Q3 2020 Chemed Corp Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Chemed Corporation third quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that today.
This conference is being recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to one of your speakers today Ms. Sherri Warner with Investor Relations Ma'am. Please go ahead.
Good morning, Our conference call. This morning will review the financial results for the third quarter of 2020 ended September Thirtyth 2020, before we begin let me remind you that the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 apply to this conference call.
During the course of this call the company will make various remarks concerning management's expectations predictions plans and prospects that constitute forward looking statements actual results may differ materially from those projected by these forward looking statements as a result of a variety of factors, including those identified in the car.
Earnings News release of October 29, and in various other filings with the FCC you are cautioned that any forward looking statements reflect management's current view only and that the company undertakes no obligation to revise or update such statements in the future. In addition management may also discuss non-GAAP operating.
Performance results during today's call, including earnings before interest taxes, depreciation and amortization or EBITDA and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company's press release dated October 29, which is available on the company's website at Kemet Dot com.
I would now like to introduce our speakers for today, Kevin Mcnamara, President and Chief Executive Officer of Chemed Corporation, Dave Williams, Executive Vice President and Chief Financial Officer of Chemed, and Mick Westfall, President and Chief Executive Officer of Chemeds, VITAS Healthcare Corporation subsidiary.
I will now turn the call over to Kevin Mcnamara. Thank.
Thank you Sherri good morning, well.
Welcome to Chemed Corporation's third quarter 2020 conference call I will begin with slide for the quarter and David Nick will follow up with additional operating detail.
I will then open up the call for questions.
When we reported our second quarter 2020 operating results.
I noted that the pandemic and related economic Lockdown severely impacted our April 2020 operating results since April both VITAS and Roto rooter have reengineered their operating procedures to safely care for our patients and customers during the pandemic. These.
These operational changes have allowed commit to generate sequential operational improvements starting in May 2020, and this improvement has continued and has in fact accelerated throughout the third quarter and continued into October Dave.
David will provide updated earnings guidance later in the call.
Our hospice segment operations continued to be impacted by the pandemic.
Fortunately the federal government, specifically HHS and CMS have been exceptionally supportive in terms of relaxing regulations, allowing the use of tele health, where appropriate and providing pragmatic flexibility in caring for our 19000 patient census.
The severe initial disruption within our patient referral and admission patterns. We noted in the second quarter has notably noticeably dissipated throughout the third quarter.
This improvement is reflected in our third quarter admissions.
Our July 2020 admissions increased 4.3%.
August increased 5.9% and September additions expanded 4% overall.
Overall, our third quarter 2020 admissions increased 4.7%.
Our average daily census did decline two tenths of one percentage point in the quarter.
The slight decline in census, as a result of softer admissions from the second quarter as well as depressed referrals from nursing homes and assisted living facilities.
We anticipate admissions to normalize when these types of facilities return to their pre covert occupancy levels. Nick will provide additional census at admissions detail later in this call.
As I discussed last quarter, we made the strategic decision for Roto Rooter banking full staffing and operating capacity early in the pandemic. This strategic decision to maintain full capacity was not designed to capitalize on any snap back in commercial and residential demand.
Both to protect existing market share as well as to maximize on opportunities to grow market share.
I believe this has proven to be the correct strategic course.
Roto Rooter services demand began to show weekly improvement beginning in the later part of April and has strengthened unabated throughout the second and third quarters of 2020. This is reflected in our monthly performance.
Roto Rooter unit for unit commercial revenue declining 38.6% in April.
Improving to a 31.8% decline in may and a decline of 19.7% in June.
Third quarter 2020 unit for unit commercial demand declined 11.6% when compared to the prior year quarter. This third quarter commercial demand is triggered the significant improvement when compared to the 29.1% decline in the second quarter 2020 commercial revenue.
On a sequential basis third quarter 2020 unit volume in the commercial revenue totaled $39.5 million than increase of 26.8% when compared to the second quarter of 2020.
Our residential services have proven to be exceptionally resilient with our unit per unit residential revenue declining a modest 1.6% in April increasing 11.7% in may and 18.7% in June.
Third quarter residential demand set all time records. The July 2020 unit per unit residential revenue expanding 22.8% August revenue include increased 24.1% and September 2020 residential unit for unit revenue increased 26.6%.
This translated into Roto Rooter, a unit per unit basis, having third quarter 2020, commercial revenue declined 11.6% and residential revenue increasing 24.6% total.
Total revenue for the third quarter European revenue increased 12.9% when compared to the prior year.
Including acquisitions Roto Rooter generated consolidated third quarter 2020 revenue growth of 20.4%.
We anticipate continued strong operational and financial results for both VITAS and Roto Rooter as we operate during the pandemic with that I would like to turn this teleconference over to David.
Thanks, Kevin.
He tosses net revenue was $337 million in the third quarter of 2020, which is an increase of 4.8% when compared to the prior year period. This.
This revenue increase is comprised primarily of a geographically weighted average Medicare reimbursement rate increase of approximately 5.7%.
As 0.2% decline in days of care in acuity mix shift, which then reduce the blended average Medicare rate increased 242 basis points. In addition, a favorable reduction in and our Medicare cap liability increased our third quarter 2020 revenue grow a 162 basis points.
Our average revenue per patient per day in the third quarter of 2020 was $194.10, which including acuity mix shift is 3.2% above the prior year period.
Reimbursement for routine homecare and high acuity care averaged $166.51 and $971.71 respectively. During.
During the quarter high acuity days of care were 3.4% of our total days of care 57 basis points less than the prior year quarter. This.
This 57 basis points mix shift in high acuity days of care reduced the average the increase in average revenue per patient per day from 5.7% to 3.2% in the quarter.
In the third quarter of 2020, VITAS reversed $4.1 million and Medicare cap billing limitations recorded in earlier quarters. This compares to the prior year third quarter, Medicare cap billing limitation of $1.3 million.
At September Thirtyth, 2020, VITAS had 30 Medicare provider numbers four of which have an estimated fiscal 2020 Medicare cap billing limitation liability that totaled $8.7 million. This compares favorably to the full year fiscal 2019, Medicare cap billing limitation liability of approximately 11 point.
$4 million.
VITAS is third quarter 2020, adjusted EBITDA, excluding Medicare cap totaled $68.2 million, which is an increase of 25.6%.
Adjusted EBITDA margin, excluding Medicare cap was 20.5% in the quarter, which is a 367 basis point improvement when compared to the prior year period.
Now, let's take a look at Roto Rooter Roto Rooter generated quarterly revenue of $191 million in the third quarter of 2020, which is an increase of $32.3 million or 20.4% over the prior year.
On a unit per unit basis, which excludes the Oakland and Hs W. acquisitions completed in July of 2019 in September of 2019, respectively. Roto Rooter generated quarterly revenue of $173 million, which is an increase of 11.4% over the prior year quarter.
Total commercial revenue, excluding acquisitions declined 11.6% in the quarter.
This aggregate unit for unit commercial revenue decline consisted of drain cleaning declined 13% commercial plumbing and excavation declining 11.2% and commercial water restoration declining 1.6%.
This was more than offset by the residential activity total residential revenue excluding acquisitions increased 24.6%. This aggregate residential revenue growth consisted of residential drain cleaning, increasing 22% plumbing and excavation expanding 31.2% in residential water restoration, increasing what 16.
0.1%.
Now, let's talk about our 2020 guidance over the past seven months, our operating units have been able to successfully navigate within a rapidly changing environment and produce operating results that we believe provides us with the ability to issue guidance for the remainder of the calendar year. However, this guidance should be taken with the recognition that pandemic.
Continued to materially disrupt all aspects of our health care system in general economy to such an extent that future rules regulations and government mandates could have an immediate immaterial impact upon our ability to achieve this guidance.
Within this context revenue growth for VITAS in 2020 prior to Medicare cap is estimated to be 4%.
Our average daily census in 2020 is estimated to expand approximately 1.3%.
And VITAS is full year 2020, adjusted EBITDA margin prior to Medicare cap is estimated to be 21% we.
We are currently estimating $8.6 million for Medicare cap billing limitations for calendar year 2020.
Roto rooters of forecasted to achieve full year 2020 revenue growth of 12.5% to 13%.
This full year revenue growth assumes 2.7% of seasonal sequential revenue growth from the third quarter to the fourth quarter of 2020.
Over the past five years, excluding water restoration and the impact from acquisitions. This Q3 to Q4 seasonal sequential revenue growth has averaged between 4% to 11%.
Based upon the above chemists full year 2020, adjusted earnings per diluted share excluding non cash expense for stock options tax benefits for stock options costs related to litigation and other discrete items is estimated to be in the range of $18 to $18 and 50 15 cents.
This compares to our previous guidance of $16.20 to 60040 cents.
This 2020 guidance assumes an effective corporate tax rate of 25.8%.
And for comparison purposes, Chemeds 2019 reported adjusted earnings per diluted share was $13.95.
I'll now turn this call over to Nick Westfall, our President and Chief Executive Officer of VITAS healthcare.
Thanks, Dave.
In the third quarter, our average daily census was 19045 patients a slight decline of 0.2% over the prior year. This decline in average daily census is a direct result of the disruptions across the entire healthcare system, which start started in March that impacted traditional admission patters into hospice.
While certain healthcare sectors have shown improvement in admission patterns in the third quarter. The long term care market, specifically nursing homes and assisted living facilities continue to be impacted as they work to safely navigate serving their residents during the pandemic.
80 seat growth is expected to normalize over the coming quarters as we return to pre pandemic referral patterns across all sectors of the healthcare industry.
In the third quarter of 2020 total admissions were 17943. This is a 4.7% increase when compared to the third quarter of 2019.
In the third quarter, our admissions increased 18.3% for our home based pre admit patients.
Hospital directed admissions expanded a positive 6.2%.
Nursing home admissions declined 22.6% and assisted living facility admissions declined 13.5% when compared to the prior year quarter.
Our average length of stay in the quarter was 97.1 days. This compares to 92.6 days in the third quarter of 2019, and 90.9 days in the second quarter of 2020.
Our median length of stay was 14 days in the quarter, which is three days less than the 17 day median in the third quarter of 2019 and equal to the second quarter of 2020.
Median length of stay continues to be a key indicator of our penetration into the high acuity sector of the market.
Before I turn this call back over to Kevin I wanted to again to thank our VITAS team for their continued commitment and perseverance to provide high quality care in every community we serve across the country.
Additionally, I want to acknowledge the work our team has done to ensure as an organization. We are well prepared to continue to navigate this pandemic.
No matter how long it lasts.
As we sit here today, we are confident in our ability to support all of our team members and their ability to deliver care by prioritizing their safety with sufficient pp inventory education and clinical protocols.
Additionally, we will continue to utilize the resources and testing supplies, we've acquired to comply with federal state and local requirements to safely access to health facilities in our markets.
Lastly, our entire team will continue to be out in the communities. We serve collaborating safely with our local health care partners to successfully identify and navigate patients and their families onto the hospice benefit during this unprecedented time.
As we've internally discussed throughout the pandemic, we'll get through this by continuing to support one another and the patients and families. We serve all while focused on continuing to deliver the results we have thus far throughout the pandemic.
With that I'd like to turn this call back over to Kevin. Thank.
Thank you Nick.
I will now open this teleconference to questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press Star then one on your telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key to prevent any background noise. We ask that you. Please place your line on mute launch. The question has been stated.
Our first question comes from the line of Joanna Gajuk with Bank of America. Your line is open. Please go ahead.
Thank you good morning, thanks for taking the questions here.
First I guess on feed us segment.
No you mentioned on the last comment here about obviously the limitations.
That nursing homes and some of these facilities.
Having in terms of visitation and I guess that the census.
So can you remind us how big is that business for you and also you said.
That you expect AIDC to nonetheless, as you return to pre pandemic referral patterns, but do you really expect at this part of the healthcare system to kind of return you know next year or kind of what what is your view of that.
Hi, good business.
This is Dave Williams, Joanne I'll, just say right nursing homes are not a critical part of our census, total were not overly dependent I think about 14% of our census is is in nursing homes of 14% to 15%. It's also worth noting that of our patients at a nursing homes over 80%.
We only have three two were one patients in that facility. So we don't have a large concentration under any single raw.
So thats a starting point, although by location of patient nursing homes have the central second longest length of stay statistically.
With that I'll turn it over to Nick in terms of what he's seen on those type of facilities and Dave alluded to it when we think about overall nursing home volume as well as assisted living it I'd say, it's a debt component and weve seen it decline on a year over year basis like other providers have.
As it relates to total days of care to your question related to do we really anticipate that coming back to pre pandemic levels and when.
It's a little bit of a nuanced.
Answer in the fact that none of us can predict when a patient flow into nursing homes is going to come back to pre pandemic levels or if it would ever however could be some pent up demand correct in that and Thats exactly where I was going to go between the pent up demand for accessing nursing homes and the us.
Listing lift.
Left market, but also pent up hospice demand. The one thing I think we found inside of the pandemic, our nursing homes and Alfs are really now more than ever paying attention to their hospice partners in the local communities and they really want to provide access to those that have scale have the ability to pay.
Provide care in a safe manner consistent with all the CMS regulations, and that's what we're able to do and have set ourselves up to be able to do throughout the pandemic, whether its compliance with testing requirements are ensuring that we are staff have sufficient ERP and tele health capabilities to really provide care to the residents.
Right. It makes sense and then because I guess the other piece to the more important piece related to hospital referral source. So I guess.
There's improvement there. So I guess, that's what you are referring saying that you expect.
The volumes to kind of come back to normal so thats, probably the one area, where we see that.
And I guess.
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Thank you thinking about are those comments because that does the guidance for revenue for feed US you lowered it sort of anomaly now implies revenues for Q4 down from Q3 is there some sort of seasonality or are you just kind of saying that.
Eddie Ses will be sort of still flattish or any kind of comments there.
On the credit the sequential revenue from Vms implied by the guidance, Yes, Joanna I'd say sequentially from Q3 to Q4, no. We're anticipating revenue growth, but if you want to look at where you want to talk about the revenue from the prior year Q4, it could be down to.
Two a fraction of a percent up to 1%.
So thats so were talking sequential there'll be growth is our expectation if you want to compare to the prior year. They had a much higher acuity mix.
Then we could be down ever so slightly.
But its acuity mix shift thats driving that more than anything.
I joined a one on one thing I would have said one way you can track doses IRT understand this is a look.
Look I'll focus on one state, Florida, which are very important to us.
Florida's.
Nursing homes.
Additionally, and hospitals.
Have been disrupted and people are the admissions into nursing homes people say well that could be.
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Hello.
A place filled with growing the virus, so theyve had their admissions disrupted hospitals.
Just had their operate and those are that's our most significant referral source hospitals would have this disrupted the net effect of this is you get more patients relish. The shorter stays our median length of stay for instance was 17 last year and 14 this year.
Just basically says more patients more short stay patients relatively speaking that is that affects your ADCC.
Thats the revenue so I'm, just saying to the extent that the other factors covered too we say normal. So we expect to see first thing we expect to see as our median length of stay go up.
And then gradually the a b C. We though it's normal levels.
For Rob.
The contribution per patient so well.
Well I would say that is one way to look at it and that in a broad sense and one last piece Johanna just to highlight you notice the six six plus percent increase on a year over year basis from hospital admissions that both up year over year as well as sequentially Q2 to Q3. However, also pay attention in the home based component which are primary.
I see a lot of the physician office pieces and when we think about referral patterns inside of health care system, we've seen more patients accessing whether its primary care or other specialty physician offices and avoiding other settings throughout the pandemic, which is not a surprise and that being up 18% in the quarter on a year over year basis as well.
It was up sequentially gives me great confidence in the strength of our education and awareness out in the communities to really have a diverse referral mix that really allows us to identify and be a good partner for all hospice appropriate patients and the community regardless of where they are.
Choosing the access to health care system, whether thats physician offices hospitals or assisted living.
Yes, and that's why we should and that's how we prioritize a diverse referral stream.
Right no that definitely makes sense and I guess to just close it up.
I guess.
On the veto segment the margin framework is very high.
So how should we think about.
Obviously, you raised guidance and I guess you are expecting.
To be.
Effective in.
Q4, as well, but how should we think about next year's margins. I mean are these margins sustainable clearly you've got them.
My first two up from sequestration left which we don't know where it's going to go but let's assume you know.
Let's assume it goes away how should we think about these are there drivers.
ADCC coming back does it mean that.
Because then you need more labor so any kind of dynamics you can walk us through how we think about margins, let's say for next year.
Given the strength this year.
Well, let me start by saying, we're going through our budgets are budgeting process and we don't really want to talk about next year, but as you make the point I mean.
We will budget that the relaxation of sequestration ends December 30, Onest Thats, 2%.
Right, which obviously is that's that's a tough comparison, but as far as the other aspects of the business.
You know the new things I don't think are going to go away.
His.
Effective use of Tele health and.
The.
The acceptance of Tele health by the patients.
Is becoming the new normal I mean, the to the extent that the labor component is low.
On a comparative basis I think is the new normal so.
We don't want to talk too much about.
The budgeted or projected.
Margin for next year other than to say, we will be planned seacoast sequestration returning to its previous level.
Just to piggyback on Kevin's comments, Joe on what we've really tried to focus on it VITAS internally is we've learned a lot throughout the course of the pandemic whether it is what's the appropriate balance of Tele health, which we were prepared for the pandemic, obviously accelerated that into the into the norm, but how that works combined with just.
Our normal plan of care, the physical plan of care component of it and really narrowing in on what patients and families prefer in how they prefer to have that cared developed I think we're we're focused on continuing to improve quality overall, and we will incorporate that obviously into our 2020 budget numbers, but we're going to not lose the opportunity.
To learn and capture the things that we've experienced over the last seven months and incorporate that into our care delivery model going forward, but Joanna what we definitely expect in 2021 is what I'd call, a slow and hopefully methodical return to preprint pre pandemic.
Admissions that type of admission so hospitals returned to normal nursing homes assisted living facilities. We normalize so hopefully by December 30, Onest of 2021, we've currently gotten back to where we need to.
And we do expect to return to providing more high acuity care as appropriate based upon our patient mix. So yes that certainly could reflect somewhat on margins, but only because we're going to have more revenue for care with a higher cost. We expect the overall profitability of VITAS to continue so we don't control.
Viewed the absolute profitability of VITAS has as just pandemic related by getting the extra 2% for relaxing sequestration. What we think is margins have been a little more volatile to the positive in this case, but the fact of the matter is the growth in VITAS is going to continue census growth is going to normalize again to about a 4% less.
Will is what we anticipate high acuity care well returns of revenue will go up but at a lower margin, but still the same dollar profitability for a day of care, but 2021 is going to be kind of hopefully a mirror image of the disruption we saw in 2020 and by 2022, we're we're running to add.
As normal as possible post pandemic.
Right and if I may on Bretaa.
One one question here.
Because these margins, they're all time high I mean, 26 40 foot. This year, how sustainable is that I guess could you talk about in the past because of the timing of that.
The shift.
Business mix weighted towards residential versus commercial how should they think about similar question.
Next year, you know us as you expect potentially commercial growing how would that impact margins or have you done something differently on the cost structure, that's kind of sustainable into next year. Thank you.
I would say, though that with regard to roto rooter.
Its business with usual it's is very strong.
Residential demand.
Improving commercial.
When you look at the.
When do you say well what within that what's driving margin, what's the type of thing that's changing the business a little bit.
Excavation water restoration I mean, there there had been very strong where we are.
Yes.
Ongoing process, we were trying to determine is it.
Pent up demand for those services is that market share taking.
Is that a little bit chain is that or change the dynamic of providing the search service that is.
More people are home more decision makers are home when the service man calls, making it a one step process.
We're so getting to the bottom of those.
A question, but generally speaking I'd say no roto rooter is.
Yes.
Well.
The pandemic response is just I mean that aspect of the business is minor or again. It's these factors that we don't really understand yet that is the pent up demand versus market share taking with.
We've been very active with the marketing our internet marketing.
The time, when maybe others are pulling back a little bit.
But it's that's the and that might be pandemic related but generally speaking though.
We think roto rooter is just.
Relatively good.
Given the advantages of marketing.
Compared to the competitors.
And having the men available to do the work, but just at a good place added and as Dave indicated.
We continue to see that that's what you know when we when we raised guidance for the fourth quarter.
A driving factor in that as Rover, our expectation Joanna I mean, VITAS is more exposed to government intervention changes in reimbursement there is a lot of pressure points that impact VITAS Roto rooter.
We've taken share we've increased our penetration on existing customers, we're definitely getting great utility of our 324 seven 365 call centers. So we really just see this as.
Momentum that roto rooter is going to hang onto I can't say that while we're clearly don't anticipate were going to do the same growth rate in residential in 2021 is 2020, it might even softened quite.
Quite a bit but continued growth, but then commercial which has been hobbled, we fully expect to have above average activity in 2021, as just a long way of saying is.
Roto Rooter business is the gift that keeps on giving as long as water and Russia, which is going someplace that shouldn't be going have an army of technicians and trucks waiting to respond immediately.
That is not going away. So our positioning has been enhanced by the pandemic very similar how was enhanced with the great recession, and we picked up share we've expanded the awareness of our brand because hey, we responded jobs. We're in very very good position on a go forward basis for maintaining the momentum we've captured this.
Here.
Great. Thanks, Thats, great color I'll I'll go back to the queue, let's let's see thank you.
Thank you and our next question comes from the line of Frank Morgan with RBC Capital markets. Your line is open. Please go ahead.
Hey, Good morning, you just answered my other question, but I guess just to just jump back over to VITAS.
I know you commented about the reduction in the cap accrual.
Im just curious is that more likely to happen in the future given this whole dynamic about the the patient mix shift in the lower length of stay and you are seeing in media and an average length of stays.
I guess first question, we are any color there any thoughts about that.
I'll turn it over to Nick but let me Frank Let me just say generally speaking.
Because of the reimbursement levels in California.
We continue to anticipate.
Good profitability, but.
But not in substantial cap of other words.
It's just you know weve talked about in the past the that the differentials had reimbursement you know our.
$130 compared to 260, I mean, its with the same cap I mean.
So with that so it's still that's changed.
What we will be budgeting for next year I'm sure is.
Because we're conservative is going to be you know.
Kind of similar budget levels of cap for this year, even though we did they did a great job and substantially reducing that number but.
It's an ongoing battle, that's not going away and we'll just always try and stay ahead of it with regard to our projections, but Vic anything to say on that then I mean, frankly, I think it really goes back to.
The experience, we've seen with a shorter length of stay patient or said differently a patient accessing the hospice benefit a day or two later than they typically would have as a result of the disruption of the pandemic. How long that continues is beneficial as it relates to Medicare cap management, but not beneficial as it relates.
Growth of ADCC in total days of care over time, and Thats really the ongoing balancing act with it. So we'll just continue to be you know.
Fiscally responsible continuing to drive.
Some of the strategic initiatives, we had to help us navigate the California can't market.
Given the dynamics, Kevin referenced to and we're making headway even in spite of the pandemic with where we believe will put us on a even a more positive short mid and long term trajectory just just to navigate the realities of that calculation basically.
Understand here just was trying to find a silver lining to it.
But just to be clear.
Right, we want our medium to go up yes, we want to continue to go up and we'll then would just.
Deal with cap you know with other measures that right, but Frank the one thing I want to ensure particularly for my you know that team members that are on the call listening to this is the team did an excellent job over the last 12 months in the Medicare Cat year really managing in navigating that into California markets. It turned out better than we anticipate.
Much better much better than we anticipated it and how much of that is in.
Implication on the pandemic versus the normal blocking and tackling that weve been laser focused on I can't put an exact number on it but overall were really happy with the approach and the.
By our leadership in those markets and our local operators.
Gotcha.
And just to go back to the 80 80 see growth if you make sure I understand this correctly. If this mix shift that you've seen with the the declines in the.
In the referral sources from sniffs and AOL Io.
If that mix shift has.
Stabilized in the admission trends overall.
Continue at where they are then that's when you see this flip back to getting the AIDC growth again in our I mean do you think you are there.
Terms of that mix.
If we look at it and if you go back and take a look at even on the sequential Q2 versus Q3 growth component.
Emissions from nursing homes, and assisted living facilities have really stabilized on flat line, which we see as a positive the hospital based admissions the physician office admissions have grown and as we see access and bed capacity being open back up across the you know the markets when we.
We operate in the long term care community more patients will come on service reside in those facilities and as Dave alluded to for the entire industry. Those patients tend to have a longer length of stay based upon their primary disease and some of the trajectory components that come along with it. So we feel good and optimistic that we've.
Captured share across the board in as the long term care market comes back we will be able to.
Prior to keep a preferred or have an elevated preferred status to to care for those patients while continuing our success with the physician offices and hospital systems.
Got you is there any particular state where.
Sniff base referrals and I'll able referrals are higher or is it generally the same across all your state of operation.
It's yeah, there is variability on a market by market basis, but the variabilities heavily predicated on what the other hospice providers, our competition in that market, whether or not their freestanding stand alone or if they're owned by say a haas. The major hospital system inside of the market. So the market dynamics tend to drive the mix shift of where we're.
We're getting that patient flow from but overall it remains a pretty pretty generic pretty generic blend.
Gotcha.
One final and I'll hop off obviously.
Obviously, there's a lot of talk about just the recovery of the same store.
Business here.
But I'm just curious to get your thoughts about.
No growth initiatives, whether it's de novo.
Agencies.
You know kind of how do you think about growing the business externally beyond just this same store story. Thanks.
So as Kevin alluded to were going into our budgeting process for next year part of that goes towards us discussing not only our internal metrics, but other.
Other markets that we may be very interested in entering and it gets down to what's the best entrance strategy, whether that's de novo or whether that is through an acquisition, but as other providers have alluded to valuations on those acquisitions in the hospice market given the appetite.
We continue to be at all time highs and so really have to be fiscally responsible around whether those things whether those things make sense and frankly, we look at I look at this rate is basically Florida and everywhere else anything we get in Florida has been a home run.
Okay, because our because generally the brand name and because throughout the state is helpful. With the state regulators have everything has been a whole month. There are there's their territories in Florida, we'd love to be and we fight for every CEO and.
We look at acquisitions.
We're we're real gracious potential acquirer or or builder in Florida.
Everywhere else with me before I, even get it further look at valuation I look at what's the I mean, what's the potential size of their of their various.
Institutions are the is it going to be a group of 50 cents as hospices.
Good.
10 locations or is it going to be two with 250, except for us I mean its.
The first well that's the biggest impediment that I look right look at acquisitions with regard to new starts new start anywhere other than Florida tend to be a long range program.
The proven hits in the us where this we feel good they'll still be on the the play.
Planning stage for the safer when we when we set our priorities.
During our budgeting process, but it's largely Florida and everywhere else.
Got you and I guess.
Meanwhile, cash flow continues to be very good and.
Kind of gets us back to the issue around stock repurchases. So so maybe color and thoughts about longer term outlooks and remaining authorizations and likelihood for future stock back in the absence of acquisitions. Thanks.
Yes, what I would say as long as the fed is doing what they're doing and we see very very low interest rates have kind of real rate they are negative.
We think that will keep us out of the acquisition market, except for some unique animals rugby.
Regarding our use of that free cash flow.
We we spent or weve used a little over $150 million for the first nine months of this year on share repurchase we are targeting about $200 million I don't see any reason why we're not going to be close to that coupled with our $20 million to $24 million a year annualized dividend, we think thats very sustainable on a go forward basis.
So we would anticipate.
Utilizing our free cash flow per share repurchasing as well as acquisitions, if they materialize that have good value, but it's primarily going to be share repurchasing and our continued dividends.
It could deal with our with our earnings growing like they have continued to be very accretive.
Yes, I mean, right now I think we're going to be pushing 1 billion five now on share repurchase and dividends. Since we started the share repurchasing program in mass.
Thank you very much.
Thank you and again, ladies and gentlemen, if you have a question at this time. Please press Star then one.
I'm showing no further questions at this time and I would like to turn the conference back over to Kevin Mcnamara for any further remarks.
Thank you thanks for everybody's questions hope Weve answered them.
It was great quarter for us thanks for.
For your attention and.
We'll be back.
In February with our.
Report on how this all turned out and what we expect for next year. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect everyone have a great day.
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