Q3 2020 Addus Homecare Corp Earnings Call
After the speaker's presentation, there will be a question and answer session to ask a question during the session you'll need to press star one on your telephone as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program Drew Anderson Investor Relations. Please go ahead.
Thank you good morning, and welcome to the Addus Homecare Corporation third quarter 2020 earnings Conference call.
Today's call is being recorded to the extent any non-GAAP financial measure is discussed in today's call. You will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by going to the company's website and reviewing yesterday's news release.
This conference call May also contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including statements among others regarding Addus expected quarterly and annual financial performance for 2020 or beyond but.
This purpose any statements made during this call that are not statements of historical fact may be deemed to be forward looking statements.
Without limiting the foregoing discussions of forecast estimates targets plans beliefs expectations and the like are intended to identify forward looking statements.
You are hereby cautioned that these statements may be affected by important factors among.
No others set forth in Atas filings with the Securities and Exchange Commission and in its third quarter 2020 two's release.
Consequently, actual operations and results may differ materially from the results discussed in the forward looking statements. The company undertakes no obligation to update any forward looking statements, whether as a result of new information future events or otherwise.
At this time I would like to turn the call over to the company's President and Chief Executive Officer.
Mr. Dirk Allison. Please go ahead Sir.
Thank you drew good morning, and thank you for joining us for our 2023rd quarter earnings call with me today are Brian pop, our Chief Financial Officer, and Brad become our Chief operating officer.
As usual I will begin with some overall comments and then Brian will discuss the third quarter results in more detail. Following our comments, we would be happy to respond to any questions.
As you already know the pandemic has created many challenges over the past eight months and I expect the environment to remain operationally difficult until there is a solution to the cobot parish.
In spite of these challenges my optimism about the future of the home care industry, and adesis opportunity within it or as great as ever.
I'm, especially proud of our dedicated team of leaders and team members that have demonstrated their ability to continue to meet our mission and execute upon our strategy.
We have continued to provide quality care to our consumers and patients with an added focus on safety. We have continued to grow our business both organically and through acquisition and we have continued to generate strong operating performance, including the most recently reported third quarter 2020 results.
As you saw with the financial results, we announced yesterday Atas continued our solid operating performance in the third quarter of 2020.
Our revenue for the third quarter was $194 million as compared to $169 million for the third quarter of 2019, an increase of 14.8%.
Adjusted earnings per diluted share for the third quarter of 2020 was 76 cents.
Up from 75 cents for the third quarter of 2019, despite the impact of Coke at 19 on revenues during our lightest quarter Huh.
Our adjusted EBITDA for the third quarter of 2020 was 19.5 million as compared to 17.4 million for the third quarter of 2019, an increase of 12.2%.
Adjusted EBITDA margin increased to 10.1% for the quarter consistent sequentially with the second quarter.
During the third quarter of 2020, our revenues continued to be adversely impacted by the COVID-19 pandemic with a decline of approximately $6 million from our pre co, but 2020 run rate.
As was the case in our second quarter of this year. This reduction occurred to varying degrees in all three segments of our business, but particularly in our New York personal care market and in our new Mexico Hospice operation, where we still see a number of facilities limiting access, which hinders our ability to work with new patients.
As a result of the recent increase in cobot cases occurring across a number of our markets. We estimate our fourth quarter revenues will continue to be negatively affected by approximately 3% to 4% as compared to our pre pandemic run right.
The majority of this reduction is occurring in our New York market.
Operating cash flow in the third quarter was strong at approximately $22 million, increasing our September 32020 cash balance to over $170 million.
During the pandemic up the last eight months many of our states have been diligent in making sure that providers such as that I have received cash in a timely manner.
We are grateful to these states and to our M.C.O. partners, who have remained committed to ensuring prompt payments to providers, even with the challenges of this virus.
As we have previously discussed effective July 1st 2020, the city of Chicago race, the city's minimum wage by $1 to $14 per hour.
A rate adjustment to cover this increase is included in the fiscal year 2021, Illinois State budget, which was passed in may of this year.
The increased rate to offset the city of Chicago minimum wage increase will be effective statewide on January 1st 2021 subject to federal approval, which the state has already applied for.
Our results for the most recent quarter include an increase in our cost due to this unreimbursed wage increase of approximately $900000.
We will see a similar effect in our results for the fourth quarter of 2020, after which the January 1st Ram bright reimbursement rate increase should eliminate this temporary negative effect.
I also want to update you on certain developments pertaining to the New York State budget reduction, which was effective April one of this year.
The New York State Department of Health announced at all non exempt Medicaid that's would be uniformly reduced across the board by 1% effective January Onest 2020 through March 31, 2020, with an additional 0.5% reduction effective April Onest 2020.
Roughly one third of our New York business is directly with the state and was immediately affected by this reduction.
During the third quarter of 2020, we also started to see certain mcl payers begin discussions on their rights to Medicaid service providers.
Our managed care team has been successful at maintaining our rights with our M.C.O. partners with only immaterial changes.
We continue to work with our New York State Association to mitigate any future rate reductions and to help educate the state leaders of the value of home and community based services.
[noise] one of our potential challenges over the next couple of years could be the effects of this virus on state budgets although.
Although this pandemic has reduced state tax revenues the impact over the last eight months has not been as much as originally expected due to the federal coded relieved about stage and the general population.
In addition states are currently receiving an additional 6.2% federal Medicaid match as part of the cares Act, which will continue through the duration of the health emergency, which currently goes through the first quarter 2021.
Our home based care is cost effective and significantly safer than having patients in the long term care facility in today's challenging environment, which we believe the leadership of our states recognize.
For the third quarter of 2020, our personal care same store revenue growth was 4.8%. This growth rate is at the higher end of our stated expectation, but is lower than we have experienced in the last few quarters. This.
This slightly lower growth rate is mostly driven by the issues, we see in New York in.
In our third quarter, our New York acquisition of VIP Health care services completed on June Onest 2019 became part of our same store growth calculation for the first time.
Our sensors for the New York market remains approximately 17% below what we saw in the first quarter of this year as families and caregivers continue to struggle with the impact of the virus.
Exclusive of our VIP acquisition, our same store personal care growth would have been 8.5%.
In addition to New York, We also saw a modest reductions in volumes in our Midwest and southeast States, which are now experiencing a new wave of the bars. However, we are very encouraged that two of our largest markets, Illinois, and new Mexico have seen a recovery in average billable hours per week, which are now running slide.
Looking ahead of what we saw just prior to the beginning of the pandemic.
With the upcoming rate increase in Illinois on January one we should continue to see solid same store growth in our personal care segment over the next few quarters.
On a company wide basis, we continue to see an overall reduction in patients on hold and improvement in our care givers hiring numbers, which contributed to a sequential 6.5% increase in our personal care same store census.
For the third quarter of 2020, our hospice same store revenue decreased 5.6% as we saw our average daily census is decreased 6.2% year over year, primarily due to continuing facility access issues and our new Mexico Hospice program just discussed.
With the continued limits on access to facility based settings, such as assisted living facilities and skilled nursing facilities. Our sales team has encountered challenges in identifying and working with new patients who need hospice services. However, we did experience sequential same store hospital admission.
Growth of 5% due primarily to an increase in our non facility referral base.
Our home health same store revenue decreased by 8.9% year over year, but improved approximately 4% on a sequential basis, while our home health volumes were up 12.2% compared to last year. Our revenue continues to be adversely impacted by an increase of approximately 300 basis points in our non.
Medicare patient mix and a reduction in our institutional early Medicare fee for service referrals under Pdgm.
Our Medicare admission volume did begin to recover late in Q2 of this year and is currently running slightly ahead of our pre cobot admissions number which has increased our Medicare patient mix approximately 200 basis points on a sequential basis.
As we announced on November 1st we closed on the acquisition of County, Homemakers, a provider of personal care services in the state of Pennsylvania.
This acquisition expands our personal care service across the state and is aligned with our strategy of creating and maintaining strong geographic coverage in the states where we operate.
We're very excited about the completion of this transaction and I want to welcome all the new team members from counting homemakers status.
As most of you know acquisitions have been and remain an important part of our growth strategy at Addus we.
We have strategically maintained a strong capital structure, which allows us to take advantage of acquisition opportunities as they occur.
While we took a short pause from pursuing new acquisitions during the early phase of the covert pandemic. We're now fully reengaged in the process of identifying and closing additional acquisitions as we look at opportunities in each of our three operating segments.
Our acquisition pipeline and liquidity position remained strong and while we are being appropriately cautious we continue to believe that we can close additional acquisitions during the next few months.
As we have grown our company over the past four years, we found that we had outgrown our corporate space in Frisco, Texas.
While we focus on being conservative with our expenses. It became apparent in 2019 that we needed to increase our office space to allow for the additional personnel that we needed to support our growth.
In the fourth quarter of 2019, we negotiated a larger corporate office space near our old headquarters. We finalized this late in the first quarter of 2020, just prior to the onset of the covered virus.
During the third quarter of 2020, we left our old headquarters and moved into our new location. Why we are still mainly working remotely. We are excited about this move our new corporate office gives us the ability to support our broader team as we continue to grow over the next few years. This move did require us to write off the remaining terms are for old.
Ladies in the current quarter.
As I look back over the past eight months I'm proud to see a team of caregivers and support staff has done a wonderful job of living our mission during extraordinary times. Our team has been willing to serve the needs of our consumers and patients in their homes in spite of all the risks associated with the COVID-19 virus.
All caregivers in all segments of healthcare deserve our appreciation for their commitment to patient care I, especially want to thank the addus team for continuing putting our patients first.
Before I turn this.
This over to Brian I want to remind our team on the value of our service walk while the cobot Paris is still a challenge for our country as well as the world we need to continue to live our mission and values, while serving our consumers and patients each of these individuals need to be cared for at home.
Well, we can keep them safe from the bars, while providing much needed care.
With that let me turn the call over to Brian.
Thank you Dirk and good morning, everyone. I just had a very solid financial performance for the third quarter of 2020, demonstrating consistent profitable growth amidst challenging conditions as.
As Doug noted total net service revenues for the third quarter were $194 million. The revenue breakdown was as follows personal care revenues were $165.9 million or 85.5% of revenue.
Hospice care revenues were $24 million or 12.4% of revenue.
At home health revenues were $4.1 million or 2.1% of revenue.
These results demonstrate our ability to continue executing our organic growth strategy with favorable results. While we are still facing a dynamic environment with the ongoing impact of the COVID-19 pandemic, we saw some improvement in volume sequentially during the quarter.
We have a strong business model in place and believe we are well positioned to meet expected demand with additional safety protocols in place and will continue to support our patients with the care they need in the face of a rising number of cases across the country.
Our results also reflect the incremental benefits of the four acquisitions, we completed in 2019 and the one acquisition. We completed earlier in 2020 with combined total annualized revenue of approximately $140 million.
We continue to evaluate and pursue other acquisition opportunities and have a pipeline of potential transactions as Dirk mentioned on November Onest, we closed on the acquisition of County, Homemakers, a personal care operator in Pennsylvania with 2019 revenues of $14.8 million and we expect this acquisition to be immediately accretive to our 2020 funding.
Actual results.
Other financial results for the third quarter of 2020 include the following our.
Our gross margin percentage was 29% compared to 26.7% for the third quarter last year.
During the quarter, we saw an impact of approximately 40 basis points from the increase in minimum wage in Chicago effective July onest without a corresponding reimbursement increase which is expected to be effective on January onest 2021.
Gee I expense was 21% of revenue for the quarter, a slight increase from 20.8% last year.
Adjusted DNA expense was 19% for the third quarter it increased from 18.2% for the prior year quarter, but lower sequentially from 19.7% in the second quarter of 2020.
The company's adjusted EBITDA increased to $19.5 million for the third quarter of 2020 compared to $17.4 million in the third quarter of 2019.
Adjusted EBITDA margin was 10.1% an increase from 9% for the third quarter of 2019, excluding $2.5 million from revenue and EBITDA related to the impact of the Illinois retroactive rate adjustments.
This is the fourth time in the last five quarters, where we have achieved a margin of over 10%.
Adjusted net income per diluted share was 76 cents for the third quarter up from 75 cents in the prior year quarter.
The adjusted per share results for the third quarter of 2020 and exclude the following.
COVID-19 expenses of two cents in.
M&A transaction expenses of two cents restructuring and other cost which includes our lease write off of eight cents and non cash stock based compensation of seven cents.
As Dirk reference during the third quarter, we relocated our corporate headquarters in Frisco, Texas and as a result incurred a write off of the remaining lease term on our prior office space of approximately $1 million, which was the primary component of our restructuring and other cost in the period.
Our adjusted per share results for the third quarter of 2019 exclude interest income from Illinois of two cents.
The impact of the retroactive, Illinois rate increase of 12 cents.
In a transaction expenses of 10 cents.
Restructuring and other costs at eight cents and non cash stock based compensation of Lisa.
Our tax rate for the third quarter of 2020 was 23.6% sequentially consistent with the second quarter and within the range of our expectation for the full year 2020 that we continue to expect the tax rate in the low to mid Twentys.
Dsos were 55.8 days at the end of the third quarter 2020, compared with 61.8 days at the end of the second quarter of 2020.
We continue to see consistent payments from a majority of our payers with home and community based service provider to being prioritized and many of the states in which we operate.
Our third quarter net cash provided by operations totaled $22.4 million and at September 32020, The company had cash on hand of $170.3 million $61.7 million of bank debt and $219 million and availability under our revolver, leaving us well capitalized to continue pursuing.
Our acquisition strategy.
This concludes our prepared comments. This morning, we want to thank you for being with US I'll now ask the operator to please open the line for your questions.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on you touched on telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key we'd also like to ask that if.
If you're on a speakerphone. Please at the concept before asking your question to preserve audio quality. Our first question comes from the line of Brian Tanquilut from Jefferies. Your question. Please.
Hey, good morning, guys congrats on a good quarter.
Thank you.
I guess my first question for you you know obviously you've done a couple of deals already.
One in Montana, and then this one in Pennsylvania, but we have investors asking me about your deal appetite in terms of geography and size are.
Are you focused primarily on deals in that size range or would you be open to larger deals you just wanted to ask.
How we should be thinking about your strategy on M&A going forward.
Yes.
Concerning our acquisition strategy one of the things we have said and continue to try to do is to build.
In density and geographic markets and that it would include not only personal care service, but also looking to try to add say home health and hospice and other states as opposed to what we normally have in new Mexico. Today. So I think what you will see brand going forward, we will continue to look.
In the personal care market, which is obviously the biggest part of our business trying to.
Fill out states in which we currently have strong operations, but at the same time, we want to continue to look at the clinical side of our business, adding home health and hospice in those markets because we find that as we have all three legs of the stool. So to speak all three levels of care in a market.
That that is something that our managed care providers manage Medicaid providers. There that's something that they're very interested in so right now I would tell you that the.
Personal care assets, we've seen tend to be in the sizes and.
So we were glad to be able to close both of the ones. We've done this year some of the clinical care deals were looking at or are somewhat larger.
Gotcha, Okay and then.
Shifting gears third so as I think about.
The elections today.
In Court review of the 88 cylinders reminding us what your exposure is Medicaid expansion I know obviously your payer mix is very heavily tilted towards Medicaid.
But how should we be thinking about the risk.
The DC eight days and validated by the Supreme Court.
Yes, you know what.
Look at the peak.
The expansion of Medicaid across a number of the states that occurred over the last four so year 456 years.
It Didnt really.
Affect us positively or negatively most of our.
Consumers and patients that we take care of our average age on the Medicaid side is around 75, plus and so most of our large very large percentage of our patients are dual eligible.
And so they qualified for Medicaid prior to the expansion through a CA so for us I mean, obviously.
We like having a PPA out there. It is certainly something that we think helps but it is not something that if there was a change to that it would not affect our company much at all.
That makes sense and then last question for me you touched on the moving parts of New York Reimbursements, I guess for you or for Brian as we think about the different moving parts, New York reimbursement changes, Illinois rate increase in January and then Im guessing theres another Chicago minimum wage increase in July of next year, if you want to give.
We have some quantification around those new parts for modeling purposes. Thank you.
Yeah, I can handle that one so on New York as Eric mentioned in his comments, we've seen the 1.5% reduction across the board to Medicaid providers, which is about a third of our business, which is not really material to us. We we haven't seen any other real material moves in the non state.
State Medicaid payers at this point, so it's kind of hard to put a quantification around that on what we would expect going forward I think everybody knows that New York has been a fairly fluid situation they've done a lot of work to try to look for ways to save money, but really nothing concrete has come out of those discussions as of yet so we'll wait and see kind of where they land.
On on Illinois going forward I think the rate increase is going to be similar to what we saw last year with the timing delay. So I think our impact from Chicago, our wage scale was a little above so we didn't take necessarily a full one dollar per which is why I think the impact for us. This year was a little less than it was last year.
The rate increase is going to be very similar to what we saw previously so.
Okay that answers kind of those those two moving we've been components.
Hey, Brian just to follow up on that so for like for example, the Chicago increase its about a dollar translating to roughly $4 million to $5 million of encrypted.
We incurred increased cost is that on an annualized basis is that the right way.
About that.
Yeah, what we saw in Q3 was just about 900000, just under a million dollars. So it's about going to be that on a quarterly basis that is correct. So right. Now you are correct. We are going to see a dollar increase in minimum wage one more time in Chicago next July and that will be addressed through the state budget for the next year.
All right got it thank you.
Thank you. Our next question comes from the line of Matthew Gilmore from Baird. Your question. Please.
Hey, Thanks for the question.
I guess I wanted to first ask about the dark mentioned sort of a 3% to 4%.
Impact in terms of the the revenue dynamics around kind of it relative to where you were pre pandemic as we're thinking about the fourth quarter.
I guess I was I was kind of curious where where did that.
Where did you end up in terms of like the exit.
With the third quarter in terms of the revenue impact and.
And are you does this outlook you provided does that anticipate some additional disruption.
But you havent seen yet or is that reflective of sort of the the current dynamics that you're seeing on the ground.
Yeah, Matt. This is Brian I started undercover I want to add color, but what we saw coming out of the end of Q3 into Q4, as we really have kind of flattened out as far as our trajectory on on volumes I think hundreds comments and three 4% for Q4, we are seeing a rising number of cases, so I think where we're be taking very.
Cautious view on how that could impact us I think from a from a standpoint of being prepared for that from our perspective, obviously PB is something we've been focused on this year, we're very well prepared for that if cases do continue to rise and we've got protocols in place to handle that but we'll see what happens with certain of our markets. If they go more into a locked out or kind of.
Different type environment that we've seen over the last three to four months.
That basically though.
When I was saying that that that basically means it's somewhat flat to the third quarter, where we already saw that impact.
Okay.
Fair enough and then I was hoping you could update us just on sort of labor market dynamics and I know, we had a reduction to the enhanced unemployment benefits and curious if youve, if youve seen that translate into.
Faster hiring or are better retention and anything on that front.
Yes. This is Brad we have seen improvement in the hiring if you look at really kind of from August forward.
Overall, we're up probably about 2% when we look at caregiver hires per business day.
So that that trend has been favorable and that's in spite of some challenges in New York, which is still hiring there is still very challenging they still have some enhanced unemployment benefits that is impacting on the New York market.
And I think this is being generally locked down, but we have seen some improvement in the hiring.
Numbers, which is encouraging.
Okay, great. Thanks very much.
Thank you. Our next question comes from the line of Ram Gopal from Sidoti Your question. Please.
Yes, hi, good morning, Thanks for taking the questions first I was just wondering I think pre Cove, Ed you are seeing sales thinking Europe up to shrink their provider networks and that obviously was going to be a benefit for you are you seeing that started to happen in a lot of states now as a result of Kobe had maybe accelerating that move.
Well.
One of the things we saw during so far during the coverage is.
With the care Act funds coming out.
To help providers as they kind of went through the pandemic I think states that have been very.
Cautious about doing anything that would affect the employment and the companys out in their state. So no. We have Dick Thats kind of a long way to say at this point, we have not seen any additional shrinkage in the networks that the states are aligned to operate I do know that.
New York was up.
York was considering during their budget process, some things that might have tightened up the network a bit further.
That now has been put on hold so right now we are not seeing any additional movement because of the coveted buyers towards a narrowing of the networks.
Okay, No that's great and.
And then on the acquisition front.
Again, obviously that was a nice addition, you announced but.
Just looking ahead any commentary in terms of valuations you're seeing out there.
Increased opportunities that might not have existed.
For demand.
Yeah, Let me take one of the things that has surprised us a bit coming out of the pandemic is the valuations that we are seeing we are seeing valuations being pretty strong and whether thats. The fact that quite.
Quite honestly I think the pandemic has really driven on the fact that home based care both.
Both clinical and Nonclinical are very important to the elderly population of this country I think that has.
And something that some of the private equity firms have seen and the other strategics like ourself as St and saw the valuations that we have seen in some of the recent transactions are higher than we would have thought potentially coming out of the pandemic that being said you know our first.
Personal care, we've been able to maintain our.
Valuations much better than we have on the clinical care side. So thats something that is nice to see we haven't seen a lot of home health providers, yet come out after both pdgm hand to covert buyer so be interesting to see maybe early next year, if some of those come out what happens to valuations.
Certainly on the hospice side I know you've been following that tells US those valuations are still pretty high so that kind of tells you as we come out of it things have have certainly not gotten less expensive and at times, maybe have gotten a bit more expensive.
Okay, and no and it thanks and.
And then finally, one thing that we have been hearing us nursing home certainly being affected.
The occupancy there was that people more willing to stay at home.
Is that something that.
You can see us maybe perhaps a little benefit to you or just too hard.
Too small to quantify it here.
Well I think right now it's a little early in the transition or the effect of the virus to be able to quantify anything material that being said I do think whats come out of this our team I think sees it is that there's a real renewed focus in healthcare on taking care of people in their homes and we like that obviously that's been our.
Our mission for the past 41 years we.
We believe it's important.
An important place in a very safe place to take care of individuals as they age and so.
That's something that we believe we have seen is that renewed emphasis from states payers and others.
On the importance of home care.
Okay. Thanks, again for taking the questions.
Thank you. Our next question comes from the line of Matt through from William Blair. Your question. Please.
Hey, good morning.
CMS recently AD out that sort of a toolkit around.
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Various state models, taking care of people in all.
Focused on LTSS and is mostly retrospective in nature, but just thought of maybe not to ask you about any trends or conversation trends, you're seeing or conversations you're having with states.
It kind of reflects Derek as you alluded to this this renewed interest in the home and whether that might result.
Funny environment or different opportunities for you.
Yeah. This is Brad I mean, we haven't seen a lot of discussions around that specifically with states looking for different funding opportunities.
Take care of people at home I think there there certainly is an interest in expanding that keeping people out of the facilities setting you know, particularly I think the virus the impact on facilities as a.
I think people have taken note of that and to the extent that we can keep them out better but haven't really had any active discussions with states around different funding sources for that.
Okay Fair enough and then.
Yes, just wanted to ask about.
In May plans I know there were a couple of piloting you had been working on but those have been paused and.
And at this point, it's difficult to predict when post covance will be but are those two opportunities that.
We see as realistic.
For 2021 or is this is this more about 2022 in terms of when you might start to date, our progress with those.
Yes. This is Brad again.
M&A plans in the projects we have there I mean, it's I think it's really a 2022 initiative that being said we do have some projects that are currently we started up kind of in the September October time period on a variety of value based projects with job. We're definitely excited about looking forward to starting to collect some data.
On those and the outcomes from those projects, but that'll probably as far as data. We're you know we're six months away from getting some meaningful data on that.
Okay. Thanks.
Thanks, guys.
Thank you.
As a reminder, ladies and gentlemen, if you have any questions. At this time. Please press Star then one our next question comes from the line of John Ransom from Raymond James Your question. Please.
Hey, good morning.
Just wondering as you think about the future of Addus do you have any markets you could point to where you've been able to integrate.
The three legs of the still meeting personal care homecare and hospice and as you formulate M&A.
Like trying to thread too fine of a needle to find complimentary assets in existing markets, where say you have a big personal care presence.
Oh, Yeah, I'll start if you want take that yeah.
So it.
We do want to replicate new Mexico.
Our markets now I don't think any of US believe that if we operate in 25 states, we're going to add 25 markets with all three legs of healthcare in it but.
But there are probably four or five of our markets, where we're very excited about the potential of being able to add additional markets. Some might be that you add one of the clinical side of care and then from that you grow that third leg more internally and so we're looking at that as a company. We've got a two or three markets that works.
Side about we're looking for as you talked about acquisitions would be nice if we could find something in those markets.
That would be our desire.
Okay, and then secondly, I know the companies that focus primarily on something else.
And had to do lots of heavy lifting to get ready for Pdgm.
Where given that's a smaller segment for you kind of where are you.
PGM integration process and as you look at it.
Essential acquisition targets, you feel comfortable you can model it now.
Thanks.
Yeah. This is Brad.
We've made a lot of progress on Pdgm front I will say I think the co bid virus has had a little bit of a disproportionate impact on pdgm as far as.
I think it makes the numbers look a little worse than what they would be without the virus just because some of the referral sources that you would have received on that from institutions.
No dropped off particularly early on in the the virus and we're still seeing some slowness or sluggishness referrals coming from the sniff environment, but as far as working on our cost structure I think we made some pretty good strides there. If you look our gross margin on the on the home Health front certainly has improved I think we'll continue to see some incremental improved.
There. So I think we're in good shape in we're certainly looking forward to add some more assets on the home health side.
And then just lastly.
Have there been any at least pulmonary discussions with M- plans on more.
More models that will move beyond kind of a simple fee for service or do you think you're going to be in kind of fee for service land for the foreseeable future.
You know John I think what we're seeing.
Probably in the last a year is a real interest in value based care and looking at ways in which companies can work with payers in a value based approach we actually have created a committee.
Committee a team.
To try to work towards developing a model or models that work with us starting from a fee for service basis and moving more into eventually may potentially a.
Our risk based model, where maybe there's just upside benefit there might eventually be some full more risk on both the up and outside.
I don't see today that we will be to a global capitation, we will we could be eight pay a party to a partner and that's something that would relate around a global cap, but for US we're more into looking at our ability to move from fee for service into some sort of.
Bonus spaced our value based payment.
Payment model that will not be by the way across the country that will be in limited markets. So we're going to remain a fee for service business mainly in our.
In our personal care business and then we will move in some markets where were larger.
And the ability to look and value based care.
Great. Thanks, so much.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Alex for any further remarks.
Thank you operator, I want to thank you all for their interest in Addus and for being part of our call today have a great week.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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