Q3 2020 LHC Group Inc Earnings Call

November 5, 2020

Good morning, and welcome to the L.A.C. Group third quarter 2014 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please ignore office specialist for pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad Switchboard question. Please press Star then too.

Please note. This event is being recorded I would now like turn the conference over to Eric Elliott Senior Vice President of Finance. Please go ahead.

Thank you Danielle and good morning, everyone I'd like to welcome you to LHC Group's earnings conference call for the third quarter ended September Thirtyth 2020, hopefully everyone received a copy of our earnings release last night I would also like to highlight that we have posted some supplemental information on the quarter and the effect of Koby 19 on the quarterly results section.

Our Investor Relations page, the supplemental deck as well as a copy of the earnings release, the 10-Q and ultimately a transcript of this call when available can be found on this page or supplemental deck, a quick Oliver reconciliations and breakdown of adjustments, we will refer to these non-GAAP measures during our call today in a moment, we'll have some prepared comments from Keith Myers Chairman.

<unk>, Chief Executive Officer, and John profit President. We're also joined by Dan Michael Our recently announced Chief Financial Officer, Dr. Bend, Okay, Our Chief Medical Officer, and Bruce Greenstein, Our Chief strategy and innovation officer will all be available what Keith and Josh During Q1 night before we start I would like to remind everyone that statements included in this call.

The schedule in our press release, and our supplemental financial information May constitute forward looking statements within the meaning of the private Securities Litigation Reform Act. These statements include but are not limited to comments regarding our financial results for 2020 and beyond actual results could differ materially from these projected in forward looking statements because of a number of risk factors.

And uncertainties certain risk factors and uncertainties such as the magnitude of the impact Govan 19 pandemic that could cause our.

Actual results to differ materially from our projections and estimates.

At Baobab more fully support than described in our annual and quarterly SEC filings included in our earnings release and related form 8-K, or form 10-K, and form 10-Q, when filed LHC groups will have no obligation to update the information provided on this call to reflect subsequent events I'm pleased to introduce the chairman and CEO of LHC Group Keith Myers.

Thank you Eric and thank you everyone.

Thank you for dialing in and participating in this morning's call.

Before we begin.

I want to thank all of our LHC group family members for the amazing work that they do every day.

Thank you.

You are people, our greatest differentiator and our most valuable asset.

Because of your unwavering dedication and commitment to serving others at the excellence and all that you do.

Let's see group family of Health care professionals continues to benefit from opportunities to grow our founding mission of service that began nearly three decades ago.

It is truly a privilege to.

To work with all of you again, thank you.

This morning, I would like to lead with what we do best which is providing high quality cost effective health care services to people throughout our country and the safety and comfort of their home.

Everything we do starts there.

And it's encouraging to see how our singular focus focus on caring for people.

Some of these gains a new physician referral sources related.

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After returning quickly to positive organic growth throughout July we experienced a 4.7 year over year increase in home health admissions for the third quarter and 11.6% sequential growth growth for the second quarter of 2020.

With hospice, we saw it even greater improvement with a 12.8% increase in organic growth for the quarter at 4.3% sequential growth over the second quarter of 2020.

These positive organic growth trends continue throughout October.

Staying home health location in that market.

Well, we believe that this recent activity will continue to gain momentum with increased M&A and continued strong organic growth trends in Q4 and 2021.

As we anticipate an historic consolidation opportunity in home health and seeing an increasing number of hospice opportunities in our pipeline.

In summary, we believe we are well positioned for a strong finish in 2020 and a strong start in 2021.

Turning to the regulatory environment.

He cares act and the policies that were put in place to free up nurse practitioners and physician assistants to take on a greater role where a good start earlier this year and.

And so were the final rule that CMS released for hospice and home health the 2021.

More consequential legislation is in play through the home health emergency access to Tele health legislation, our heat Act.

This bipartisan legislation that was introduced late last month in both the house and the Senate.

The heat act legislation has strong sponsorship and directly addresses a hole in CMS as opposed to the pandemic.

While they have allowed the use of tele health to facilitate visits it has been without any reimbursement to this point.

We will continue funding it internally to deliver the care that is required for our patients, but if this becomes law. It will allow home health agencies to be reimbursed.

For the duration of this public emergency.

In conjunction with industry colleagues through the partnership for quality home Health The National Association for Homecare and state associations throughout the country. We are working closely with members in both the house incentive Senate to build consensus on this important piece of legislation.

Late last week CMS posted their home health final rule for 2021.

Overall, there weren't any surprises in the room and more importantly, there are no additional cuts this year and no recalibration of case weights.

The final rule resulted in a net positive 1.9% for home health reimbursement.

And loop of payments there was no modification of the 4.3.

6% behavior adjustment under BG PDGF.

CMS had originally proposed a 2.6% increase but more data for both inflation outlook and productivity reduced amounts.

CMS refused to reduce or eliminate the 4.36% behavior adjustment because they feel it is premature to do so and they are required to go through notice and comment rulemaking for any changes to the national standardized 30 day period payment rates to account for differences and assume.

And versus actual behavior change.

There were no other major policy changes, but I do want to note that they made the changes from the March Thirtyth interim final rule permanent regarding flexibility in the use of telecommunications equipment in the home.

They will also let home health agencies claim administrative costs on the cost report for telecommunications technology, which will help with rate setting in the long term.

I want to close my prepared comments by once again, acknowledging and thanking the special people, who make all of the above happen our growing family of 32000 plus employees.

We strongly believe that we have the best team in the industry and we will continue to make investments to ensure that they are safe protected and have access to the best resources and support available.

It's important to us that they have as much peace of mind and quality of life as they provide to patients and families throughout our country today.

Before I turn it over to Josh I want to introduce Dale Michael our new CFO.

Bill joined US earlier this week.

Comes to US most recently from Blue Cross Blue Shield in Nebraska.

Where he was executive vice President and CFO with a broad portfolio of direct responsibilities across that organization.

His experience with the blues and Aetna. In addition to other roles. He has had throughout his career will prove beneficial as we accelerate our ongoing work with payers and partners Dale.

Thank you Keith it's a pleasure to be here this morning and to be a part of this team having lost first hand, what LHC group has accomplished in the industry from my time on the other side of the table. This is a great opportunity to join a leader at the forefront of value based care.

I look forward to bringing my experience to bear as we work with payer and joint venture partners.

As I did my detailed due diligence on the company.

And net more members of the leadership team I quickly realized just how strong and deep and the finance and accounting team we have here at LHC group.

I expect to complement this team and Im looking forward to supporting them in every way possible as we collectively continue to support the growth and performance of the company.

Since I transitioned into health care at the start of 2008 on the payer side.

And as my wife has a registered nurse I have often thought about and considered when might be a good time to move over to the provider side.

With the healthcare landscape evolving so much and given LHC group's history of and commitment to the highest standards of clinical quality compassionate care and unwavering commitment to compliance and integrity.

This was the natural choice for me at this time in my career.

Now, we'll turn to Josh to provide some additional color on our financial and operational results as well as our updated outlook.

Thank you Dale and good morning, everyone. Thank you all for joining our call I'll.

Ill begin my prepared remarks by saying how much I appreciate all of our clinical professionals and support personnel across the country and what they do each and every day.

It is a true privilege to serve you as you give so much of your self serving others.

From the transition to Pdgm to an historic pandemic.

To several severe weather and wildfire natural disasters that have affected some of our providers within our national footprint 2020 has been a challenge to say the least.

However, it is a challenge that has highlighted our resolve and strengthened us in ways that we could have not foreseen as we enter this year.

I could not be more proud of our entire LHC group family and truly humbled to be in a position to represent you all on this call and to support an advocate for you each and every day.

I would also like to take this time to welcome bill to the team.

We conducted a very thorough national search over the past few months and placed a particular emphasis on experience financial and accounting professionals, who came from the managed care world.

Dell is extremely qualified to lead our finance team and brings a skill set that will help us accelerate the work, we're doing and payment innovation and care models.

I've been getting to know Dale over the past couple of months and I'm excited about how well he fits the LHC culture, and how well he will complement our strong and deep team of financial professionals.

He has already hit the ground running.

Our supplemental financial information is posted on our website with detail on the breakdown among sector performance as well as a significant amount of detail on the monthly trends.

Urge you all to review this supplemental financial deck as it provides additional details to my comments this morning.

The third quarter was once again impacted by expenses associated with COVID-19 for purchases of pp.

Additional supplies and employee related costs and expenses, including employee bonuses increased wages and wage supplements for frontline caregivers and other categories of costs and expenses incurred in response to the pandemic.

The $10.5 million in pre tax or 24 cents per diluted share was nearly half of what we experienced in KOVA 19 costs in the second quarter we.

We expect that these covered related costs and expenses will continue in the near term, but we anticipate they will continue decline sequentially.

Another major change in our results is worth highlighting as well.

As most are aware the government continues to adjust the eligibility requirements and the related calculations associated with the provide early fund.

However, based on the continued strength in our results and the favorable outlook for our business. We have decided to return the entire $93.3 million and funds. We received from the provide relief fund.

We remain extremely thankful for the government stepping in during an unpredictable and unprecedented crosses for our country.

We appreciate the support of the policymakers, who advocated for and provided relief on behalf of healthcare providers across the continuum to pass the care Act and the benefits afforded by the care AG. During the early months of the pandemic when our business was impacted and the recovery was yet unknown.

We believe returning these taxpayer dollars is the right thing for us to do and that these funds can best be used elsewhere in assisting with the ongoing response to the pandemic.

As a result for the third quarter, we reversed $44.4 million or 87 cents per diluted share net of NCM contacts and government stimulus income that we had recognized in the second quarter.

Rehearsal had no impact on our adjusted EPS as we had previously excluded the impact.

The full amount we received was recorded as a short term liability and government stimulus advance in our consolidated balance sheet.

I'll also note that there was a change by CMS in the repayment schedule for the $317.9 million and accelerated Medicare payments, we received in April.

Recruitment will now be in the stages that began 12 months from our receipt of these advanced payments by CMS with holding 25% of future Medicare fee for service payments for claims for 11 months, and then withholding 50% of future payments for an additional six months.

And interest rate of 4% will be assessed on any outstanding balances 29 months from the date of the initial advance, but we fully intend to repay the full amount before and any interest will accrue.

The reversal of the government stimulus and the impact from the higher co related expenses have once again created a bit of noise in our reported results, but what is abundantly clear is how remarkable the pace of weekly and monthly improvement has been across all our segments.

If we go back to our coven induced low we are up approximately 12.4% and home health census.

And we're up 7.1% from where we were prior to the pandemic.

In home health admissions were close to where we were pre coated and in hospice. We are in line with precocious levels already.

As key highlighted earlier sequentially, we are up 13.1% and home health same store admissions in Q3 from Q2 and in hospice were up 8.3%.

We have a little more work to do on the institutional versus community mix returning back to normal, but we are close and that metric is definitely moving in the right direction.

That's a tribute to the commitment of our clinicians and the investments that Keith mentioned earlier as well as the many months of preparations pre committed we had putting in place our pdgm care model and operational strategies.

Similar to last quarter I'd like to break down these comments on the monthly improvement with each of the key drivers.

First home Health average daily census went from a low point of 74817 for the month of April to a high of 84091 for the month of October which represents a 12.4 increase in home health AIDC since April.

This monthly improvement has come even though there are a number of states that were slow to lift the ban on elective procedures and reinstated them in some cases.

And my last data point on home LTC is that as of this morning, we are sitting at 85259 patients on census.

Home health admissions were on our lowest point in April with 27948.

As our supplemental information shows the third quarter monthly average was 24.4% above that coated low with between 34000 435200 admissions per month.

That improvement led to posting a 4.7% positive increase in organic home health admissions compared with a 4.7% decline in the second quarter.

For October we have reached 36786 admissions.

I would also note that our non Medicare episodic same store admissions have grown 34% year over year from 7778 in Q3 of last year to 10422 this quarter.

The majority of this growth is from episodic contracts that pay at Medicare equivalency.

For our missed visits due to cope with 19, we saw a similar trajectory our highest point was the month of April with 22913 missed visits you can see on our supplemental deck that we have experienced a steady decline each month since October and had 722 missed visits due to code 19 that month.

Our expected LUPA rate is between eight and 9% of total home health episodes and Thats, what we saw pre go that way.

We hit a high point in April of 11.4% and have now been within our targeted range of 8% to 9% each month since we were at 7.9% in October.

The number of patients declining admission due to COVID-19 has also been trending down by month ever sent the high in April as.

As of last month, we were down to only 103 refusals.

Our LTX maintained our strong base with average daily census, climbing to 264 patients from 257 in the second quarter and 206 a year ago.

We received full LTAC reimbursement for every patient admission for the entire quarter, which brought our revenue per patient day to 1346.

This public health emergency related relief is currently scheduled to be in effect through mid January of next year.

Our new referral sources, which again are a key driver of our organic growth showed monthly improvement.

For the first quarter, we had 3915, new sources of home health referrals that improved to 3996 in the second quarter and was up again to 4582 in the third quarter.

Thats, an increase of almost 42% over the third quarter of last year.

Within the third quarter alone we saw increases of 40.3% in July 35% in August and 51% in September.

These new referral sources are early indicators and read throughs to market share gains and organic growth.

Another strong indicator has been the number of confirm Cove in 19 and suspect that patience, we have treated since the pandemic began through.

Through the end of the quarter, we have provided care for 11567 patients who are either coated confirmed or suspected of which 94% were cared for in our home health segment and 6% in hospice.

As Keith mentioned earlier all of these measures help connect the dots on how much in demand our industry, leading quality is among our referral sources and partners as well as how confident patients and families are in receiving the best care and the comfort and safety of their home or place of residents.

Our partners have experienced first hand throughout the pandemic, just how well we have been able to deliver for them through close integration in collaboration with the highest level of quality in the most cost effective setting.

That's having a positive impact not only on our organic growth, but also on our M&A pipeline as we are extending current joint ventures, and reviewing an increasing number of inbound requests for new partnerships to fulfill similar needs.

The sheer number and quality of our partnerships was represented in the new joint ventures.

With Orlando Health in August University Health system.

And northeast, Georgia in October and Chris This in November.

We expect we'll have a few more transactions to announced by the end of the year as well.

All told we've completed joint ventures, representing approximately $14 million in annualized revenue since early August and with our value proposition on display our pipeline is as active as ever.

Let me now turn to our segment performance recall that we are still benefiting from the carriers as temporary suspension of Medicare sequestration through December 30, Onest of this year.

We saw a full quarter benefit from the approximate 2% increase in fee for service Medicare payments, resulting in 6.5 million in additional revenue in the third quarter due to the suspension of sequestration.

We still expect this to be a positive impact to revenue for us and 2020 of approximately 15% to $20 million.

This sequestration effect and Pdgm are meaningful enough to impact our revenue per episode, So let me drill down into these factors.

Our revenue per episode was down approximately 1.4% in the third quarter from prior year, which is an improvement from the 2.5% decline we experienced last quarter.

From a sequential standpoint, our revenue per episode is up 1.9% from 27 71 in the second quarter to $2824 in the third.

While we still remain ahead of our original expectation on the revenue and cost initiatives associated with Pdgm. We continue to see the impact from COVID-19, offset by the suspension of sequestration.

COVID-19 cause increases in our community admissions as a percent of overall emissions as well as a shift of our patient mix from early payment periods. The late payment periods.

These were partially offset by the $5.1 million of additional revenue in the third quarter from sequestration.

As a result of our focus on Operationalizing Pdgm, we continue to see rate improvements on episodes in progress, which gives us confidence in our ability to mitigate the remaining portion of the impact of Pdgm as previously planned once the impact from Cove It stabilizes.

The lower revenue per episode was offset by cost savings associated with greater efficiencies.

Our hospice and Eltek segments continued to perform well with volumes improving year over year and sequentially.

The revenue impact from sequestration in these segments were $1.2 million in 204000, respectively.

The LTX also received an additional $6.4 million in revenue from the change to full LTAC payment on site neutral patients as required by the carriers out there on the PA.

We did see an increase in contract labor in the LTL division and higher labor and wage costs in the third quarter due to Covance and expect those to normalize as we head into next year.

Our home and community based services segment reported a 130 basis points sequential improvement in EBITDA for the third quarter as compared to the second quarter. During the quarter. We also experience an impact related to COVID-19 with billable hours declining 14% as compared to last year, but that is up 1.1% compared to last call.

Peter.

We have been anticipating sequential improvement and our billable hours and we continue to see this number improved where we need to be entering next year.

I would also like to highlight the strong performance our health care innovations segment.

The primary driver was the outperformance of our Alco management company subsidiary, which yielded a $9.6 million Medicare shared savings payment.

This was well above the 5 million dollar we had budgeted for the quarter and more than triple the 2.9 million. We received in Q3 last year.

As we illustrated in slide 17 of the supplemental deck, even if you normalize our Q3 results with only the $5 million, we expected from the MSS payment our underlying performance across all other segments were still ahead of expectations.

That said, we cannot be more pleased with the results of our Alco management company and how our model has demonstrated that independent physician Agios and health system goes can achieve success and value based healthcare.

We are extremely proud of our provider partners and look forward to sharing with them. The financial rewards. They have earned by delivering more primary and preventive care and referring to the highest performing post acute providers in order to keep Medicare patients healthy and avoid unnecessary costs.

This strong performance by our Alco Management Company subsidiary is also very encouraging as a predictor of and to provide data and further learnings that will benefit us and our home health service line as we move to more value based and shared savings models with our managed care payer partners.

Based on these results we have increased the guidance we reinstated only last quarter. We are now expecting net service revenue to be in the range of $2.06 billion to $2.07 billion adjusted EPS to be in the range of $4, a nine cents to $5 and adjusted EBITDA less NCR to be in the range of 232 to two.

$37 million.

These new ranges compared to previous Midpoints of $2.025 billion in revenue $4.70, and adjusted EPS and $225 million and adjusted EBITDA.

With the strong sequential results, we posted this quarter and the implied improvement for the fourth quarter. We are where we originally intended to be for finishing out 2020, with our new Pdgm care model and operational strategies in place and entering 2021 with great velocity.

Turning to page 27 of the supplemental deck, we have updated all of our debt and liquidity metrics for the quarter end.

We have approximately $500 million of liquidity with cash availability on our credit facility and an accordion feature for up to 200 million of additional capacity net of Medicare accelerated payments and provide early funds.

Adjusted free cash flow was $46.3 million for the three months ended September 30.

Recall that the cares act permits employers to defer and deposit the payment of employers portion of social security taxes that otherwise would be due to me would be due between March 27, and December 30, Onest with half deposited by the end of next year and the other half by the end of 2022.

As of September 30, we have deferred $33.6 million, which keeps us on track for a cash benefit of approximately $50 million to $55 million in 2020.

I'm pleased to report that Dsos continue to improve down to 54 days in the third quarter compared to 61 days in the second quarter, we expect mid 50 to be the normal range moving forward.

Stepping back and looking at how far we've come through the pandemic to get where we needed to be with our care model in place and being ahead of schedule with our cost structure for Pdgm combined with what we have learned through coded and we have gained with new physician referral sources and partners that has accelerated our improvement we're very bullish on our growth going forward.

There could still be challenges ahead to overcome with coated but all the pieces are in place.

Our organic growth is accelerating.

From our coven induced lows with all key drivers moving in the right direction.

Our and organic growth has only scratched the surface with a number of joint venture opportunities, adding to our M&A pipeline and our potential acquisitions are currently comprised of nearly two thirds hospice locations.

This historic consolidation opportunity, we have been anticipating and home health is materializing now that the government stimulus is wearing off for some smaller agencies and that should begin to add to our pipeline as well.

With the substantial liquidity, we maintain our balance sheet and the continued ability to execute on our co location strategy through de Novos, we have a number of very compelling ways to accelerate our growth in 2021 and beyond.

We look forward to sharing more of these details in the coming months.

That concludes my prepared remarks, operator, we are ready to open the floor for questions. Thank you.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. This.

If you are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then.

The first question comes from Brian Tanquilut from Jefferies. Please go ahead.

Hey, good morning, guys congrats on the quarter.

My first question, Josh as I think about guidance.

It from the guidance that you gave for the year, it's implied that it will be down sequentially from Q3 to Q4 I know you've got some moving parts in the Q3 number with MSP, but just want to hear how you're thinking about that internally just the progression of earnings and then I guess, just what were the topics of MSP.

How sustainable do you think that level of earnings would be as we look at next year. Thanks.

Yes, Thanks, Brian.

I guess as it relates to guide we tried to illustrate on I believe it was slide 17 in the supplemental deck, but let me take just a moment to break it into its parts to illustrate.

That we actually do continue to expect sequential quarter over quarter improvement from three to four in the core base business.

Setting us up nicely for the glide path that we've been talking about for next year. So if you look at the midpoint of our reinstated guide from August.

And I ran through those numbers in my prepared remarks, I won't kind of re go through the exact numbers now and then the Midpoints of our raised guide that we just put out the differences are an increase of 40 million at the Midpoints in revenue almost.

Almost 10 million and EBITDA and 25 cents of EPS.

So if you think about where we had originally guided with the MSP expectation at 5 million then the incremental upside created by the MSP was approximately $4.6 million of revenue.

Which is all falls down to EBITDA as well as 11 cents of EPS. So the implied guide increase from our core business. If you take the 40 million at the Midpoints back out. The 4.6 that is just inherently from the betterment of MSP that.

In the 35 and a half million of an implied guide raised on revenue and about a 14 cents implied guide raise on EPS with about $5 million of guide raise attributable to core business EBITDA being better than we expected when we put it out in August and then when you.

Overlay that to kind of the midpoint to the upper end of our guidance range for the year and what it implies for Q3 were actually imply almost about a $10 million to $15 million increase in revenue quarter over quarter with some potential for EBITDA.

Growth and EPS growth as well from Q3.

Does that help Brian.

That helps yes.

And then just the MSP component Josh Yes.

So you could not be more.

Proud of and excited about our entire team and how they executed on on the MSP program. If you think about this relates to last year's performance, which is really the first full year that we at LHC group had the.

Accountable care management company subsidiary within our family as as most of the folks on the call. My recall. This was part of the almost family segment in their HCR when we merge within the 2018, so from two years ago, having performance at about three.

$2 million of shared savings to being able to triple that year over year is really a testament to not only the leadership at the IPO management company that is all part of our team now, but really I'm sitting here looking across the table, adding it's a testament to what a lot of the things that Bruce and his team have brought to bear as well.

As just the analytics that we have improved over the year and targeting those patients and working with those payers.

Specifically the providers in the market on identifying areas to do preventative care and to really lower their cost of care.

So Brian I'm going to ask Bruce to fill in some more detail because I'm sure. He's got a lot to add here, but for me.

Well you know I don't know that I would replicate almost $10 million next year, if you're thinking about rolling into your next year numbers, you might pull that down a little bit because it does have a lot of play in it not really even sure how co bid is going to impact those numbers because again the numbers. We just reported were pre coated so theres going to be some.

So it impacts to the MSP, which could go either direction, but.

But at a high level I would like to highlight what were learning from the IPO management company is directly translate double into all of the contracts that we have been entering into throughout the course of the year with a value based component and Bruce and his team are taking those learnings getting one.

Got it okay, and working with our operators to implement improvements operationally that will really be driving performance over the next few years not just in the Asia Bruce Yes. Thanks, Josh It was very well said, it's been one of our sort of by secret incubation.

Centers within LHC group, because we have harvested so many learnings from it.

Full Medicare fee for service data to prove out with these tests are.

Brian Let me go back to answering your question, Yes, we do believe that we can carry on this performance forward really gets down to three areas within the subsidiary. We won have now our data analytics system fully ironed out we onboarded. It last year now we're running.

100% and we think that we're making further innovations on top of the analytics that we are able to run their to know how to target.

Different physician practices and patients to get greater savings never too. It's the programs that have been set up and now are running at full force. They are yielding significant savings and we think there are still a lot of savings the hardest through those programs. In addition to that we continue to build new programs.

To target patients and a new location lastly, it's that high level of cooperation with the physicians with whom we work so.

So it's.

One thing to say that our MSP payment was very high which it was but the other is that percentage of the asias that we work with that all triggered the MSP payment to start with you have to get over 5% of savings to trigger that there's something about this feeling that as physician practice guess wed.

They recognize all the work that they put into it over the previous year now is continuing to show how it pays off by creating better savings and more efficiencies within their practices. So those three areas I think put a lot of wind in the sales in our a C. O program moving forward and then sort of that positive way.

That had both create are the learnings that we then bring into the LHC family home health, particularly as we put those parts into our value based arrangements in our performance in the field.

Gotcha, and then I guess my second question, Josh and they look at hospice revenue down sequentially and then if I look at your supplement right admissions are up every month.

Since this started trickling down and then billable hours down from say June July just if you will on walking us through the dynamics there like what are the moving parts and your hospice business and with.

Admissions going up does that mean that we should expect an uptick consensus and billable hours against before.

Yes, great observations, Brian and yes, there is a little bit of I hate to call it noise, but moving parts in the hospice numbers this quarter right.

Really pleased with as you just noted the admissions trajectory.

There was a little bit lower.

<unk> average length of stay throughout the quarter. Some of that is attributable to coated patients, which inherently have a lower length of stay.

But as as we expect the length of stay to kind of get back to a normal level. Those admissions will then translate into.

Census growth that we normally experience in hospice and on the revenue side as we pointed out in our in our supplemental deck I believe it was I think that segments on page 22.

We had a little over $2 million of some write offs from so older periods in the hospice segment that is directly related and.

Brought down the revenue. So if you add that back your revenue is not only up a little bit but your EBITDA margin normalized for the quarter is still in that 14% range and I would I would tell you Brian from the hospice segment standpoint, not only do we have good growth momentum, but we've been buying that 14% to 16%.

EBITDA margin for a while and weve been talking to that about that with you off for a while and sitting here having.

Some real good visibility in October and how we're projecting for the rest of the year I mean, I think that 14% to 16% EBITDA margin for hospice is where we'll be in Q4.

Awesome. Thank you.

[music].

The next question comes from Andrew Marc of Barclays. Please go ahead.

Hi, Good morning, I wanted to follow up on the strong gross margin performance in the quarter on the home health, but how did that perform relative to your internal expectations can you help us break down how much of the improvement was related to pdgm initiatives versus cobot and related but how should we think about the sustainability of that margin performance heading into 2021. Thanks.

Yes, Thanks, Andrew.

I would say the lion share the almost all of the margin improvement was just from core fundamental operations.

Which inherently relates to the Pdgm model I Wouldnt say there is any of that that is cobot induced or cove. It benefited.

With one caveat being our visits per episode or.

Our in person visits per episode are around 13, right now and we could see that possibly tick back up a little bit maybe the 14 or so range.

Maybe throughout the rest of this year maybe into next year. So the incrementally that little bit may be coded related it's really hard to kind of break that apart.

But but I feel really good about where we are.

We were a little ahead of our internal expectations on home health, which helped lead to you know the outperformance in the guide rates raise but I believe that our internal modeling has that continuing through the fourth quarter with a lot of confidence going into next year, but this is now a a new kind of run rate for us.

Great and then maybe a question for Dan I know, you're still set up settling into the new role, but would love to hear some of your initial impressions on the balance sheet, including where you're inclined to deploy capital over the next 12 to 18 months. Thank you.

Yes, no I mean, obviously very strong balance sheet and.

Just first of all I'd say and reiterate what a privilege. It is to be with this great company team that LNG.

She has a very impressive strong balance sheet and I think as as as you heard from both Keith and Josh in the prepared comments the pipeline for M&A Joint ventures is very robust and so I think we will continue to be very disciplined in our approach to deploying capital to where we see the best opportunity.

As for them.

Great. Thanks for the color.

The next question comes from Scott Fidel with Stephens. Please go ahead.

Hi, great. Thanks, good morning.

First question just interested in your thoughts on the legislation thats been introduced to reimburse home health agencies for Tele health.

That's been introduced in both the house and the Senate and.

How meaningful you think that could be if it is approved and then.

Actual legislative vehicles that you're tracking that you think that could be added to for example, maybe nexstar stimulus package.

Yes, Bruce you want to.

Well, yes, I mean, it's.

We've been in a position in contrast to other providers with regard to tele health reimbursement, where other tell how other providers have been getting direct reimbursement being able to drop CPT codes and on the home health side, we did receive flexibility in mid March two.

Be able to count.

Our to be able to exchange our visits by not count them towards.

This.

Or required visits and this would allow us to move forward in that area.

So we find us.

Very positive and also we sort of.

Calibrate home health along with other providers. So we think it's a very judicious approach to move forward now when it comes down to vehicles.

Probably a stimulus bill would be that the most elegant and.

Straightforward way to do that but it certainly is possible that it stands on its own or.

Next up another a bill that is healthcare related that it can be attached to.

Obviously at this point.

We have we have a clear picture on what the leadership looks like in the house and the Senate. So.

Despite a lot of uncertainties in general with the election, but this looks like it's got a strong base of support from the provider community. All the large advocacy groups and we're having very favorable discussions with the leadership in the house and Senate.

It has been long supporters of Idaho.

Health World.

Okay, Great and then just had a follow up question just on the on the institutional mix picking up again in October and home health looks like that was up a little bit north of 200 basis points.

Just interested in terms of observations around geographies in terms of whether you saw that being pretty broad based and then also thoughts on sustainability.

Of that just just given that the cobot searches across the country, whether you're still seeing that institutional mix hold steady or even improving or if you think that could be volatile just around the club the trends. Thanks.

Yes, Scott this Josh.

I think it's pretty steady now.

I always say one month doesnt make a trend, but we're back up to 63% in October here you know the early we track this daily.

As you might imagine so you know it's holding true.

Through the early days of November and really that breakthrough has been fairly broad based there is still some markets, where you know the shutdowns and the.

Electric procedures are not quite where they had been but I would tell you. It's not only broad based geographically, it's getting more and more broad based among who the referral sources are as well so our JV partners as you might imagine we continue to see that improvement and getting back to.

What I would say pre pandemic levels of the mix we receive.

And then other hospitals and and institutional referral sources in the marketplace. So if we can we're at 63% now we were around 67% pretty pandemic, if we could get into that 65% to 70% range, which is where we had modeled earlier in the year.

Prior to.

The pandemic, even being a thing and when we were thinking for Pdgm. So we still got a little bit of improvement to go but I feel good about all the market indicators, we're seeing across our footprint I'd just add one piece Josh.

And so I'd like to.

So what we are comparing.

So which is our community based admission.

Thanks.

Tracking elective procedures as the sort of measure of hospitals bouncing back but at the same time that elective procedures have been down since March even February.

Emergency Department visits have been down quite dramatically as well so while emergency department visits has come back there is still not recovered levels and there is a national distribution in the ages. So those that are over 65 have come back at a lower level to the emergency room in the emergency room.

Admissions then many times.

Get converted into an inpatient admissions and many of those patients end up being discharged to home health. So you can still see that theres going to be a lag as admissions to home health that will come out of the the hospital sector. So we're watching this very closely as we move along at the same time, when we compare to community basis.

Missions, we should not shy away from being proud of increasing the admissions from the community we.

We are picking up new admissions sources, our clinicians around each of our markets are explaining the way home health can be used as a pre acute visit to home health and in many cases alleviates the need from going to the hospital at all so we're using them, especially in the public health emergency to help.

Medicare enrollees avoid going to the hospital altogether, it's a better deal for the Medicare Trust fund and it's keeping patients even safer in their home and anxiety lower so thats something that we don't want to reverse or race, we just want to see even higher volume coming from the hospitals, particularly when both elected and.

Emergency Department numbers move back to pre coated levels.

Great point Bruce.

Got it and when we think about what sort of built into the implied Fourq revenue guide is that 63%.

Good baseline to think about or do you have that still are you building in the assumption that that continues to improve over the rest of the quarter.

The 63% is pretty much what we've built in so if there is improvement there you cut out a little bit of upside to that number.

Okay got it thanks.

Yep.

The next question comes from Justin Alan at Deutsche Bank. Please go ahead.

Hey, good morning, everyone and appreciate all the disclosure is Jen.

In the context of five or six Hurricanes you guys tell at this quarter it was.

Great performance.

Just.

Kind of continuing on on the last question is there a way to think about what the kind of the opportunity set is.

Like from a creep pre covered perspective so.

An example would be.

We typically we generate 10% of our admissions from elect is we've only recaptured 5% of that.

And so that.

I'll stop there for the first.

Okay got it. So so we do know we've been tracking it all along we're generally seven 8% of our admissions coming from elective procedures of the hospital, we're not quite back there yet so we are seeing certainly higher rates since.

Since March April, but we're not quite back to that full amount yet again at the same time, when we think about overall institutional you think about well what makes up the rest and again many of those referrals that have got back to pre coated levels are patients that end up in the hospital through the emerge.

Zero not through the front door. So we're really tracking on both sides.

At the same time.

We're getting a greater share of hospital discharges relative to snacks and.

I know we've been fielding a lot of questions from the Investor community over the last six months and we're tracking these data very closely so thats an area where despite lower.

Discharges from the hospital in an absolute number we're picking up a higher percentage of those that are coming out for any kind of post acute care as we continue to take market share from patients that otherwise would have ended up in this now yes.

Yes, Bruce this is Josh on I would add as well when you take our answer from the last question. The extra color. Bruce just gave here that also it not only has an implication to the institutional percentage it implies a betterment and case mix as well because you've got a higher acuity.

Patient population that you're carrying four and you can see that in our numbers on slide 21, we've got several different component parts that build the revenue and the Pdgm world. So our case mix. We also expect to continue to climb and we see good progression. There and then I would point you to the percentage of key ones versus the two.

And now.

Now that we have such strong and steady admissions growth on the home health side that will continue to trend nicely for our percentage of PD ones, but also get a higher reimbursement and pdgm. So if you take all of those parts together, Justin if the institutional piece its the higher case mix that's attributable to the.

Institutional patient referral and then the PD one percentage.

Got it and then for my follow up I just wanted to go back to the commentary that what you guys are learning from that you see here is directly translate a little.

To to the home health business and then.

In the slide deck, I think you said that you're.

Non fee for service side.

Visits were up.

Kind of like an astounding, 34% year over year and.

Then if I look at your you know the.

Rates across that book.

The non fee for service to it looks like its you know its up a good like 8% year over year. So.

It looks like you guys are kind of going.

Going after that business with you know some.

Some targeted programs and just wanted to leave the call open to kind of talk about some of the Skunk works initiatives you have going on there.

Yeah, Justin this Josh Thanks for the question.

So there's a there's a lot to unpack there I want to start off and then I want to.

Ask each of you know Bruce and doctored, okay to jump in as well.

Really put some meat on the bone about what we're doing you know clinically and innovatively to make this happen but.

I want to just highlight the numbers again, we've gone from just under 7800, non Medicare episodic admissions Q3 last year to almost 10500, there is that 34% growth factor you referenced.

Those.

We have also translated into at the start of the year on January Onest of this year, we had around just under 8% of our home health census was non Medicare.

Sonic.

As we sit here today, we have been bouncing between 11, and 12% of our home health census over the quarter.

Is non Medicare episodic and you know really kudos to our managed care team.

We've got a great leader that has been driving this and we've been talking about it for several quarters on how this is a journey and you know.

You have small wins and then you have incremental better wins, but we have been negotiating and getting much stronger contracts over the past two years that has turned into this.

This you know Expo.

Explosion in episodic drove our top three contracts, which I wont say, what they are have each more than doubled over the course of this year and our volume. So yes, we definitely have targeted approaches that we are that we are putting forward. The other thing that I would highlight and then you know ask others to.

Jump in here because this is really an exciting strategic part of where we're going.

Is we're not moving away from Medicare, it's kind of like what Bruce was just saying about institutional versus community. We want the community to keep going up but we want to the institutional to keep going up with it. We you know we are aggressively going after some of this good managed care and episodic and value based contracts, but we definitely want to keep going aggressively after Medicare.

Fair and in this last quarter alone we've entered into a few new contracts with what's referred to as a DC or a direct contracting entity, which is for a lack of a better way of saying that kind of a new age AC O vehicle, where its Medicare populations that are under the contract there.

Our narrowing a tightening those networks with high quality providers and you have the ability through performance to earn above Medicare equivalent rates. So.

So there's a lot of different areas that we are actively pursuing right now that has us extremely excited so let me just add on Bruce I want you to chime in.

You mentioned that.

But.

References in the past two remaining engage with managed care partners.

It's been quite a long journey, I mean, 10 years or more since we all had this discussion and it wasn't always so present.

I'd like to I'd like to be able to say that.

We alone would have stayed and at this long, but really I have to give credit to our hospital joint venture partners for doing that because of our partnership with them and their need for us to.

Except those patients and care farm it kept us at the table with managed care.

Payors and having to learn the things that were important with them and how we could do business with them. So.

Just it is a great place we've also added some.

Some different perspectives to the team Bruce and Dale perfect timing for you to show up 10 years ago proud.

Probably would we probably weren't ready for you.

Here now that Bruce yes. Thanks.

You are definitely detecting a lot of restraint in how we're how we're talking about our enthusiasm for this work clearly not ready to claim victory in the value based world. It is not over and and Keith from my perspective, we've been pursuing value over volume from the government side for well over 15 years, we probably have enough.

They're 10 15, maybe 20 years to go until that journey is completed.

But it's really important for the reasons that I think that we have made so much progress really is two sided one we are absolutely proving value through our clinical excellence to the payers period that is still important to note. The second is as Josh mentioned.

The woman that heads our managed care team is absolutely tenacious and so she has just negotiated negotiated showed value use data as a way to negotiate contracts that really reflect the value that we convey to the patient and the health plan and thats going to be the strategy that we continue to use moving forward.

It it's really really important.

You also asked about the Seo learnings and whats quite interesting is the world of the Hcl.

Ranging behavior is moving more slowly even than in the health plan world and many spaces, but during co that especially maybe a one year or so before that that downward substitute ability has been one of the major takeaways and so that could mean doing procedures.

In one location compared to another clearly for post acute care it means using home health rather than sniff for patients that are clinically appropriate.

You saw.

Over the last two or three years significant savings results coming out of BPCI bundle programs, primarily from shifting patients from sniffed at home health and now we're starting to see a more orchestrated are choreographed way of thinking about home health rather than snus in a way to provide a equally.

Clinical experience, but also saving significant amount of funds.

All of this when.

When we think about co that has not been a game changer in so much as it's been an accelerator of what we were already seeing in the value world clearly in the shift from Snicks to home health, it's been absolutely highlighted by the imperative of safety for patient safety.

And we're watching continually whats happening within congregate living facilities in Smith, we're also helping patients and their families reduce the anxiety being.

Being in an area that they're not comfortable with.

Now lastly, I want to talk about an example, it goes back to the data that.

Josh shared in terms of higher acuity patients that have a higher rate under PDGF and it also triggers more PD ones as they as they come in and I'm going to hand, it over to Dr., Doug in a second because early in our cobot experience with both JV partner health systems as well as those.

With whom we don't have the JV, but work very collaboratively with they ask for help they ask for help moving their patients out of the hospital, where they couldn't admit to us net or patients were refusing to go to a snip. They wanted a clinical program tightly highly disciplined deliberate program.

I'm from home health, where they can transfer patients that were at high acuity from their hospital to the home they needed to free up hospital that form new coded patient, which we're starting to see.

The tightness in markets around the country right now looking a lot like it was in March and they also needed to throughput patients that we used were either coded positive or Eli patients patients under investigation or suspected and they turn to us to deliver these programs and so that it doesn't mean talk briefly.

Got that protocols that we developed in what we were already capable of doing and tossed discharge planners, what they can rely on us for yes. Thank you Bruce So big picture.

Ongoing we've been worked with our joint venture partners as well as our referral sources to deliver efficient care in the home and are very high quality Bruce.

Bruce mentioned, the fact that not just associated with Kobe, but even before our focus was on high acuity patients and how to captures those patients that can return home rather than go into a conduit living facility or institution.

Ill take you back briefly and then walk you through to answer the question at the end of 2019, we reevaluated our major diagnostic diagnostic category pathways in treatment programs, which included in.

In depth educational piece for all of our 20000 clinicians.

That included focus on Indepth, physical examination and risk stratification of our patients.

Based on that we developed the latest use of technology as well as.

Protocols for pathways and treatment plans.

To be accessible to those clinicians the key component here is that those pathways in treatment plans using best practices are now in a part of our electronic health record. So it is embedded in there for availability of our clinicians at the click of a button and then based on the risk Stratifications are the needs of the patient getting back to our AC.

Oh learnings from our high cost high emergency department utilization patients that could be some customization.

Opponents and laid out there that they can choose and it makes it more efficient and that process. So that plan was developed in late 19 early 20, and a rollout of the pilot was scheduled to happen mid summer of this year now with COVID-19, we still felt that it was of utmost importance to roll this out despite.

Right the Covance situation, because we thought it could be also helping the efficiency of care of those patients, which we did on a small scale and then began to expand as early as last week, we met with the clinical team and we reviewed the findings of this of this study of our pilot program and it was evident that the satisfaction of both our patients patient family.

Please joint venture partners and our referral sources, we're very pleased with the outcomes, we were able to care for as Bruce mentioned some of the 15% higher acuity patients that are a huge part of a snip diversion program and getting patients out those Congress living facilities. So the initial plan was to expand the pilot in.

In early 2021, specifically January Onest as we reviewed the findings in the data analysis. It became clear that we can't wait and we're planning to rollout an expand that that pilot program before the end of this month here in November and then with the hopes of going companywide in 2021. So.

Thats bridge the gap between lessons learned for those high cost patients keeping them out of the emergency departments and hospitals learn.

Learned through our a CEO in collaboration with that physician group as a trusted partner moving to our joint venture partners and getting those lessons learned and bringing those hospitalist as well as their engage physicians on board and then rolling it out across the board to our many referral sources that we see today as illustrated by the numbers that just presented earlier.

Thanks, Doug good Doga.

Yes. Thank you for the comprehensive response, that's all for me.

Got it.

The next question comes from Joanne I gave you of Bank of America. Please go ahead.

Hi, Thank you for squeezing me in I guess the learning all the time. So just two quick follow ups. So the commentary on home health.

Alright in terms of the the average revenue for that book of business grow with a visit uhm, but yeah, when you're kind of compare you know.

And they to fee for service where are you now verses. That's a you know a couple of years ago and you know.

And what are you you know are you expecting there's got to to actually eventually close.

Yeah. We we can can you just say that gap Marilyn and you know whether that got me a fully closes on the base rate you know kind of hard to maybe go that far predict that but I think there is a a pathway where it cannot only be completely narrowed but you have some upside.

And some of the value based arrangements that we're entering into you know when you look at all of the non Medicare book of business. The fact that the episodic has been the you know one of the big growth engines. You know gives you that blended right improvement, but you know I I do want to acknowledge you know.

The the improvements we've made over the past few years just in the the hand to hand combat negotiations of per visit contracts as well and those continue to climb and we see betterment and those rates also.

So you know when you take all that into account Joanna and then you know I I know, we haven't given a whole lot of stats on this but the percentage and number of contracts that have a value based performance component to them and that is both in the area of the pervez It mom.

Holes as well as the episodic models.

With some shared savings generation, an upside to the base rate continues to grow every quarter, we're entering into new arrangements and having a broader group of our home help locations under those models. So I would tell you you know continue to watch that gap come.

Come down and shrink overtime.

Alright. Thank you so much for the call I appreciate it.

The next question comes from that in the room with William Blair They've got.

Hi, Good morning, Thanks for letting me ask one here at the end. So just that's kind of look at a sequential bill throughout 2022, two down about 6% X M. S. S. P. Maybe done out 1% in three Q and then four Q up slightly in terms of revenue I know you've talked about.

This longterm acceleration to maybe high single digit.

Plus home health seems to rabbits.

5% to 10% plus Same-store hospice Admix could you maybe help US bridge how are you thinking about 2021 at a high level understand it's not guidance, but kind of bridging what we've seen in terms of sequential bill throughout this year into 2021.

Yeah, So I would maybe I'll take it both from a a growth perspective and from an earnings perspective.

So there's there's gonna be some noise and the growth numbers next year, just because the cops are gonna be a little bit you know off with you know what has happened. This year. So one thing that you know we tried to illustrate on our supplemental deck on slide seven which is you know a sequential look as well because.

That you know not only illustrates the pace of recovery, but where where we're headed because you know with all the covid numbers, it's making some of the organic comps.

Be a little bit.

Off next year, you'll have a little bit of that same phenomenon in the second quarter. So to say, we expect you know X percent of organic growth you got a factor in the comparable year, but what I would tell you is you know now that we're back up to you know that 83 to 8500 admit.

Per month.

Run rates that was you know kind of getting back to where the pre covid level is now that we have all these new referral sources that we have engaged with through the pandemic. Once we get some of those other referral sources getting back to the levels that they were referring at whether it's electric procedure related or otherwise if we get that run rate more close to 85.

500 to 9000, then you're going to have even more aggressive growth and we had pre pandemic and we were at double digit growth and home health as you might recall with the entire company. <unk> am included we were running you know 12, 13% organic growth before the pandemic hit so take out the organic cop.

<unk> and I would just tell you we would expect an even higher pace of what would have been organic growth and to next year with the run rate that we're experiencing and the momentum we've got on the referral side on the and then I would also hate to keep highlighting it but.

Our organic growth itself being positive for seven for this quarter embedded within that we've talked a lot about the non Medicare episodic.

Highlight looking at well what was the Medicare only if you add the Medicare and the non Medicare episodic together, we had positive growth organically in the third quarter in that area as well when you combine all episodic with Medicare and non Medicare. So that's another real healthy indicator mat and then on the earnings side when you.

Unpack, what I said earlier about our implied guide for queue for you know.

Eric and I were saying even at the start of this year. If we could exit 2020. This was all free pandemic, if we could exit 2020, with a 65 or greater million EBITDA run rate as we enter 2021.

Then you throw on top of that the growth that we just discussed and that we feel so bullish about then or 2021 right now is going to be better than we had originally expected or 2021 to be when we started this year, because we're right at that $65 million to $70 million EBITDA range quarter.

Early as we sit here today going into next year, so feel really good about it.

Okay. That's that's helpful and then.

Obviously.

You'll have talked about Smith diversion, but just wanted to maybe get an update on started to sniff at home in Tucson choose home platform. We've talked about I know, there's something you've been kind of building internally and maybe look into pilot out with some some pairs and then I guess in theory take the same S. At some point so any comments there'll be interesting yeah certainly.

Oh, we have had really quite positive experience with a sniff diversion program. So much so that we had sort of genericise it to make it a program for.

Simply high acuity patients so as to not dissuade discharge planners from being very very selective on who they choose.

Two things one is despite having overall higher acuity, we have lower readmissions.

This year compared to last year.

PDGF perspective in other words, how does how does the economics work around the highest acuity patients well.

I'd like to say this every once in a while that we think the government got it right when it comes down to that PDGF.

K snakes, and paying appropriately for more complex patients.

Our app margins are about the same for these high acuity patients as they are for patients around the 50th percentile. So.

Not dissuaded any of us from taking the high acuity patients they actually work well in the system.

Lastly on this topic, though when we thought about sniff diversion patients and we work with are clinical teams led by Dr. Dogy, along the way and we prepared these robust.

Protocols, we found that patients and sniff diversion programs looked very much like other patients that we have always been taking they represented the top 10, 15%. So our clinical teams in the field were pretty well prepared to take these high acuity patients. So.

That.

Set of programs and protocols have been propagating across the.

The company across different geographic regions and will continue to do that and we will not stop doing that after covid because it makes sense from a value perspective as well.

On the choose home or.

The new set of.

Say legislative activity going on in Washington D. C. We're seeing a lot of very positive.

Movement, we're seeing.

High levels of interest.

On both chambers, both sides of the aisle, we think that this definitely has legs moving forward. We think that this would be a very positive addition, and expansion to that.

Title 18, the Medicare program itself and would allow a very high percentage of patients that otherwise go to Smith to be able to come home as Keith had mentioned or data shows somewhere between a quarter and a third of those that good a smiths can be clinically appropriately taken care of at home.

Thank you.

Sure question comes from Webmail UBS. Please.

Hey, Thanks, I've got just one quick when I'm I'm just still confused on the revenue per episode in the third quarter of last year, you reported 30, 70, which implies that it would be down 8%, but the disclosures. This.

This year now recast the prior year or 228 63, so what's the difference between the two none of the other metrics changed.

Could you restate. The question you were coming in a little low.

Yeah on revenue per episode last year, you reported 30 70, and this year you are reporting that the prior year was 28 63, so I'm just having a hard time reconciling that large of a of a change like what's what's the difference none of the other metrics in the in the organic or the disclosures Chi.

<unk>.

Hey, this is Eric I can get with you offline and kind of walk you through it basically it's looking back at last year and trying to recalibrate.

Where the.

Medicare revenue per episode was.

With adjustments without adjustments and trying to get it in line with where it kinda is this year as opposed to.

Kind of reclassifying kind of some of those those issues, but I'll I'll get with you offline and kind of walk you through it.

Well, let me ask it a different way so if your organic it missions or up 4.7, and your organic revenue was down 4.1, how do you reconcile the difference it seems like that would imply an 8% decline on your revenue per episode on a like for like basis.

That's really if you look at where the admissions are and where the episodes or and then you roll in that.

You were down the 1.1, 0.4%.

Year over year.

But it's being offset a little bit by sequestration. So.

That's kind of how that plays them.

Okay. I guess, we can just we can follow up I don't know if I followed the adjustments I'm sure there so.

Well thank you.

Thank you.

And the next question comes with Frank Morgan RBC capital Okay.

Good morning, what I wanted to go back to M&A that you've talked about earlier I'm. Just curious when you characterize that do you do you see most of that coming.

Through P. D. G M related opportunities finally coming to fruition is Ruby results with Jv's and then what sort of a mix that you would expect to see between say hospice at home health care. Thanks.

Yeah Fragrances Keith.

So I think it.

Let's start with the with the joint venture pipeline.

Throughout the Covid at pandemic.

Really I guess starting.

April.

Conversation that we had in the pipeline.

Got put on hold.

We work through.

So we thought those would come back and then we continued to talk to.

More potential candidates about.

Something in the future, but that pipeline current installed in that pick back up.

Continue with home health on the consolidation.

Freestanding home health aide.

And.

And hospital agencies.

I think the stimulus money when that began to flow.

Also cause people.

I said put on pause, but it's certainly decrease the sense of urgency to.

To do something with their home health agencies, and then as the clarification bigger.

Began to come out and there's more restrictions and first thought on the stimulus money then.

There we saw that begin to pick up now.

I see the consolidation that we thought it was going to happen.

Ralph PDT M.

All of it.

Is now picking up here.

I think that's what's driving though what's going to drive and consolidation home now.

And then.

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