Q1 2021 LHC Group Inc Earnings Call
[music].
Detail on a breakdown amongst sector performance and a significant amount of detail on the monthly trends all of our non-GAAP reconciliations and breakdown of adjustments are included as well we will reference this information and on remarks today, we expect today's prepared comments from Keith Myers, Chairman and Chief Executive Officer, Josh profit, President and Dale Macworld Chief Financial Officer.
To run for approximately 20 minutes to allow time for Q&A before we start I would like to point everyone to are forward looking statements on page two of our supplemental presentation and encourage you to read them carefully they apply to your statements maintenance go on our press release and on our supplemental financial information now I'll turn the call over to Keith.
Thank you Eric and thank you everyone.
As always I want to begin by banking on more than 30000, LHC group colleagues who daily.
Our mission and vision of caring for people in need and communities, we are privileged to serve throughout our country.
I also want to acknowledge a recently published environmental social and governance report.
That is available on our website.
Since our founding nearly three decades ago on.
Goal has always been to be an invaluable asset.
And are responsible contributing citizen of each community. We are privileged to be part of an serve well beyond being a valued community health care provider.
This new ESG report brings to light the many activities and actions our team members throughout the country have undertaken.
To provide on even broader positive impact in the thousands of communities. We are privileged to serve throughout our country today.
Now I'd like to begin by providing some perspective on how our policy efforts and current legislative and regulatory activity are providing tailwind that are shaping our business and that of the broader and home health care services industry in a very positive that way.
In home services.
For decades, now proven and time tested innovative state Medicaid programs, such as the passport program in Ohio that you've heard me mentioned before.
And the Oregon Health plan.
Given seniors the choice to age in place are being cared for in the comfort and privacy of their own homes.
As an alternative to more costly long term institutional care.
Our choose home legislation.
Builds on the successful state programs, which deemed seniors eligible for in home health care services as a first option.
Blending the traditional home health Medicare benefit with Medicaid non skilled services.
We continue to Bill congressional support for this legislation and expect it to be introduced later this year.
I would also point out that.
The proposed rules for fiscal 2022 related to hospice and <unk> are also very positive for us and.
And we will provide additional momentum later this year and in 2022.
For more details on our policy efforts and policy related focus areas I would point you to the policy tailwind summaries. We are provided on pages seven and eight of our supplemental debt.
On January eight 2021 CMS.
Formerly recommended expansion of the home value based purchasing demonstration.
From its current nine states so a nationwide program.
We strongly believe that given our proven capabilities as a national in home health care services provider.
Consistently delivering higher quality outcomes and patient satisfaction at.
At materially lower cost, resulting in consensus that incremental earn performance based incentives.
Expansion of home health value based purchasing would provide additional opportunities for us to leverage our proven efficient and effective in home health care services delivery model to drive organic growth.
So all that to say.
Our proven ability to consistently deliver high quality outcomes and.
And higher patient satisfaction.
At consistently low across lower cost across our footprint.
It currently serves over 60% of the population in our country.
We have good reason to be confident in our ability to significantly grow our market share.
As performance based payment models become more popular.
And traditional fee for service models transition.
The models that place a greater emphasis on object objective measures of effectiveness outcomes quality and patient satisfaction.
On a way from reimbursement models, a solely on the volume of provider activity.
Yeah.
Turning to M&A.
Our active pipeline of acquisitions and hospital joint venture opportunities. We are pursuing at this time total.
Slightly over $500 million in trailing 12 month revenues.
With over 300 million or 60%.
Of that amount being opportunities, where we are currently in exclusive discussions with sellers.
Yeah.
Of the 500 million and trailing 12 month revenue.
71%.
As hospice.
28% as home health.
And the remaining roughly 1% is.
As our first home Health agency that open to just four years earlier in 1994.
The vision of our clinical leadership team from day, one has always been to provide hospice services in each community we serve.
As a part of our continuum of care with home health.
With a higher volume of anticipated M&A growth in 2021 and beyond.
We look forward to make a meaningful strides toward fulfilling our founding vision.
Providing home health and hospice.
As a coordinated continuum care.
In each community we serve.
And some dreams the significant advances, we see on the legislative and regulatory from.
Combined with our continued organic growth.
Significant expansion M&A activity.
And a nine 1% usual year increase in emissions from our growing National network, a physician referral sources and hospital JV partners.
In addition to Acos and payers other payors demonstrate.
That we have managed through the COVID-19.
Demick with the level of professionalism and dependability.
That has resulted in on even higher level of trust.
<unk> and loyalty among the many patients family members.
Physicians discharge planners hospital partners.
Community referral sources and payers.
Who collectively make up our customer base.
Without question today, we are on better stronger more.
Agile it more responsive organization then.
Then we were at the beginning of 2020.
Our experiences lessons learned and improvements implemented over the past five quarters.
Have created a new normal in our day to day operations throughout our organization.
That will continue to benefit.
Our organization and more importantly, patients' families and communities we serve in the future.
We will never rest on on laurels never takes assess for granted.
We are continuous learning organization committed to continuous improvement.
On a relentless pursuit of excellence and all that we do at every level of this organization every day.
And I will turn it over to Josh to provide more color on girls and operations in Dale's drive more detail related to financial results and guidance before we began Q&A Josh.
Thank you Keith and good morning, everyone. Thank you for your time. This morning, I'm very excited to provide more details on our strong start to the year and while we're so bullish on our current operational on growth trajectories.
Following up on Keith comments continued in organic and organic growth as well as increasing tailwind from a legislative and regulatory perspective are perfect starting points from our prepared comments today.
Last quarter, we set the table for the strategies, we have created to deliver a differentiated growth in 2021 and framed up are near and long term growth potential.
Today I want to focus on how well we are executing on this growth potential our confidence in the trajectory over the next several quarters and the strength of the sequential improvement.
Ensuring would generate quality growth has been a top priority and as you'll see on slide channel or supplemental deck. We are delivering with joint ventures continued on sequential growth in episodic admissions continued momentum with bringing on new referral sources and the continued build out of our co location strategies.
As highlighted on slides 11, and 12, we're pulling multiple organic and organic growth leavers the hit our objectives in particular, the labor's on earning share from competition executing on the co locations driving margin growth from Jv's in recent acquisitions and capitalizing on the upside opera.
Unities afforded and connecting with the movement to more value based reimbursement models, which I will touch on more on a few moments.
We received positive feedback since last quarter on the day to we provided on the slides to help model out the growth opportunity this year on going forward.
With the exception of the M&A top line, increasing 20% from the fourth quarter those assumptions remain unchanged from Q4.
To put this quarter in the next several in the proper context, it's important to note that we are now past the one year anniversary of operating under PDGF and a year of living in operating within the Corona virus pandemic.
While those are two distinct events that are permanently altered our industry. We have used each as an opportunity to Pat and our law siegert DNA to always learn from change and improve upon are clinical on operating models and waive that will always prioritize patient outcomes and satisfaction and prove sustainable and valuable for you.
Is to come.
Thank you so much to our frontline workers and all of our quality operations and growth leaders and support team members all across the country for such stellar execution in the face of such historic change.
We are better day because of you.
Let's shift gears now to some of our key metrics.
The year over year comparisons are still a little muddied, while the sequential comparisons the spot three successive ways of COVID-19, including the most recent post holiday season, Serge are positive and more indicative of our underlying growth.
This will likely be the last quarter, where we break out the PDGF specific metrics as they have remained within a tight range of expectation in the last several quarters.
Given how meaningful they are to our expectations for the year on now I want to spend a moment on our sequential trends.
Slide 14, and 15 show the progression over the last five quarters as well as March and April.
We wanted to break down the last two months in particular, because we overcame the post holiday COVID-19 surge in December on January the number of clinicians on foreign team during the first quarter and the ice and snow storms that occurred during the quarter.
They will will share more details on these trends on our key metrics in a moment, but I want to highlight in particular, the fact that despite all the headwinds or home health admissions for the first quarter were essentially flat with our queue on 2020 admissions.
At that point and all Tom Hi on Lhc's history.
And when you Peel back the day to a little further you see a couple even more impressive indicators to our home help growth.
One being that our admissions per day in queue on this year were higher than they were in Q1 last year.
And two that are total home health admissions in queue on 2020 was 12.4% higher than in Q1 of 2019, so to be back on that pace after having that hurdle rate for this quarter with all the headwinds as a true Testament to the growth momentum. We currently have on our home health segment.
We are also pleased with the fact that our hospice admissions are tracking above pre pandemic levels as well.
I would now like to share one additional observation that not only further speaks to our sequential momentum, but also provides additional evidence to the environmental momentum that is leading to more care shifting to the home.
Although during the early months of the calendar year home Health census has historically performed well an experienced growth you typically see is starting to flatten out and then have a modest seasonal decline.
For example, and the non COVID-19 year of 2019 for the 60 day period from the start of March to the beginning of May or home Health census decline from 78 320 to 77107, four a 1.5% decline.
However, this year over that same 60 day period, we've actually grown home health census from 85 994 at the start of March to 8700 696 at the start on May which is a 2% increase.
Our full year guidance is based on achieving home health on hospice organic admissions growth of eight to 10 percentage, we've outlined in the quarterly breakdown of organic growth across the two segments on slide 15, and we are on track achieve these targets.
The queue on admissions per day trend, particularly in March after getting past all the headwinds and again in April give us the strong confidence to be very bullish on our second quarter trajectory and thus the momentum we expect for the remainder of the year.
One point I will make here is that hospice, we have seen similar trends as others in the sector with average length of stay impacted during the quarter by the same headwinds and the fact that patients are being discharged later from institutional settings, and our percentage of referrals from Alps, ILS in Smiths or two to 300 basis points below prepaying demick leather.
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Since exiting the quarter, we have seen hospice length of stay begin to stabilize.
In addition to the Phe and Medicare sequestration extension that will discuss all of these trends on home health on hospice give us confidence to raise our full year guidance.
Our confidence is also based on how well we are performing in other areas too.
In addition to the leading quality scores an increased amount of unique physician referrals, including nearly 5200, new physician referrals and Q1 that we have highlighted in recent quarters I want to call out on slide 13, what our recruiting and hiring trends have been across our service lines. We've.
We've had two consecutive quarters in which we have hired a record number of frontline employees. While our turnover has continued to decrease and home health alone. We hired 1900 16, new frontline employees this quarter compared to 1200 25 hard on queue one last year.
These head count statistics have a direct correlation and validation with our differentiated culture continued census growth and unwavering focus on patient satisfaction and quality outcomes.
Turning quickly to our inorganic growth lavers I want to focus on our Jv's on acquisitions as Keith mentioned earlier, we remain very bullish and delivering or exceeding against or target of $150 million to $200 million an acquired annual revenue this year.
Our M&A pop line is now over $500 million with several exclusive bills in various stages of negotiation and due diligence.
And the last topic I want to briefly touch on as our value based strategy, which continues to benefit us as well as our partners as the payers we are engaged with.
We have the unique assets in the right mix of quality based program innovation and rigorous clinical protocols to create care plans that deliver what payers need to reduce readmissions lower length of stay on episodes, while improving the patient experienced on outcomes. We continue to be the only one of our peers with an ACO management business and the <unk>.
An ache inside that experienced brings the.
The value we are delivering is also evidenced by the approximately $14 million in value based awards, we earned in 2020.
One other point I would like to make on our ACO management business build on want Keith described earlier.
There are over 9 million attributed ACO lives in the markets we serve.
Of the ACO attributed lives in the markets. We serve approximately 10, 30% received home health last year.
As we continue to harvest and educate on the learnings from our value based arrangements and the learning from our ACO management company subsidiary and demonstrated the evidence based correlation between reduction in total cost of care and high quality outcomes when appropriately utilizing care in the home.
We expect that the size of the opportunity will also continue to grow beyond the current 10.3% utilization with more home health utilized for patients that are appropriate to be cared for with home health.
Now I will now turn it over to you to add add additional color on our results on our guidance.
Thank you Josh on good morning, everyone. We are pleased to report first quarter results that were ahead of our expectations specifically on a year over year comparable basis net service revenue increased to 3% to 524 $8 million adjusted EBITDA increased 61, 3% to 61 five.
5 million and adjusted net income increased 86, 7% to 43 $6 million or $1.39 per diluted share.
Our first quarter performance, coupled with our exit velocity places is right, where we need to be to deliver on our full year projections a.
Revenue was above the midpoint, while adjusted earnings and adjusted EBITDA exceeded the top end of the range.
These are all the more impressive when you consider the significant headwinds we face from the post holiday COVID-19 Serge percentage of our staff on quarantine.
The impact on the ice and snow storms and the related closure of 218 never agencies from multiple days during February.
With the detail we have provided in our earnings release and supplemental deck I will spend most of my time on the key metrics and trends supporting our guidance and growth initiatives and then turn to a raise.
Guidance, along with our strong capital on liquidity position.
I would first like to call attention to pages, 14, and 24 and the supplemental deck, where we've broken out the key revenue factors for our home health hospice in home and community based service segments.
For home health the sequential improvement in our revenue per Medicare episode continued through the first quarter with March exceeding pre pandemic levels in April trending ahead of March.
While the percentage of institutional admit was down this quarter due to the resurgence of COVID-19, which caused softer hospital volumes. We've seen this percentage start to climb back in April and believe this momentum will continue due to elect a procedure starting to open up again.
Ah loop a percentage on PDGF episodes continues to hold on line with our expectations of 89% in our case mix will not get back to pre pandemic levels is improving.
Josh mentioned, it a moment ago, but I want to dig in a little more into the hospice performance for this quarter similar.
Similar to other hospitals hospice providers, we saw a decline in our length of stay during the quarter from 79 six days in Q4 to $78 one day as in the current quarter.
We attribute this declined to patients being discharged from institutional settings much larger than in the past and also to the fact that many patients are not seeing their primary care physicians as regularly as they used to and consequently are being admitted to hostas. Much later in their disease States.
Additionally, emissions from senior living facilities, and sniffs, continuing to lag pre COVID-19 levels.
Ah Hostas EBITDA margin of 10, 5%.
I'll up 60 basis points year over year is down from 13, 2% sequentially in queue for primarily due to three factors one lower length of stay.
To the 70 basis points seasonal impacted higher payroll taxes, and three 100 basis point impacts from out of period implicit price concessions.
As we have communicated previously we believe the sustainable EBITDA margin target for this segment isn't the 13% to 15% range, we expect incremental improvement in the second quarter, while returning to the normalized margin range of 13% to 15% in the second half of 2021.
Our personal care business experienced a decline in billable hours of four 2% versus first quarter of 2020, but we did see a sequential increase in billable hours of 1%. Despite all the headwinds presented in January and February.
The biggest challenge for the personal care business remains staffing well stimulus checks continued to be mailed demand is very robust and we are working several initiatives to increase labor supply and capture the unmet demand.
Looking at the first quarter compared with our previous guidance recall that we had called out the following differences bridging sequentially from Q4 to this quarter the.
The seasonality, we typically experience around the holidays and the slower start to the year we have in January.
The percentage of our clinicians on quarantine, which reached a high of four 1% in January stayed in the range of 2.5% to 4% the balance of January and February before dipping below 1% in March.
The closure of 218 agencies due to severe winter weather in February effected revenue associated with new admissions managed care per visit patients and personal care billable hours.
The higher payroll taxes, compared with queue for which were approximately four 5 million higher in queue for.
In the lower effective tax rate due to the excess tax benefit from the vesting of restricted stock, which resulted in the tax rate of 21, 4% for the quarter.
We also projected we would experience a disproportionate share of COVID-19 expenses in the first quarter relative to the rest of the year as you can see some slide 14, we saw 20% sequential increase in the admission of COVID-19 patients and home health and a 34% sequential increase in hospice. This corresponds directly with the most recent COVID-19 Serge.
And combined with a higher percentage of clinicians on foreign team drove higher expenditures for PPE medical supplies hazard pay and an increase in health insurance claims.
We had projected $8 million $12 million of COVID-19 related expenses for the first quarter and we were right at $12 million.
Looking ahead to the full year, we are still comfortable with our original guide range of 20 to 25 million for COVID-19 expenditures.
And as incurred will be adjusted out of our results.
We will revisit our COVID-19 spend view at the end of Q2 and communicate any changes to our estimates if applicable.
Turning to the flow ear guidance outlined in our earnings release non slide 30.
At the mid points of our new range, we are projecting eight 6% revenue growth 45, 7% adjusted earnings growth and 23, 6% adjusted EBITDA EBITDA growth less noncontrolling interest.
<unk> remained largely consistent with our initial 2021 guidance outlined during our queue for earnings call on documented and our fourth quarter of 2020 supplemental deck.
Updates to our full year guidance include our queue on operational performance and beat on EBITDA in EPS.
The <unk> the sequestration waiver extension through 12 31, an extension of the public health emergency through July 20th.
We are still early in the year helped with ongoing residual uncertainties related to the pandemic. We have allowed for a prudent level of caution in our guidance as it relates to one the pace of elective procedure recovery to hospice length. This day and through a personal care billable hours on to labor supply constraints.
Lastly, I want to highlight are strong balance sheet.
We have 556 million total liquidity and that's net of the Medicare advanced payments and the provider relief funds, the latter of which we previously announced we intend to return to the federal government.
On that note I will mention that on April 13th CMS began recouping the accelerated payments that were distributed last April.
Details on the schedule of those repayments our in our earnings release.
We tend to fully repay the advanced amounts along with the provider relief funds before any interest will accrue.
Ah day sales outstanding increased to 57 days in Q1, while down from 62 days in the first quarter of 2020 DSO is up sequentially from 52 days in queue for the sequential increase was directly related to the no pay wrap implementation, which eliminated the remaining 20% of the re request for accelerated payment.
The CMS payment program adjusted adjustment resulted in an impact of cash collections and cash flow of approximately $34 million.
Even with the impact of the no pay rap our business has produced a robust $42 million a free cash flow in the first quarter.
The strength of our liquidity combined with sustainable on strong free cash flow does a significant competitive advantage and the ability to execute on the wealth of growth opportunities at our disposal. We look forward to reporting our progress to you with respect inorganic opportunities in the coming months.
That concludes our prepared remarks, operator, we are ready to open the floor for questions. Thank you.
Thank you.
We will now begin our question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question you May Press Star then too and.
In the interest of time, we request that questioners asked one question and one follow up and then we will move on to the next speaker.
At this time, we will pause momentarily to assemble on roster.
The first question comes from a J rights of Credit Suisse. Please go ahead.
Thanks <unk>.
First I appreciate the updated information on the deal pipeline I just wondered if you would comment on what you're seeing on no a lot of those deals sound like they are exclusive to you, but in terms of pricing dynamics competitive landscape. We're hearing about others pursue an activity that may not be new from your perspective, but I just wondered what's your latest thinking is on.
Competitive landscape for deals.
Hey, Thanks for the question on Aj's, Keith I'll I'll start much saying from my perspective.
That has been done on hospice of let's start with that so so hospice is.
As competitive but.
But I do see.
Do seem.
Multiple variation and.
Thing on the market.
And.
And then just concentration on certain markets and volumes, but.
For us.
We looked at it a little bit different we're building out a continuum of care. So when we looked at a hospice.
Knowing that multiples, we're going to be high.
We're focused.
Markets, where we have.
A significant amount of home health volume, because we know that we have volume to bring to the table from our home health Operation then from hospital partners.
And so on everything obviously, all the acquisitions new look at we model out.
But we will also build that on top model that we look at it so much.
Multiple as a high and in some markets.
We have we can model out.
The combination and make it work nicely for us and others would just have to walk away from Joshua.
Thank you. Thank you very well said.
Of the one day J that we're currently working many of them fit the exact model, but Keith just described so on.
I would just reinforce our history of discipline due diligence rigor all the things that were known for in the deals that we do close and then we execute upon and even with.
Somewhat higher multiples on some of the transactions.
Still going to be ensuring that those deals have growth potential an upside and we're not just acquiring a static business or one that doesn't have a lot of upside in growth on it. So I feel really good AJ about what we've got going on in our hotline.
Okay, then maybe for the follow up question it seems like.
Referrals and this seems like it's for both business as home health and hospice.
From snaps senior housing that's the one area that is still sort of day.
Relative to pre COVID-19 levels, I guess, it's probably two dynamics there one being sort of a senseless in those facilities with this one is depressed and hasn't fully come back in Maine on for Awhile and then there's also just getting access to the facilities I wonder which of those it can you.
<unk> is it really just the census has gotta come back or is there some element of getting access to the the patients as it reopened Joe you'll see some take up and then can you comment on I would taken home health at least you might see the referrals coming.
Coming from other sources all these new referral sources you are getting so maybe those that volume that would've come to you from those sources coming elsewhere, but is it more of a home health issue or a hospice issue you would say what you're seeing with those senior housing Roberts.
Okay.
Yes, so josh on contact team that again.
Yellow.
Let me just start with home health.
Home health.
We're looking at a loss data from hospital partners and.
We feel that we're getting a lot of patients that were previously August net then just coming directly at home health.
<unk>.
We can see that we're dealing with.
Higher acuity patient population.
That'll be on discharged from hospital then.
We assume that these are the patients that we have on our staff mounted on straight to home <unk>.
Hospice is a little more difficult.
There are no we're seeing some of that on hospice as well, but but I don't know I don't know if we have enough data to feel a certain about that as we do at home now industrially, yes. So.
I would say AJ. It has some of both census, and the facilities.
Diversion around the facilities, which can you just mentioned and access on the access issue I would tell ya.
Talk with our growth leaders quite regularly just to see how that's going on I am encouraged that that seems to be getting better and better almost by the week.
As we have more adoption of the vaccine throughout not only our workforce, but in the markets, where we have smith relationships. So so I am saying the access getting better week over a week.
I'll give you a few data points, just a really kind of drive home. The point you are Megan.
For home Health, we're down about 350 basis points of the percentage of our referrals.
From Smith's so Q1 last year, where I'm at 11, and a half 11, 5% and we're about 85% right now.
On the on the reverse we're up 300 basis points on.
On physician referrals, so a lot of what we've been talking about on the new referrals coming from physicians. So I think the diversion around some of the congregate settings is not only is Keith mentioned coming directly out of the hospital, but also coming from the community from some of those new physicians, we've been able to develop and then on hospice where now.
About 300 basis points, there as well when you look at Sniffs, ILS and ILS now from about 11% Q1 last year to right around 8%. This year. So the good news with all that AJ as if.
As the trends improve as the census levels increase as the App access improves then if we can continue the stickiness of those new physician arrangements or hospital electives are bouncing back and then you throw in a increase trajectory from sniffs aisles and aisles that gives you a lot of confidence in the <unk>.
Both in the last three quarters of the year.
Okay, great. Thanks, a lot.
Thanks.
The next question comes from Scott Fidel of Stevens. Please go ahead.
Hi, Thanks, and a good morning, everyone.
First question just wanted to go back in the fourth quarter, you have provided us with a really helpful Bridge from <unk>.
Four Q2, two 221 in terms of drivers of revenue and EBITDA.
Just wanted to just get your sense on you had called down to target to get $550 million and.
And revenue by two Q.
Handwriting $9 million worth of headwind from Medicare sequestration, and the Phd that that now has been extended so just interested.
And that that target laid out for the $550 million in revenue and then more specifically the three.
Segment components that you had sort of called out on.
For the home Health Hospital ACB Ash in terms of the growth that you are anticipating how you're feeling about each of those pockets at this point relative twin bed had initially provided that in the fourth quarter.
Yeah. Thanks, Scott for the question this is Dale.
Yeah, we feel very good about the bridge that we put together from Q1 Q too we're still right on that trajectory. The only differences that would update to it would be the change in sequestration in PHA extension range. So when you look at that you look at the bridge, we provide and you look at those changes and you can see where now we're looking at.
John and adjusted basis with that so I think everything's sets up really well for that I would say in terms of the three segments feel really good about home health the exit velocity Outta queue on was extremely strong and I'd say, we're probably looking at some over performance on them going into this bridge.
I'm, a little bit of underperforming and half is because of the length of stay challenge right that has been something that's kind of come up with everyone.
We're not as directly impacted by it is we're not as exposed to the senior living facilities from an emissions basis, but as Josh said, where we're from 11% emissions down to eight.
And that affects our length of stay so.
And then we still feel good about hospice, we feel like the margins are going to be in the 11% to 12% range for that but that's probably a little softer than than what we had projected and then I would say.
Personal care business.
I would say little changed there may be I mean, we expected that business to have the most difficult climbed back from the pandemic, because the labor supply and things like that.
So I think we had tempered our expectations in queue to quite well for that so I would say.
Pretty much in line.
With that that when you put that altogether.
We feel very solid about the queue to bridge yes.
Scott is Josh maybe the only other two kind of data points I would give you time back to that specifically on home health since that's the lion's share of the bridge, we have signaled we needed to home health centers to be 87, five and as I mentioned in my prepared remarks were already north of that and we've been.
Then.
Between 87, five and knocking on the door of 88000 now for the better part of the last two weeks.
Which gives gives a lot of confidence into that and then if you look at our admissions per day run right. So the sustainability of that census, or admissions per day are higher than they've been ever.
So last Q1 of last year pre pandemic, we were just under 1200 AD myths per day on home health and now we've had two consecutive months of North of 1200 admittance per day and home health. So you've got to really like where we're at census, and the admission throughput that we're having.
Got it thanks, good color on that and.
And then just as my follow up question I guess would be more of a strategic question around positioning around some of the policy dynamics and.
Keith I know, you've you've called out.
The proposed enhanced 400 billion.
Https funding and Medicaid that guidance proposing and some other things and I am interested for for LHC, Jay How you would think about the best way to position for their ships if that spending ultimately, it's past or something even even close to that.
With the strategy beat it to ramp up more of your direct P. C X.
Exposure capability.
Through Medicaid funded on a Cvs or you ultimately looking at trying to drive more of on the policy side towards ensuring that Medicare providers are are eligible for for a lot on that funding as well just just trying to get sort of how you're thinking about that I get those two different.
Strategy elements relative to this enhanced proposed funding.
Yes, it's a really good question.
So.
Right now where.
Focused on on.
On trying to.
See the on trying to bring the two programs together gather Medicare and Medicaid.
We know that combination how that works well.
Improve in another state models, we were very familiar with so it's easy for us to plan in that direction.
But with the 400 billion this proposed and spending.
It's difficult now because there's a number that's out there, but there's not a lot of detail around how it is going to be structured.
And.
It could mean a lot of things, we don't know how much union activity is going to be involved in that.
So I think we're.
Were taken to where we take a conservative approach and everything so we're staying very close to it from about policy perspective.
And.
And we're just going to evaluated as there's more color around it.
I'm not opposed to are not ruling out expansion.
And to me.
More expansion of the personal cash services.
We think that's a vital service.
It's been the most difficult one for us to manage because of how it.
How it's delivered if there is a different program an average day different rates.
Are are too.
Have stable staffing.
You know all of those challenges and and we're not big risk takers.
You all know that so.
I would say that.
We're we're keeping on pulse I on it and.
And if there's an opportunity there in the risk profiles good enough for us, we'll move in that direction, but for right now.
We're spending the majority of our time trying to work towards.
Coordination of Medicare and Medicaid services together.
For for patients.
Through this choose home legislation or anything this structure remotely similar to that.
Okay got it thanks.
The next question comes from.
Mister Justin Bowers.
Of Deutsche Bank hold on one moment one more.
Move you into the.
Q you May go ahead. Thank you.
Thank you for the steam introduction operator.
Hey.
[laughter].
I I want to just kind of follow up on <unk> and Scott's questions and ask it a little differently, but if we take your.
You're 20.
Two Q bridge.
And add back to sequestration in the PHA benefit.
And annualize that.
Just run that out for the next three quarters, we get at.
About $234 billion EBITDA.
Take your <unk> print of 61, and a half could takes us to like 295 296 right in the middle of the current guide.
And it sounds like you're tracking now like.
Slightly above the pace.
For to cure at least feeling good about that.
Are we thinking about that the right way and is it fair to say, it's kind of your April census, kind of holds for the rest of the year that.
You're right at the midpoint on the guide with maybe a little upside if things improve does that in my over simplifying things there or.
Yeah, just in this day I don't think Youre over simplifying I think this is how I would sort of look at the guidance at this point in time range. So midpoint. The mid point, we've raised revenue $10 million and we've raised EBIT 21, right. So let's.
Let's let's talk about the revenue context, there's three things, we're keeping our eye on.
Related to that residually from the pandemic and one is pace of elective procedure recovery.
If you think about our guidance from the beginning of the year right. We we have assumptions around elective procedure recoveries, we had hospice length of stay assumptions and we had.
Personal care billable hour assumptions in there.
I think we're all still seeing some slowness around the pace of elected procedure recovery, obviously, we all understand that dynamic around the hospital length of stay right now and that's the one thing that that were.
Keeping ourselves a bit of caution around as we look forward, we expect it to come back.
Timing of that is a little variable and then personal care billable hours same thing right slower to recover so when you look at what we originally guided.
From a revenue perspective, we're pulling back about $10 million to $12 million of revenue around those three data points.
And letting queue to play itself out see how those indicators start to play out for the next two three through two to three months before we are.
Our view of that we think it's an appropriate.
Stands to take but when you look at the margin I think you're right on in the margin right margin print was really strong in Q1.
And that was evidenced by our queue on results and that's showing up firmly is flowing through on our guidance.
So.
We've got the full margin flow through in there despite holding back about $10 million to $12 million of revenue.
And.
Just in this is Josh and.
And that was a pretty impressive introduction, so maybe I need to talk with operating and see if I can introduce us that way that was pretty good.
But what I'll sales.
Add is.
I really want to put a fine point on what I said I'm on prepared remarks around the fact that bearing what is traditionally a seasonal decline flatness to decline over the months of towards the end of March and into April and then as you get into May June and you are in the kind of that late spring summer.
And I mean, I went back and looked every year from stop looking at 2014, just because it proved itself out every year.
<unk> seen that kind of trend what we're seeing now we've had a 2% growth on our services when it historically wouldn't have done that so I think your point is very well made that if that were to continue and now that's on is because we're living in a new normal but if that were to continue and census continues to.
Increase throughout those months than I do. Thank you you do have some potential for ups out there I don't want to.
Make that and just yet, but that's another reason I'm pretty bullish.
Got it and then maybe just on I'll follow up on home health and some of the nuances and the volume there can you.
You're seeing like in April it's pretty obvious that.
On the acuity is increasing there.
Along with the institutions is that is that.
More.
Is the institutional side is that.
All hospital or is it some of the other modality is and then.
Is there a way to help us think about the day.
Third and kind of elective volume maybe from 4221.
<unk> and and I know, it's early but how it's on it's training now and I'll just I'll hop back in queue after that.
Yeah. So.
This is day I'll get I'll take that yeah. So when you look at the.
Sort of balance first of always say is the April we wanted to give you guys as up to date indicators as we can the caveat in a footnote as you know on the pages. It's an estimate we're not close with April at this point, so we'll make that caveat.
But obviously were incurred very encouraged by what we're seeing during the close process here.
The uptick in the institutional is probably some of the rebound that's coming around hospital. I mean, there are volumes I think are starting to to recover so that would make sense in line there.
On.
When you look at your question around the electives I mean, I think this is pretty well known but I think we view it the same way we're at about 75% of pre COVID-19 volumes around electives and.
We fully expect that to.
Get back toward pre pandemic levels over the course.
Of the balance of these three quarters, probably more low more heavier than the back half of the year.
For us about 10% of our admissions come from.
From the elective procedures. So that's about 200 250 basis points of opportunity for us.
That as that process comes back of those volumes come back that are.
Additive to us.
Understood. Thank you.
The next question comes from Brian 10, Quillet of Geoffrey's. Please go ahead.
Hey, good morning, guys.
Joshua loose follow up or I guess, yeah, I'll follow up on the comments on margin. So obviously pretty strong this quarter as.
As we've seen visits kind of like bought amount it feels like it that 12 six visits per episode, how are you thinking about where that lands once lupin normalizes and.
Are you thinking about the pace of recovery.
Yeah, Brian Good morning, I would say the.
12, and a half to 13 has now been pretty sustained in pretty consistent.
And what we would have expected NR PDGF modeling for the patient population in the acuity that we were seeing.
As we see case mix increase in as we see patient acuity go up I think you could see I don't necessarily want to call. It a rebound because I think it's appropriate where it's at.
But as you see more.
Post elective post surgery, you might see that go up to 13, 13, and a half but as we said before when that occurs case mix goes up on the revenue comes with it so I still feel very confident about in the margin throughput.
Under each of these we've got some sensitivity analysis that we've done on visits per episode and how it relates to the different HHR jeeze and the co morbidity stack and what all that looks like so as the VP where to pick up the margin would still be sustainable.
And that way so I feel really good about that and then the other thing I have to mention as we're talking about VB is I want to give a captive to Dr. No gay and Angie on our entire clinical leadership team as well as our operators on that have just unwaveringly not taken their off the ball.
On our quality outcome star ratings patient satisfaction throughout not only PDGF execution, but the pandemic.
We continue to monitor those results monthly and feel really good how we're facing there as well.
And then just just a follow up to your point on on a day.
See.
We're census being of that driver right. So as I look at your admissions trends for the quarter of it.
Versus what ADC trends were and if they think about pushing that going forward and where do you see the research right movement going will we be able to sustain kind of like this elevated level of research or is this just the new normal posts PDGF.
Yeah, I think we're on our resort right somewhere around 36% or so.
I wouldn't necessarily say that elevated there was a little bit of elevation earlier on in the pandemic. If you go back and look at it quarter over quarter, but.
35% to 38% or so is about what we would expect and about what we would run. So I think that's pretty solid. So if you are linked to stay in your recent rate is pretty stable and solid then you're just looking at the correlation between the admit throughput in the census.
Got it okay. Thank you.
Hi from.
The next question comes from Matelot rule of William Blair. Please go ahead.
Hi, Good morning, cash I, just wanted to talk a little bit on your comments on the emanate pipeline.
Thank you mentioned that largely creating more overlap markets, maybe could you just confirm that that's where the majority of the pipeline nance versus anything you've seen on the footprint expansion side and then are you starting to see anything sort of PDGF related start to pop up.
And any of your discussion.
A return on Sunday and balance you saw before.
Before all the character on strike blown up.
Yeah, Matt Good morning, I would say on both of those that.
Yes, and yes, [laughter]. So the majority of the acquisitions in the pop line, especially those that were pretty far along in our diligence in discussions.
Are more overlap either.
Co location overlap, which was the strategy that Keith described earlier or just market density.
Opportunity and the state that we currently operate so there's not a lot of geographic expansion or.
Footprint growth and that kind of a way and.
And then on your second question, which was remind me again, Matt the second point that I said, yes to already.
Yeah sure just you had mentioned pre COVID-19.
You are low yeah, where debbie from PDGF opportunities come on just curious landed on this started coming back.
Yeah no.
I'm glad you did ask that one because if you look at our pop line right now.
And even if you look at the difference between what we reported last call on this call. There is an uptick and home health and the top line. So last call. It was 80 or so percent weighted toward hospice and now at 70 or so percent weighted toward hospice on about 30% home health and even this week we've had two inbounds.
From.
What I'll call.
Small to medium sized home health opportunities that were already kind of modeling and looking at so definitely sensed insane.
Uptick and home health specific activity over the last two months that we were not seeing in the fourth quarter.
Okay. That's helpful and just a question on the hiring side. Obviously, you took of hiring a record numbers to try to meet record demand just curious.
Their ability of some movies commissions, you think in any way related to other providers not pain COVID-19 bumps smoking reduction in some of the travel pay or bonuses Scott Keith might've been using just curious if there's any sort of different supply side dynamics that are sneaking up with with your hiring.
Yeah, that's a hard one to answer.
I can speculate and give you my good on it which I think it might be some of a lot of things.
I still continue to believe that just the flexibility and the.
The type of work, we do is very attractive and then when you're doing it in a pandemic setting where everyone is just.
Going through fatigue, and burn out throughout all levels of settings of healthcare I think we are a.
A good place for a lot of the clinical workforce.
But I I want to spend maybe more time talking about.
Our processes and what we have really focused on and improved over this last year from the efficiency of our on boarding and orientation process to the way we more closely monitor our speed of higher metrics. We've got daily pop line reports that go out all throughout our operations and sales teams for their open posish.
<unk> and.
And the velocity of hiring we've had back to back quarters now just keep jumping themselves in the higher number being historical highs last week alone we have the strongest week in the company's history. So I mean, we're watching this one that closely and had just another record week last week and hiring.
So.
I'm really I didn't know we would be here quite frankly, Matt we we put a lot of process in place we added to our talent acquisition team most of the leadership on at the tactical level.
And hopes of building up capacity for growth, but honestly, we're a little bit ahead of pace from what we would have expected.
Okay. Good deal thank God.
Thanks Man.
The next question comes from Frank Morgan of RBC Capital markets. Please go ahead.
Good morning.
I guess I wanted to stay on the M&a's for just a second I think what went on here your numbers of.
Five day increase in Dsos $34 million use of cash from.
The whole rap elimination.
You just gotta think it's going to hurt at some point, so I guess.
Is it the deals. These recent deals that have come in on or people talking about that or people talking about what happens after sequestration and I'm trying to figure out what scares mom and pops enough to actually want to.
To actually considered selling your assets.
Yes.
I mean.
I think on on home.
Are you talked about home health.
Yeah, Yeah Mhm Yep.
Yeah, So I think the.
I think the decisions.
Of home health.
Of mom and Pops to sail.
Was made in 2019 and then the COVID-19 pandemic an assembly on this money you heard her say this.
We're all stay on the same thing I mean, I think is the true.
Provided.
Some relief and postpone.
There.
The urgency.
But just so much changing and the way home health is delivered and I mentioned in my prepared comments about value based purchasing that's a really big deal.
When I look at the.
At our data and I'll see.
How far were outperforming.
Home health agencies that are getting.
91% of the business and.
In places where we are.
That's just that's.
Get found out and brought July and so to take their home health agencies from where they were.
And how they were operating I'm really is a cash how to how they were moving out of it.
I'll, just make that decision to sell as theirs.
Just as just and May right and and so now we are.
It's just there long term view.
I mean I am on let me just sales a couple of other things is probably to lead and I don't want to mention any names and stuff but.
There are people that.
That on the started these like Ginger and I did.
And and they grew on to a certain level.
And these are real on thinking of Briley people now that I know that.
We're talking to.
That didn't didn't have the good fortune to end up and on LHC type situations that they grew a business started from something.
From something very small and so they don't have any debt and so is their nest egg that they're going to retire at and so there.
Late fifties mid sixties.
Just.
Just looking to move on I, just think is that is that simple.
Gotcha and the the mix of the backlog is that more a function.
Or the size of the deals in.
Total on the hospice on or do you just like larger deals and therefore.
Represent a larger percentage how would you characterize the backlog from that perspective.
Yeah, so so the hospices that.
That we have in the pipeline now.
Aren't of that of the Martha calm that I've just described.
The ones that we're looking at now we're more.
Investor owned.
Our investor back.
And.
So.
They have done quite well with them to a point and just in the five to seven year window, where they're going to flip out of it and and move on so we're.
We're not.
There are some of the hospices that and on the other model that on describe that a relationship type deals, but the ones on our pipeline now on Josh on Meg Ryan Yeah, just a couple of small but.
Significance on.
And on the size question Frank on the hospice sales you're right. They are no a little chunkier.
Ranging.
From medium size too pretty good sized whereas on the home health those are.
I would say more smaller to medium size as we're consolidate on that for PDGF as we just discussed.
Got Ya and then the last from here just obviously you had management you already commented on on Brian's question about the.
On the visits per episode.
Beyond visits per episode is there anything in terms of labor mix substitution labor between nurses, an LPN true.
<unk>.
Any nicks opportunity left and the cost of labor cost structure or from here is PGM will just touch on refining coding.
More top line. Thank you.
Yes, Frank I would I would tell you that.
You know is quite well and we've been very public with Gower LPN RN mix in our PTA Petey mix and.
We continue to feel like we are operating very effectively there and efficiently and have monitor those metrics as the VP had evolved through PDGF, but again.
Hate to sound like a broken record going back to all of our preparation work before we executed on PDGF, but we knew what those were going to look like before the calendar flipped of 2020 and the team is executed quite well. So I wouldn't say that there is a lot of upside or further improvement there were still 45% or.
So mix on Lpn's and.
And probably 50, 55% on PTA.
And Frank this is Dale what I would say it would go to the opportunity is is around contract labor portion.
As Josh mentioned with this the strong hiring strong retention.
We're starting to create.
And in our clinicians off quarantine on our capacity is starting to.
Getting back to where we are very comfortable with it and so that creates an opportunity to displace some of the more expensive contract labor, we're a little bit overweight in contract labor, yet and home health and hospice, but.
It's gotten better now, but we feel that we're adding.
A pivot point, where it's starting to get better for us.
Yes, a day Franklin on me.
I think that are <unk>.
Or is that a mix up.
So we're talking about business.
For episode.
I think it's time for us to start talking about.
How the delivery model change.
As a result of PDGF.
And then.
And was also influenced by COVID-19.
So when we think of inside LHC group just so so you know we don't.
We talk about visits.
But our big focus on on patient and counts.
And minutes net.
Of time with patients.
So our patient encounters and at the time that we spend.
With patients.
Hi.
But we're only having this discussion around around business.
I think it makes it would make it easier for all of us not info initiatives to understand is how differently we function today.
COVID-19.
And how we have virtual meetings and someone will.
Tried to convince us that was valued in a virtual meeting two years ago, not many of us flow.
For the on that.
Day, but.
But the day, where.
Significant amount of his time that on nurses and patients are are through telehealth.
And those are all in addition to the visits were making.
So.
At some point, we're going on each how to bring that up keeps talking about just visits give the impression.
We are spending less time with patients.
In this volume we're actually now.
On the more types of how we communicate that's on the market.
Frankly.
Okay. Let me ask went down follow up so what's the difference between the visit and an account or did you get the account things like telehealth and other things to create the encounter.
Then I will help us.
Yeah. So so these are not things that we put on on cost report.
And so we've always put visits on we've talked about home health in terms of the visit.
And we honestly didn't do much of this much of this.
Pretty COVID-19.
Pretty PDGF pretty coat, where they will have on the same time.
But now.
We monitor all encounters with patients.
So.
In the past if if a patient.
At some.
Of.
Some issue.
At 30 minutes on the phone with a nurse during the course of the day.
Let's just say five years ago that was on something we would crack.
And today, we track all of that all of that.
As part of the encounter time with with patient just just to learn how the models work. It doesn't have a financial impact on so that we can build a or anything.
Okay. Thank you good insights.
The last question today comes from Joanna Good joke of Bank of America. Please go ahead.
Hi, Thank you I guess for sticking around.
[laughter] precede thinking that question here can I get that to follow up.
On that.
I guess, the premium Max that choose home legislation that.
You seem to be even more I guess confidant it could be introduced this.
This year.
If this is passed away, which we didn't know on a Canadian exteriors things complaint or maybe this year at home. If you can talk about.
Timing of thinks and also moving.
More importantly, and I'd just as Patsy clean this next at home benefit.
Essentially how big of an on 14th this D.
The industry and the company kind of any way you could frame it for US I mean, obviously you have a decent exposure personal okay.
Inc. But can you would you require more of these assets of what your partner to be able to implement.
Implement best email markets.
So we will start with this question about choose home.
We.
But the model is nothing new it's it's borrows from.
Oregon Health plan in the passport program in Ohio to be quite honest it in.
Maybe adds a little more skilled side to take higher acuity patients.
But.
So when we proposed it.
I think we were surprised by the Receptiveness to it.
And I think.
The reason.
And surprised by the positive way out of recession is because.
The COVID-19 experience, we all just went through shine the light on the need to have an alternative to.
To institutional care for that patient population.
So.
So we're building champions on the hill in both on on both the house and Senate side.
And.
That is exceeding our expectations based exceeding Myers.
Pretty conservatives always pay on for the worse, but.
Just surprised cash.
At the champions that are getting behind this.
Think it's the right thing at the right time so.
So I am pretty confident that will get introduced.
Later, this year, whereas in goat as it doesn't get past.
I just I just don't know.
So so that's where I am on on the legislation.
Every all policy in Washington, DC right now.
If you show up and want to talk about.
Ideas to shift care to the home.
Body wants to talk to you and then.
It is.
Make a lot of it has to do with just the COVID-19 experience.
But.
I'm sorry, but.
Your second question about if it does pass.
At home Yeah.
How big is opportunity.
Right and then would you would you need more personal okay, I guess coverage to do that and what would you have to Oh no partner.
So so we would have to have.
More personal care activity because of the the choose home legislation incorporate.
A L. A on a personal care with the traditional Medicare skilled benefit.
So I would say in.
And markets where.
Our volume is lower.
We would probably.
Contract with.
Personal care provider, if we didn't already have service in that market, but in in larger markets, Let's just say like the Dallas market, where we have the THR joint venture.
And that kind of market wood properly.
Acquire or build.
Personal care.
Just just.
On the scale.
The volume there.
Annie Lawrence Hospital on.
Make the market.
I think.
And the regular home health model.
Without this combined services.
We have proven out.
40% of the patients being admitted to serve.
Could be care far at home with just the traditional home health.
And we were doing that already.
So.
When we look to this benefit.
I think.
I think we're talking about three or four 8%.
So.
<unk>, which means.
70, or 75% of patients.
Patients that we're going.
Smith.
Two or three years ago.
Could be care for.
In the home setting with a combination of both.
Of services.
Alright, I appreciate the color I guess, Oh Wow on and here gives me only time. Thank you.
Thanks, Sean.
This concludes our question and answer session I would like to turn the conference back over to Mister Keith Myers for any closing remarks.
Thank you operator.
As far as closing remarks, just as always thank you for our.
For your questions. Thank you participants are participating in the call and know that.
Management team will always be available to you between calls contact Eric Elliott and if you'd like to speak to myself Dale on Josh.
We'll set time aside and we'll be glad to speak with you and answer any questions you may have.
The conference has now concluded.
Thank you for attending today's presentation you may now disconnect.