Q4 2020 Chemed Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Kim and Corporation fourth quarter 2020 earnings Conference call. At this time all participant lines are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today, Sherri Warner with Investor.
<unk>. Thank you. Please go ahead please.
Good morning, Our conference call. This morning will review the financial results for the fourth quarter of 2020 ended December 31, 2020, before we begin and let me remind you that the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 apply to this conference call during.
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 and the <unk>.
Companys news release on February 23rd and and various other filings with the SEC. 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 and the future.
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.
Filiation of these non-GAAP results is provided and the company's press release dated February 23rd which is available on the company's website at Chemed 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.
And a vice President and Chief Financial Officer of Chemed, and Nick Westfall, President and Chief Executive Officer, and cabinets VITAS Healthcare Corporation subsidiary I will now turn the call over to Kevin Mcnamara.
Thank you Sherry and good morning, welcome to Chemed Corporation's fourth quarter, 'twenty and 'twenty.
Conference call.
I will begin with highlights for the quarter and.
And David and Nick will follow up with additional operating detail.
And then open up the call for questions.
Operating during a pandemic has been exceptionally challenging for both of our business segments. Fortunately VITAS and roto rooter have shown incredible speed flexibility and focus to remain completely open and operate safely for the benefit of our patients customers and employees I believe Kevin is operational and.
As for performance. This past year is a testament to the success of these efforts.
Our VITAS healthcare segment continues to be directly impacted by the pandemic for.
Finally, the federal government, specifically HHS and CMS have been very supportive in terms of relaxation relaxing regulations, allowing the use of telehealth, where appropriate and providing pragmatic flexibility and care.
And for our entire patient census.
The most complex issue facing be passed over the past nine months has been the disruptive impact. The pandemic has had on traditional hospice referral sources, which in turn has impacted our patient census patterns and Fortunately the portions of the health care continuum abnormal.
And portions of normalized and hospital referral admissions have significantly improved from low admission rates experienced early in the pandemic.
This is reflected in our second half of 'twenty and 'twenty admission and census activity on <unk>.
Third and fourth quarter. According 'twenty admissions increased four 7% and two 8% respectively normally two sequential quarters and solid admissions growth would result in increased and average daily census, however, despite the admissions growth our average daily census declined two 8% and the fourth quarter.
This decline and Sensus is a direct result of disruption and senior housing, which includes nursing homes and assisted living facilities senior housing as an important referral network for the hospice industry given the fact that over 90% of all hospice patients are over the age of 65.
So you know housing has seen a severe reduction in occupancy levels and continues to struggle, even as hospitals and other key hospital referral sources and significantly recovered.
Hospice referred admissions typically accounts for 50% on VITAS is total admissions and a significant portion of these referrals have very short lengths and stays VITAS hospital referrals are returning to pre pandemic levels. This is reflected and hospital generated admissions, increasing six 2% and <unk>.
Seven four per cent and a third and fourth quarters, respectively.
Nursing home hospice patients represented 14, 7% of our fourth quarter, 'twenty and 'twenty incentives a decline of 310 basis points when compared to the prior year VITAS.
And the types of nursing home admissions decreased 22, 6% and the third quarter of 'twenty and 'twenty and.
And declined 19, 3% and the fourth quarter when compared to the equivalent prior year quarter.
Nursing home based patients are referred to hospice earlier into a terminal prognosis and statistically have a much greater probability of being and hospice more than 90 days.
This decline and nursing home admissions as a direct result.
A continued disruption and senior housing occupancy according to data provided by the National investment and center for senior housing and care of COVID-19 continues to adversely affect senior housing occupancy, which reached another record low and October of 2020.
Median length of stay on the fourth quarter of 'twenty and 'twenty was 14 days two days less than the prior year. This unusual decline and median length of stay as a result on a seven 4% increase and hospital referred admissions and and 19.3 per cent decrease and nursing home admissions and the combination of which.
<unk> has had a material impact on our medium length of stay.
The guidance, we will provide later on this call reflects this continued weakness and senior housing occupancy for the first half of 'twenty and 'twenty, one we anticipate improvement and senior housing and housing ambitions and the second half of 'twenty and 'twenty, one and senior housing patient mix and aggregate occupancy returns to pre pandemic levels.
Roto Rooter operating results and but nothing short of exceptional during the pandemic.
Strong residential plumbing and drain cleaning demand and more than adequate to compensate for weakness from our commercial customers the force.
And quarter branch residential demand set all time records unit for unit residential revenue totaled $123 million and the quarter and increase of 28% when compared to the prior year quarter.
Fourth quarter. According 20 unit for unit branch commercial demand did it did declined to nine 8% when compared with the fourth quarter of 2019.
This is a significant improvement when compared to the second quarter, 'twenty, and 'twenty, which had commercial demand declining 29, 1% and the third quarter of 'twenty and 'twenty with a commercial revenue decline of 11, 6% when compared to the prior year.
Roto Rooter generated fourth quarter, 'twenty, and 'twenty revenue of $201 billion and increase of 10, 2%.
Consolidated revenue in addition to burden our branch operations includes independent contractors and franchise fees and product sales as well as the Oakland acquisition completed in July of 2019, and the H S. W acquisition completed in September of 2019.
With that I would like to turn this teleconference over to David.
Thanks, Kevin.
VITAS is net revenue was $332 million and the fourth quarter of 'twenty and 'twenty, which is a decline of two 3% when compared to the prior year period.
This revenue variance is comprised primarily of a two eight per cent decline and days of care and geographically weighted average Medicare reimbursement rate increase of approximately two four per cent and acuity mix shift, which then reduced our blended average and Medicare rate increase approximately 255 basis points.
The combination of a lower Medicare cap and a decrease in Medicaid and net room and board pass through increased revenue growth and additional 64 basis points and the quarter.
Our average revenue per patient per day, and the fourth quarter of 'twenty, and 'twenty was $198.33, which including acuity mix shift is a seven basis and seven basis points below the prior year period.
Reimbursement for routine home care and high acuity care averaged $169 83 sites and $997.37 respectively.
During the quarter high acuity days of care were $3 four per cent of our total days of care, which is 62 basis points less than the prior year quarter.
In the fourth quarter of 'twenty, and 'twenty, VITAS accrued $2 $5 million and Medicare cap billing limitations and this compares to a $4 5 million dollar Medicare cap billing limitation and the fourth quarter of 2019.
Our VITAS has 30 Medicare provider numbers 23 of these provider numbers are currently have a Medicare cap cushion of 10 per cent or greater for per.
Provider numbers have a cap cushion between five and 10%.
One provider number has a cap cushion between zero and five per cent.
And two of our provider numbers currently half of fiscal 2021, Medicare cap billing limitation liability.
VITAS is fourth quarter, 'twenty and 'twenty adjusted EBITDA, excluding Medicare cap totaled $78 $7 million, which is an increase of 11, 7%.
Adjusted EBITDA margin, excluding Medicare cap was 23, 5% and the quarter, which is a 306 basis point improvement when compared to the prior year period.
For Roto Rooter, Roto Rooter generated quarterly revenue of $201 million and the fourth quarter of 'twenty, and 'twenty and increase of $18 $7 million or 10, 2% over the prior year quarter.
On a unit for unit basis, which excludes the Oakland and H S. W. Acquisitions completed in July of 2019, and September of 2019, respectively, Roto Rooter generated quarterly revenue of $183 million and the fourth quarter of 'twenty and 'twenty, which is an increase of 12, 8% over the prior year quarter.
Total branch commercial revenue in the quarter, excluding acquisitions decreased nine 8%. This aggregate commercial revenue decline consisted of a drain cleaning revenue declining 11, 6% commercial plumbing and excavation declined 889% and commercial water restoration increasing 1%.
And.
Total branch residential revenue, excluding acquisitions increased 28%.
And this aggregate residential revenue growth consisted of a residential drain cleaning and increasing 17, 1% residential plumbing and excavation expanding 25 five per cent and our residential water restoration inquiries aimed 16, 8%.
Now, let's turn to Chemed <unk> full year 2021 guidance.
Historically chemed, earning guidance has been developed using previous year's key operating metrics, which are then modeled and projected out for the calendar year.
Critical within these projections is the understanding of traditional pattern correlations among key operating metrics.
Once we complete complete this phase of our projected operating results. We will then modify the projections for the timing of price increases changing and commission structure wages marketing programs and a variety of continuous improvement initiatives that our business segments and plan on executing over the year.
This modeling exercise also takes into consideration anticipated industry and macro economic issues outside of managements control, but are somewhat predictable in terms of timing and impact on our business segments operating results.
With that said, our 2000 and 'twenty one guidance should be taken with a recognition that pandemic will continue to materially disrupt all aspects of our health care system and general economy to search and extend that for the future rules regulations and government mandates could materially impact our ability to achieve this guidance.
Statistically, our VITAS patients residing and senior housing and are identified as hospice appropriate earlier into their terminal prognosis and have a much greater probability of having a length of stay and excess of 90 days.
Hospice patients referred from hospitals oncology practices and simple water and referral sources are generally more acute and they have a significantly lower probability of length of stay exceeding 90 days.
According to data released by the National investment Center for seniors housing and care COVID-19 continues to adversely affect senior housing occupancy, which as Kevin mentioned earlier had another record low and October 'twenty and 'twenty.
This reduced occupancy and senior housing has had a corresponding reduction and VITAS and nursing home admissions and.
Nursing home patients represented $14 seven per cent of the VITAS fourth quarter, 'twenty and 'twenty patient census, which is about 310 basis point reduction when compared to the prior year quarter.
VITAS anticipates continued weak occupancy and corresponding week referrals from senior housing for the first half of 2021.
This guidance anticipates senior housing will begin a normalized to pre pandemic occupancy starting in the second half of the calendar year 2021.
Based upon the above discussion VITAS is 2021 revenue prior to Medicare cap is estimated to decline approximately 4% when compared to the prior year VITAS average daily census in 2021 is estimated to decline approximately 5% and.
And full year adjusted EBITDA margin prior to Medicare cap is estimated to be $19 four per cent.
And we are currently estimating $10 million for Medicare cap billing limitations and calendar year 2021.
Roto Rooter is forecasted to achieve 2021 revenue growth of approximately 5% to 6% and write orders adjusted EBITDA margin for 2021 is estimated to be 26%.
Based upon this discussion the full year 2021 adjusted earnings per diluted share excluding noncash expense for stock options tax benefit from stock option exercises cost related to litigation and other discreet items is estimated to be and the range of $17 to $17 50.
And this 2021 guidance assumes an effective corporate tax rate and adjusted earnings of 24, 7%.
And this compares to <unk> 2020 reported adjusted earnings per diluted shares of $18.08.
I'll now turn this call over to Nick Westfall, President and Chief Executive Officer of VITAS healthcare.
Thanks, Dave.
And the fourth quarter, our average daily census was 18000 and 718 patients a decline of two 8% over the prior year.
As Kevin discussed earlier this decline and average daily census is a direct result of the disruptions across the entire health care system that impacted traditional admission patterns and the hospice since March.
While certain health care sectors have shown improvement and the admission patterns referrals from senior housing, specifically nursing homes and assisted living facilities continued to be negatively impacted.
It is important to note and the fourth quarter, we saw the sequential decline of senior housing segments, specifically nursing homes and Alps moderate to actually show a slight improvement as compared to the 'twenty and 'twenty third quarter total admissions for the senior housing segment.
D C growth is expected to normalize and the second half of 'twenty 'twenty, one as we returned to pre pandemic referral patterns across all sectors of the healthcare industry.
And the fourth quarter of 2020 total admissions were 17960 <unk>. This is a two 8% increase when compared to the fourth quarter of 2019.
And the fourth quarter, our home based pre admin and admissions increased nine 2%.
Hospital directed admissions expanded seven 4%.
Nursing home admissions declined 19, 3%.
Good living facility admissions declined 14, 7% when compared to the prior year quarter.
Average length of stay on the quarter was 97.2 days. This compares to 95, two days and the fourth quarter of 2019, and 97.1 days and the third quarter of 2020 or.
Our median length of stay was 14 days and the quarter, which is two days less and a 16 day median in the fourth quarter of 2019 and equal to the third quarter of 2020.
Before I turn this call back over to Kevin I wanted to again, thank our entire VITAS team for their continued commitment and perseverance to provide high quality care and every community we serve across the country.
Needless to say 'twenty and 'twenty was an unprecedented year, where our organizational flexibility leadership and commitment to our patients their families are referring health care partners and one and other was tested unlike anything we've ever experienced and.
I couldnt be more proud of every VITAS team member who stepped up to these challenges to help provide access and incredible care, while producing these results for our shareholders.
Our entire team will continue to be out and 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.
With that I'd like to turn this call back over to Kevin. Thank you Nick.
I will now open this teleconference to questions.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press, the pound or hash case and please standby, while we compile the Q&A roster.
Your first question is from Frank Morgan with RBC capital markets.
Good morning, and I guess I wanted to start on the guidance here are some of the puts and takes and the guidance.
And I'm curious when and when you talk about a recovery and the second half of the year.
Are you, saying that just the admission patterns the turn in and nation patter starts to turn positive.
But if I'm up on an ADC standpoint, and I guess I'm trying to figure out how long does it take you to recover to fill the hole, assuming ER admission patterns normalize and the second half of the year and once again, just trying to figure out the cadence here and and for the quarters of this year and then also kind of what that means going into next year first because that's.
My first question.
Yeah, Frank and this is Dave.
That is the wildcard and not just when the improvements start as the pace of the improvement and when we get to what we'd call Priyanka pre.
Free pandemic occupancy and mix levels. So we anticipate on starting and the second half of 2021.
And by the end of the year, we think it should substantially improve and normalized but it could drift into 2022 slightly but.
The reality is when we take and I, a nursing home patients today and.
It's still in terms of.
And the majority of those people will still pass away pretty quickly and it really takes two or three quarters for you before you got the statistical outlier. So that's just a long way of saying is you're right it'll develop through the second half of 'twenty 'twenty, one normalizing and we anticipate that a substantial portion of 2022 is going to be call. It a pre pandemic mix levels.
Frank another way of saying that it's premature for us at this point is one one thing that we look at is.
On the.
Patients that are with you 180 days or longer that comes from the group of patients that have been with the 90 to 100 day 80 days and that group is of course comes from the the group has been with you.
Longer than 60 days those are the things, we're watching and to the extent that <unk>.
Each group is shored up.
Largely by.
Referrals and expanded referrals from the scene.
And senior housing.
Sector.
And that's when we will have better better visibility on it to be honest with you and.
And we won't we won't be comfortable that we've returned to normal.
Until our.
Our long stay patient.
Numbers are.
We don't know, where we had been running and so to the extent that and we say it is a process Dave's really suggesting that's what we're going to be watching over the next.
A couple of months and if those if those call it the.
<unk>.
Lower.
Elements of the of the days in the program and those groups have solidified we're fairly certain that then they will mature and to the a certain percentage of more.
Mature and at the next level and that will have the the salary and Torrey effect on ABC. So it's something hard to at this point, it's a bit of a guess, but it's something that we do feel feel we'll have visibility into as it is in fact happening.
Frank one other quick comment that's embedded inside of <unk>.
And the narrative is as we you know.
Continue to look at occupancy levels and become a good partner with it you know the obviously, there's without stating the obvious there's external factors whether its vaccination rates.
New resident or potential new residents and their families and comfort and confidence with safety and vaccination rates inside of those facilities. The reason why we are stating we're also comfortable when it swings back and as Dave alluded to it's just tie.
Timing and velocity is while the pandemic has highlighted the benefit of the ability to when you can care for patients at their home, which is at the core of home care and at the core of hospice and the other thing that is and it gives us confidence there is always going to be a continued need and.
Roll for the senior housing industry, specifically nursing homes is they're just flat out arent enough caregivers to go out and deliver care at individuals' residential homes for you now.
Period, and I think that's a that's an important thing to note as we feel confident that you know occupancy levels may moderate, but they will continue to come back as the pandemic subsides and frankly, the one thing I'll also let us say put them on to leave Covid, let's say.
And any comparison to 2020 is fraught with peril I mean at the beginning of 'twenty and 'twenty.
And we gave guidance of.
And it was a range, but let's say $16 20, a share I mean that we thought that was going to be a very solid year of course, we didn't know the pandemic was coming.
And.
And what in fact happens through a lot of other forces. We've made reference to reported $18.08. Okay. Obviously, a lot of that I mean.
A good portion of that was things that are hard to talk about sustainability.
We are.
Yeah.
Relaxation of sequestration for a longer period and in 2020, we have relax the temporary relaxation of various regulations by.
Regulatory bodies, but.
And the way, we look at it is and smoothing and saying you know.
We ignore yeah, we like for cash we got that for our earnings of course, our cash.
We had the earnings with Zigbee, and we had the zig and Zag, when we had the zag and we had a.
We'll kind of blowout year and.
And 2020, but.
What we really look at it and the businesses.
We earned <unk> 96 on adjusted basis and.
In 19.
We were looking to the earned 16 20 and.
And the midpoint of our range for next year, a 17 25 so.
And we look at on.
Keep in mind, Roto Rooter, and VITAS for two pretty basic predictable businesses.
Problem is the pandemic made VITAS and less predictable.
In two respects positively and what the government did the key processes and business and negatively on what happened to the nursing homes. I mean, you got to remember it and nursing homes, not only where occupancy levels down.
VITAS and.
Poised weren't allowed on site.
For weeks on and in Florida. So.
And those things tend to have the lingering lagging effects, which were dealing with but overall it's.
We've been very satisfied with the.
The net effect of the.
Both of our company's operations during this unusual period.
Got you maybe another one for Nick on the U.
Mentioned the vaccinations have you seen any at this point is there any anecdotal evidence are you seeing any kind of changes.
And I mean, presumably most nursing homes now and have vaccinated there.
Their population and and I'm, assuming most of the assisted living as well, but have you seen any early signs that where you've got large vaccination rates or it's been completed that youre are you starting to see a change there.
And I think as of right now and obviously, there's a we're pulling it not only at a macro level from fact based and sources, but also anecdotally and you know on a market by market basis, we are seeing encouraging signs related to it and so you know I think as of this morning, there's roughly 65 million doses or so that had been distributed across.
<unk>.
The United States and many of those and the targeted population you were referring to you know we do see.
Signs of optimism, obviously every market every facility whether their residents or whether they are employees and that facility or having different experiences with adoption rates.
But you know all and all the combination of vaccinations as well as those nursing homes and rail.
And you know the pandemic has also highlighted a differentiation and hospice providers debt I'm optimistic we've been able to take advantage of and hopefully we will continue to pull that relationship through and what I mean by that is you know high quality, but also safe. So you know all of our infection disease protocols for safety the PB <unk>.
He then our folks are wearing and the education and we've even provided and are currently providing across certain state segments. I think is hopefully helped to elevate the brand and.
And so you know where I feel confident.
<unk> and us being a good partner with all of those institutions across the entire country in 'twenty and 'twenty, one and beyond and Frank I would say is on where it will declare that nursing homes returning to normal beyond making sure all the the nursing home employees are vaccinated and as well as the resident visitation and.
Returns to pre pandemic rules, when the entire family and grandchildren and can visit their grandmother, who just went into a nursing home. When those visitations are allowed we think that'll be the last obstacle to returning to normal occupancy no one's going to put their grandmother and and nursing home if.
Visits are not allowed or extremely restricted so we think that'll be the last hurdle for normality and another metric you can look at it Frank because we mentioned that we mentioned and passing but it's a big number for us.
Medium length of stay and you'll have a pretty good sense and things will return to normal where that number goes back for 16 or 17.
And parts of the third and fourth quarter. It was as low as 12.
So.
And that's the proof sets and the potent for specific months.
Got you and one last one I'll hop back in the queue.
Other modeling just to clarify no buybacks.
Built into this guide and and obviously the stock is has been and the process of reacting is down another 3% a day, but maybe just any thoughts around buybacks going forward from here. Thanks.
We continue to think buybacks are an excellent use of our free cash flow and we anticipate pursuing that throughout 2021.
And we have a lot of.
A lot of wherewithal to pull those off let's put it that way.
Thank you.
Your next question comes from Joanna Gagik with Bank of America.
Thank you so yourself for a couple of follow up questions.
So when you talk about that day.
On your housing occupants, you said value.
Expect us to begin to normalize starting in second half.
And I guess, you were talking about which Scott and more like just submission patterns when how should we think about the actual census Raleigh.
Crawling cause I guess your guidance you know for down five per cent for the year.
Obviously, it's worth it.
In Q4.
And so I guess, if you can just talk about the cadence here and kind of you know should.
Should we expect the census level itself to kind of get back to credit.
Closer to normal by the end of <unk>.
This year.
So Joe on it.
Yes, we were responding to Franks.
Original question related to it of timing pace and velocity, particularly with that senior housing segment, it's going to impact days of care with a degree of lag to it and no different than it no different than it has historically so you know as we think about the year and obviously, we don't provide.
Quarterly guidance, we built and certain timing assumptions in that specific segment that you know if they come true and you'll see the traditional admission and ADC tag our ADC lag if the general mix of admissions, which I wanted to go back to on a macro level still is positive even with the <unk>.
Climbs and that senior housing segment.
<unk> returned to normal what we'll see is you know how big of a lift up we get from the senior housing footprint coming back and how much of the hospital, but also the physician office referral business, which has performed.
Sequentially and on a year over year basis on a positive level, how much of that continues to pull through as well. So it would be back to the census component would be back loaded in terms of some other growth potential for the latter half of 2021.
Okay. So that we may make reference to it and the guidance as far as what we think for the year.
But certainly the linkage happens and the first half of the year in terms of census, and then we start recovering from there Joanna.
Right. So so in your ear for.
For it.
Uh huh.
Oh, and what kind of assumption in terms of for a question of occupancy improvement and these other studies in terms of nursing homes, and architect and nursing homes, and and senior housing and how you're expecting one to do better than the other setting.
I don't know if.
We can speculate as to which one would do better or not and it also gets to the definition. The senior housing has a lot of other segments outside of just nursing home and LLS inside of it and as we're interacting with all of those various segments with it you know I.
Think some had been impacted more than others, the nursing home ones. The one and really we're really focused on the assisted living.
Communities when you get to vaccination rates, one could theoretically make the argument they would have.
You know it would be earlier to recover because by definition inside of there it gets to the potential patient and their family member being comfortable with one another access and get more than a nursing home, which is more restricted due to the higher acuity need and skilling need of those residents inside of that setting.
And think suggests and one thing there's a couple of elements one element as you might say, what why our occupancy levels.
For these.
These different parts of senior housing down they are down for a couple of reasons. One there was a preferred a presumed and safety associated with them and load.
Think of a New York nursing homes that they were hotbeds of.
New Corona virus infection.
Frank suggested with vaccination levels.
And in many respects.
The other elements of that shouldn't be alleviated another very significant.
No impact on us as Nick said focused on was the.
And the rules and the fact that.
And if you had someone who was severe and family member that was considering.
Our nursing home option or assisted living and care option.
Uh huh.
But knowing day, one when they moved and there will be no visiting visitation allowed.
Since there was a severe impediment to a new add net too.
The senior housing.
To the extent.
Those rules are being softened and they're not they're still changes I mean, the question is what is the new normal there's still limitations on not everyone's vaccinated.
And even the Cdc's rules with regard to.
Behavior by.
Groups of people, 100% of whom have been vaccinated and theyre still different than they were before so.
Ooh.
We're still talking about what the new normal is but having said that I mean keep in mind. There is theres a couple aspects of why.
Our referrals were down for nursing homes, and widen nursing homes.
Sure.
And it's just wound care of lost occupancy Theres a couple of factors those factors are being alleviated at different rates, but to the extent that what we always say internally is there is a reason for the existence of the nursing and living.
Assisted living care sector. It performs a very essential function and.
And.
It's not to be ignored and.
And we're fairly confident.
You know that.
That will report and to wait at least a new normal and we will take advantage of that but it's very hard. Your question really goes to the timing and that predictability and predicting of it for modeling sense I really I understand that we're just saying we don't have the visibility yet, but as I was suggesting to Frank Morgan.
There are aspects of our business that are predictable and.
And we will be seeing Ellen.
Elements of that that is a good class example to the extent that we see are our medium length of stay drifting up to the extent that we see there or percentage of patients who are and the 90 to.
Mm 150 day.
Group to the extent, we see those numbers drifted up it'll help us give you the modelers more visibility.
Right, so yeah, I understand that uncertainty and the other bucket and we can give it.
Right.
All right out on me.
And one clinical data point and it gets a sign of optimism was just released over the weekend that the CDC came out and they were.
Reporting on vaccinations for long term care residents roughly a million residents Baxter and between mid March and mid January and talking about not only the safety, but the adoption component of it that's all encouraging not only for the country not only for that segment, but also for US as we think about the consumption habits as well as the elevation.
And of safety and and that could be a leading indicator into certain things, but at this point.
We're just.
Being continuing to be a good partner and being there to support those facilities and the residents inside of there as each one.
Returns to whatever its new debt.
Finish and a normal is going to be and that's heavily dependent state by state as well.
Alright, because my other part of your question is something you mentioned and I don't.
And you've quantified it but.
And so you said that missions from hospitals actually accelerated.
And 1% and I.
I guess it was out for like 6%, good and in third quarter, but what was the community setting and physician and admission.
Pattern this quarter versus last quarter.
Great.
Yep, we lump it into the and the Homebase setting and so for this quarter. It was up nine 2%.
That setting was for the third quarter on pulling out here and a second.
But it was up as well.
Third quarter it was up.
18, 3%.
Point being is you know as patients may not be accessing those facilities, they're going to a specialty physician or another for primary care physician were there to continue to support that referring segment, depending on wherever the you know the patients are traversing the health care system and that and it's not surprising to US. Let me just tell you that give you like one.
And and say that.
And if a patient is and let's say a nursing home or in some.
Some setting, but I'm going to focus on nursing home for a minute, where they're very familiar with the hospice benefit they see other people being provided that benefit on a daily basis.
And they're in the Super elderly class there.
And they bring they've been told by their doctor that their situation.
Situation is terminal.
And if the disease runs its normal course.
No.
With 51% chance that the.
Yeah.
But they would be.
Discharged on and terminal basis.
The.
The effect of that is that people tend to get in hospice earlier, and one year in hospice earlier, the patient and the whole family.
Realize that.
Rushing somebody to the hospital when they return for when there is in terms of the worst is not what's indicated well if you're if you're not on a nursing home and your home and you haven't been exposed to the benefits of hospice and you haven't turned for the worse that same patient who hadn't been and inertia on what might've been in hospice.
Three months earlier, and and never rush to a hospital at that point well given the fact those patients arent in those settings. There home, there's a turn for the worse the rushed to the hospital and there's nothing they can do and that becomes a.
Hospital admission and it becomes an admission per hospital referred admission to us the only problem is by three months later than.
We would have otherwise would've gotten it so yes.
For the patients.
A good portion of them and if they're not on a nursery, Tom Ben and being at home and then they end up with that hospital stay prior to coming to.
Under our care, which is one of the reasons.
And that we stood.
Congress exists because the save the government money that could prevent that lasse.
And not helpful Hospital visit.
And that bills to be incurred so, yes, we expect but a long way of saying is yes.
We would expect hospital based Ed bits that go up under this scenario. So Johanna last comment to reinforce Kevin's is not only the hospice benefit, but the way in which we operate a VITAS, we're able to respond to whatever setting the patient presents themselves whether its a physician office hospital nursing home.
And a timely quick manner and if they are eligible for the hospice benefit bring them on and care for them, whether it's on a nursing home and L. A for at their house and so that diversity flexibility that I referenced in my.
Prescribed remarks is really what has.
[noise] allowed us to continue to navigate this pandemic successfully and our communities we serve.
Alright makes sense, because that's what I was getting at it.
And some offsetting effect on a more admissions from these other settings do sounds like they come with obviously and potentially lower and shorter length of stay but are you actively pursuing these other referral sources like the physicians primary care specialists.
Absolutely. So we've always pursued educated supported a day.
Deferred a diverse referral base and every market and which we operate for exactly that reason because every patient journey is slightly different depending on where they are presenting and our goal is to help educate all of those referring health care partners as to how to help identify a potentially hospice eligible patient and where we can be there.
To to help you know from and education awareness, even advanced care planning goals of care et cetera to prepare that patient and family for making the right decision for them.
Right and I guess.
So wrapping up on on the hospice side.
Question on Guadalajara.
On behalf to say, though we talk about obviously all these pressures and you know, whereas on your guidance implies a revenue decline this year, you'll see here, but the margin guidance.
It's better than what we were expecting.
19% above 19% is actually.
Much above the pre pandemic levels that the margin.
And back then was 18% I guess call it two.
2019.
Can you talk about and you know how sustainable is that margin is this the way to think about it you know the 19% margin for that business.
While part of part of that shift Joanna as we're doing more routine home care and less high acuity care, which has a differential margin that helps significantly as well as there's still roughly about $6 million of relaxed sequestration and Q1 of 2021. So when you compare to the 292019 margin and that's also one.
So it's those two factors that are contributing Nick anything more on that.
We referenced it and the last quarter's conference call no different than we have in every year and you know 2021 and every year from this point and for it and for all historical years, you know from an operational standpoint, we will always continue to balance out our labor needs against our care needs and the anticipated increase in on.
Only and patient flow, but also patient days of care and so that that goes into it as well and the group did a fantastic job of balancing that out throughout the pandemic.
Just to remind everyone. We did not furlough, we did not lay off a single individual inside of the organization and we were able to achieve the operating results, we posted for 'twenty and 'twenty.
Okay. That's that's helpful and on the onto Roto Rooter side no. Other question I guess.
With this margin outlook for 26% of session and you don't fly for Saturday.
And up year over year, and that's a you know also.
Much higher.
And the pre pandemic level. So it's you know what's driving that better margin and you know at least that 26 per cent kind of sustainable going forward.
The short answer is yes, we think so.
<unk> and the margin increase and you really started them you saw the margin increasing over <unk>.
Seven years ago, primarily because of the increased revenue from water restoration.
And what happens is we have already have the branch infrastructure setup. So although water restoration. All these other jobs have the same rough margin as everything else and since we don't have much and the way of increased infrastructure cost more of the contribution margin for the incremental revenue drops for the EBITDA line.
And what happened with water restoration and it's also happening just overall the increased revenue we're enjoying doesn't come with any increase Inc. Increased infrastructure cost. So again more of that contribution margin for that increased revenue is dropping to the EBITDA line and we expect that to continue.
Some of the things that really help 2021 in terms of.
Increased margin that we're not anticipating continues would be it for example, health care costs for both VITAS and roto rooter or abnormally low as people avoided scene and the doctor during the pandemic.
It helped the margins a little debt on that as well and 2020, and we didn't anticipate that continuing but it all got dialed in higher revenue is contributing to the maintaining.
Maintaining the margin.
Alright, and at the very last question cash flow, obviously, you mentioned, a very strong cash flow.
And how should we think about cash flow for this year and and Capex because it sounds like you know you've been opening up.
A couple of these de Novo and your plan.
On a more sounds like and Florida inpatient units. So can you give us a sense of you know operating cash flow and then also capex including growth Capex.
Capex outlook for day I think.
Yes, certainly whatsoever, what I would say in terms of the cash flow and 2020 for the calendar year is artificially high and one of the reasons. For example, there was 40 some odd million dollars on the cares Act money that we took as lost revenue that didn't have any cost attributed to it so on a pre tax basis that was pure cash flow.
In addition, we had about a little under $40 million of deferred payroll taxes for the chemed consolidated so we don't have to pay the employer portion of payroll taxes until half of it gets paid in December of 'twenty, one and the other happened December of 2022, so that spike cash flow another.
$40 million say roughly.
And then you add of course sequestration, which is real but we don't expect that to continue that spiked cash flow and another $18 million, so really takeaway and I'll call. It about $110 million herself out of the 'twenty and 'twenty cash flow.
I think it's safe to say our free cash flow was really a our adjusted earnings per share. So if you take between 17% and $17 50 take 17 and a quarter at the midpoint at $16 5 million shares Youre talking free cash flow and the neighborhood up just north of $300 million.
We expect depreciation and amortization run between 58 and $60 million in 'twenty and 'twenty, one we expect capex to be running between 55 and $60 million and 2021, so our free cash flow, earning characteristics haven't changed we don't have any net debt worse as on this morning, we're sitting on a net cash of like 220 million.
Yeah.
So I'd say, if you really want to pay available of if you look at the cash on our balance sheet of 200, plus and 300 plus of free cash flow, we have $500 million of cash flow.
And to play with in terms of share repurchase and other investment opportunities and we fully intend to put that to work if we're able to in 'twenty and 'twenty one.
Okay. Thank you.
And you so much for that color.
I'm not showing any further questions at this time I would now like to turn the call back to Kevin Mcnamara for any further closing remarks.
Well field and closing remarks, I just wanted to.
Thank everyone for their kind attention and.
It was an unusual year and 2020, but we.
And we look forward to returning as soon as possible as a business as usual.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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