where information and data can be shared broadly quickly without having to go through the usual corporate channels of communication that can be slow and deteriorate the quality of the information shared.
The response from our field and service Center partners was quick and organized created myth Mitt, creating methodical pathways for communication and accountability to react quickly when operations experienced suspected cases or needed supplies or had to react to the dozens of federal state or local regulatory updates.
Response plan was organized in for general areas, environmental precautions supplies staffing and communication.
Our environmental response plan identified isolation and infection control best practices from the CDC and other regulators focusing on Sanitization prevention and population tracking measures designed to reduce the spread of of the virus from person to person or from object to person.
Our commitment to high quality clinical systems in the senior living setting differentiates our operations generally and especially in the face of an unprecedented health emergency.
On the supply front aided by our partners at at the end sign group and Caretrust as well as our own extensive network, we pursued personal protective equipment related to supply and related supplies aggressively and early.
Through April we spent over $500000 above our usual cost levels to secure necessary PE and related supplies as of today, our efforts have pointed us.
Positioned us with the PE necessary to operate for several months at current levels and with a pipeline to quickly obtain more.
In a handful of select operations, we have implemented increased premium or hero pay where there is a heightened risk of exposure to the virus.
Through April we have experienced nearly $1 million in labor cost related to cope with 19.
In order to offset this our field and service center have carefully implemented cost control measures such as flex schedules and furloughs of select Nonclinical employees.
In addition, our board of directors executive team and other senior leaders throughout the organization have voluntarily reduce their base salaries, while the pandemic pressure persist.
While we maintain financial discipline through this pandemic. We're we're also see opportunity in the dislocation of employees in other industries and are actively expanding our leadership pipeline.
In all of these efforts our philosophy has been to manage the current demands of the crisis, while investing in the future.
While we have experienced some overall negative impact from covered 19, we firmly believe this is one although significant of many channels because we have and will faced and likely will not be the last one we face.
When we spun off from and sign it was our state admission to create to healthy public companies that will provide long term value for our stakeholders and with that in mind, we ensured that our home health and hospice and senior living businesses were operating within the Insein model.
And that our our balance sheet and long term leases positioned us with cushion to weather.
Difficult operating conditions, the local approach to healthcare that is the foundation of our operating model is the mechanism that will lead us lead to our success and sufficient liquidity ensures that we can continue to operate and become stronger through adversity.
With that I'll hand handed off the Derek to discuss our recent investment activity there.
Thanks Danny.
During the first quarter, we continued to execute on our disciplined growth strategy by closing a handful of acquisition, while maintaining a pipeline of additional opportunities. We began the year by acquiring the home health agencies, serving Clarke County, Nevada.
Which together with our hospice agency and senior living communities in the area strengthens the continuum of care there.
We also added a senior living community in twin Falls, Idaho, and the Hospice agency in Missoula, Montana.
And we continue to make progress on the previously announced home health joint venture with scripts health.
And as we announced in our press release yesterday, we are days away from closing the first phase of a transaction involving three affiliated hospice agencies with sizable footprints in the southwestern United States. We expect the full transaction to be completed on or before July onest subject to close standard closing conditions.
Through the pandemic, we continue to maintain a robust pipeline of acquisition opportunities, while bolstering our balance sheet and liquidity position.
I understand that some investments with the highest returns are executed during periods of disruption. So an important part of our pandemic response was improving our cost cash position and revolver availability to be ready to move quickly for the right opportunities whether source from market offerings for our cultivated network off bucket partners.
We are excited about the deals we've closed or announced year to date.
And think that there are many more opportunities for consolidation has pandemic headwinds persist persist and disproportionately affect some operators that we'll be looking for the right strategic buyer.
With that I'll hand, it over to Jan to provide more detail in the Companys financial performance Gen.
Thank you Derek and good morning, everyone.
Detailed financial results for the three months ended March 31st 2020 are contained in our form 10-Q and press release filed yesterday.
Reported GAAP diluted earnings per share of 10 cents and adjusted diluted earnings per share of 16 cents for the three months ended March 31 2020.
Proximately, 90% of the adjustments to earnings pertaining to the exclusion redundant and nonrecurring costs related to transition services and share based compensation.
We had strong revenue and earnings per share results, primarily due to this strong execution of our field leaders during a very difficult operating environment.
We also benefited from disciplined management of our general and administrative costs.
Non-GAAP adjusted earnings per diluted share Ussixteen cents represents a 23.1% increase everspan adjusted first quarter 2019 adjusted earnings per diluted share of 13 cents.
Other key metrics included $17 million of cash on hand as of May 13th 22020.
Cash generated from operations at 2.1 million during the first quarter.
At least adjusted net debt to adjusted EBITDA ratio at 4.85 times as of March 31 2020.
And $62 million availability on our line of credit as of May 14, 2020.
Our results during the first quarter do not include the impact as any cures Act finance.
Since quarter end, we received approximately $9.9 million and care Act provider really funds for which we did not apply.
We have not made a decision to accept or return the funds as we are evaluating their terms and conditions.
In the meantime, we are holding these funds at the segregated account and carefully tracking lost revenues and expenses related to covet 19.
We also applied for and received approximately $28 million and advance Medicare payments of which $19 million went to paying down the outstanding balance on our revolver.
These advanced payments are subject to automatic recruitment through offset to new claims beginning 120 days after their payment issuance.
We also intend to utilize the care act payroll tax deferral program to delay payment of approximately.
$7.2 million at the estimated employer question of payroll taxes during 2020.
Finally, we estimate a positive impact at 2.4 $2.5 million related to the temporary suspension of the 2% Medicare payment sequestration established by the Karen Act.
As we announced in our press release yesterday, we are not changing north try and our 2020 guidance.
At annual adjusted earnings per diluted share as 53 cents to 58 cents, an annual revenue of 376 million to 386 million.
2020 guidance is based upon the late diluted weighted average common shares outstanding of approximately 30 million.
Our effective tax rate as 26.4%.
The inclusion of acquisitions announced year to date.
Exclusion of costs related to startup operations.
Exclusion of acquisition related costs exclusion of redundant or nonrecurring expenses related to spinoff transition services.
And the exclusion of stock based compensation.
As we announced in our earnings press release yesterday, we made the decision to maintain our fiscal year 2020 guidance.
While the pandemic has impacted our results so far and the remain unknown about the links and depth of its future FX. The data we have available at this point give us confidence in our ability to meet the previously established guidance.
We believe our operating model and growth strategy enable us to be successful three changing operating environment Covet 19 included.
In addition to the measures we've taken to mitigate revenue impacts and to flex our experience around changes in our revenue. We believe the pandemic presents new opportunities for resilient operators that are responsive to local needs.
And with that I'll turn the call back over to Danny Danny. Thank you Gen before before we turn it over to the acute today I'd like to just recognize a few of our local teams that have achieved outstanding results in each of these stories.
You are.
We are able to witness the resilience of our model.
Led by Executive Director, Matthew Briggs and directors of clinical service, Kristine Stier, and Sander Copsey River Valley home health and hogs with Hospices established itself as the provider an employer of choice in northwestern Arizona. These leaders and their teams have established a culture of driving objective lease strong clinical and financial result.
It's River Valley has achieved a 5.4 0.5 star.
CMS star rating and multiple deficiency free surveys all while preparing their team for pdgm, helping with and helping with the acquisition of urgency urgently needed PE for other pendant affiliated operations.
During the first four years of our ownership spanning the years 2015 to 2018. The team has achieved a revenue CAGR of 28% and an EBIT CAGR of 22% in 2019 revenue continued to increase and EBIT increased another 222% okay.
Over the prior year.
And our momentum carried into 2020 with their highest ADMET month ever in January River Valley. As an example of entrepreneurial leaders, providing excellent care to local communities and achieving quality clinical outcomes and financial Mount milestones along the way.
River Sherwood village, a 160 bed assisted living and memory care community in Tucson, Arizona is another remarkable example of what can happen when leaders.
Live our core values and are empowered to run their local businesses led by CEO, Cindy Fitzgerald, COO, Patti Stevens and now executive Director Russell Sylvester The Sherwood team has gone through a transformation in their community culture and care to become a high quality solution for the growing needs of seniors in the.
They are area at the time of our acquisition in 2014 Sherwood was 58% occupied these leaders in their staff has steadily grown that occupancy over time, which now stands at 95% or an increase of 37% during the first quarter Sherwood set.
New record EBITDAR of 537000, an increase of 39% over the prior year quarter. They are excellent care quality and performance earned Sherwood the coveted pennant flag award in 2019, which is the highest award one of our operations can achieve.
Last quarter, we shared the incredible progress made at Rose Court assisted living memory care in Phoenix, Arizona.
And we'd like to share what clinical leader and COO Trust Us Patrick and CEO Carolyn Lynch have done over the past few months to confront the challenges of the pandemic.
Carolyn interest us in their team started long before the Corona virus outbreak hit their state they jumped on all of preventative guidelines in real time as they were rolling out from the CDC and local health departments weeks before any suspected covert cases arrived in their community the roads Court leadership team.
Already had.
Their own five step escalation plan in place.
Had ordered Pete additional PB moved to universal masking prior to CDC recommending it secured new equipment and supplies to facilitate in room dining for all residents trained all their staff on infection control measures with the cobot positive environment and had execute and communicated.
With their residents and family members, what their plan was and how they would executed.
Because of these measures and their existing relationship of the Roes core team.
With the community and residents in their family.
And because of their ongoing communication and extraordinary care those family members in the community have been incredibly supportive rose scores frontline heroes and residents Carolyn and trust US lived and led by our core values of customer second to take care of their employees going through the challenges due to the pandemic.
The Roes core team rallied together and amazing ways to take care of their beloved residents in each other.
On top of all of their incredible actions to take care of their residents families and staff. During April Rose Court achieved one of its best EBIT months ever a monumental testament to their dedication and disciplined execution within our local operator.
We are so grateful for them and these teams in so many others in the field.
It's through examples like River Valley, Sherwood and Rose Court and many more like it.
We were able to achieve our success.
Now, we will turn to the Q and a portion of the call as Derek mentioned earlier, we are here with our COO, John Doctor, who is available for questions.
About operations as well Frederica can you please instruct the audience on acuity procedure.
As a reminder to ask a question unique to press star one on your telephone again Estar one.
First question comes from the line of David Mcdonnell with Suntrust.
Hey, guys.
Couple of quick questions.
I'm just curious I mean.
Look in this environment, there's been a lot of providers, who haven't been able to.
Kind of rice vacation in the same manner I'm just curious what you've seen in terms of referral sources. When you look at your different businesses.
Are you seeing a meaningful expansion and referral sources.
I'll post candidly some modes some competitors falls out in your April to guide to gain share on that front.
Yes, it's generally speaking, yes, we don't.
Havent talked about in disclose the particular number of referral sources, but I will tell you weve seen a widespread strengthening of our existing referral relationships and then an expansion of those.
Literally there were instances, where some of our referral sources, we're in really difficult situations, whether it was staff.
You know abandoning ship or not really truly having any place to place.
Patients that needed to being discharged from any of these care settings, and and our teams the ability to to execute in the environment with appropriate ERP.
Combined with this localized responsiveness that we talk about all the time it.
The story, we could spend all day talking about the stories on the ground as it relates to these things, but yes that I don't know if we have particular numbers on that John or.
Gen but.
But we're seeing that same trend, it's been really gravity gratifying.
Okay.
Could you just talking a little bit more detail about kind of the local leadership model. The strength of your IP systems. What it has afforded you in terms of speed of decision, making and flexibility obviously the conditions on the ground are very different in different markets. And then also in that same vein can you also talk about.
You know look you guys have a pretty big presence where this.
And to hit first what you learned early and what.
Best practices, you were able to share just coming out of the Pacific Northwest Yeah. Thank you for that's great question. So.
You know.
Each one of our operation the best way to think about our response to this is it there was a pendant response and then there were 130 individual responses. Each CEO has the ability because of our IP systems.
And other processes to see exactly what their PNM all is going to look like and so some of them were affected very differently and as you mentioned.
Our operators in the Pacific Northwest where were hit much much earlier than the rest of the organization.
But there is theres this extreme transparency around.
Where everyone census is and the individual local team sees that but so do all of their other partners and and so.
The ability to look at their own individual supply costs their own individuals' staffing measures their own individual revenue and earnings model in a given month.
It takes tremendous effort from our finance team to make sure that that they have an objective PNM will that doesn't have wide variances in it and then that really.
It's kind of the heartbeat, so none of our operators are flying blind.
They are able to really understand okay. This is how we're being affected in Seattle and it's different in Arizona, right now and it's different in Denver.
Denver was also hit really hard early on that Didnt make as much of the news but.
So what happens there is those leaders are pulling financial and clinical levers just immediately so you are not waiting for.
The us in the service center to see something and then make changes.
Our operations are dynamically changing on a daily basis in these markets and and then they're able to draw on their partners. So as it relates to what we saw in the Pacific Northwest that I mean that was ground zero and a lot of and lot of ways and we immediately where.
Well to have ongoing calls so that everyone around them from other parts of the country, we're watching things literally as they unfold a daily what the cases are you facing how is it affecting your employees what types of employment.
Different benefits do we need to put in place to reassure employees, what kind of communication.
Is really going to help employees residents family members, how do you stand up digital.
Visitation.
And so we just by the end of the first week of this we had a list of best practices that others were already implementing in other markets and and then as it continued we even had leaders who are in good positions in other states.
Fly right into the the eye of the Hurricane up there and in Seattle and get on the ground and do work to help stabilize things and provide support and then they come back to their operations with a better understanding of the urgency around a lot of the measures for.
Environmental controls and infection control and and it's that's just such an example of how the best practices gets shared in our organization and Theyre not being rolled out from us its motivated entrepreneurs, who are trying to protect their business and their residents in their staff as much as we are and they.
Just quickly learn from each other and so our focus is on how to share that and so I think we were really fortunate to have a toe up there in the northwest and really see what this looked like early early on and and then our two of the credit of our operators they learned and adapted very very quickly.
Okay. Just the last from me one I would assume your learnings in the Pacific Northwest was part of what helped you guys get ahead of the TP any purchasing secondly, just anything it's kind of got lost in the shuffle, but anything you'd call out in terms of the implementation that Pete.
Gamble and.
And then I guess my final one would be how has the relief fund this year, just kind of delayed the inevitable in terms of a meaningful uptick.
And M&A opportunities.
Yes, great so on the PE front.
Yes, I mean, because we were affected early and we were.
We had a multifaceted response secure NGP everything from.
Getting it from dental offices that had been close down and making sure that there was the immediate ability for our staff members to start.
Caring for their patients.
With adequate ERP.
We also leveraged their relationships that we have.
With the Ensign group and with Caretrust and other.
Operators to place large bulk orders and really our model was on full display there.
With our local operators leveraging their existing channels of ordering from PE. So the mckesson's and you know the other types of companies in the world.
But then it was supplemented with our ability to do large bulk orders from the service center and those were happening simultaneously and we would see successes here and there and then.
That out a supplier and jump to that one and secure as much as we needed and that was coupled with.
Daily projections on a burn rate and and other measures.
To.
The PV side of this has been very interesting and challenging but again.
Our model really enabled us to to get through that environment.
On the Pdgm question.
Just overall, it's coming in line with our expectations. It's hard to believe that Pdgm is kind of an after thought to this conversation.
But.
Our preparation paid off the execution of it just a lot of really positive things in the field.
Making adjustments thoughtfully.
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Overall, our quarter first quarter included the impact of.
Some higher than normal LUPA.
Outcomes because of missed visits towards the end of March.
And even with that impact baked in we're still at a about of an even relative to our previous.
Revenue levels. So we're pleased with that we think that there could.
May even be some improvement from there based on.
Our.
Our ability to execute within a non.
Panicked environment like existed in the last two weeks of March.
So the final question was was on relief funds.
Ill.
There are a lot of smaller providers from our just limited sample size that are turning heavily to those.
The PE or the PPP loans in particular, but the other stimulus funds from the cares Act I think.
It's going to delay things a little bit but.
We still are seeing opportunities coming our way and we're we're prepared to take advantage of those opportunities.
And do deals in the current environment as we as we talked about we've got one that we're anticipating closing here in the next.
30, 45 days so.
The what were the relief funds will ultimately kind of factor into everyone's calculation I think is going to be correlated with a better understanding of the terms and conditions.
Our concern on that front is that just make sure that our long term health is intact and if there is short term benefits that come from that really funds, but don't compromise our long term organizational health. We we make we're open to that but our focus has been primarily on.
Operating with resiliency through the difficult situations.
Without external help so.
Thanks for your questions David.
It's very much guys congratulations.
Okay.
Your next question comes from the line of Frank Morgan with RBC capital markets.
Good morning, I guess staying on that subject of the grants is there any specific.
I think that you could call out any kind of specific.
Terms to that.
Financial assistance that are worrying some.
Because I know we've had a number of.
Of the company some take taking it others, but anything you would call out specifically that the local worsen.
Yes so.
Really the first the most worrisome issue is that there is not clarity on the terms and so.
You know right now the.
The information, we're getting as you, it's an all or nothing nothing proposition and the decision there doesn't give you an adequate clarity on the terms.
Our or will exist and so thats, probably the primary issue. The secondary component is just really what the scope and nature of the auditing and reporting requirements are.
And and in in making some of the decisions around lost revenue.
You know theres a lot of assumptions that go into that and and we are very very conservative organization as it relates to matters of compliance and things like that so making making determinations on what counts as lost revenue or what doesn't count as lost revenue.
Becomes pretty complex and and tricky when you're thinking about that and the implications of.
Accepting the fund so those are the two primary items out of there is anything that gener, Derek John have to add to that but.
We're watching it everyday.
We're in close touch with our external advisors on legal and accounting fronts.
And even they are.
Sort of flying blind trying to sort out.
Parsed parse the meetings of really limited guidance from the government. So it really still feels Frank like the book has been written and that's I think our biggest hesitation here is over from the executive pay limitation to whether you have to return the whole thing. There's just a lot that seems ambiguous about those terms and we're we're studying it out we're working.
Yes, the best experts that we have to make a great decision there.
Gotcha and I guess.
Going to the subject Pdgm just wanted to go back again and talk about.
Obviously, you talked about how your revenue held up pretty well even on the Pete and I think you called out in the press release, you were very specific to say Pdgm cases, so I guess I wanted to confirm that.
Yes, it lupus did pick up and you were able to grow that either hold or even grow the that MGM case revenue.
I guess that would suggest you did pretty well no rate side. So I was wondering maybe more color around.
Your ability to drive that was a coating and change in mix or any kind of color around that thanks.
I'll have John tackle that one yes, I think what you're seeing in that is we had we had a strong quarter from a revenue side that included both PPS episodes for all those episodes that were being completed into the quarter and then of course Pdgm episodes for every subsequent and I think we're as Danny said, we were where we thought we would be.
We've been able to execute on education related and coding accuracy related to eliminating questionable encounters and really where what we saw as at the end of the month of March we started to see a pickup in lupus because we couldn't get into facility, sometimes or patients with declined visits and so that resulted in.
Some episodes ending early resulted in a significantly increase loop a percentage, but we feel like based on what we've seen.
We're right, where we thought we would be which as this will be a net net benefit as long as we continue to execute we code accurately and we capture the acuity of our patients properly.
And it will be a multifaceted ongoing effort.
But weve early early indications are we feel very very good about it.
Got you. Thanks, very much and then I guess jumping over you've got several I think three pending deals you called out in the southwest and.
I know you can't provide a lot of details, but can you give us maybe lockup revenue number that it.
How much revenue, we might be talking about as result of lease rate and.
Yeah I'll stop there.
Yes, Thanks, Frank I think consistent with as as we disclosed previous deals and especially so since this one is signed but we havent closed that yet we'll have more to share as that saying as that closing takes place, but we're not in a position to to give that detail yet.
Okay.
It did it would be accretive to this year or would that be maybe next year kind of.
Yes, because its hospice and that it's a more it's a more sizable hospice. These three different ones in your 80 see ranges.
Plus 200.
And and so you when you take all of that together you.
We see it being mildly accretive we don't ever count on.
That is often the home health deals tend to be a little dilutive senior living off obviously as frequently dilutive. This one there might be some mild benefit to it.
Gotcha and just to be clear the 280 see is that across the three programs or is that each.
No that's across the three.
Okay, and it's a little north of that.
Okay.
And then I'm curious on the script you talk about that relationship.
Any any more color you could share with us there on how that's developing and kind of what you envision it turning into and.
And maybe some thoughts around what type of club revenue opportunity that might be.
Yes so.
John it's been really heavily involved in that so I want him to comment on this but sort of high level.
We view this as a test case.
And and.
Scripts has been a great partner for us through this process they have been attracted to our localized.
Operating model and the idea that they can have a decision maker that has full PNM responsibility right there alongside them.
So.
There are some systems and processes that we have been investing in quite heavily to make sure that we could respond to other inquiries from hospital systems that either aren't getting what they want out of their current home health arrangements or hospice arrangement.
And and then others as we look to the future of the the inside dependent care continuum, we see increasing integration with hospital systems around.
Controlling rehospitalizations.
Care delivery systems that might involve sniffs and the whole post acute continuum.
So this is this is kind of a test case for us we feel like it's a perfect situation.
Enzyme in that market controls a high percentage of the skilled nursing beds.
And so theres theres, a unique relationship and integration to that whole.
Health community down there and.
And yet we know that we've we've got a we've got to build systems and processes to really make sure. We can take care of the health.
Health system as a partner and.
And so we're we're it's a it's a beginning of something that if it's if it's highly successful, which we believe it will be we would then seek to replicated in a very disciplined.
Targeted way in markets, where it makes the most sense for us So John would have Swede, yet I am just a little bit of color to to those high level points with specific our guards to scripts.
This relationship has been ongoing we've been working on this deal for a long time, but we've actually been able to.
Be involved in be supportive over the last since the beginning of the year, we've been able to implement homecare homebase as their new DMR in that program.
Which I think has allowed them to have access to data and two metrics in two ways to measure that.
Previously their old system couldn't give them and so we've been excited about that opportunities to support them through that to support them clinically and operationally as they transition through that and the relationship is as strong we're excited about.
The way the board will function and support the.
Agency on a go forward basis, and we're looking forward to October and closing that deal.
I mean, a fourth quarter will affect the revenue specifically to your question.
It's not.
Not dramatically.
Amongst one for one quarter is you layered into next year.
It should be significant.
The that census in that joint venture.
This highly sensitive to volumes at the hospital and the hospital systems. So they've been affected quite heavily in the current environment, we expect them to recover.
But that that gives you.
Little bit to chew on.
Thank you and then I guess.
Just looking at the margin picture.
On the senior living side that Dan March down year over year, but but up 140 840 basis points sequentially by our math.
And I know that issue as you look forward.
You know obviously some of that the census, softened as well probably effect that margin here and then in the near term but.
Is there anything else that on the cost side that you see I know a lot of changes were made in that division that but any any commentary around.
Either any incremental cost control efforts on that part of the business and.
I'll stop there thanks.
Yes. Thanks.
Ken.
There have been 10 concerted effort to focus on cost management during the first quarter.
On our senior living business and they are span.
As you now in the last call that we haven't talked specifically about the senior living business and our need to focus on that cost there and so there has been improvement over the quarter and less cost. So we are seeing positive progress and we'd anticipate that that will continue throughout the year.
Yes, it's sort of coupled with our overall focused on helping them.
As a group.
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At here, a little more carefully to our operating model.
As we shared data around cost measures and align those cost measures with resident needs.
You see lots of unique opportunity to refine and improved quality of care, while doing it more efficiently.
One example is this just missed quite a bit but in on food cost.
A lot of times people.
The convenience of ordering.
Frozen or whatever but the when you compare it with a chef thats doing meals from scratch and a custom menu you actually save quite a bit you improved satisfaction and it's just like could confirm home instead of ordering from Grubhub Dino.
That that kind of practice is something that we will continue to see and improve upon.
In that portfolio so.
Okay. That's helpful. Thank you very much.
Thanks, Frank I appreciate you.
And again Estar wanted to ask a question.
And we have an audio questions at this time.
Okay. Thank you Frederica and thank you to all of you for joining US we are grateful that you're part of dependent journey and during this historic.
The event going on in the World we are grateful for.
The support that you continue to show and we look forward to visiting again in the next quarter.
Bye.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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