Q4 2020 Amedisys Inc Earnings Call
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Right right.
Greetings welcome to a medicine for fourth quarter and year end 2020 earnings conference call.
At this time all participants are in a listen only mode.
On the answer session will follow the formal presentation.
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Please note this conference is being recorded.
At this time I'll turn the conference over to Nick Muscato Nicky.
Nicky you may begin.
Thank you operator, and welcome to the <unk> Investor Conference call to discuss the results of our fourth quarter and year ended December 31 2020.
Copy of our press release supplemental slides and related form 8-K filing with the SEC are available on our Investor Relations page of our website.
Speaking on today's call from them that assess will be Paul Kusserow, Chairman and Chief Executive Officer, Chris Gerard President and Chief operating Officer, and Scott <unk> Executive Vice President and Chief Financial Officer also joining US is Dave Kimberly Chief legal and Government Affairs Officer.
Before we get started with our call I would like to remind everyone that statements made on this conference call. Today may constitute forward looking statements and are protected under the safe harbors for the private Securities Litigation Reform Act.
These forward looking statements are based on information available to a medicine today. The company assumes no obligation to update information provided on this call to reflect subsequent events other than as required under applicable securities laws.
These forward looking statements may involve a number of risks and uncertainties, which may cause the company's results or actual outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our forms 10-K, 10-Q and 8-K and.
In addition, as required by SEC regulation G. A reconciliation of any non-GAAP measures mentioned during our call today to the most comparable GAAP measures will be available on our forms 10-K, 10-Q and 8-K.
And I'll now turn the call over to our medicines CEO Paul Kusserow.
Thanks, Nick and welcome to the <unk>, 2024th quarter and year end earnings call.
We generally try to avoid hyperbole on these calls, but considering all of the challenges 2020 through our way our performance has been nothing short of spectacular.
I could not be prouder of our over 21000 employees that have worked tirelessly to overcome the obstacles presented by our stork pandemic.
A first in 20 years regulatory payment reform.
Providing the highest quality care to our over 418000 patients.
Other highlights of the superlative performance, we delivered in 2020 are as follows.
When the pandemic hit we quickly mobilized to ensure our ability to reach and serve our patients we secured ample PPE, creating a centralized distribution center, we implemented new PPE protocols for our clinical staff, we developed a COVID-19.
19 positive patient treatment protocol.
And our business development staff rapidly prioritize and secured our current referral sources and even found new ones, helping us to recover quickly our volumes at even growth.
So naturally despite all the challenges presented by COVID-19, we grew our adjusted EBITDA year over year by 21% for.
From 225 million to $274 million, while expanding our EBITDA margin of 170 basis points to 13, 2%.
We continued our inorganic journey forward and successfully closed the <unk> care hospice transaction during the middle of a pandemic.
And are actively out looking and negotiating for more deals, especially on home health care.
P D. G M. The first major regulatory payment overhaul since P. P. S over 20 years ago.
Our 2019 investments and constant practice paid off we executed nearly flawlessly overcoming the for three six behavioral assumptions rate impact.
Lastly, we continued our close to core innovations.
By expanding the utilization of our nationwide personal care partnership three times we.
We developed a snip at home product solutions to take care of higher acuity patients who want to recover at home.
And we integrated telehealth into our care planning.
Our personal care network generated approximately $3 5 million in revenue.
Our care coordination with our home health and hospice segments for the full year 2023 times at starch and a revenue number we look to double in 2021.
We are also working on exciting new innovations largely in predictive analytics and integrated care technologies that will further allow more people to be able to age in place in their home.
Before we dive into our fourth quarter and 2020 results in 'twenty 'twenty, one outlook I want to acknowledge both Chris Gerard and Scott yet.
If you saw our announcement last night, then you know that our board of directors has appointed Kris to President and CEO and Scott to executive Vice President and CFO.
Chris and Scott have been in their role since 2017 and have helped to craft and execute upon all of our strategic initiatives, but it was in the two months of 2020, where they showed their true metal, helping guide us through P. D. G M and COVID-19.
We not only survive but thrive.
Both of these promotions are richly deserved and fully earned as a result of exemplary leadership hard work and significant achievements.
I am confident that both Chris and Scott will continue their exemplary leadership and help drive the company to even greater levels of success once again, congratulations gentlemen.
With that I'll turn the call over to President and COO, Chris Gerard for a run through of our fourth quarter performance take it away Chris.
Thanks, Paul and let me first start by saying I'm excited and honored to continue to help lead on medicines on our journey to becoming the aging in place solution for patients wherever they call home.
Thank you to Paul the board and all the other medicines associates that help to enable our mission.
With that let's take a look at the fourth quarter and full year 2020 results as it relates to our four strategic pillars quality people operational efficiency and growth for us.
Quality.
As you know quality has been and will continue to be a focus of the organization. We are proud that during 2020, our home health business achieved a quality of patient care Star two P. C score of 4.33 and.
And we had 95 per cent of our care centers at force bars, and 65 per cent of our care centers on four and a half plus stores.
Next people.
In a year in which numerous unforeseen challenges impacting our daily lives and work lives I'm very proud of the progress we've made in supporting and retaining our talent.
Our total voluntary turnover for the year was 18, 3%.
We made good progress, we still have work to do especially within our clinical staff.
Reducing nursing turnover is a key initiative for us in 2021, and I'll look forward to updating you on our progress here in subsequent calls.
Now on to operational efficiency.
Entering the year PT GM was our biggest initiative and even though the pandemic through a wrench in our plans, we still overcame the impact of Pdgf's behavioral assumptions on.
Optimize our care delivery and utilization to ensure that our patients while receiving highest quality of care with the most appropriate visit and we improved our clinical staffing.
For the quarter, we performed 14 business perhaps.
Which was down point for business sequentially, and 2.8 visits year over year for.
For the full year of 2020, we performed 14.9 visits per episode.
Down $2, one business from 2019.
We remain very comfortable with our <unk> experience as we have seen no impact on quality and in fact quality performance has improved throughout the year.
Entering 2021, we will likely experience a slight tick up from our fourth quarter exit rate.
It's COVID-19 related this business return, but we believe for the full year 2021, our business, perhaps so it should be around $14 five.
On clinical mix, we achieved 47, 5% LPN utilization and 59% PTA utilization in the fourth quarter.
Visits per episode have come down our ability to increase our LPN utilization has become more challenging.
However, there is still room for improvement on this numbers, we worked through 2021.
And finally for growth.
For the quarter in home Health, we grew same store total volume inhibition is 5% and 6% respectively.
For home Health Division has been nimble throughout the pandemic as displayed by another strong quarter of Grace.
In hospice, we grew same store admissions by 15%, while EDC was flat for the quarter.
Last quarter, we discussed how ADC growth lagged admissions growth.
At the end of the fourth quarter, a new industry dynamic further inhibited our ability to grow a D C.
This new dynamic was a sharp increase in the death and discharge rate from the same month add nuts.
Along with the timing of patients coming on to service, which all hindered ADC growth during the quarter.
So that otherwise patients were dying on service faster and entering our hospice business later in the dying process do historically.
This was largely related to COVID-19, or the deferral on care due to figures from COVID-19.
We believe this is an industry wide dynamic.
She will course correct over time, however, it's hard to project when that time will be.
The ADC and it continued in early January.
But we're now seeing some very positive signs in fact, we started to see a week over week decrease.
As you know in February as well as total administered pads from total discharges.
We have provided additional information on these trends in hospice stats, along with our 2021 monthly ADC projections on pages 13, and 22 of our supplemental slide deck.
As you can see we had another great quarter and an incredible year.
Focusing on our four strategic pillars continues to pay off for our patients our employees and our shareholders.
With that I'll turn it over to Scott, who will take us through a more detailed review of our financial performance for the quarter and year as well as our guidance for 2021 Scott.
Thanks, Chris I'm very pleased to report on another excellent quarter and full year financial results for the fourth quarter of 2020 on a GAAP basis. We delivered net income of $1 36 per diluted share on $551 million in revenue, a revenue increase of $50 million or 10% compared to 2019.
<unk> for the year, we delivered net income of $5.52 per diluted share an increase of $1.68 on to one beta on revenue an increase of $116 million on a 6% compared to 2019.
As a reminder, we have chosen to play our cares act funds only to direct costs associated with COVID-19.
The majority of these costs are included in cost of service and consists of the following.
PPE of nearly $1 6 million for the quarter and $14 4 million for the year testing.
Testing cost of $3 9 million for the quarter and $5 5 million for the year.
Our team pay of $1 2 million for the quarter and $4 1 million for the year. We've utilized 33 may of the cares Act funds received for.
For the quarter, our results were impacted by income or expense items adjusting our GAAP results that we have characterized as non core temporary or onetime in nature.
18 of our supplemental slides provides detail regarding these items and then kind of statement line items each adjustment impacts you'll note that our adjustments included the recognition of cares act funds and direct costs associated with COVID-19.
For the year on adjusted basis. Our results were as follows revenue grew $110 million, a 6% to $2 1 billion EBITDA increased an impressive $48 million or 21% for $274 million.
EBITDA as a percentage of revenue increased to 170 basis points to 13, 2% in.
And EPS increased $1 71 sets for a 39% to $6 11.
Which includes the Q3 EPS benefit of <unk> 72 sets, resulting from executive stock option exercises.
The suspension of sequestration added 23 million to our revenue and gross margin for the year.
As our results indicate 2020 was a tremendous year for <unk> as we continued to execute on our plans to deliver financial results.
That match, our clinical excellence, we successfully implemented PDGF and delivered on our cost mitigation strategies, which led to significant expansion of our gross margin and helped us to overcome the challenges presented by the pandemic.
Additionally, we closed on and successfully integrated two hospice acquisitions during the year.
For the fourth quarter on adjusted basis, our results were as follows.
Revenue grew $50 million or 10% to $551 million.
EBITDA increased $26 million or 50% to $78 million EBITDA as a percentage of revenue increased 380 basis points and EPS increased 55 cents to $1 40 NAV per share.
Items impacting our fourth quarter 2020 performance are as follows.
The suspension of sequestration added nine may entire revenue and gross margin rate increase of two 4% effective October one.
Continued improvements in clinical utilization and a shift in clinical staffing mix drove a substantial portion of our 450 basis points improvement in gross margin.
The benefit of our 2020 hospice acquisitions and raises which went into effect August one.
Sequentially EBITDA increased $2 5 million driven by an increase in hospice reimbursement and home health volumes, which is offset by a full quarter of raises a decline in hospice ADC and increases in contracts on utilization and health.
Now turning to our fourth quarter adjusted segment performance keep in mind segment level EBITDA as pre corporate allocation.
In home health revenue was $329 million of $13 million four per cent compared to prior year driven by strong same store total volume growth of 5% and total admissions growth of 6%.
Revenue per episode was up $54 or 2%, which is driven by the suspension of sequestration and increasing case mix offset higher lupus and a two 8% <unk> rate cuts, resulting in a roughly flat year over year change in revenue per episode, excluding the sequestration benefit.
Visiting clinician cost per visit increased 6% over prior year. The increase was driven by planned wage increases effective August <unk>.
A significant increase in these from contractors driven by growth in the high number of quarantine commissions, which reached a peak in the last week of December <unk>.
Increased health insurance expenses that lay in medical spend due to COVID-19 caused a more significant sequential increase for normal seasonality.
New higher pay and the impact of lower book lower visit volume on a fixed cost.
Our gross margin improved 490 basis points. Despite the six for an increase in cost per visit.
The improvement was driven by our significant progress on clinical staffing mix and utilization a 90 basis point impact from sequestration relief on the variable nature of our business model, it's benefited from higher volumes.
G&A increased approximately 4 million, mainly driven by planned wage increases. The addition of business development resources.
And Thats, a slate of PDGF, partially offset by lower travel and training spend.
Segment, EBITDA was $65 million up $17 million with an EBITDA margin of 19, 8%, representing a 460 basis point improvement.
Sequentially segment, EBITDA was down for $3 million as higher contractor utilization, a full quarter of raises and higher G&A spend more than offset an increase in volumes.
Now turning to our hospice segment results for the fourth quarter revenue was $204 million of $39 million over prior year, an increase of 24%, which includes the addition of two acquisitions closed during 2020 Assad on on January one and a share care on June 1st.
Net revenue per day was up 5% to $160 72.
Driven by sequestration suspension on a two 4% hospice rate increase.
That went into effect October one.
As Chris discussed after submission growth was an impressive was impressive at 15%. However, ADC was flat as an increase in deaths with patients on incentives and delays in care resulted in shorter length of stay.
<unk> cost per day decreased $1 68 primary related to pharmacy contract renegotiations.
And the decline in business performed by our employees due to COVID-19 related access restrictions.
EBITDA was $53 million up approximately $15 million an increase of 40%.
The <unk> care acquisitions added revenue of 32 million and EBITDA of 5 million for the segment's performance this quarter.
Sequentially segment, EBITDA increased $3 4 million, despite a sense of a sequential decline in ADC. The increase was driven by the impact of the hottest rate update effective October one.
Turning to our total general and administrative expenses.
On an adjusted basis total G&A was 174 million on 31, 6% of total revenue.
Is an increase of $20 million year over year and includes $11 million on additional costs related to our acquisitions.
<unk> made our hospice segment and 2 million in corporate.
Additionally, incentive comp accruals raises additional business development resources and operational support staff accounted for approximately $9 million.
We continue to generate impressive cash flow in the fourth quarter, producing $66 million in cash flow from operations our.
Our cash flow for the quarter was impacted by approximately $15 million on additional tax payments related to our treatment of cares Act funds for.
For the year, we generated $289 million on cash flow from operations.
Our continued strong cash flow generation that has helped us to end the year with a net leverage ratio of <unk> seven times, which is quite impressive as we have completed approximately 650 million on acquisitions since February of 2019.
We remain focused on pursuing M&A opportunities in 2021 with an emphasis on consolidation opportunities within our home health segment.
Finally, as you can see on page 20 of our supplemental slide deck.
<unk> our guidance for 2021.
Our guidance range as our revenue of $2 two eight to $2 $32 billion.
Adjusted EBITDA of $315 million to $325 million and adjusted EPS of $6 25.
To $6 47.
There are several key assumptions impacting 2021 guidance outlined on slides 19 through 22 of our supplemental slides.
First our home health and hospice pricing updates are partially offset by the sequestration suspension ending March 31 2021.
The estimated impact of pricing updates net of the anticipated retired on sequestration.
Is $20 million as noted on slide two of our supplemental materials, we anticipate a decline in ADC before returning to sequential and year over year growth in Q2.
Quicker than projected ADC recovery will result in significant outperformance.
Incremental EBITDA contribution from previously completed acquisitions of approximately $25 million.
Some margin impact on the hospice business from the alternative outweigh Commission visits which is approximately $8 million benefit to the hospice segment in 2020.
Planned wage increases of 2% to 3% that will be effective in the second half of the year.
Keep in mind, our first half 2021 results are impacted by raises given in August of 2020.
Total.
Equates to approximately $24 million an increase spend.
Our effective tax rate assumption is approximately 26% with an estimated cash tax rate of approximately 15% and finally continued incremental investments in the business of approximately $15 million, which include additional de novo spend of five.
And investments in innovations and projects are approximately $10 million.
Some additional items to keep in mind led to our performance from Q4 2020 for Q1 2021.
The impact of the ADC hospice declines combined with two less calendar days is estimated to impact revenue by approximately $10 million.
Home health rate increase net of true sequestration of $4 million and a benefit of lower health costs related to seasonality of claims.
Additionally, on the full impact of the retirement of sequestration in Q2 was $9 million.
Yeah.
Finally, our guidance assumes 33 4 million shares and we are projecting cash flow from operations to be in the range of 235 million to $240 million.
This projection is inclusive of the impact of the no pay rep and repayment of payroll tax deferrals under the cares Act, which together total nearly $60 million.
I'll now turn back the call back over to Paul to conclude Paul.
Thank you EVP and CFO, Scott Ginn well done as you can see we have much to be proud of for what we were able to accomplish in 2020 is turned the headwinds of PDGF and COVID-19 into tailwind we have even more to be excited about.
For 2021 and beyond.
First demographics, they are strongly in our favor with the baby boomers, creating a potential surge of patients in the coming year with more people, turning 65 years old than ever before the.
For the burgeoning 75, plus population coupled with ever increasing unsustainable health care costs puts us in a very advantageous position as an at home aging in place company delivering the highest quality care at the lowest cost to seniors.
Keep in mind over nine out of 10 baby Boomers want and expect.
To be able to age and die at home.
According to CMS as public projections and based on current law book.
Both home health and hospice are in line for positive rate updates well into the future given the low cost and high quality nature of our businesses. This makes a lot of sense.
Next our scale and cash flow generation, coupled with the fragmentation of both for home health and hospice industries.
Presents us with an exciting opportunity for continued inorganic growth and will position us as a major market consolidator.
As the unsustainable subsidies subside, we expect to capture more and more market share over the coming years as we roll up our respective industries and lastly.
For the Covid accelerated trends of doing more for more in the home no. One is better positioned than <unk> to take advantage of the share shift into the home.
And as we grow our sniff at home capabilities technology innovations and other high acuity programs, we expect to take even more share from other post acute providers, it's truly unexciting time to be at a medicine and that ends our prepared remarks operator.
Please open the call for questions.
Thank you.
At this time, we'll be conducting a question and answer session to allow as many participants as possible to ask questions. Please limit yourself to one question.
If you'd like to ask a question today. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.
You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to for you kept your handset before pressing the star keys.
One moment, please so we pull for questions.
Thank you and our first question is from the line of Brian <unk>.
With Jefferies. Please proceed with your question.
Hey, good morning, guys. Congrats on the on the year in the quarter. Since we are only allowed to ask one question I'll give you a three part one.
No.
Yeah, Paul I'll start by asking obviously the growth rate for Q4 was solid, especially relative to what we've seen for the peer group.
How are you thinking about in the guide is a strong rate so what drives that and then I guess related to that.
The hospice ADC, obviously his childhood as faceless challenges. So if you can walk us through.
What you are doing or how youre thinking about inflicting that and getting us to the trend line that you showed on that slide on your deck and then I guess for Scott last one is just the conservatism guidance all.
Related to the first two parts of the question. Thanks.
Yes on the on.
The growth side I think we're just very confident about.
What we've seen in terms of our trajectory Bryan Besides good looks and charm, which I think we've got.
Yes, there is lots of that's a joke or theres lots of sales.
Sales folks that we've been incorporating we've taken a lot of business.
And in the Covid period, I think by being good.
We've actually done.
As we've pitched in hard and we want a lot of market share although in some places, let's say in some facilities.
So now some.
Some of these other places we've gained share but it's but it is.
Hi.
Smaller due to Covid again, so I think our feeling is that we can continue to drive the volume.
We're seeing very strong indicators that again, the quality correlations to service correlations.
Talked about initially.
Came in very strong with P. P. E. So I think I think that's been pushing us forward. So yeah, we're going to stick by the 9% home health growth at 18%.
Hospice admit growth and then drive that and then we're starting to see some good things on ADC, but I'll, let Chris take that one.
Yeah. Good morning, Brian. Thank you, yes, so on the ADC side, we've analyzed this.
Almost every which way you can and what we're seeing is is that you know truly across all segments.
Upsetting in home or in facility.
Our Smith as well as where the referrals are coming from either position our own home health agencies, referring over or hospital or sniff referrals were seeing a decline in the lakes day across all of those segments. So for us.
We do feel like it's going to happen throughout 2021, and we're already seeing that so far in January and February as you know as the.
The vaccine is getting more widely distributed.
And Covid is starting to decline we're starting to see these death rates start to decline as well.
We expect that to continue through this year.
And then start to revert back to our normal lead to stay and you can see that illustrated on our slide deck in terms of where we see it going.
That part, we see as kind of uncontrollable on from.
Our our viewpoint is just really more about people getting comfortable going in seeking other medical care.
Timely timely fashion.
From the things that are controllable, it's around emissions and we've been building out our AR.
Our FTE count on staff for for sales, we have been working with our data to identify new referral sources and taken opportunity, obviously with a 15% admission growth.
Year over year in Q4, that's a good sign and we've got aggressive growth plan. This year 18 percentage for the full year.
Mitch.
We feel like we're going to execute on that strategy in just a little color around that on the admit growth and the AUC growth.
Through the acquired locations that we've done over the last couple of years plus our de Novo's. We've got about a third of our agencies that are less than 50, ADC and that's where we see the real opportunity is taking those smaller agencies growing those aggressively we have the feet on the street, we had the volume flow thats coming through in what we just need to.
We really see it pull through on an ADC perspective is a reversion back to a normal zone.
Yes.
I'll get to your third one.
Brian So I think from a conservatives on the guidance perspective the trends.
On the ADC is what's got US there, we certainly have the opportunity to outperform as we move forward.
So we're watching those trends we feel good about them right now, but as we were sitting here in November.
Really good where we were then the deterioration from this kind.
Kind of a shift in what we're seeing from a discharge perspective, certainly had us rethink it but feel good about where we are I think there is always something built in there you certainly we're going to.
We've done a good job at our spend over.
Over the years the way we low this is we generally with some room from a decision on perspective, where we're not going to load up all cost early if you were to go look at our trend Youll see that we kind of spend late in years and that is once we have a better handle that we're delivering on our growth promises. So we'll do that again I'll ask myself room, there so feel pretty good that.
The other place well right now and generally.
We come out Theres, some conservatism around that delta.
Thanks, Brian.
Thank you.
Our next question comes from the line of Justin Bowers with Deutsche Bank. Please proceed with your questions.
Hey, good morning, gentlemen.
Hey, everyone and congrats to Chris and Scott on the recognition and big job well done on this year.
Just kind of follow up on the on the previous questions one related to home health. It sounds like you guys are taking share.
And I was just curious if.
One.
Where are you in terms of the the recovery of day electives are our trends pretty similar to where they were.
In the last quarter and then.
How are you thinking about that in terms of the guide how much of that comes back this year.
Then.
And then.
On hospice I'm, just one with all the moving pieces how are you thinking about margins year over year, there and then I'll stop there.
Great, Chris I'm going to hand off to you except for one thing that I think we're watching very carefully just into that is.
Or the fact that straight hospital discharges are not only what we're looking at we're seeing some migration of certain procedures. After ambulatory surgery centers. So we're seeing some growth there. So I think one other things we've done very well was understand.
And on <unk>.
Where the.
The types of.
Places, where we get our patients where there has been migration, we followed that in when we followed it over to ambulatory theirs.
We expect there's going to be more and more of it's done over there.
As well as other.
Other places outside the hospital, but we were all over the hospital, we're winning shares there we're winning share there, but we're going to look for that to be a little more diffuse than we used to see I don't know Chris.
Yeah, Thanks, Justin so.
What we're seeing on what we have baked into our plan for 'twenty 'twenty. One is we don't right now we're at about 75% of pre pandemic levels in terms of the elected procedures, we don't have that coming back to a 400%. So for in the event that it does that's some upside for us we have been coming back to about 90%.
So thats kind of baked into our growth numbers, we do get our fair share of these referrals coming out of hospitals.
As Paul mentioned some of those may transition over to.
No.
Ambulatory surgery centers, which we see as an opportunity to actually increase our share of those discharges. So we see that as an opportunity.
Side, it's not really baked into our numbers.
But.
When you don't have really a significant part of our 9% admission growth.
Thats planned for 2021 coming from this subset sector go again, we're sitting at 75% of pre pandemic levels, it's not gotten much north of that.
During the pandemic. So we're still we're still being pretty conservative around our capturing about.
Yeah, Yeah, and then you are requesting around us I think on margin on hospice margin I think most of that movement, you're going to see is it really going to be at the gross margin line I think with all of the everything we have going on here, there's a lot of moving pieces with acquisitions run it out I think.
From a gross margin perspective, we came in roughly at 49% for the fourth quarter, which is really strong and as I signaled throughout the year, we were benefiting probably about 1% from lower visit volumes because of access issues on hospice.
That normalizes to around 48%.
From a gross margin we're going to have.
Right right right increase for a full year, which will affect in Q4. So that's a beneficial you'll have sequestration go away in the second quarter. So I think from a gross margin percentage, we're going to kind of hang in that 47% to 48% range for the year, which would probably keep us on a similar range to where we were net 20 <unk>.
<unk> had 24 to 20.
25, 5% type of EBITDA margin in hospice.
Got it thanks, so much for other questions.
Thanks Joseph.
The next question comes from the line of a J Rice with credit Suisse. Please proceed with your question.
Hey, Jay Hi, everybody.
Maybe I'll just ask you about the labor dynamics.
I know you've called out now.
A couple of times.
In the last quarter.
Head to head.
Headwinds from <unk>.
Clinicians on on quarantine I Wonder if you could quantify that.
Youre coalitions I would think they would be.
Pretty much front on the line to get the vaccine and so could we see that moderate pretty quickly once they were vaccinated. They wouldn't have to be add on core gain or is there something I'm missing there and then just on similar on the turnover rate your turnover rate was down sequentially from third to fourth quarter.
I guess, we're hearing about conditions burning out on all of this stuff with the.
Covid crisis to see the turnover rate come down to sort of.
'gainst that grain any comment on how you are.
On having that happen.
Yes.
I must start on.
Let me start with the kind of the impact around the dollars and Chris I'll, let you kind of get more into the other piece around the core data and so forth but.
I'll start with the fact that <unk> does certainly we had a impact to us and.
And we did see some higher quarantine of clinicians in Q4 as Covid cases, Roes. We think we peaked at the end of the end of December So that certainly is working its way down, but it'll be a slow kind of drop.
So thats.
So what's causing that what happens when that happens as we're getting impacted by leading contractors. The strong growth in home health is also driving that need as well.
From a sequential perspective, we were up $1 39 on contractor cost per visit at one 8 million visits per quarter that's roughly.
Two $5 million sequential hit to us relative to that year over year were up roughly $2 36 on contractor cost per visit which equates to roughly a $4 million. So certainly some opportunities on those but.
The strong growth will kind of limit to how quickly we can bring that number down Chris any other color.
Yes, just just in terms of kind of the work force. We peaked at about 6% of our clinicians were Inc.
On corn seeing leave.
In December that was the high watermark for us dating back to early April.
Of last year.
That number has come down significantly so far this year, we're around 3% as we get our clinicians vaccinated that obviously offset some of that so that theyre not required to go on corn team leave.
Even if they are going to expose but they have been vaccinated right now we're about getting close to 40% of our clinicians have been vaccinated. So thats moving in a good direction.
As well, while we're focusing on for this year is really that clinician burnout for both home health and hospice and making sure that.
We're adequately staffed we're really beefing up our clinical capacity.
Frankly, our 6% Medicare or 6% growth in Q4 was a little bit stunted just because it was coming so fast we're finding warranty with our with our clinicians and utilizing contract nurses that we could've done a little bit better. So we're really has opened our eyes to making sure that we're building out this clinical capacity.
This year, making sure the back door shut in terms of any nurses choosing to leave the organization.
We see that we've got good line of sight to be able to support the growth that we're going to have that we have in our plan for this year at the same time driving down contractor dependencies back to a normal level. So you know.
I am very optimistic about all of that.
Those are all kind of good.
Factors to support not only good growth for this year, but a good growth trajectory going forward.
And then two points. Thank you.
On the labor side one is.
One is we know what causes burnout.
We were on the staffing business. So that's what we're.
That's all.
Our utilization of human capital is what we do as a business and hard to find human capital. So we've developed a very good predictive model out there, which can basically tell when were going to lose people between 60 and 90 days ahead of the time they leave.
We're.
Being very proactive now about driving this model to drive down turnover.
<unk> seen some very good early results and.
That sort of effort to understand how to manage human capital, which is key to our success. We are just people we have no real assets and therefore the assets our people and we have to have incredible understanding, particularly when.
There is more burn out and there is shortages of conditions. So we feel very good about where we are but we're going to continue to really drive.
B in the vanguard of understanding.
How to predict labor utilization, how to predict burnout how to predict turnover.
Okay, great. Thanks.
Our next question is from the line of Andrew Mok with Barclays. Please proceed with your question.
Hi, good morning.
Hi, Good morning wanted to follow up on the Hartford headwind on the left side of your earnings presentation, you have a nice visual for the revised hospice ADC assumptions in your guidance I think the revenue headwind at about $25 million I think I heard a $10 million headwind in your prepared remarks can you confirm that headwind amount or provide a quantification for the ADC revision.
Yes.
Yeah.
Yes.
Prepared remarks, referencing the move from Q Q for Q1, and the $10 million number as we thought that that would be impactful to revenue.
Your math is looking at the chart Youre probably in the ballpark on from a revenue perspective on what you can see there.
Got it Okay. That's helpful and I wanted to dig in a little on the expectation for a 9% increase in same store admissions growth on the home health side. How are you thinking about the pace of that growth throughout the year and I think you had 1700 no referral sources through Q3, you have the total new referral sources for the year.
Are you able to quantify the contribution to growth from those new referral sources.
Yeah. That's a great question. So I don't have the number for the full year I do have an update for Q4 and that was actually 3000 on the home health side, a new referral sources and that generated.
20% of our volume for for the for the month for the quarter I am sorry.
We're still really doing well.
Well in terms of attracting the new reforms Pearl sources and getting good yield out of out of those those referral sources and that's.
That's baked into kind of our assumptions around.
2021, as well we want to continue along that path in terms of pacing, obviously Q2 is going to be a low comp.
So.
We expect that you'll see on an outsized kind of year over year growth number in Q2.
In Q3, and Q4 should be a little bit more kind of in lines of the high single digits on the growth side in Q1, a little bit softer there was no disruption with regards to.
The pandemic until late in Q1, we.
We lose a couple of business days this quarter than what we've already kind of witnesses we had a pretty quickly storm last week.
We ended up losing about 325 office day, so our offices were closed.
In the impacted markets for a total of 325 days, if we accumulate that much.
Much of that gets moved to the right, but not all of it and we will have instances like that.
We'd look relative to last year. It was only 20 days that we lost in February due to weather. So that's a little bit of a little.
So a little bit of a standard we took in last week just related to just kind of the weather dynamics, but and we don't feel like that's all lost business, but just a little bit on kind of a slowdown for for Q1, but otherwise.
We should see.
Solid solid growth throughout the year with Q2 being a little bit exaggerated because of the easy comp.
Got it and then go on acrylic.
Yeah.
And approximately 1100 75.
New hospice referrals too for the quarter right.
Correct.
Yeah. So on both sides of the Andrew we're doing pretty well.
Thanks.
Next question comes from the line of Whit Mayo with UBS. Please proceed with your questions.
Okay.
So Cvs put out a slide on their earnings call, suggesting that they believe they will vaccinate pretty much everyone in assisted living long term care by <unk>.
Mid March on out maybe that's optimistic I have no idea can you just maybe remind us your exposure, but really the question on getting to here is.
How are you orienting your strategy around this for the reopening and how you position to get your clinicians back in the door. How are you engaging with these access points just feels like a coiled spring and maybe to clarify this across both lines of business. Thanks.
Yes, it's going to be more impactful for hospice, which has much more significant.
Our share of market in the areas, where CBS is going to be going my hope is that Cvs is right.
Much less in home health.
Obviously I think it is good the question is.
That is will this bounce back to the old norm. We are convinced that that's going to happen. We're convinced that what's going to happen is more referrals will probably continue to go to home health.
Due to the fact that referring clinicians now have had a year.
Trying to keep people institutions, but of course, you've got the numbers on I think it's 40% on hospice and I don't know what it is on wholesale it's about 8% exposure to the denials on the home health side.
What we've been doing this we've been getting increasingly more access to the facilities, mainly around having our clinicians vaccinated to be able to enter into the facility. So that's that's an opportunity that we're continuing to focus and take advantage of what we do see you know as if 100%.
Occupancy for our residents are are vaccinated about mid or late March I don't know that that's necessarily a lot of upside opportunity really what we need as these facilities to get back to kind of pre pandemic occupancy levels.
And I still think that even on the residents are vaccinated.
And they're not letting family members, who are not actually that's still going to be a little bit of a barrier.
For them to grow their kind of their occupancy levels.
So we don't we're not really baking that into our projections for 2021.
That has tremendous upside.
But as things start to kind of settle down and more people are vaccinated, we do see just kind of a little bit more returned to norm versus just outsized opportunity.
Okay.
I think for your idea the idea for us with smaller pie bigger piece, we've been stealing share regularly largely that's because of the good citizen marks we've been getting have taken care of COVID-19 patients are getting early and PPE and then pushing vaccination. So as long as we're there we think that it can keep doing that we think will get.
The bigger pieces of a smaller pie our hope as the pie gets back to normal if CBS is going to be pushing that that would be great for us, but we are counting on it.
Thanks, a lot.
I appreciate it thanks. Thank.
Thank you.
The next question is from the line of Joanna Cassia. Thanks for.
America. Please proceed with your question.
Yes.
Alright. Thanks.
I just wanted to talk about I guess that you mentioned are you there.
The discussion on the margins on that on the hospice side. So can we talk about the outlook for the margins on the home Health Science I appreciate the color about the progression of the.
Of that mission.
On outlook for the year, but can you just walk us through what the puts and takes on the on the margin side of things.
Yes, so on the hospice side.
On the home health I'm, sorry side of the business, we ended up 44, 2%.
Pretty phenomenal margin for us we've seen continued improvements there I mean, its similar things and I'm just kind of talk about so if you think about we had rate good guy coming through that'll be helpful. You have sequestration runoff in Q2.
So those are all great. The other thing that we do have as margin expansion opportunities. If you go look at our PPE.
We're down to eight year over year in Q4, and we've looked at in Q1 of 2020, we were at $15 eight so theres opportunity earlier in the year around that Theres opportunity also for the revenue per episode were roughly down kind of three 5% to 4% in Q1 to Q2.
Were basically flat when you take away sequestration right now so youre going to we will see some expansion opportunities when you kind of look at a year over year comp perspective.
Back to the where we really are at $44. Two I think we will have a net 44% to 45% kind of range on a gross margin perspective.
For the year and we're right around.
<unk>, 19%.
For.
For the year and EBITDA margin.
I think we have a potential with the rate increase to get a little slightly better than that.
There is still additional margin availability in our utilization.
L P M.
At a time book, but we will still continue to focus on that as well and then the one thing that it'll be a little pressure, but.
I think.
Definitely play out.
In Q1 coming out for Q1 into Q2 is that again with the contractors that we have in place we've been aggressively hiring nurses and doing a very good job. So far this year, so bringing nurses in they're not productive for the first nine weeks.
On employed with us so we're running a little bit of a duplicate cost with these clinicians, but we will see the contractor start to trade on what paid off to a more normal rate.
We'll get these nurses into.
Protective state.
Our focus for 2021, which I think can be really kind of translate into margin opportunity is really.
Keeping our clinicians.
Constantly to turnover, a clinician, particularly a nurse or a therapist.
In our business.
Lot of focus on keeping our clinicians and actually being able to leverage some of those savings into any kind of wage pressures that we see related to nursing as we go forward. So.
I think that net that's still a positive opportunity for us it will be a little bit of a headwind for Q1, but I think coming out we should be we should see the benefit of lower turnover lower contractor utilization and better per for professional utilization as the year goes on.
Yes.
Anticipating our growth Joanna we understand the fact that if we're going to growth rates that we're projecting.
And that labor stabilization and productivity amongst long standing employees is what's the most important thing for us.
So we are starting to see some very good early results. We're reporting we've been putting a lot of emphasis on term turnover as I mentioned with a J, we're able now to within 80% accuracy predict when somebody is going to leave our organization within 60 days and so we're being very proactive on that front to make sure that we.
Start to hold our employees and understand where those problems and proactively get in front of it.
Yes, if you started it back and look at Q4 in terms of our 6% growth in home health, but we also had a spike in our cost per visit that's what we're trying to award. So we're staffing for that 9% growth early on this year, we expected to achieve it will.
We'll achieve it.
And so.
We could have had better margins in Q4, if we were fully staffed for that 6% growth and did not have to depend on the contractors. So that's how we're looking at 2021.
Alright.
That's great color. Thank you so it sounds like there's still some upside there. Thank you.
Very much thanks Joanne.
Our next question is from the line of Matt Borsch with BMO capital markets. Please proceed with your question.
Hey, Matt.
Hey, how are you good.
And last quick question about <unk>.
Industry consolidation and growth.
Okay.
While it may not happen this year.
We've talked before you've talked before about it slipped out from TPG.
Hi.
Which which obviously got delayed.
You might put in some ways because of Covid disruption that really from that says how would you be comfortable about that going from Q now that were in 2021.
Yes.
Our pipeline of acquisitions.
You can be looking on.
Yes for pipeline Scott.
But our pipeline is still pretty good.
And Scott can talk a bit about that but in terms of the governmental piece of it.
We're looking at.
We're looking at assets at the factors are no pay wrap which is.
If you don't get that right can be very costly that's been in effect now for two to almost two months.
The people are going to start to old back the money they were borrowing on receivables from.
From the cares Act and then they're also going to have to start to pay their payroll tax deferral at December this year. So the money is coming due.
<unk> is going to be there's going to be on he do so I think it's going to be.
That's going to be.
We'll start to see it whenever the subsidy stopped when the cares Act people. Finally, the subsidies are going to stop I think there will be a.
Opportunities to swoop in but I think Scott and team are still gonna do deals regardless of when this actually for Scott I interrupted you.
Sorry, yes.
No I was just.
I think thats right.
Just had it been a little different mindset on it early on we felt that these deals will be coming to us and we saw some on that early we've kind of had to switch to play book a bit and go back to what we did on hospice and identify targets, we like and go pursue them. So we've got a great pipeline. Our team is working hard we're confident we'll get some deals done I mean looking at our our balance sheet.
Seven times Levered, we did close to $650 million deal since February 2019, we basically paid on that so we've got the ability to do that this year will be another strong cash flow generation. So.
We're confident we'll get there we've got to work through our diligence process we want.
Lower our standard from the acquisitions, we want to do and there is a high quality high clinical quality.
So feel great about it and we're pushing hard.
Great.
I mean, just reading between the lines it sounds like.
Maybe because of how per tops.
Bookings have done get it maybe going into 2022 that we see something closer to a tipping point.
For the expected there is one.
Maybe I could just sorry.
Ill ask one other question here, which is.
How are you thinking about the new entrance.
If I could put it that way coming home health is proving to be.
I'll start with very attractive fundamentals on so surprisingly others bigger companies.
Some of the mom and Pops are looking to come in.
Paul we see Marvel's clear with their own internal home home health operations as well.
Yes.
We welcome it from a certain perspective again on.
This is all we do and we do it really really well.
And I think our mix in business in home health Hospice personal care palliative care is really good I think the neutrality, we have in the market is really good.
I think there will continue to be people, we hear rumors every day much more.
Assets being snapped up there was some news. This morning, there was some news last night.
I think people are understanding the home is the place where you need to be and I think there will be diversified companies that will try to get into this space and we'll see how they do I think one of the great things about this industry is it so highly both industries as they are so highly fragmented so theres always going to be the opportunity to continue to work with some of the big players that are out there.
That's going to buy something doesn't mean, they're not going to have to partner with somebody and most of the referral sources that we see hospitals for example, there's a.
11 and 12.
On home health agencies, they deal with so we're delighted to have.
On to up the game and to continue to.
Partner with various people, where possible and go into geographies, where they arent so.
I think there'll be a lot more activity on my guess is there'll be a couple of ipos out there we hear rumors on it again.
Compare themselves to us, we'll see how they do.
And we welcome the competition.
Great. Thank you.
Right I appreciate it Matt. Thank you for your question.
Thank you. Our final question is from the line of Matt <unk> with William Blair. Please proceed with your questions.
Hey, Good morning, this is Dan Lawler on for Matt.
Thanks for taking my question Hey, there.
But.
Yes, so just wanted to follow up on the 9% admission growth guidance in home health can.
Can we get a little color on what drove non Medicare revenue flat in Q4 compared to Medicare revenue up 6% and then maybe how we should be thinking about same store admissions for Medicare versus non Medicare with respect to guidance for 2021.
Yes.
Yes, so from a first on the issue around the non Medicare.
Growth perspective, yes, I think it was flat year over year. If you look at the actual stats on it it's going to look better than that I mean, we've got a couple of things going on we probably got a 2% pricing good guy and I think the volume around those numbers from an admin perspective is high.
But really for in our Medicare and non Medicare business. We saw visits per kind of add net go down somewhat we saw on our Medicare business. So.
Or is the volume piece was probably about 1161, 5%. So if you look at those combined were kind of on a range of four five type per cent, we'd be looking for while that's not showing up as really two things that happened a little bit higher from our price concessions. What's old terminology is our reserves around revenue those are a little higher in Q4.
For 2020, and then it.
We talked last year in Q3, we had a contract or the cash.
For improvement plus I think for the name we talked about that converted to UHC product that converted from purpose from episodic to per visit and that conversion in the way. We recognize revenue. There is completed episodes that ran into Q4 of last year that don't show up in volume numbers that propped up that number that was probably about two 5% so three and a half.
And one way probably you know the other flattened out that growth number, but we are still seeing strong admit volumes coming out of non Medicare and shifts in our revenue.
This recognition issue, which will kind of work its way out after this quarter Thats why youre seeing that flat growth.
Great. Thanks, I appreciate the color on if I could just sneak one more in on.
Snippet home pilot you've mentioned on the last call can you give us a sense for maybe where you stand with payers and if you have anything related to the timing for rolling out the pilots already been taken at the CMS.
Yeah, we're in good shape, there I think.
We've had our innovations group has done a really nice job putting it together were were actually in kind of the final.
Contract negotiations with a major player in the space and so hopefully we'll be out with some news there, but we've actually started to do some of the work ahead of time. So we're excited by that for <unk>.
Very good partner. So we're excited to learn what we can but I don't think were going to say anything until we have a signed deal.
But we're feeling good lots of conversations with people, particularly.
On the Convenor type space, where people want to reduce the cost of snips.
The fear factor that are associated with snips. So we're getting a lot of interest from managed care plans, but what we want to do is find a great partner show how it works first and then integrate it into managed care.
We believe we can produce better results for less cost. So obviously thats a tremendous interest, particularly to the MA plans.
Hey, everyone. Thanks, a lot guys.
Yeah, one other thing I wanted to kind.
Got to make sure we have a lot of in our earnings call that around.
Our estimates around guidance for next year and some of our assumptions and just there's a lot of moving pieces. There I don't want to just quickly walk through if you look at 2020, we're exiting at $2 74.
We got on.
Net rate good guide just to be clear with everybody on that and how we're talking to is roughly $20 million and that's we've got a positive rate of roughly $30 million in sequestration unwinding, a fifth of negative 15 for deposit rate of 'twenty, we've talked about our acquisitions that we've done already in place for CCH for this Eric <unk> on everything we've done is going on.
Probably we think drive incrementally $25 million, we've got raises in held for out. There then Oregon increase kind of help has been run low lower because of some COVID-19 people not going out and seeking medical care as much on that's impacted us for between raises and health that we think that's roughly $40 million.
Raises or roughly 24, and then the project de Novo spend we said roughly 15, we think travel returns thats, probably another five set the bucket of roughly 20 that puts you somewhere in a range of $2 60 type of number at that point in time, and we think through growth and gross margin expansion and kind of get to that other $60 million. So just some high level level moving.
<unk> out there to help you guys. Thank for your modeling.
You got a bonus stand there you go thanks Scott.
Youre welcome.
Thank you.
At this time, we've reached the end of our question and answer session I will now turn the call over to Paul Kusserow for closing remarks.
Great I appreciate it very much operator, I want to thank everyone, who joined us on our call today I'd also like to again, thank all of our employees who delivered on another incredible year of results.
Keep doing what youre doing its amazing to see taking care of each other on the people who need us.
Most of our patients we hope everyone has a really great day today, and we look forward to updating you on our ever evolving progress and purposeful work on our next quarterly earnings call in April until then take care, everyone or we will see on the road.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.