Q2 2020 Amedisys Inc Earnings Call
Greetings and welcome to the first quarter 2020 earnings Conference call.
This time, all participants are they listen only mode.
A brief question answer session will follow the formal presentation.
If anyone should require operator or technical assistance during the conference. Please press star is you're on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Nick Moscato. Thank you Mr. Mosquito you may begin.
Thank you operator, and welcome to the Amedisys Investor Conference call to discuss the results of the second quarter ended June Thirtyth 2020.
A copy of our press release supplemental slides related form 8-K filing with the FCC are available on our Investor Relations page on our website.
Speaking on today's call from a medicis will be pockets around president and Chief Executive Officer, and Scott Good Chief Financial Officer.
Also joining us as Chris your our Chief operating Officer, and Dave Kemmerly, Chief legal and Government Affairs Officer.
Before we get started with our call I would like to remind everyone that statements made on this conference call. Today may constitute forward looking statements that are protected on the safe Harbor are the private Securities Litigation Reform Act.
Forward looking statements are based on information available to the medicines today.
The company assumes no obligation to update information provided on this call to reflect subsequent events other than as required under applicable securities laws.
These forward looking statements may involve a number of risks and uncertainties, which may cause the company's results or actual outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our forms 10-K 10-Q, an 8-K.
In addition, as required by FCC regulation G., a reconciliation of any non-GAAP measure mentioned during our call today to the most comparable GAAP measure will also be available in our forms 10-K tend to an 8-K.
Thank you and now I'll turn the call over to a medicis CEO, Paul because Europe.
Thanks, Nick and welcome to the Amedisys second quarter 2020 earnings call.
Before we get started I once again want to give a heartfelt. Thank you to our front line care givers without hesitation and throughout this pandemic have care for the most frail and vulnerable patients in the country, including and especially those with cobot 19.
The dedication encourage all our incredible people highlights our unwavering commitment to our mission of caring for all patients in their homes and delivering the highest quality care to our patients.
Truly proud and amazed by each and every one of you and once again. Thank you everyone for all you're doing.
This quarter, our call will once again be structured differently. So that we can spend time, making sure you thoroughly understand our underlying business performance and cobot nineteens impact on second quarter results as well as our outlook for the remainder of 2020.
And beyond.
During this call Scott, Ken and I will cover the following.
Our performance in Q2, which bested our internal modeling and street expectations and highlights just how important essential and resilient home health hospice and personal care are to the healthcare delivery system.
Oh, good 19, and how it has impacted our business. How we are successfully managing through it and what we've learned and gained from this challenging experience.
Post cobot.
What are we doing to position ourselves for a strong 2021, and why the future value proposition of all our business segments looks even more promising than it did pre kobe.
The reimbursement outlook for both home health and hospice.
Which will set up 2021 to be our best reimbursement year in recent history.
Finally, a sarahcare and our other hospice acquisitions.
How are prodigious lease strong cash flows have us paying down our debt to one times by year end.
We are actually back in the market looking at new deals and de Novos for late 2020, and 2021 as well as how we are progressing on integrating on our four hospice deals.
Now I'm going to turn it over to Scott, who will run us through our second quarter performance and full year 2020 guidance Scott.
Thanks, Paul I'm very pleased that Q2 results, which exceeded our internal and street exit expectations in the face of challenges created by Coven 19.
These results combined with our continued successful implementation of Pdgm, our ability to close on material hospice acquisition.
Strong cash flow generation during these challenging times Macy's results, even more impressive.
For this though I'll start off by reviewing our financial performance for the quarter discuss our progress on Pdgm and provide highlights of our full year 2020 guidance ranges ill then hand, it back to Paul who include the impact of Cowen 19, our business trends, we're seeing through July and for discussion of our focus and expectations for that.
Remainder of the year.
For the second quarter on a GAAP basis, we delivered net income of one dollar and four cents per diluted share or 485 million in revenue.
A decrease of 8 million or 2% compared to 2019.
GAAP results include I recognition of cares that funds, which is included as other operating income in our statement of operations for the three months in six months ended June Thirtyth 2020.
We've chosen to apply our cares that but only to direct costs associated with coven 19.
The majority of these costs are included in cost of service and consists of the following.
Increased costs related to pp of nearly $11 million as you'll see as you'll recall, we had been paying nearly five times a normal cost for pp. However cost facility moderating and should continue to do so as equipment becomes more available through traditional pp suppliers.
$9 million and bonuses to our caregivers during the quarter for their service during the pandemic in corn to pay of approximately $2 million.
Our results were impacted by income or expense items, adjusting our GAAP results that we've characterized as noncore temporary or onetime in nature.
Slide 15 of our supplemental slide provides detail regarding these items and the income statement line item each adjustment impacts.
No. The adjustments include the recognition of care Act funds and direct costs associated with Coven 19.
For the quarter on adjusted basis. Our results were as follows revenue declined to 13 million or 3% of 485 million EBITDA increased 5 million or 8% to 66 million EBITDA as a percentage of revenue increased 140 basis points and EPS increased 11% to one dollar.
And 34 cents per share once again keep in mind. Adjusted results did not include any of the cares that funds or cobot 19 direct costs.
Our decline in revenues due to impact of Cove, 19 of volumes and reimbursement totaling 30 million as well as pdgm, reducing reimbursement by 7 million.
These reductions are partially offset by acquisition revenue of 16 million in 5 million from the suspension of sequestration effective may 1st.
They haven't nature of our cost structure mitigated the impact of co. The 19 revenue disruption Warner operating results.
Additionally, it is impacting our Q2 20 point performance are as follows.
Health and workers compensation decreased 6 million driven by the Coke 19 disruption to health insurance claims.
Strong cash collections resulted in lower revenue adjustments and reductions in utilization and the continued shift in clinical staffing mix helped to offset the margin impact on PGGM uncovered 19 disruptions.
Sequentially EBITDA increased 13 million on a 7 million decrease in revenue driven by filled with Nineteens impact and all three segments.
13 million increase in EBITDA consist of a 7 million increase from sequestration relief and covert 19 rated increases in our personal care segment, and a $7 million the client DNA expenses, excluding the Aseracare acquisition.
Turning to our second quarter adjusted segment performance.
Keep in mind segment level EBITDA is pretty corporate allocation.
In home Health revenue was 290 million down 28 million or 9% compared to prior year, driven by cobot nineteens impact on emissions and reimbursement during the quarter.
Revenue for Upto declined 2.3% driven by 7 million dollar impact to revenue due to the 2.8% reduction from Pdgm and higher loop in loss billing peers. As a result of an increase in mis business due to cover 19.
These were offset by three main of additional reimbursement from the suspension of sequestration.
This includes some cost per visit increased 1.5% over prior year increase is driven by planned wage increases effective August versus 2019, and lower visit volume. These impacts was offset by significant decline in health and workers compensation.
Our gross margin improvement of 190 basis points is driven by the variable nature of our business model along with a year over year reduction and visits per episode of 1.9 and continued shift our clinical staffing mix.
Segment, EBITDA was 53 million down 3.5 million with an EBITDA margin of 18.3%, representing a 50 basis point improvement.
Other items impacting the second quarter results of our home health segment include.
DNA decreased approximately 3 million despite an increase in business development resources and raises effective August one 2019.
The decrease is primarily due to covert 19 related disruptions in traveling training health costs within sales incentives.
I want to buy a little more color, our pdgm performance and observations around.
Revenue for episode was down approximately 2.3% from prior year, which reflects the impact of Pdgm excel at 19 offset by the suspension of sequestration effective may 1st.
So covert 19 drove increases in lupus and loss billing peers during the quarter, which negatively impacted revenue per episode.
As you recall, we estimated impact of pdgm to be 2.8% for the full year 2020.
As results of our focus on Operationalizing Pdgm, we continue to see rate improvements in north on episodes in progress, which gives us confidence in our ability to mitigate a portion of the impact of Pdgm as previously planned wants covert 19 subsides.
On the cost side, we continue to make excellent progress on both of our levers clinical staffing mix and utilization.
A clinical staffing we ended the quarter with a 45.4% LPN utilization up from 40.1% in the second quarter of 2019.
And a 47.9% PJ utilization ratio up from 40 point, 42.6% in the second quarter of 2019.
This continued progress keeps us on track to achieve a 50% LPN and PJ utilization ratio by fourth quarter 2020.
Keep in mind that every 1% shifts in utilization equates to approximately $450000 and cost savings.
When utilization we ended the second quarter at 15 point visits per episode, which was down 1.9 visits year over year end points for visit sequentially.
During the quarter, we made significant progress on the Metalogix care rollout and now have approximately 75% about home health care centers.
The laws and care and expect to have one hundreds to them or care by the end of August as a reminder, the care product is analytics to create a patient specific care plan to drive the most optimal outcomes.
I want to spend our care centers in it.
And information teams on their progress in performance is covered 19 added additional complexities to training and implementation.
Great job, it's all involved in this initiative.
Turning now to our hospice segment adjusted results.
Revenue was $177 million of 18 million over prior year, an increase of 12%, which includes addition of two acquisitions closed during 2020, that's gone on January 1st.
In the Sarahcare on June 1st.
Net revenue per day was up 2% to $155.51 fastest cost per day decreased 5.4%.
The decrease was primarily driven by the kind of business performed by variable cost employees.
Lower transportation costs, and lower health insurance costs, all due to covert 19, as well as a reduction in pharmacy costs.
DNA as a percentage of revenue was up 90 basis points of $6 million over prior year.
Increase is driven by our hospice acquisitions was additive $4 million segment.
Excluding acquisition activity, Jamie as up to me and driven by addition of approximately 80 business development activities. Since Q2, 2019 offset by reductions in travel and training.
EBITDA was 46.5 million.
Approximately $10 million an increase of 26%.
Our personal care segment generated approximately 18 million revenue in the second quarter and improved EBITDA margin by 230 basis points over prior year.
So with 19 impacted billable hours and client served in Q2. However, the segment benefited from approximately two made and coven 19 related rate increases.
Turning to our total general and administrative expense.
Got it basis total DNA was 151 million or 31.2% of total revenue was up 160 basis points over prior year, largely driven by the co. The impact of co 19 on revenue and includes approximately 5 million additional costs related to our acquisitions for being a hospice segment and one main and.
Corporate.
Sequentially DNA was down $3 million at 6 million, excluding that Sarahcare acquisition.
We continued our impressive cash flow generation in the second quarter, producing $134 million in cash flow from operations.
This increase in cash flow was driven by a 4.6 day reduction in Dsos, bringing dsos were 42 days down from 46.6 days at the end of the first quarter and $20 million and payroll tax apparels under the care that.
I want to take our care center staff, and our corporate billing and collection team for their efforts around the significant change our billing processes associated with PDGF.
We expect to generate approximately 280 made and cash flow from operations for the full year 2020.
This would result in the third straight year generating cash flow from operations in excess of $200 million and result in our ability to significantly pay down our outstanding revolver or fund additional acquisition activity.
Keep in mind, our estimated strong cash flow generation for the full year will be eight about aided by an estimated 60 million in deferred payroll tax has allowed us to the Kazakh which is payable in 2021 and 2022.
As Paul mentioned in his opening remarks, we're happy to reissue our full year 22 wanting guidance.
Our new guidance ranges reps in our best view of the business at this time.
There are numerous factors that could materially impact our ability to achieve these ranges, including the potential to increase decrease the number of cobot 19 cases nationwide the pace at which elective procedures began and return to normal levels return of patient confidence to in a hospital or doctor's office access to our faces at home and homes at the sale.
Ladies.
Particularly sniffs analysis.
And any feature a prolonged structure in place orders in our supplemental slide deck, we have provided our geographic geographies and our care center accounts. So that you can see areas, where we have more or less exposure.
Additionally, our guidance includes the impact of approximately 30 million an increased costs in the second after 2020 laid to plan raises and increases in health claims.
Our new guided guidance ranges are as follows revenue of 2.0 for the $2.07 billion adjusted EBITDA of 245 to 255 million and adjusted EPS of $4 from 84 cents to $5 and stick sense.
Now I'll turn the call back over to Paul for discussion around Toby Nineteens impacts our business, what we're doing for our patients and employees in our recovery plans Paul.
Thanks Scott.
There are a few topics I'd like to cover with our remaining time, which are.
The effective cobot 19 on our business during the quarter and our recovery plans, which we are executing upon.
The regulatory outlook, including the proposed home health and hospice rules, the Aseracare acquisition and our integration efforts on our for how hospice deals we have closed in the last 18 months and.
Tremendous opportunity in front of us that will propel us for outsized future growth and innovations for 2021 and beyond.
Now turning to cobot, 19th impact on our second quarter.
And the trends we continued to see.
As we discussed during our last call home health admissions and referrals have a low point the week of April 5th.
Since that time I'm happy to report that we have seen a steady V shaped recovery a sharp bounced back instead of a prolonged frost.
In fact.
No volume at the end of the second quarter was approximately 98% of our pre cobot baseline and is holding strong at those levels. Excluding July 4th of July 4th holiday.
Keep in mind.
Total volume includes both admission and Recertifications.
Total admissions at the end of Q2, we're at 91% of our pre cobot baseline.
Also some interesting data points.
We have not seen a material recovery in elective procedures.
We have seen a significant recovery in our admissions, which means we are winning market share and new referral sources.
Our admissions would also suggests that we are starting to realize the trend of patients wanting to avoid admission into snaps and other facility based settings.
It is without a doubt that the home is the safest place to care for patients and as we continue to innovate as an aging in place company. We believe there was a compelling post acute market share capture proposition from offering a significant home product and finding other ways to capture patients that history.
Typically would have received care in facilities.
Our efforts are underway on this front and we fully expect to be carrying for more acutely ill patients in the home over the coming months in Fracked, we're already seeing is now.
In hospice referrals hit their low point the week of March 20 seconds, but comparatively it was a minor drop.
As we discussed last quarter.
Hospice add mid volumes have significantly improved however, the slow down in March impacted both legacy and CCH AIDC early in the second quarter, particularly with short stay cobot patients that said, we have shown very solid performance and are projecting narrowly sick.
<unk> percent adamant growth in July.
As you can see the rapid response BD plans, we implemented in Q1 are paying off as a reminder, we are rolling out focus area action plans created by specific BD roll Vps, ABTS account executives and care.
Transition coordinators to take advantage of the two malls in the market and show, we're better and different.
We've been tailoring call routing based on sophisticated referral source segmentation first physician hospital.
Long term care ambulatory surgery centers and other settings.
We're continuing to hire an onboard BD FTTS during the slowdown they're trained and hitting the streets.
We've developed patient and family facing talking points for working through objections to home health and hospice out of fear of exposure and we've been leveraging the fact that we've been good citizens and or we have been opened to taking cobot 19 patients since day one results.
Thing in building up new referral sources and partners.
This is paying off particularly well.
Let's talk about patients and employees.
Poise are always our most important asset and patients and their families. Our most important commitment.
These have been at the forefront of our decision making during this pandemic as such I am proud to say that during the quarter, we gave out over $9 billion and bonuses to home health hospice personal care and all frontline kit caregivers that have seen patients during the pandemic.
Our caregivers are the heartbeat of our company and this monetary token of our gratitude and appreciation is most definitely well deserved.
When we take good care of our employees that cares passed along we will continue to aggressively invest to make sure. We have the best employees with the best tools delivering the best care to our patients, it's our strategy and mission in a nutshell.
On the legislative and regulatory relief front. There is very good news here in early April CMS released the full year 2021 propose hospice rule, which was comprised of a 3% market basket update offset by a 40 basis point productivity address.
For a net proposed rate update of 2.6%.
CMS also proposed increasing the cap amount by 2.6%.
We expect our impact to be in line with a 2.6% rate update.
So this is a proposed rule and not yet finalized positive rate updates in hospice are increasingly impactful to our business as we continue to grow hospice, both organically and inorganically.
We expect the final rules come out any day now.
Similarly in late June we saw CMS issue the calendar year 2021 home health prospective payment system rate update we're in CMS proposed to increase payments by 2.6, beginning in January 2021.
In addition to this positive payment update CMS also proposed to make permanent the tele health Flexibilities. It has previously granted to home health agencies during the current public health emergency.
We applaud CMS worth proposal to extend Tele health Flexibilities and we look forward to working with them on this important policy.
We think this modality could be a highly additive tool in care provision.
These two payment updates will be significant tailwinds for our company as we enter 2021.
Reducing approximately incremental $40 million in 2021.
Now, let's discuss why we continued to be very excited about our future 2021 and beyond.
To begin with demographic macro trends are very much in our favor.
The baby Boomers age there now between 56 and 76 more people are turning 65 years old that than ever before over 10000 a day.
The aging population, coupled with ever increasing health care costs put us in a very advantageous position as an aging in place company delivering the highest quality care at the lowest cost to seniors wherever they call home.
Nine out of 10 boomers want to age and die at home.
Many of the teams we witnessed at the end of the first and this quarter have continued and we'll continue beyond the time period of this public health crisis.
Prior to cope with 19 over 90% of seniors prefer to receive care in their home given that devastatingly sad impact Kogut 19 has had on seniors in facility settings. It it's safe to assume the percentage of seniors preferring to receive care in their homes has only increased.
Finally, given our scale M&A chops cash flow and integration capabilities when the true impact of PGGM is finally felt within our industry, we will be ready to continue our organic and inorganic expansion in home health.
And are well positioned to capture more and more market share.
Finally, I'd like to highlight the closing of the Aseracare acquisition on June Onest Aseracare is an extremely high quality hospice asset with 44 care centers across 14 States census of approximately 2100 patients and approximately 100 and.
$17 million in revenue.
This asset is a great addition to our portfolio and integration is well underway.
Once again, none of the money we received as part of the Cares Act was used to fund. This transaction, we have grown our hospice asset significantly over the past few years and now with Aseracare. We operate a 190 hospice care centers and 35 states, while carrying for an AIDC of.
Approximately 14000 patients.
Hospice is an important benefit in the care continuum and I'm proud of the work our hospice team has done to bring their incredible care and compassion, two more and more patients and families.
We have four great hospice assets under varying parts of integration and all are going well.
We're also active on de Novos, and we're innovating on new ideas sniff at home dialysis in the home Tele Health College of care and our National personal care network. It is truly an exciting time to be a part of Amedisys and I'm thrilled at all.
The future potential for our company, our associates and our patients.
This will conclude our prepared remarks, operator, please open the lines for questions.
Thank you.
Ladies and gentlemen, we will now have our question answer session if you'd like to ask a question. Please press star one on your telephone keypad.
A confirmation Tony will indicate that your line is in the question Q.
For those of you who are using speaker equipment may be necessary for you to pick up your handset before pressing the star keys.
We also ask our audience. Please limit to one question and one follow up only thank you and please hopefully now poll for questions.
Our first question comes from Brian Tanquilut with Jefferies. Please proceed with your question.
Hey, Brian Hey, good morning, good morning, guys and congrats.
There was a tough quarters so.
You will [laughter], so Paul I guess.
On the recovery right away right I mean, you talked about had the VC recovery and as I look at the slide deck eyeballing. It looks like in July you're trending coming into 5% same store admissions range from Medicare. So how should we be thinking about your perspective or your view on where you think organic or kind of like same store addition trends.
Our volume trends.
The.
We see some recovery and then factoring in the fact that you're not in Texas, Florida, you in your in Georgia, Tennessee, where your National obviously, there's been a big bouncing cobot bit pickup in total bid volumes Coca cases, so just wanted to see your thoughts on the acceleration of volume.
Especially post go ahead.
Yeah, I'm going to I'm going to have Chris answer most of this because I think he's he's more equipped to I think that what we're seeing though is we one of the things we've done that it has been very purposeful over the first half of this year is continue to advance.
In business development resources continue to expand in BD to continue to bring expertise in CD to put out additional incentives to bring additional tools. So the growth piece of this is something we're very very focused on.
We're starting to see it I think one of the issues that we're starting to see is making sure that our staffing keeps up with our growth. So that's where we've been focused lately, we've been seeing very nice growth.
And even in the market we've been offsetting that fight markets that are clearing up for example, the northeast is recovering very nicely, while we're having a more difficult times in Florida, and Georgia, but Chris anything you want to add on that.
Yeah, Thanks quality, Brian you know.
The wildcard really is kind of the resurgence in certain markets. So as you mentioned some of the southern States, where we have some density, Florida, Georgia, Tennessee, South Carolina, you know, we're seeing some impact there, but as Paul mentioned thats being fully offset by some good growth in some of the less impacted markets or the ones that are off.
Still on a rebound like with north east so the challenges around trying to win when these flare ups happen you know it's not so much the referral slow that slows down I think the patients who were over the anxiety if not going on the home care and I think we've gotten good protocols in place with facilities to be able to access the almost more around.
You know those exposures have you have employees going on quarantine, while waiting on testing and things like that sort of challenges your capacity a little bit all that said.
I think what we're thinking about the balance of the year is just a character those kind of nuances then think about mid single digits.
Growth.
Whereas we know that hospitals are not back to near full occupancy and we know that one of our strongest referral streams.
About 80% of our home health business counts downstream from snows in many snaps, you're really still struggling to keep.
They are your occupancy up so we think that they are still.
From demand that has not been released we don't know that will happen by the end of the year based on.
Just kind of the penetration of.
Good my team but.
We do feel like.
Growth in.
On the card for us the balance of the year mortgage is kind of thinking mid single digits, but we're obviously very pleased with where we are now we very well can be higher than that of due to the year. If we continue to execute.
Yes, I'd have thought I'd get that I guess.
I give a shout out to our central and western divisions, who in the past.
Really struggled there they've come around incredibly well and we're seeing strong results out there northeast is coming back very strong so its whack a mole and a good way. This has worked for your grass River.
Has been actually very beneficial to us.
Certain areas as this thing moves around.
We have very strong performance when when it dissipates and even when we're in the midst of it as as Chris said, it's mainly an issue of making sure. We have enough staff because there is an increase in staff were quarantining.
As these as cobot increases in markets like Florida and Georgia.
That makes sense, so I guess going to guidance as I think about 2021, great looking into growth algorithm. So you've got to Sarahcare. It adds about 6% year revenue already rate growth proposals are in the 2% to 3% range, you're growing organically five to seven and then some cost cuts.
You've put in.
In Q2, and I think maybe talking gives a little more color that is if possible.
Put all that together and im getting an EBITDA growth trajectory.
15% or higher for next year that from where we sit today is that the right way to think about that.
Our your lips to God's ears, we'd love to do that but ill, let Scott a tough that down a little Scott.
Yeah, well now I think that it's hard to run from that number.
Brian Thanks for the question I mean, when you think about loan from the rate good guys at.
It's somewhat around $40 million mean across those segments that certainly great opportunity for US you mentioned Aseracare of you have CCH, which we still.
Happy with what's going on there was certainly coveted impacted that we've added a lot of BT heads. There. So were in April we passed kind of where we wanted to be on CCH head count. So we think theres a lot of energy and as we exit and hit our exit rates here. Yeah. I think we feel Warner for about 20 2020, we certainly you're seeing the.
The benefits of what we've done and monitoring utilization on the Pdgm the shift in staffing. So all those things we had it ended up taking a hard look at our staffing.
In the quarter as we looked at our visits are coming down when you take down to visits an episode. If you think are averaging 75000 episodes, hey quarter. That's a lot of visits that's that's almost 600000 visits so you take that an accounting and get our mix shifts correctly, we made some adjustments there and staffing that we think really has been roughly.
Active in these numbers so.
We feel great about where we are and where we're headed.
Yeah, we feel very good about what your what you throughout Brian Let me, Chris you want to just.
Just did a lot of good work in the theme at home out pulling costs out.
That.
We had we have we were heavy on some PT populations, we turned some folks from salaried into per visit us. So a really good job. There. So our cost structure is very very strong and obviously, we're pushing very hard on the growth piece. So we feel very good about next year in particular.
Awesome. Thank you.
Thanks, Brian I appreciate it.
Thank you.
Next question comes from that Leroux with William Blair. Please proceed with your question.
Hi, good morning.
Before I get 2021, and maybe I just wanted to ask about the back half of 2020, and Scott you alluded to I think $30 billion increased costs in the back half, but could you maybe help us understand a little bit better just how some of these dynamics flow through whether it's the group medical as to the staffing adjustments you made and at the end of QQ that Weve.
And we'll get the benefit after the back half the year terms and Pts next just if you could just help us.
A little bit on them all in there because I think even layer in that 39, I'm still kind of getting towards the higher end of the guidance range.
Flush.
Yeah, maybe if you think about that and what we did from a cost revisit the only thing I'd caution, Matt and I think that way these numbers get really large and I really points, our hospice segment at that high gross margin.
We did benefit from if you think about how we get paid for hospice.
Patients still in service, we get Cape pay per day, I'm, sorry, and some of the visits.
Actually from the hourly type folks are eight they weren't able to get out there now that's swinging back around they're coming back so I think that margins probably.
A little in play that saw with test that down a little bit as we move into the second half of the margin. We're still in right now on the gross margin perspective, that's one thing to keep in mind.
We'll see how this I mean, the typical you'll see the health core cost higher in Q4.
We still got a pretty big gap up there I think the raise impacts roughly eight which will be effective August 1st and then you've got the health flowing through which we expecting from a trending perspective, why the dollars a down it should look similar.
We'll watch that when closely as this lease through so it's interesting I mean, it to it got earlier back to some typical patterns we see.
One things a little different typically our yet are you happy right. We're exiting this quarter as is extremely high compared to where we normally are at this point as we saw build and you saw those do numbers late we saw strong recovery there so.
We kind of EV lumped a lot into that second half of the year.
But I think the takeaway and you look into your modeling is I think that gross margins closer to around the 43% on a go forward basis.
Okay. Thank you and then.
Hey, Paul on Chris one of the follow up on some of the share taken and significant version.
Is there going you can help us may put some numbers around what the.
Various referral source.
Components were pre co vegan and what you've seen as volumes have come back and then.
Maybe on a longer term seems to create an opportunity.
How do you kind of bucket inpatient you're taking today that were an easy land grab it just needs and content team versus the longer term opportunities that might involve capability expansion.
In terms of what you offer.
Yeah, I think just to start us off I think from a sniff perspective.
And I'll use Chris is terms of about 10% of the sniff business, we estimate between eight and 10% is what we called jump ball. So we think a lot of the jump ball business that may be 150, 50 is probably coming to us theres. Another maybe 10% out of the sniff business that if we can.
Utilize custodial care or personal care. So we're probably going to have to work through with M&A. If they want to do more more work there.
You know clearly.
When you know it's been a highly publicized area.
Where but we also do a lot of business and sniffs, 30% of hospice at this point.
And we've got a you know about 18% of home health, we do work in sniff. So we want to make sure. We're the ones going into these sniffs, but at the same point, we compete with them. They went through their own version of PTC him, which ultimately makes it more profitable in better for them to move up the acuity scale.
Ill. So what we're seeing is as the sniffs are moving up and taking care of sicker patients are there kind of leaving more acute or what we consider more acute patients. So we're seeing our level of acuity go up as some of those patients. There are less interested in taking care of in this now I don't know Chris do like grow.
Most of it or any comments.
Yes, just you got to Paul just kind of give a little more detail behind the numbers and what we're looking at now.
Our physician referrals.
You know rebounded quicker through Toby my team, both or physician and hospital or institutional referrals drops.
To the same level, but physicians came back quicker.
Which really kind of helped with our with our recovery in our rebounded in fact, we actually added 1400 90.
New physician referrals sources in Q2.
From Q1 sequentially, which was which which added quite a bit but hospital and institutional referrals got back close to 100%.
Yes, as we exited Q2, but our electric procedures only got back to about 75% or pretrial. Good level. So that would suggest we're getting a little bit of a different type of referral from from the hospital in the institutional referrals.
We are also see in case mix weight come up on our patients as well that would suggest little bit different type patient and we feel like that's really going to be.
Diversion from these stations landing into a skilled nursing facility first and then coming to US you are coming to us directly. So we got to get tighter about round quantifying that but we think thats.
Assign node.
Some opportunity still to come that we can take advantage of and then longer term the bigger play on really quote unquote Smith at home business.
We really see that model is being.
A realistic.
Future for Us and unit did poorly for home care in general.
It's going to require some new thinking around payment models. It really kind of will also support and skilled care just presence in the home technology.
Meals on transportation somebody other things that are counter going to needed to be bolted on in paid for to be able to do this would if it can be done in the right away.
You can see a complete shift toward the type patients.
Normally will spend weeks in this properly go home can actually go home, we get the same period, but I'd say that this is really starting to put focus on that so early stages, but now it's up to the industry to kind of try to take us or.
Hey, Matt and one other thing real quick on that second half just wanted to.
In our Q, you'll see that acquisition revenue for the quarter, which includes Aseracare aniston, a roughly did about 6 million in revenue.
Talk about some adjustments in there. So you know those combined drove about a million dollars of EBITDA for the quarter thinking about aseracare going into the rest of the year weve within that guidance, which wasn't in our original guidance because we hadn't closed until until June fires, that's probably additional 5 million coming out of Aseracare.
Okay. Thanks, Michelle.
Thanks Bye thank you.
Our next question comes from A. J Rice with credit Suisse. Please proceed with your question.
Hi, everybody.
Maybe first on the hub.
Turnover rate your highlighted about 16.8% I guess.
Below that I'd be just curious as to what you're seeing in terms of staff availability. How people are responding I know you've mentioned some.
Bonus pay etcetera that you.
Well good related that you've given but just the availability of workers the turnover rate where things stand in light of the crisis and is that presented challenges or opportunities in anyway.
Yeah, we think we'll bring that down but why don't you comment on why it's at the rate. It is it's we think it's a little high at this rate due to all the too much but Chris you can take people through what so how you're thinking about it.
Yeah. So you know turnover is going to focus of ours for several years weve continuous to continuously driven that down.
I think we did a good job theory.
Really the harvest the pandemic to make sure that we were keeping turnover at a good level.
We even saw some areas, where we had to make some staffing adjustments that we actually alluded to in our in our prepared comments.
What we find now is that.
The biggest challenge around staffing in capacity just comes with wherever you have a flare up and you have a number of employees go on any kind of corn seeds leave for you know after two weeks or those that may Unfortunately get.
By the borrowers.
What we have found is that we did slow down a little bit on a requisition during the the trough of volume and we ran sat back up in part in new hires we have good pipeline.
And we have good higher in China pipeline that closure I've now that we're bringing on board. So I feel like you know we're in good shape. We do have you know as always is.
The bottom it then Dan.
Okay environment, you do have certain areas, where it gets really tied on labor, but you know in those areas. We also.
In other ways like utilize the contract labor where possible to make sure that we can we can effectively and safely treat patients. So we don't feel like stacking staffing level can you kind of constraint for us.
You know again, we put.
We put turnover at the top of the list of things that are high on our priorities.
As a managed the continue to focus on that.
Yeah, we expect that okay, what drives the other thing the other thing AJ that I think it's really important is.
Considering all that's going on in facilities and institutions.
Recruiting is getting better and better so we have the opportunity to go after some very good people, who want to start to work in the home. So we're starting to see that pretty pretty intensively remember when we first started this effort we were in the five years ago, we were at 40% turnover rates. So we feel very good.
But I think our goal is to get as close to a close to kind of below 15, as we can get and where we anticipate we'll get there.
Okay.
That's great.
Second the other thing I wanted just ask about was.
You talked about the cobot impact on the hospice of being short stay hospice.
I wondered how many can you flesh that out a little bit obviously to extend you take a code bases that would boost your admissions in hospice, but what kind of effect is that having on the business.
Do most coated.
Patients that ultimately end up debt do they do a lot of them go on hospice.
And how else is it rippling through the business and impacts to the business.
Chris York pickup.
Ill take that so we have admitted almost thousand koby patients one or hospice average length of stay as eight days on service typically the discharging simply pass away. So.
In a normal world when we've been averaging about let's say 90, 798 average length of stay for a patient in have kind of a more normalized environment.
As you had growth in the mission as you're going to see your sense AIDC grow overtime as well. So during Q2 as a shift in terms of the types of patients and we were getting these very very low linked to stay so did not really support any kind of AIDC growth in Q2 now in Q3, our AR.
Missions in hospice for.
For core Kogas related patients declined sequentially throughout the quarter April may and June.
Continues to do so in July so from that we see that we're back to more of a normalized.
Mission I guess mix, if you will that should start to sport kind of DTC growth, which we as we go through Q3.
Yeah, and I'd say, there's one other thing we want.
Turning to see A.J., which is the the good citizens piece, which we mentioned in our remarks, which is there's a lot of hospice wouldn't take co bid we have since day one offs. So we're going back and talking to these people about other referrals other than co good and having a lot of good success.
Alright, great. Thanks, a lot.
Thank you.
Next question comes from just in balance with Deutsche Bank. Please proceed with your question.
Hi, Justin.
Hey, good morning, everyone.
And thanks for the question, so I'm, just sticking with hospice, what some kind of.
How are you thinking about that the trajectory of that through the rest of year.
And and I'll pause for the next one.
Well, we will certainly you know as our numbers aren't as we've talked to you and when we did some conferences post Q1, we're expecting to get to certainly where we originally thought our exit rates will be so hostile. So we could expect opinion as continued increase in that 80 see through the I've talked a little bit earlier, and Chris is given some numbers but.
Certainly around CCH, you've added a lot of staffing so we expect that to continue to see.
The margin perspective, I do see that certainly get some expansion.
But you'll have some cost return as we get more those alley type employees back out there really transportation around for those folks as well as hourly pay will come back.
We are expecting to see it increases in AIDC across the board our hospice segments I mentioned that Aseracare will add another 5 million roughly to the back half said, we continue to see that up to up into the right. As we approach that year end and really are certainly pushing to hit our targets as we exit and really get a nice run right heading into 2000.
21.
Hey, just embraces Chris I'll give you one quick all that data point really quickly is.
Sequentially, we added 25 costs must be DFT ease in Q2 over Q1 and a year over year Q2, Q2 was 93. So we have 432 bcf to use it as we enter into as we entered into Q3, and that's where we feel pretty bullish it takes a little while to get those reps up in productive, but once they get.
There.
And we retain them that we see that does who helps 40 gross.
And I'm just to add that'd be which is if you look at our cost structure. I mean, we're carrying all that extra cost year over year, which is you see our DNA numbers really.
Held and fairly well and actually coming down.
One thing I would say too I mean, we saw big fall off of course is would everyone expected traveling training. That's another number that will probably keep up creep up a bit parts, depending on opening in stages, we need to get our operators.
Pieces, and so forth back out there and get some training going on some of these new head so.
That's just one item to keep in mind.
Yeah, I appreciate that and then on on home health.
Chris I just wanted to understand some of the referral dynamics a little more because I think I think as you guys said like emissions are trending nicely into the third quarter up in the mid single digits, and you're seeing Medicare ill come back nicely and then.
Based on your earlier comments it sounds like acuity is going up a little bit too so as that.
Is that a fair deduction and then the shifts from institution are coming back a little stronger.
And then yeah, I think kind of maybe.
Okay I'll pause there.
Yeah, I think you're looking for that right. So we're watching use count of our clinical coating, our case mix wait for our patients functional levels.
In C and how that is trending over the course of the year and we're seeing a very consistent ticking up you're also seeing our recert rate came up a bit.
So quite a bit in Q2, we think some was driven by higher acuity patient that may have typically landed again in the SNF, maybe should let's say two weeks lemons trade at home and then we're taking care of them signal this little bit longer to really get them fully recovered Bart.
Independent living so.
We feel like we're getting a.
Different type of patient were going to put more quantification around that and and give some more color as we dug into the data, but we certainly feel that that's that's that's an accurate statement.
That's correct I, just add a little bit floor, I mean, just got to keep in mind to and you're not seeing it in our rate yet, but we certainly as Chris said are seeing that from a patient base, but it's been somewhat masked by we did see higher if you look at our numbers restarts versus add meds kind of climb up where we have in our completed numbers a higher percentage of research and we normally run we think.
You see our EBIT growth return thats going to flip back.
Restart episodes going to average about 80% of what an AD mid episode will be from a reimbursement perspective. So you will start as we move through in that normalizes, you'll see our rate.
Sorry to come up around that.
Yup, Okay, just and then just a couple of quick follow ups on that Chris I missed that what was the percentage of referrals that from Sniffs you mentioned earlier.
Earlier.
Nor nor yeah go ahead, and then and then the other kind of the other one was just on the omni electives.
Is there is there kind of a category that that's not coming back.
Or is it pretty spread out.
Yes in the second one it is spread out so I mean, we're looking at it and its you know kind of the it's even equal evenly distributed across all of the types of.
Actions that we've done beginning we're back about 75%.
Of the pre kind of at levels. So.
Thats.
What we do see us geographically there were some the areas that are back well.
Hundred percent or even greater than 100% and that really have something to do with states opening up in kind of the current environment around cobot My team and we have some states so they're still well below 50%. So we think that theres still some some time to go before they get smarter to a normal level.
Also pre cobot about 18% of our home health referrals came from snaps.
And that those would be you know kind of downstream from a Q2 of snow shipments to the home and then the referrals comes from there that is still significantly below accrete cobot levels.
So that would suggest that even though we're at the because we're at the volume levels. We're at today.
And that's that's an area this down post the close the elective procedures that are down.
Just suggest that we're getting we're getting share of these patients that would normally spend time Dennis.
Yeah. We also think that there there's the potential for diversion.
For example in certain types of surgical procedures that people are going to ask fees and other places so that we're keeping our eyes on that or BD folks are seeing.
If theyre going from the hospital into NFC, we're going to.
We're going to obviously, we're talking to quite a bit aveo sees a pretty intensely now. So again, we're following this volume if its leaving the hospitals and going elsewhere, we're tracking it.
Okay. Thanks, Thanks, a bunch I'll hop back in Q.
Great.
Thank you.
Next question comes from Kevin Fischbeck with Bank of America. Please proceed with your question.
Hi, Kevin Grace Hey.
So I guess, maybe just kind of falling back up on this kind of share commentary around nursing homes.
When you said I think earlier that maybe 8% to 10% as that business is kind of a jump ball do you mean volumes coming out of the hospital that 8% to 10% of time at the jump always when it goes to you or where that goes to a nursing home I'm just trying to solve some of these numbers.
If you got that that 10% to you or is that a different kind of seeing.
Your volume, if we were able to get that 10%.
Yes, the jump ball business basically on a clinical basis, where could people be taking care of and the idea of the current our current ability to take care of patients would allow for physician to choose between us or sniffs.
And so we now think obviously that these physicians or these caregivers when they're doing discharges are probably.
Increasingly sending people to the home because they could send them either place. We also think said, there's probably another 10% business of the business, where if we could add custodial care.
You know on skilled care through our personal care network.
We believe that a lot of this is just eyes on work is dealing with activities of daily living that fundamentally we could take care of these patients more in the home and also from a higher acuity perspective, we've developed a you know us sniff at home business that we will go and.
People that auction to do it so we really have three.
Three plays here on that we believe will attract more of this business.
You are the more complexity.
Activities of daily living as well as the jump ball business. So we think we have some more opportunities there I don't know Chris you anything I missed.
No together.
But I guess I'm, just I think if you get 10% more of the hospital volume that's what is that.
5% to.
Your volume because after bonds coming from other sources or how do we think about.
What that opportunity as to your growth.
Yeah.
Chris I don't I don't know what that would I mean, we havent fully.
Got through and cut through the numbers, but.
We believe out of this out of some percentage of that sniff business, we will start to migrate to sniff business is approximately according to the way we looked at it lasts about a 30 billion dollar.
Business about twice what home health is.
In terms of spend.
We're about equal sniffs do a little more.
In terms of post acute we're at about 16 Snfs are about 18% of post acute discharges us So we think.
We think we'll start to nip into that and we think are referrals will start to stepped on that.
Okay. That's that's helpful. And then I guess these number that you're talking about as far as taking share.
[music].
Makes sense I get do you have any color as to whether.
The fact that your hospital volumes are back to normal even though the electives arent is that is that because.
The industry is seeing that or is that because you were disproportionately.
Able to.
Yeah accommodate those patients trying to figure out how much is fundamental shifts of where cares per being provided versus market share within location of care.
I think you're going to see a dynamic which one it is and I give us I can't emphasize how much I've been hearing about our goods citizenry and the idea is that we've been out there aggressively out there taking patients during this and being very flexible and that's a testament to our people. So we're starting to see good.
Hey back from that more conversations I think Chris mentioned that there were 1500, new referral sources or something is just extraordinary what we've been seeing from new business. So we anticipate we're gonna grow market share. We also anticipate once pdgm kicks in and full and this kind of shift part of that.
Conversations, but there will be a significant shake out in this industry and again, we will we anticipate we're going to keep growing share. Once we're just doing better than everyone else, but to whats pdgm kicks in because you'll remember.
As of one 121.
To wrap payments will completely disappear and a lot of the subsidies that are out there are going to go away.
If I could just sneak in one last one the you mentioned at the beginning that 90% of people for coated wanted to preferred care at home I guess.
How durable do you think this switch will be if people were already predominantly looking for home and we had a basically 50 50 split as far as post acute.
Discharges.
Out of the hospital and between you and nursing homes.
No.
Why wouldn't it go back to that same split.
Once.
So I think a product.
Right.
I'll give you an anecdotal answer to that and the anecdotal answer is when I go talk to physicians, which I used to do a lot of free coded and I'd say why are you referring this to sniff when you can refer them to the home they say safer.
They would say you know it's I cover all my basis.
They needed continuous care.
And what they're going to start to do now hopefully reimbursement will fall. This I'd look for more and I may then.
Mass at this point, but I think what people are going to say is physician and those referral sources are going to try to keep people out of these institutions. Because there has been you know the second surge of this has has met this thing keep popping up so they're having to go through a whole new round of saying we want to avoid.
Sending people into institutions, we think at some point it'll settle into some of their their long term memory and and they'll get more used to referring and hopefully having successful referrals into the home. So we think that this pattern.
Cobot coming back although dreadful frankly is helping us.
The second wave is helping us because it's generally a younger people, but it's still it's still changing the habit. So lot of our referral sources.
Okay perfect. Thank you.
Thank you.
Thank you.
Next question comes from John Ransom with Raymond James. Please proceed with your question.
Hey, good afternoon.
If we look at the two H guidance, what's the implied volume kind of year over year volume assumption.
In both home health hospice.
Got you want them.
So I would tell you that's kind of.
As we move forward as Youre looking mainly at a kind of.
Kind of low single digit type of number system home health side, they cost us AIDC as it recovers is kind of in a similar kind of that lower lower number I don't think theres some overly aggressive numbers there.
Expect to see that ramp up really on 80 see in hospice in the back half a fourth quarter. So on average it right not of massive top line number.
And you talked about a 30 million of costs, how do we think about the gross margin.
Or the however, you want to talk about the segment level EBITDA versus DNA, how do we allocate that extra costs between the two businesses in June I.
Yeah, I would say that 30, John I'd put about 80% of that that will hit to gross margin lines. So though in cost of cost of revenue because that's mostly the clinicians are higher population, which will hit both have claimed as well as arrays be 70% to 80% is not really safe number to use.
Just just proportionately distributed between hospice and home health.
I would say it's probably.
Yes, 60% home health.
If you kind of break that number back down so starting with that 30 million, 60% Bayer be home health and then take an 80% to get you to roughly what should roll through gross margin.
Okay.
And.
Maybe I missed this but what is your projection for coated costs and other type.
Acquisition spend what what kind of adjustments should we think about in the EBITDA line.
So I said like you had in the second quarter.
Yeah. So if we think about it.
Starting to look at from a code perspective, I think and that's going to be somewhere around $11 million in the second half, which will treat that takes that they come against that.
I think you'll see probably continued level of that acquisition integration, we really have kind of pushed off.
Some of the acquisition because of integration because it over 19, so it'll probably be at a similar level I would say.
This is less of the year.
Okay.
And then just.
Last one for me and this is a I know this a little bit of idle left field, but.
If we think about some of the rapid.
Tests that are going to be more and more available on the market that give you a point of care answer and less than half hour.
Is that something that a amedisys would look at as a.
As I must have to avoid this set kind of course until we quarantining or is it are you going to stick with the kind of some additional.
Labcorp quest, where we'd just hear increasing stories about backlogs and.
Saturday turnarounds and that sort of thing.
Yeah, I think one of the key things that we're looking out in the future. John is testing. So thats a really good question I think the idea is that more and more of the institutions that we do call and call on one for setting up these kind of variable rules for us what we're trying to do as Rescaling down to one continue with one rule that weekend bye.
By which is our which we think is going to affect testing. So we've been out there looking at a variety of different methodologies for testing. So that we can be obviously, what we want to say is we're all our folks are cobot free going into these institutions.
So that's that's a huge advantage for somebody out there. So good question and we're pushing on this pretty hard.
Chris you're getting at any other thoughts.
Well I think Thats your instinct is right John.
The.
The rapid is the way we'd like to go quicker quicker turn around what we're running into his reliability and inaccuracy issues with that so you know its can be really depend on.
That improving we are running into some spots with our big gender.
That we're using for traditional testing with ER with some backlogs in it it just prolong account.
This lack of is access to care givers, while we're waiting for answers so.
We're hopeful that there's some good progress made in the rapid testing side and also availability and that's an area that we would we would love to transition.
Yes, and Allied what were the what was the loop.
How many episodes were subject to loop adjustments in Twoq versus one Q and what do you said how are you thinking about that for the back half of the.
Yes, so I'll give you kind of the sequence of bloopers by March through Q2, we hit an all time hog, 11.2% of all upsides in April 8.7% in May 8.4% in June were trending down a little bit from there so far.
In Q3, our normal radius around 8%, that's where we'd love to get to that's pre that's our pre pdgm perrigo bid level. So you know that that's what we're we're moving back towards we feel like we got to put to good handle on it.
The things that will continue to impacted or just really kind of the flare ups.
And if we run into any kind of.
Issues getting business down in some of those markets, but the trend is very good I think we've got our arms around it really quickly and.
I think you'd be doing what to think about it odd model this up.
Out in around the 8% range.
Okay. Thanks, so much appreciate it.
Thanks, John.
Thank you.
No further questions at this time I'd like to turn the floor back over to pull Cutia ROE for closing remarks.
Great. Thank you vector and I want to thank everyone, who joined us on our call today I'd also like to again, thank all of our front line employees, who are out there in the field battling the corona virus as well as all of our back office and corporate staff, who helped to enable our folks on the front lines. It is because of.
Your daily actions that we're going to get through this together.
Doing what you're doing taking care of the people who need us. The most we hope that everyone has a wonderful day.
And we look forward to updating you on our ever evolving progress and purposeful work on our next quarterly earnings call have a great day. Thank you very much.
Ladies and gentlemen. This concludes todays conference you may now disconnect. Your lines at this time. Thank you for your participation and have a great thing.
Sounds like we're done.
Good vector.
I think given you're welcome have a great say gentlemen.
Thank you can we appreciate it good job everyone really good job baseball well done our until Victor Okay. All right.