Q1 2021 Encompass Health Corp Earnings Call
Ladies and gentlemen, most of the operator for today's conference is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience.
[music].
Good morning, everyone and welcome to encompass health first quarter 2021 earnings conference call. At this time I would like to inform all participants that their lines will be in a listen only mode. After the speakers' remarks, there will be a question and answer of period. If you would like to ask the question during the.
This time, please press star one on your telephone keypad, you'll be limited to one question and one follow up question. Today's conference call is being reported if you have any objections you may disconnect. At this time I will now turn the call over to Kristy Carlisle encompass health Chief Investor Relations Officer.
Thank you operator, and good morning, everyone. Thank you for joining encompass health first quarter 2021 earnings call.
With me on the call today are Mark Tarr, President and Chief Executive Officer, Doug Coltharp, Chief Financial Officer.
Barb Jacobs Meyer President inpatient rehabilitation hospitals April Anthony Chief Executive Officer of encompass home health and hospice and <unk>.
Patrick Darby General Counsel and corporate Secretary before.
Before we begin if you do not already have of coffee the first quarter earnings release supplemental information and related form 8-K filed with the SEC are available on our website at encompass health Dot com.
On page two of the supplemental information you will find the safe Harbor statement, which are also set forth in greater detail on the last page of the earnings release during the call. We will make forward looking statements, which are subject to risks and uncertainties many of which are beyond our control certain risks and uncertainties like those.
Relating to our ongoing strategic review and its impact on our business of stockholder value as well as the magnitude of impact of COVID-19.
Cause actual result to differ materially from our projections estimates and expectations are discussed in the company's SEC filings, including the earnings release and related form 8-K. The form 10-K for the year ended December 31, 2020, and the form 10-Q for the quarter ended March 31, 2021 windfall.
We encourage you to read them.
Were cautioned not to place undue reliance on the estimates projections guidance and other forward looking information presented which are based on current estimates of future events and speak only as of today, we do not undertake a duty to update these forward looking statements our supplemental information and discussion on this call will include certain non.
Non-GAAP financial measures for such measures reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information and at the end of the earnings release and as part of the form 8-K filed yesterday with the SEC all of which are available on our website.
I would like to remind everyone that we will adhere to the one question and one follow up question rule to allow everyone to submit a question. If you have additional questions. Please feel free to put yourself back in the queue with that I'll turn the call over to Mark Good morning, everyone and thank you Christy.
We're off to an encouraging start in 2021 <unk>.
Compared to the first quarter of 2020 consolidated revenue is up for 0.1%.
<unk> adjusted EBITDA is up 10% and adjusted EPS is up 27%.
And we've increased our full year 2021 guidance.
Our first quarter performance was characterized by promising volume trends that are contributing to solid revenue and EBITDA growth.
Our future growth is supported by attractive business development pipelines across all of our service lines.
We're also seeing continued strength in Medicare advantage discharges for our <unk> segment, and we are encouraged by the strong start in the United Health care National contract in home health.
Now I'd like to take a moment to recognize our incredible employees.
I continue to be in all of how they respond to meet the needs of our patients and business partners. Despite the external noise in the world the.
The stories of their compassion and the positive impact they've had on patients are truly moving.
I am grateful for such wonderful staff, who help us put the patient experience at the center of all we do.
Let's turn now to our segments.
In our inpatient rehabilitation segment net operating revenues grew five 6% of.
Adjusted EBITDA increased 9%.
And volumes continued to improve.
Our average daily census was generally above fourth quarter 2020 levels throughout the first quarter.
And we saw the return to discharge growth in March.
For the second quarter of 2021, we expect to report strong discharge growth since volumes were most significantly impacted by COVID-19 in the second quarter of 2020.
In addition, with the continued the rollout of the vaccine we have fewer hospitals experiencing census caps due to staffing constraints related to quarantines.
We're beginning to see the return of elective procedures in many of our markets.
However, we believe our patients elderly patients with complex medical conditions are not choosing to go first.
Our numbers show this.
We treated approximately 16 fewer <unk>.
<unk> hundred fewer orthopedic and lower extremity joint placement of patients in the first quarter of 2021 than we did in the first quarter of 2020.
If we add back the 1600 lost discharges are total discharge growth for the first quarter would have been two 2%.
We look forward to the full return of elective procedures as our patients' confidence in the safety of the health care system grows and we believe elective surgeries for patients will improve in the back half of the year.
I also want to acknowledge the tremendous job our hospital teams continue to do in managing our labor costs.
For the first quarter of 2021, our employees per occupied bed, which we use as the metric to measure our efficiency was 331.
<unk> to $3 three eight in the first quarter of 2020.
And 346 in the fourth quarter of 2020.
Our technology and real time data combined with our clinical Knowhow continue to make us a best in class operator.
The ageing demographic continues to drive increased demand for our services and we're investing to meet that demand.
During the first quarter of 2021, we opened our new 40 bed inpatient rehabilitation hospital in San Angelo, Texas.
And we added 15 beds to our existing hospital in Fort Worth Texas.
In April we opened our new 50 bed hospital in North Tampa, Florida.
We plan to open six additional hospitals in 2021 and at over 100 more beds to existing hospitals.
For 2022, we plan to open at least 12 new hospitals.
We already have three new hospitals announced for 2023.
This development pipeline is strong and we expect more growth related announcements throughout 2021.
Our growth efforts also include continued dialogue with Medicare advantage payers on our value proposition.
During the first quarter of 2021, we continue to see evidence that our market by market efforts with local and regional M. A directors are paying off.
The same store Medicare advantage discharges increasing 34%.
We're also maintaining our focus on the continued development and implementation of <unk>.
Post acute solutions.
We expect to begin piloting our falls prevention model in May as part of our ongoing efforts to produce better outcomes for patients and lower the total cost of care.
Leveraging data from our electronic medical record system. Our goal is to reduce falls optimize the quality of care and reduce overall patient risk inside our rehabilitation hospitals.
In regards to regulatory updates on April 7th CMS released its notice of proposed rulemaking for inpatient rehabilitation facilities for fiscal year 2022.
The proposed rule focuses on routine updates and minor technical changes and it's consistent with our prior guidance.
It includes a net market basket update of two 2%.
There was no discussion of.
For reference to a review choice demonstration program for herbs in the proposal.
And our home health and hospice segment.
We grew adjusted EBITDA by $9 8 million or 23, 9%.
Our margins, which were 380 basis points higher than Q1 of 2020 benefited from continued lower cost per visit and the suspension of sequestration.
While the limitations on electric procedures and facility access restrictions continue to limit our volume growth. We have a lot to be positive about in regards to the volumes. We saw in the first quarter of 2021.
And how we exited the quarter.
Non Medicare admissions were at an all time high in March 2021, primarily due to our new national contract with United Health Care for home Health Service line.
We're also very pleased with the over 3000, new referral sources, we added during the quarter we.
We remain confident that our traditional referral sources will return to their historic referral levels as seniors begin to return to the elective surgery market and skilled nursing facilities and senior living communities begin to recover from their depressed census levels.
The combination of the return of our former market along with new referral sources, we had added throughout COVID-19 leave us very encouraged about the strong organic growth opportunities beginning in the back half of the year.
Additionally, we are seeing a resumption of home health acquisition activity and had a solid pipeline of development opportunities.
We recently announced a definitive agreement to acquire assets from frontier home health and hospice.
This business is a $36 million revenue of home health and hospice provider with nine home health and the 11 hospice locations across five states.
We expect to close on this transaction in the second quarter of this year.
We're also pleased with the progress we're making in regards to our care planning approach and the further improvements we expect to achieve over the balance of the year associated with the use of the Metalogic care module.
Based upon the strong results in regard to both quality outcomes and visit efficiency.
We have seen of markets with high levels of Metalogic adoption, we are adjusting our internal operating model to ensure greater adherence to the metalogic recommendations and has proven results.
We're making these adjustments in an incremental fashion over the balance of 2021 in order to ensure the model delivers the desired balance between efficiency and outcomes.
We expect to see sequential improvement in visits per episode over each of the next three quarters as this new approach is rolled out.
Let's turn now to the outlook for the remainder of the year.
The past 12 months of proven resiliency of our business.
And as you've heard me say many times, we are confident the fundamentals of our business are intact and strong.
Our full year 2021 guidance has been increased to reflect our first quarter results and the recent legislative action by Congress to extend the Medicare sequestration suspension through the end of the year.
Guidance now includes the following.
Consolidated net operating revenues of $5 $6 billion of 523 billion.
Consolidated adjusted EBITDA of 1 billion to $1 <unk> 3 billion.
And adjusted earnings per share of $3 of 94 to $4 16.
Before I turn it over to Doug I want to touch on the strategic alternatives review of our home health and Hospice segment.
The review is well underway.
We are following a rigorous and disciplined process and continue to evaluate and prepare for all scenarios.
Including the full or partial separation of the segment through an initial public offering.
Been off <unk>.
<unk> sale or other transaction.
We anticipate being able to provide an update on the status of this process with our Q2 earnings report at the end of July.
Until then we will not speculate on any particular outcome for may.
Any additional comments rather than to say, we are dedicated to identifying the best path forward for our company to generate value creation for our shareholders.
While we actively pursue the strategic alternatives, we will maintain our focus on operational excellence.
We've had a great starts of the year and I look forward to seeing what we can accomplish in 2021 and beyond.
With that I'll turn it over to Doug.
Thanks, Mark and good morning, everyone. We're pleased with the performance of both of our segments first quarter consolidated net operating revenues grew four 1% consolidated adjusted EBITDA increased 10% and adjusted EPS increased 27%.
The continued to generate high levels of free cash flow with adjusted free cash flow, increasing 44% year over year to $107 4 million.
In our inpatient rehabilitation segment revenue increased five 6% and adjusted EBITDA increased 9% with both increases primarily driven by pricing.
Growth in revenue per discharge, primarily resulted from a higher acuity patient mix, an increase in reimbursement rates and the suspension of sequestration.
Volume growth in the quarter was impacted by COVID-19 related limitations on elective procedures as well as census caps and some of our hospitals due to the isolation and quarantines.
In January of 2021, approximately 30 of our hospitals were impacted by the census caps.
By the end of the quarter seven of our hospitals were experiencing census caps and today that number is down to five.
The rollout of the vaccine has assisted us in addressing these issues.
As of today, approximately 50% of our Earth employees have been vaccinated.
While we continue to experience of higher patient acuity than prior years, the rollout of the vaccine and onsite COVID-19 testing capabilities are helping us make progress in lowering our patients average length of stay.
By the end of the first quarter, we had rapid testing devices in all of our hospitals for.
For the first quarter of 2021, our average length of stay was 13 days compared to $12 seven days in the first quarter of 2020.
By the end of the quarter, our average length of stay was trending lower as evidenced by a March average length of stay of 12 five days.
Our net operating revenue was impacted in the first quarter of 2021 by an increase in bad debt expense, primarily due to aging based reserves.
As our Medicare advantage book of business has grown we are.
We're experiencing a higher amount of write offs associated with patient co pays and deductibles under certain plans.
We are currently reassessing, our collection procedures with regard to patient responsibility.
We increased our guidance assumption around bad debt from a range of one four to one 6% of revenue to a range of one five to one 7% of revenue to reflect this trend.
And our home health and Hospice segment revenue was essentially flat, while adjusted EBITDA increased 23, 9%.
With regard to volumes total starts of care, which includes both admissions and recertification were up 6% year over year.
We achieved this growth despite entering the quarter with the COVID-19 resurgence and a high level of quarantined employees as well as unusual winter storm activity in February in Texas, and Oklahoma to states with significant market density for us.
Recertification increased eight 3% due to our servicing of patients with more comorbidities, who stay on service longer as opposed to the shorter term elective procedure patients we saw pre COVID-19.
Non episodic admissions increased 3%, primarily due to the new national contract with United Health Care, which began in February 2021, and which as a reminder, moved out of network volume historically paid on an episodic basis to in network volume paid on a per visit basis.
Yes.
As Mark mentioned, we continue to see of decline referrals from snaps patients residing in senior living facilities and elective surgeries.
Combined these three areas of accounted for approximately 3700 of our admissions decline in the first quarter of 2021.
And it not been for the 3700 lost admissions are episodic admissions growth would have been a year over year increase of approximately three 4% and that's in spite of the United Health care contract shifting patients from episodic to per visit basis.
Our home health cost per visit was down 5% year over year with the primary driver of this improved CTV being the compensation structure changes. We made in May 2020, coupled with effective management of productivity of our full time staff.
Within our hospice service line same store admissions continued their strong trend.
With over a 11% year over year growth.
With regard to our capital structure, our net leverage was three five times at the end of the quarter.
In March we issued notice for the redemption of $100 million of our five <unk>, 5% senior notes due 2023.
We completed the redemption of those notes in April.
Our continued strong free cash flow and well balanced capital structure support the investments we are making in our growth.
We remain well positioned financially and operationally for the future.
And with that we'll open the lines for questions.
Thank you at this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on the telephone keypad.
The question has been answered or you wish to remove yourself from the queue press the pound key are for.
First question comes from the line of Brian Tim Quillin of Jefferies.
Brian Hey, good morning, good morning, Congratulations guys.
I guess my question for both of US So as I think about the guidance raise it seems to me like you raised it for the Q1 beat and the Medicare.
Sequester extension so.
I guess Mark how are you thinking about the pace of recovery. It sounds like you are still assuming that nothing will really bounce back in terms of the I'd like to procedures until the back half of the year and then I guess for Doug just as I think about the cadence from Q1 for Q2, just any color you can give us to help us model the quarter improvement sequentially. Thank you.
Well, Brian it's Mark and I'll address your first point.
We do carry out of certain amount of very positive momentum out of margin and as we've noted.
Having the electric procedures come back we will have an impact on both of the operating segments. There is a certain amount of uncertainty on exactly when that will happen.
We do think that will be a latter part of the year of the second half of the year event, we certainly expect it to happen we just don't have.
Lot of insight in terms of exactly when but we are starting to see the electives come back in a number of the market. So we have reason to be positive on that for the second half of the year and.
Brian Youre exactly right. The the raise in guidance was solely attributable to those two factors. The Q1 performance and then the the.
The benefit of the sequestration suspension for the last three quarters of the year recall when we issued our initial guidance at the beginning of this year, we said that embedded in that was an assumption that business would improve in performance would improve in the second half of the year. So some amount of continued improvement was already factored in.
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The bulk of pacing through the year some things to consider is second quarter will certainly be our easiest comparison because that was the most severe decline that we saw during 2020 and volumes.
So was the quarter in which we absorb some $43 million in extra SW be related to the PTO benefit that we gave to our employees in both business segments.
And then just also a reminder that.
The first month of the quarter last year without the suspension of sequestration and that was prior to us making the compensation changes at home health and hospice. So all of those factor into the second quarter comparison.
As you think about Q3 Q4 of the one thing that I would point out is in our pre opening expenses are going to be more heavily skewed towards those quarters. Normally you would think about that in Q4, but we actually have free new hospitals, which are slated to open in the first quarter of 2022.
Awesome. Thanks, guys.
Your next question comes from the line of Matt Larew of William Blair.
Morning, Matt.
Hey, good morning, Thanks for taking the questions I wanted to ask about your.
Because of the M&A environment on the home health and ask the side, obviously, you just completed.
The deal.
The accelerated reimbursement reversal of the rap payment now gone, perhaps higher personnel costs. The bunch of past flow petitions for smaller providers, just kind of curious if theres been sort of of pickup and maybe unbound interest or what the balances in terms of opportunities youre seeing out there.
Yes, Matt This is April I would definitely say that.
I think recovery, particularly in the home health segment is underway as far as M&A opportunities last year.
Most of what we saw come to market of of significance within the hospital sector.
With some of those pressures that you identified I think we are definitely beginning to see a little bit more activity. This year on the home health side and anticipate that there's going to be good opportunities for us throughout the balance of the year depreciation home health acquisitions, while continuing to look at hospice acquisitions of help us build our scale and density of market overlap.
Okay and then just.
Paul I'm trying to understand the timing in terms of the leadership transition for the home ethanol business day on the strategic review I think the transition date is June 18th.
The market is alluding to is sort of the end of July for the end of the reveal my presumption is any new CEO would want to know the outcome of the review so im just trying to understand that sort of GAAP, there and what the plan is for leadership during that interim period.
Yes, Matt. This is mark we will have a smooth transition there clearly we have engaged a third party firm to initiate a national search.
In terms of the timing out of that is.
A bit uncertain in terms of whether that is of 60 or 90 day timeframe, but we are well underway with that.
April and I will work collaboratively on a near term interim transition to make sure everything operates smoothly with the core group of of the senior management staff there in Dallas.
Okay. Thank you.
Your next question comes from the line of AJ Rice of credit Suisse.
And a J.
Hey, everybody.
Best wishes the April on the future endeavors, obviously.
So maybe.
Quickly on the <unk>.
Comment on the home health I know you highlighted.
The euro.
The non contracted helped you.
Show growth in that non episodic volume area I Wonder is the how much further help.
Obviously, United is a huge player so being in that I wonder because I don't think you got a full quarter's worth of that benefit is there any way to talk about what that May mean for you for the rest.
When you get it fully implemented in the quarter.
And of course.
Yeah, we're happy to talk about that so we did begin that contract in February that we really got the kind of a mixed bag in the first quarter. So we had strong volume in April from that contract and excuse me in March and are continuing to see those into April the we feel like.
Without frankly, even a whole lot of sales push we've seen significant increase a little more than doubling of our monthly admissions coming from the United relationship.
Until we get on the other side of some of the staffing challenges.
One of kind of walk that tightrope carefully because what we don't want to do is over pursue the United relationship to the detriment of our Medicare patient base and obviously the reimbursement rates are a bit different there and we want to find that balance where we can serve both populations effectively so I think hopefully the biggest opportunity is going to be.
To improve our staffing balance so that we can run hard at those opportunities, but definitely the aligns when we see a full quarter of United in the second quarter and it will be an upward trajectory from Q1 as it will be fully baked into the second quarter's numbers.
Okay, maybe just my follow up on the Frontier acquisition, you guys announced the.
It looks like if I net out the tax benefit it's about two four times revenues.
I know you haven't said historically, where you price the home health acquisitions, but I know some of the peers of said it tends to be historically, a little less than two times revenues I Wonder is there something about that acquisition that warrants.
A little more fulsome price or is that sort of where the market is these days coming out of the pandemic for home health of assets some perspective on the pricing I guess.
Yes, a J I would I would say you need to look at the couple of things first of all Youre looking at a trailing revenue number of net revenue number of it was obviously impacted by COVID-19 and is not necessarily representative of the run rate of the business. The second is within the frontier opportunity, we see great organic growth opportunities to come from adding additional scale.
And density into those western markets, and we see substantial margin improvement opportunities to be additive to EBITDA growth as well.
Hey, Jay works, Okay for the acquisition and think the frontier is the great asset that for me a great complement to what we have in our home health Hospice segment.
Okay. Thanks, a lot of.
Your next question comes from the line of Kevin Fischbeck of Bank of America.
Hello, Kevin.
Hello, Thanks, Greg.
So I guess one.
First question here.
Yes.
Lot of reconcile your comments about some of your referral source of thing depressed volumes in NAV.
Rebuild.
Youll see the benefit of that because I guess some of the referral sources, one might think are being pressured and yet the volume is coming to you right. So I mean some of this is about volume skipping over some of those sites of care people staying in their whole longer versus going through in Alberta, the nursing homes. So.
I would think that as day return volume that might put pressure on your core business. I mean are you, saying net net net you still think of those things grow you will be a net positive and widen.
Of that more of a of a.
And to take at the same time.
Well I think youre absolutely right. There are some good guidance for example, being our admission in terms of skilled nursing facility come down.
The discharge from Smiths to us is probably part of what's contributing to our admissions from acute care hospital.
Patients that are bypassing that component. So there are some puts and takes in that.
We think that there's opportunity for both we think the market has realized that not every patient needs to be admitted to the Smith, but we also think in time that the admissions will recover and patients become more receptive to that environment. So I think we will see both I think we'll see it.
<unk> of our higher direct admission, but I think we will also see those facility types.
The cover just as we've seen in our own Earth Division as those recoveries happen, we'll continue to see those downstream opportunities I think for you guys see as kind of overall acuity level increase the acuity level of the average patient is going to increase the acuity level of the average home health patients going to increase same with the with herbs and then EBIT to some extent patients reside.
<unk> assisted living senior housing communities may even ex the elevate and so I think as all of that happened. It really presents an opportunity for both recovery from a prior referral sources and the continuation of maintaining the sort of net new opportunities that we're seeing.
Okay. That's that's helpful.
And then I guess.
This.
Dynamic you're talking about as far as of May go on the SaaS that's creating.
While the copay collections and higher bad debt is that the.
Is that of permanent thing of M. I always have a higher collections issue or is this more of a function of you're growing so rapidly that it's kind of growing pains.
Alongside that and you would expect that number to come down.
It's a combination of the two Kevin So you've got the rapid growth in EMEA, which is certainly a component of it. But then there have also been some pretty significant structural changes within some of the larger MA plans that have increased the burden and the responsibility on the patients and many of the patients simply don't understand that.
And they come in still prepared to meet that obligation I will say also that historically, we haven't had to add personnel in our hospitals. We're in a centralized business office devote a lot of time too.
The collecting on these and we're in the process now of revising those procedures.
And in an appropriate way to be a little bit more upfront about it if you will although it's not always easy to do that based on the status of our patients added mission.
Not a significant movement, but it was noticeable and that's why we factored it in I should also note that when youre looking at bad debt associated with Medicare advantage, there's not an ability to recover that through cost reports as there is with Medicare fee for service.
Okay, great. Thanks.
Your next question comes from the line of Steven Valiquette of Barclays flow Steven.
Hey, Thanks, Good morning, everybody. Thanks for taking the question.
But within the inpatient rehab business and the higher acuity patient mix that drove some of the strength in those results you talked about that for a couple of quarters now I guess Im curious whether there were any notable changes around that in the first quarter of 'twenty one versus the way you were seeing in the back half of 'twenty. How are you thinking about the acuity levels in the remainder of 'twenty, one based on what Youre seeing.
And today, just given the rapidly changing environment.
The 30 to 60 days or debt.
I will let barb Jacobs Maher weighing on that yeah. So really there is a component of we think we think similar acuity that we saw at the end of 2020 I think of day piece, that's going to make of differences as the COVID-19 number of patients decreases that will impact the acuity, but a larger component is going to be the return of these elective surgery.
And again as Doug mentioned earlier, we just don't know the timing on that that is those patients come back into our hospitals that will have an impact of lower the overall acuity as those patients do tend to have a lower CMI, Steve we discharged over 4000 COVID-19 patients in the first quarter of 2021 and as I mentioned.
We had 1600 ortho.
Orthopedic cases that we had in 2020 of that didn't have in 2021, so as Bob said, the kind of a combination of two things happening you have elective orthopedic procedures coming back in that had a lower acuity at the same time youll have fewer COVID-19 patients that had a higher acuity. So we would expect some.
<unk>.
Two to return on our overall case mix index for acuity.
Okay, that's perfect. Thanks.
Your next question comes from the line of <unk> Chickering of Deutsche Bank.
Hey, good morning, Thanks for taking my questions in April of the pleasure to work with you over the years.
I know you aren't giving any commentary on the strategic review until July but conceptually do you think your home health assets have enough scale to be of Standalone company or would be more beneficial to merge with another with the larger asset in the market. There is also looking for a strategic review.
I think the scale of sufficient to accommodate any of the array of alternatives that are currently on the table.
Okay and then.
On the visits per episode.
The decrease during the quarter you guys had mentioned how that was kind of decrease throughout the year can you quantify for us what inning. We are in for the amount of largest rollout and how much more the visit perhaps can decrease through 2021.
The room for for more declines in 2022.
Yeah, Peter I think.
We're still fairly early we really completed.
The deployment in the middle of last year and with all the things going on during COVID-19 I will say that although we completed that deployment. It may not have been the top priority of each of our branches during that period to think about how to successfully deploy that I think we're seeing that.
Any progress with that tool you see that in the continuing trends within our visits per episode of quarter over quarter, and I think that trend will continue to improve throughout the balance of 2021 and probably even into the early parts of 2022, but I think we I think we'll begin to see sort of full realization of this time next.
Year, but I would expect sequential improvement between now and then.
Okay, and then if I could squeeze in one more.
No.
The cannot given what the data anymore for the first quarter was extremely volatile with the COVID-19 surge in the storms in February.
Can you quantify for us how the home health admissions trended in March thanks, so much.
Okay.
Yes, So we had a strong march as I mentioned, the non Medicare admissions in March were very very strong, particularly from the United relationship is that became fully online in March.
So I think we.
We came out of the quarter feeling good about the trajectory that we're on.
And we'll continue to see how it unfolds here in the second quarter, but we are encouraged particularly when you think about the displacement. When you think about the United you can't think about it as only the United non Medicare additions you really have to think about the net impact of those because we were bringing in about 700 ish.
Non admissions from that but that were episodic and so previously they ran our episodic admission.
We're excited about the doubling of that that we're seeing as we've moved into this contracted rate. You also have to take into account you've got some puts and takes with that the year to see our episodic jump, but we're going to be carrying about 2000 AD net of month 'twenty 100, our quarter 'twenty 100 admission per quarter impact on our episodic by having that ship.
For the non episodic so just keep.
Keep that in mind as you look at the numbers in total our total admissions for the quarter.
Were the highest we've seen since COVID-19 and continuing to make progress. So I think we're encouraged by what we're seeing we're encouraged by the recovery of acute care hospital discharges and a lot of lot of things moving in the right direction.
Great. Thanks, I'm very we're very happy with the with the volume trends of both of our operating segments and the trends that we see upstream that will carryover into Q2. So.
Very happy to see these trends turnaround for us without throwing in the cold water on that I do want to remind you that the effect of those winter storms in February will linger into the second quarter, because although it's not impactful new admissions growth is impacting research. The admissions that were lost due to the storm you don't get of research.
On those and that impacts of the volume in the first month of the second quarter.
Alright, Thanks, Doug.
Yes.
Once again, if you'd like to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of Matt Borsch of BMO capital markets Hello, Matt Good morning, Matt.
Good morning.
Maybe if you could talk about I think you said the job.
At year for that.
The vaccination rate today is about 50%.
Just curious where you where you think you can get that.
What youre doing.
The increase that.
And how do you think thats been the effect.
The business over the course of the year.
Yeah. So currently we are at 50% we survey all of our staff on a regular basis and about 77% of our staff for saying that they ultimately want to receive the vaccine. The vaccine rollout has been slower in some markets than others as far as our availability. We do have the availability now in all of our markets though.
I think we'll continue to see that number.
But we are our chief Medical officer has done a great job on doing education for our employees on the value of the vaccine and so we're just going to continue to just the supported in our markets I will say that we were seeing a lot of interest in the one dose J&J vaccine.
And when you had the unfortunate news regarding that even though it's been reinstated.
That took a little bit of of the wind out of our sales with regard of the progress we're making we're getting people back focused on both the safety of the J&J vaccine and.
And converting some of that volume over as well to the two dose vaccines.
Well I had the J&J shot on fine So theres one data point for you.
That's good that's good.
If I could just sneak in one last one.
The patients that are coming to the earth by kind of thing.
Is that.
Does that create some challenge I'm sure everything does but I mean is that is that just a good trend or.
Is there some of that debt.
The.
Isn't necessarily what you want.
No it's actually a good trend what's been greatest debt and in the pair of historically, we did very well on getting the conversions of Medicare advantage stroke patients, but many of the other diagnoses.
And they tend to push towards Smith, mainly from a cost perspective of.
What COVID-19 has allowed us to do is there has been patients who are who did not want to go to skilled we had waivers for a short period of time, but what's allowed us to do is get some of those other types of patients. So that we can have actual outcomes to show. These M. A regional directors that these patients do well they go home they have of low rig.
Turning to acute so it's actually helped us reinforce that value proposition for other diagnoses outside of the stroke diagnosis, but I think one of the things that the pandemic did show us that there clearly is the difference in the various post acute settings and the types of patients that can be care for each.
And clearly the Earth's segment.
One of the winners in that in terms of the quality and the.
The outcomes they were able to get with the COVID-19 patients. So because they have the resources and clinical know how to treat these types of patients with the higher acuity. So.
I'm very proud of what we did on our <unk> and our home health services in terms of caring for the COVID-19 patients.
Good stuff. Thank you.
Your next question comes from the line of Frank Morgan RBC capital markets.
Hi, there Frank.
Good morning, Hey, hopped on late so hopefully this one hasnt been asked.
In Hca's earnings call, they talked about expanding their post acute continuum of specifically called out rehab hospitals as an area of focus, particularly in Florida. So just curious about your thoughts on that and.
What you see as the debt.
The the likelihood of that occurring and then the second one was just for the general question. When you when you talk about emission caps and obviously that number coming down for you nicely in the quarter is there a lag much of a lag from the time you lift those and kind of go back to normal before you actually see volume pick up that's yet thanks.
Okay. So first on the the question regarding each day, we do have HCA and many of our markets.
We see the majority of those are units inside their hospitals. We've also heard locally in many of the Florida markets about them wanting to add the unit.
And in actuality, that's usually a good thing because it increases the awareness of their internal team on the value of inpatient rehab and many times those units can't take care of all of their patients.
So we're used to working with them in our market and then on the <unk>.
Capacity constraints being lifted usually there was about a week or two delay because of referral sources when theres a cap in one of our hospitals the referral sources need to find a place for those patients to go. So it takes usually about a week or two to get back letting them know theres bed availability, but the recoveries pretty quick after that.
Just one further comment Frank on the HCA historically, they have not ventured into freestanding nerves and so as Barb said most of what we see with regard to Earth volume for HCA is in <unk>.
Units and as you know those tend to be considerably smaller so they're really not a source of great incremental supply to the markets in which we have overlap.
Okay. Thank you very much.
Your next question is a follow up from the line of <unk> Chickering of Deutsche Bank.
Oh, that's even.
The more hey, guys did you Miss me.
A quick follow up here on Kevin's question, but could you quantify it for you guys and referral sources and the pivot away from SNP in assisted living.
Referral sources I'm curious how active those new referrals were during the quarter, how they ramped throughout the quarter any numbers that you can give us on admissions from referrals of how should we think about those changing throughout the year.
Yeah, I don't know that I have the <unk>.
Data right off top of my head the reality generally when you bring in of new referral source and it is the beginning of the relationship and it creates the opportunity to prove your impact that you can make for their patients and so generally as we see new referral sources come in there is of a ramp that occurs over time as they start to see the value and the quality of our services.
On the patient's behalf and so we would expect those to continue up and let me be clear that we're not pivoting away from the sniff for senior living businesses. It's just the right now.
<unk> levels within those particular housing alternatives for senior living and then the SNP environment are down and we are kind of the we're seeing the impact of debt on our admissions. We believe confidently that those are going to return and as they do our referrals from those sources will go up as well. So we're not we're not leaving.
Then we're just recognizing that there is a bit of of depressed time and that is having an impact on it and say we're seeking note the alternative referral.
Knowing the potential residents and patients are still out there. It's just a matter of how do we access the more effectively in this period.
Okay, and then one more follow up here cost per business continues to be held in the very consistently at these levels.
Since you announced the restructuring last year. Despite the COVID-19 costs you guys saw during the quarter as we annualize those costs in the third quarter I'm curious, how we should think about wage pressure from these levels of local go up in the three 5% range or is there still room for increased productivity to maintain cost per visit at these levels for throughout the next 18 to 24.
Yeah.
Yes, I think we expect.
Cost per visit is something that we will continue to stay laser focused on we know we still have some productivity opportunity, but we also recognize particularly in the nursing discipline that salary and wage pressure is very real for us in those markets that theres a lot of competition for nurses in the market and so I think we'll see.
Really in the nursing discipline that we'll continue to see productivity gains, but also recognize that they're going to probably be some salary increases whether they come in the form of a base salary increases or.
Hiring incentives or retention incentives. So we're looking at a whole array of things to make sure we control those but we're not going to give up on continued productivity improvement either.
Yes.
Thank you I will now return the call to Crissy Carlisle for closing comments.
If anyone has additional questions. Please call me at 2059705860.
You again for joining today's call.
Thank you that does conclude the encompass health first quarter 2021 earnings Conference call. You May now disconnect. Your line line have a wonderful day.
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