Q1 2021 Amedisys Inc Earnings Call
And and palace and reverberation of Thunder of spring over distant mountains.
He who was living is now dead, we who were living are now dying.
With a little patience.
Here is no water, but only rock rock and no water and the Sandy Road the road winding above among the mountains, which are mountains of rock without water.
If there were water, we should stop and drink amongst the rock one cannot stop for thing.
Greetings, ladies and gentlemen, and welcome to the <unk> Q1, 2021 conference call. At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation anyone using speaker equipment.
Excuse me, if youre and Nieto's operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded and is now.
My pleasure to introduce your host Mr. Nicholas Scotto. Thank you you may begin thank.
Thank you operator, and welcome to your Medicine Investor Conference call to discuss the results for the first quarter ended March 31 2021.
A copy of our press release supplemental slides and related form 8-K filing with the SEC are available on the Investor Relations page of our website.
Speaking on today's call for medicines will be Paul Kusserow, Chairman and Chief Executive Officer, Chris Gerard President and Chief Operating Officer, Scott Ginn Executive Vice President and Chief Financial Officer, and also joining US is Dave Kimberly Chief legal and Government Affairs Officer.
Before we get started with our call I would like to remind everyone that statements made on this conference call. Today may constitute forward looking statements and are protected under the safe harbors of the private Securities Litigation Reform Act.
These forward looking statements are based on information available to <unk> medicines today. The company assumes no obligation to update information provided on this call to reflect subsequent events other than as required under applicable securities laws.
These forward looking statements may involve a number of risks and uncertainties, which may cause the company's results or actual outcomes to differ materially from such statements.
These risks and uncertainties include factors detailed in our SEC filings, including our forms 10-K, 10-Q and 8-K and.
In addition, as required by SEC regulation G. A reconciliation of any non-GAAP measure mentioned during our call to the most comparable GAAP measure will be available and our forms 10-K, 10-Q and 8-K.
Thank you and now I'll turn the call over to <unk>, Chairman and CEO Paul Kusserow.
Thanks, Nick and welcome to the <unk> 2021 first quarter earnings call.
2021 is off to a good start for our medicines and none of our performance this quarter would be possible without our 21000, plus employees, whose unwavering commitment to providing the best care to our patients in their homes is nothing short of inspiration.
<unk>.
I want to thank every one of you for helping to deliver such strong results.
Before I turn the call over to Chris and Scott to walk us through our performance this quarter I want to review a few developments that have recently occurred.
The poet.
Who you heard instead of our usual music T. S. Eliot was wrong. When he said April was across month April for a medicine has turned out to be a very fortuitous month first on April eight CMS issued its proposed rule to update hospice payment rate.
And the wage index for fiscal year 2022.
Factive for services provided beginning October one 2021.
CMS estimates hospices, serving Medicare beneficiaries, we will see a two 3% increase and payments based on our analysis of the proposed rule, we expect the impact on <unk> to be in line with the 2.3 increase we view the proposed rule very favorably.
And as positive rate updates and our hospice line of business have provided a meaningful impact and given our substantial topline growth and increase in size over the past few years.
We don't and we will not count our chickens before they're hatched, but when the proposed rule was finalized this summer it will represent an incremental $6 million.
Next on April 13th Congress passed HR, $18, 68, which among other provisions extends the temporary suspension of Medicare sequestration through December 31, 2021, we are updating guidance by $27 million to rip.
<unk> the further suspension of sequestration.
Also on April 14th we announced that we signed a definitive agreement to acquire licenses that will allow us to conduct home health care operations, and Randolph County, North Carolina. This certificate of need purchase allows us to provide home health services within a 15.
Miles radius surrounding Randolph county, including the populace Montgomery County, the service area provides access to 31000, Medicare and Medicare advantage enrollees, we expect the transaction to close on April 32021, as we have said in the past M&A.
<unk> is an important tool for us to continue to expand our geographies and market share and we are continuing to work for more significant ways to deploy capital to grow inorganically throughout 2021.
While these are small deals they increase our presence and strong markets are geographically strategic and represent we are active and successful and the M&A market and expect to do more and bigger deals as the year progresses.
Finally on Tuesday evening, we announced what we have previously referred to as an innovative sniff at home pilot with our partners at sound physicians, a leading physician partner to hospitals health plans physician groups and post acute providers seeking to transform outcomes for <unk>.
And post acute episodes of care, we are delighted to be working with such a high quality partner and industry leader on this initiative. Our pilot is set to launch in May we will be focused on caring for higher acuity patients, allowing them the option of being cared for in the home, but with a more robust.
Home based care offering, including home health and telemedicine.
Arsenal care and other services focused on Adl's activities of daily living and S. D O Hs social determinants of health.
We have two sites identified and ready and are working to locate to more we are excited to test learn iterate and grow this important program and we will keep you updated on our progress and moving up the acuity scale.
That's the main news for April So I'll turn the call over to our resident poet Laureate President and C. O O Chris Gerard for a run through of our first quarter performance, Chris could you do this and I am pentameter. Please.
Thanks, Paul.
It's amazing the things I have to put up with.
Now moving on.
Let's take a look at our first quarter results as they relate to our four strategic pillars, which are core to what we do quality people and operational excellence and growth.
Always first quality even.
Even though the CMS has frozen it's home health compare data until its January 2022 release and delivering the highest quality care is always a top of our priority list.
If we deliver the best quality and good thinking forward.
While this debt is frozen we've been using internal datasets for minutes HP to benchmark our performance and on them.
Extremely proud of the progress we continue to make and fact as of our last internal benchmark 316 of our 320 home health care centers are.
Sure.
For stores, which puts us at 99% of our care centers with for stores and above.
For perspective in 2015, we averaged three two stores.
And this performance is nothing short of amazing.
This is a great proxy for how our continued focus on quality is paying for.
Congrats to the home health and clinical teams for <unk>.
And just tremendous progress.
Much like on Hill, CMS has frozen the hospice compare reporting metrics and resumed reported in 2022.
We usually historically outperformed the industry average on all hospice item set measures and you can see.
And we strive to improve our performance.
Next Green CMS will publicly report postures star scores.
Currently collecting data for the initial release.
Seamless journey, we have been replicating our home health structure analytics and reporting that has propelled our hometown and moved to best in class.
Our focus on preparations should set us up to perform well and we look forward and having true public benchmarks and being at the top as we are and whole milk.
Next you can't have a great quality without having great people.
And our people and helping them develop and grow as our next great challenge and <unk>.
And one that I am personally energized by a committed to driving and.
As Paul stated time and time again, we are a company on people.
Takes time and effort to recruit our clinical staff.
Higher demand and error.
When we do bring in top talent it is our job to keep them fulfilled and productive.
Further our ends and initiate nearly 90% of our revenue.
So turnover within the army and clinical status.
Trickle down effect throughout the organization.
I'm very proud of all the effort the entire organization has put behind this initiative and how quickly the results would come.
I am pleased to report that at the end of Q1.
Our total voluntary turnover was down to 15, 9%, which is down from 19, 5% and Q1 and 2020.
Keep in mind Q1, 2020 was a prepaid debit cards.
Making this kind of turnover and <unk> during the pandemic is really amazing story.
We saw reductions and clinical turnover and nearly across the board and boats and houses and saw reductions and care center leadership turnover and both lines of business.
This is a phenomenal performance for the quarter and we look forward to continue to improve our turnover statistics throughout this year.
It's all about our people.
Next is operational excellence for.
For the quarter, we performed 13 nine visits per episode down 0.1 visit sequentially and one nine and visits year over year.
We remain very comfortable with our VP levels as we've seen strong increases and our quality scores.
As a reminder, we consistently stated that we will never do anything to impact quality scores and given our continued improvement and whom low quality along with our decreases as perhaps we are delivering on that promise.
On clinical mix in Q1, and we achieved 47, 6% LPN utilization and 52, 5% and PTA utilization.
And as visits per episode have come down our ability to increase the LPN utilization that's become more challenging however, theres still room for some improvement.
We also saw year over year productivity improvements and our homeless clinical staff as our business per FTE increased nearly 4%.
Okay.
Increased productivity combined with decreased visits per episode will increase our capacity, which will be key to our future growth opportunities.
And finally growth.
For the quarter and home Health, we grew same store total volume and and admissions and an impressive 6% and 5% respectively.
Our home health line of business has done a tremendous job growing through the pandemic and continue that strong momentum and the first quarter.
We did see significant weather disruption and our operations in February which impacted our Medicare admit growth by about 1%.
As a reminder, Q2 of 2020 was the most significantly impacted by COVID-19.
So we're expecting a large year over year growth number in Q2, 'twenty, one that will put us in line for a full year guide and home health growth growth target of 9% total emissions.
Moving to hospice, we saw increasingly strong same store growth throughout 2020 reach and 15% and Q4.
So our growth rate in Q1, 'twenty, one and was 5% our admissions increased sequentially.
With one less working day and significant and a significant weather event in mid February.
The severe weather caused unprecedented office closures, resulting in a lost opportunity of approximately 1% of admissions growth.
Okay.
Additionally, COVID-19 impacted our and the volume in Q4, 'twenty and Q1 'twenty one.
Excluding the initial peak of the pandemic, we saw the highest volume of COVID-19 and Thats in Q4 'twenty and.
Nearly 400 on a same store basis.
This number declined to less than 300, and Q1, 'twenty, one with 70% of those COVID-19 and admits occurring during January.
Keep in mind that these COVID-19 and minutes, which we're helping our EBIT growth in the back half for 2020 were also negatively impacting our ADC.
With length of stay and single digits in many cases.
As COVID-19 Emmis decline, we continue to see improvements and median length of stay after reaching a low point in January of 'twenty one.
And and our discharge rates, especially on our shorter length of stay patients.
Which will be beneficial to reaching our ADC target throughout the remainder of the year.
COVID-19 has also had an impact on our ability to hire and train hospice BD ftes.
However, as more and more of the population are vaccinated and COVID-19 restrictions are lifted the pace at which we're able to increase our BD staff rollout other training programs and get our reps in front of people is increasing and we're seeing more consistency and access to our referral sources.
The increase and the head count combined with improvements and productivity and conversion rates should both be catalysts for increase and that and it's on ADC as we move throughout the year.
Page 18 of our supplemental slide deck shows graphically how were performing versus the forecast and plan.
We normally are skeptical of hockey stick forecast, but the second half of 2021 should be just that.
And personal care, our network drove approximately $1 2 million and revenue to our home health and hospice segments, which is up 107% year over year.
Small, but we still have plans in place and we're working to drive more volume through the network.
We've also expanded our dialysis partnership and Massachusetts to include several aging services access point or organizations <unk> for short.
And this apps are responsible for the reimbursing and overseeing our providers of Medicaid waiver services for Massachusetts Medicaid.
This reimbursement is a three way partnership between the setups for.
<unk> medical care, and our medicines and coordinated and execute dialysis focus personal care services in the home for dialysis patients.
Through this partnership we have further refined our dialysis programming and services requirements.
For dialysis focused personal care services will be performed by a supportive home health aide, who has received specialized training to service the needs of a dialysis patient.
This shows how we are progressing to prove that personal care is an essential element and care for the very sick patients and their homes.
And finally, as Paul mentioned, we signed and innovative pilot with sound physicians to provide a bundle of home based care focused on higher acuity patients that can be cared for and the home.
A key piece of this program will be utilizing personal care services to support activities of daily living and for economically providing more routine and consistent patient interventions.
We will be utilizing our own personal care assets for our initial pilot markets and as we.
We expand our personal care and their network will be engaged.
While these pellets are initially small they're great representation of the new and innovative ways. We are trying to use personal care.
We view, our personal care line of business as a service delivery incubator and will continue to deploy personal care services and new and differentiated ways.
As you can see we carry much of our core business positive momentum from 2020 into the first quarter.
Our focus on clinical distinction employer of choice operational efficiency and growth continues to pay off for nationally, but more importantly for our patients.
And with that I'll turn it over to Scott, who will take us through a more detailed review of our financial performance for the quarter Scott.
Chris I am very pleased with our first quarter financial results for the first quarter of 2021 on a GAAP basis, we delivered net income of $1 55.
Per diluted share or 537 main and revenue.
Revenue increase of $45 million or 9% compared to 2020 and.
As a reminder, we have chosen and apply our cares act funds only to direct costs associated with COVID-19. The majority of these costs are included in cost of service.
For the quarter results were impacted by income or expense items, adjusting our GAAP results and we have characterized as non core temporary or onetime in nature and slide 14 of our supplemental slides provides detail regarding these items and income statement line items each adjustment impacts you'll note that our adjustments include the recognition of cares Act.
Funds and direct costs associated with COVID-19.
For the first quarter on adjusted basis. Our results were as follows revenue grew $45 million on 9% to 537 million EBIT increased 25 million, a 47% to $79 million.
EBITDA as a percentage of revenue increase for 280 basis points.
And EPS increased 49.
A 47% to $1 54 per share.
Significant items impacting our Q1 2021 consolidated results are as follows.
The suspension of sequestration and rate increases added 18 million to revenue and gross margin improvement and home health revenue per episode and clinician and utilization drove a substantial expansion of our gross margin and as their care acquisition contributed $25 million and revenue.
Now turning to our first quarter adjusted segment performance.
Keep in mind set.
Segment level EBITDA as pre corporate allocation.
And home health revenue was $329 million up 25 million or 8% compared to prior year driven by same store total volume growth of 6% and total admissions growth of 5%.
Revenue for episode was up $197, 7% half for the increase was driven by the suspension of sequestration and the 2021 rate increase and the other half was a result of fewer lost building periods and improvements in our case mix and functional impairment scores.
Okay.
And I implementation and metal losses care has led to a reduction of one non visits per episode and while we continue to improve on our quality scores.
Visiting connection cost per visit increased 5% over prior year. The increase was driven by inclement weather pay planned wage increases and <unk>.
And increasingly the utilization and rates of contract conditions, driven by growth and COVID-19, higher health insurance costs and the impact of lower visit volume on fixed costs.
Our gross margin for the forgings and 70 basis point, despite the 5% increase and cost per visit.
The improvement was driven by a significant progress on clinical staffing mix and utilization.
Hundred 60 basis point impact from sequestration relief and rate increase and the variable nature of our business model, which benefited from higher volume and reimbursement.
G&A increased approximately 4 million, mainly driven by raises higher health insurance cost increases and cash generative administration, and staff and business development resources and investments related to <unk>, which offset by which were offset by lower travel and training spend.
Segment, EBITDA was $71 million up $22 million with an EBITDA margin of 21, 5%, representing a 540 basis point improvement.
Sequentially segment, EBITDA was up five 4 million and driven by the 2021 rate increase and lower health costs. Our total admits increased 5% sequentially. However, lower revenue per episode weather and the timing of the completion of episodes impacted revenue.
Now turning to our hospice segment results for the first quarter revenue was $119 million up $22 million for prior year and increase of 13%, which includes the addition of the <unk> acquisition, which closed on June <unk> 2020.
Net revenue per day was up 3% for $159 76, driven by sequestration suspension and a two 4% hottest strength increase that went into effect October one 2020.
As Chris discussed hospital admissions grew 5% and ADC declined 4% as our discharge rate and a delay and a tightening of patients coming on to service resulted in shorter length of stay on.
Cash cost per day decreased $1 79 assets, primarily related to a decline and visits performed by our employees due to COVID-19 related access restrictions and lower restaurant utilization and.
And lower room, and board price low room, and board price concessions and partially offset by raises and health insurance costs.
EBITDA was $47 million up approximately 8 million and an increase of 21%.
Take care acquisition added revenue of $25 million and EBITDA for may and to segments performance for the quarter.
G&A increased seven six mainly driven by their share care acquisition.
Sequentially segment, EBITDA decreased $5, six may and driven by the anticipated decline and ADC.
Turning to our general and administrative expenses.
On an adjusted basis total G&A was 171 million on 31 eight percentage of total revenue, which is an increase of 16 million and year over year and includes eight made on additional cost for laser hair care acquisition.
7 million and our hospice segment, and Onemain and coffee. Additionally, health insurance costs and incentive comp accruals raises additional additional business development resources and operational support accounted for approximately $8 million.
We continue to generate impressive cash flow and the first quarter, producing 54 million and cash flow from operations.
Cash flow from operations was ahead of internal projections due to strong cash collections.
And and extension of federal tax payments due to estimate why other than February.
DSO increased $3 seven day, some year end versus our forecast and increase of five days.
And as a result of our continued strong cash flow our net leverage ratio at the end of the quarter was <unk> seven times.
M&A remains our main capital deployment priority and our pipeline of both home health and hospice deals install enacted as Paul mentioned, and we recently announced the signing of a definitive agreement to acquire the regulatory assets.
And our home health operations, and Randolph County, North Carolina.
We also plan to use the novo's as a total and expanding our footprint with 15 planned in 2021.
During the quarter, we opportunistically deploy at approximately $73 million of $100 million share repurchase authorization.
And even with this repurchase we have over 460, <unk> made and liquidity positioning us well for a continued inorganic growth.
Finally, as you can see on page 16 of our supplemental slide deck.
Our guidance ranges for 2021 to reflect the.
And the extension of the sequestration suspension.
And our new guidance ranges are revenue of two $3 billion to $234 billion.
Adjusted EBITDA of $342 million to $352 million and adjusted EPS of $6 85.
For $7 seven.
The module to keep in mind as we move into Q2, we're still climbing out of our ADC declined from Q4, we're seeing an increase and access to patients and both facilities and their homes for our hospice as and L. P and the impact is approximately $3 million quarterly as we return to our pre COVID-19 visit levels.
We anticipate a sequential increase and health insurance and workers compensation of $7 million to $8 million.
I'll now turn the call back over to Paul to conclude Paul.
Thanks, Scott I Love financial poetry, and April as you can see we have delivered another strong quarter of performance and an ever changing market, we bested our expectations and increased our guidance ranges, we remain and a very advantageous.
<unk> position as demographic psychographic regulatory and operational tailwind all point to a very exciting future. This.
This ends our prepared remarks, operator, please open the call for questions.
Thank you, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is and the question queue.
If you'd like to remove your question and you May press star two and.
And the interest of time, we ask that you. Please limit yourself to one question and one follow on.
We'll now.
And again questions.
First question comes from the line of Brian <unk> with Jefferies. Please proceed with your question.
Hey, Brian Good morning, guys. Good morning, Congrats and.
Thanks for the reminder of my English lit classes from.
And we're going to break out and Thats why it on that one.
And Chris and I sympathize.
Yes.
Yeah.
I guess my first question is for Scott Scott It and they think about the guidance adjustment right. So you are only just to clarify youre only adjusting for the sequester, but nothing has changed in terms of the assumptions and your Q2 to Q4 guidance. Despite the buyback for what seems to be and earlier than expected acceleration and kind of like the recovery pace.
At hospitals and other.
Great way to think about that.
That's right, Brian and so yes, so I'm only adjusting for the impact of sequestration kind of sticking to our plan around waiting to get to Q2 to reassess guidance. So we're sticking with that and I would say from the buyback.
And not seeing anything from an EPS impact perspective, I think a full year impact of that is somewhere around two so it's minimal got it.
Okay and then it's Paul.
And I guess for you and Chris to Hospice turnaround you. If you don't mind, just walking us through what the action plan and as I know you have the guidance chart and.
And your slide deck, but how are you thinking about operationalize and turnaround there and I guess I'll throw the second question.
And since from your Humana day is just thoughts on.
And what Theyre doing there how does it impact you know that they've brought.
Kindred at home and house. Thanks.
Sure.
Chris why don't you take on the <unk>, we're seeing and hospice I think its beneficial <unk>, but.
We've been where we're focused most just to preview a little bit about what Chris is saying we're focused on ADC, that's very important for us and our length of stay.
<unk> bottomed out in January this March is equal to last March pre COVID-19. So we're feeling very good about that but I'll, let Chris.
Describe the seesaw.
Yes.
Good morning, Brian.
And you can only imagine what our go through every day.
Great.
[laughter] on.
For us this.
We saw as really kind of a big.
And we'll as it came through at the end of December into January related to the pandemic. We entered the 15% admission growth with new ADC growth and Q4 and came out and again really strong with strong admission growth in January and saw some declines after that and as we saw that most of that was either hospitals discharging or.
And related patients.
So the metrics, we're watching very closely our really our medium length of stay in our percentage of patients that are on service for 14 days or less the good news is as you move through Q1.
Both of those numbers moved and a positive direction and the pace a little quicker than what we had and our internal model.
So and.
And we hit the low point on media and lead to stay of 18 and January of this year and Thats compared to 27 in January of last year. So the signs there around count and stabilization of length of stay on really positive and looking good and unfortunately, we just haven't really just on the emission marked by our standards.
And if we have some work to do around that and mainly around we can share that we have the right and number of feet on the streets, we saw a little bit of a pick up and turnover.
And Q1 from our sales team.
And on enhancements, particularly that we've got our arms around and no we havent aggressive channel.
Our charter and deploy the on plan and we're in the middle on right now that we should have been on by the market.
Mark.
It makes me feel good that we'll be on track to be able to generate on a committed numbers for for TV one.
And Bryan Bryan in terms of the Humana acquisition of Kindred Thats great.
Ex Humana person and I'm sitting with three Humana people and the room ex humana manner folks.
I think it is a validation of the idea that the payers if theyre going to be <unk>, they're going to move into the home that managed care, particularly Medicare advantage, which is growing at four times the rate of fee for service is going to.
Wants to be on the home, that's where the demographics are going for the baby boomers that are that are signing up for Medicare advantage for to one.
And so I think it's a very smart move for them I think I think they are renaming it to <unk>.
<unk> center or something like that anyway.
But it's smart to be on home health as we saw when we were all there when we got involved and started humana at home.
We found that using home health for your Sickest of your sick members works very very well in terms of cost savings.
The interesting thing will be on that is weather and.
It seems like they have good overlap with kindred, whether all that Humana business.
And we'll go to the kindred folks and then they'll think of cost savings versus generating revenues. If so where we compete against kindred will that provide an opportunity for us if that capacity and if kindred is used up.
And by Humana business, if that means more fee for service business for us and I think one other things we talked about is how high our quality scores are.
So I think where we will compete.
I think it's a good sign for us and we're good partners with them, we were kindred isn't we work with them.
And interesting to see what happens if they they and I guess, they did announce they're spinning off hospice and personal care. So I think that commitment to home health is very good for our planned to do and I think cautious hospice should be not part of non.
And not part of our payers so.
It's all happy news for me.
Okay.
Thanks, guys.
Appreciate it Brian Thanks get back to that getting back to that old poetry anthology feature.
And hidden the attic.
And well.
Yeah.
Thank you. Our next question comes from the line of Matt Larew with William Blair. Please proceed with your question.
Hey, Matt.
Hey, how are we doing and good morning.
With lower visits per episode right now in part because for biologics and you record low turnover and you do have and increase capacity and with a record referral source add Adam and the last 12 months.
And we think we got even more demand. So how do you make sure that that increased capacity that you have is really been fully utilized and capturing all of these new referral source opportunities.
Well first Chris do you want to take.
Taking that through the incremental referrals we have.
And how and then the natural growth rate. So I think that we described and our JP Morgan deck and.
And in January talks about the demographic growth. So yes capacity is going to be a significant issue for the entire industry and that's one we're trying to get a front in front of <unk>.
By making sure we have very low turnover.
And so yes, Chris you want to walk him through that.
Thanks, Matt.
So from a.
Kind of growth and referral accounts, we added another 3200 homes else, referring accounts and Q1 those are accounts that did not refer business to us and the previous 12 months, we have a strategy around that is we're growing our BD sales force pretty aggressively on that.
Not to be able to maintain those accounts and go deeper into those accounts and feel good about on.
Our strategy has been one that.
It's one that we've been with for a while now and it's definitely paid off I think and another thing to look at the segmentation of our business and wholesale.
And even with the growth that we're looking at right now on slide pursuit.
And in Q1.
Our senior living.
Switch on will include skilled nursing and rehab and there as well and sales and Idaho is still down 20% year over year, but it's.
And 4% sequentially from Q4, so we're starting to see that come back and that's an opportunity for us if we should should see and its not.
Utilizing our capacity and as you mature and so we still have.
Room to grow there and so she and these come back that business comes back as well as the electives.
And we still have not seen those really get above 80% of prepaying debt level.
Level on around 75% and now so we see those as to do those as a couple of good signs on things to come as we continue on the strategy.
On the sound condition kind of an interesting partnership there and is there anything and give us in terms of price like what.
What kind of build test and iterate.
Iterate, what metrics and tracking and what ultimately do you want to provide versus potentially eventually convene and then is there a sort of a timeline in terms of.
And and point here for the pilot stage, where he might make Paul to expand more broadly and potentially even other partners.
Yeah, I think the idea there is one first of all we're very proud to be working with such a quality group as it sound physicians.
Known them since their inception, and Theyre just extraordinarily good so you get phenomenal execution on that side.
The what we're basically looking for and I think what Theyre looking for is they're compotator and I mean, they go in and they they.
And they work and a variety of areas and what they want to do is optimize outcomes at the lowest cost and.
And there's a belief that there is you know.
20% to 25% of business that goes into sniffs that potentially can go on to the home. If we were able to provide the other services that we mentioned.
Personal care combined with home health combined with telemedicine.
Transportation diet all these other things that we can provide so.
Thank the ideas as we move up the acuity scale. This is very important for us because it increases our addressable market tremendously.
To start to work in higher acuity environments. So I think it's going to be more of the traditional things where can we do in terms of making sure readmissions are taken care of med adherence, which often drives admissions so the traditional things quality outcomes customer satisfaction and.
And you know the cost the cost per patient compared to what they would normally do if they referred it into into and institutional setting. So those are the pretty much the best benchmarks that we put in front of US I don't know Scott's running innovation. So Scott did I Miss any of the benchmarks.
And no Paul you've got and I mean.
Matt it's going to be mostly around <unk>.
Readmission, and that's where all the cost is so it's better for the patient and how many days can we keep them in the home credit keep that number of days up and.
And patient satisfaction on the use at the end of the day so.
And I think some of the normal items, we talked about and then it will be the measure that for a financial perspective.
Yeah, I mean, Matt a lot of this is we are jumping in with sound great partner, we've set up some some benchmarks again, our job is to deliver them the value that they need and the process of doing this but then to iterate iterate iterate until we build a methodology that were really successful with we overlap and <unk>.
Plus areas with sound, obviously sounds associated with United So Theres, some really good opportunities to expand beyond this particularly with our friends at United.
Thank you I'm on.
Next question comes from the line of a J Rice with credit Suisse. Please proceed with your question.
Hi, Jay.
Uh huh.
Hi, everybody.
Just first.
And I appreciate the comments about the elective business and we're there.
That stands, but if you think broadly about what the business looked like pre pandemic.
And where you are at now I know you've picked up COVID-19 patients and I know theres been some shifting of the referrals and may have come from sniffs.
And then your comment.
Come from hospital sits next to you that now come and directly to you, but do you have a sense of where.
The rebound and additional business is how much below.
Baseline or Paul or whatever you want to call it.
And you're still running so how much is there to still potentially catch up.
Yes, Chris Chris should address that but it's a good question a J I mean, we've stolen share where we've been clearly on the sniff area, we've stolen share.
Two main two because it's not equal to the decline so.
Chris you want to talk about where we see things in terms of percentage of growth pre pandemic vs post.
Yeah, Hey, Jay I would say that physician business is back.
Pre pandemic levels and growing.
Partly because the market is back and partly because we're also growing our base of physician referrals pretty significantly and hospitals are fully back as well so.
But we do think will happen with hospitals is as electives are starting to move more acute and ambulatory surgery centers, they're going to fill those beds with other kind of net search patients and other concentrations that could create some incremental thoughts on opportunities, where we have very strong hospital relationships. So excited about that.
And when I talk about.
And the skilled nursing and rehab and senior living community again.
That is down almost 20% year over year and $19 six to be exact for Q1 and <unk>.
That business makes up about 18% of our admission mix. So we see the opportunities is there and we don't feel like we've lost share in those and we actually feel like we've taken share and those so getting back to pre pandemic levels and beyond and those markets is where I would expect to see.
And significant growth opportunities.
Okay.
Okay, Great and maybe just quickly on the.
The M&A front I know that remains a priority for you and I think come and ended the year, you talked about potentially $300 million to $350 million spent on acquisitions, though as a target and we got sequestration that may.
Stretch things out a little bit we've seen a couple of deals small regional deals done by other players that were north of two times revenue can you tell us what youre seeing and in terms of pricing and whether you think things like the sequestration move.
We will delay a little bit.
Rebuilt a rebuilding of the.
Acquisition activity.
Yes, a J I think the on the M&A front and I'll have Scott talk about the pipeline because we're we're feeling very good about the pipeline and I think.
Oh, and and North Carolina is not where we are going to end the year.
So we have pretty good pipeline largely proactive.
The pricing on the deals that we've seen out there from some of our competitors has been perplexing.
For particularly the assets that they are.
Acquiring.
So we're going to continue along being highly proactive going after high quality assets at reasonable prices have we seen the prices move up and home health a little.
But not crazy high.
<unk> Crazy and some of the last deals that have been done.
But I think Theres a move.
For a lot of people too.
Try to get home health and hospice, if they're going public or if they're doing a spec or something like that to get that on their books and so we feel that.
We feel that that's causing some inflation out there, particularly with some of the assets.
We've seen a lot of these assets before.
I don't know Scott do you want to talk a bit about how we're doing on the pipe and using up some of the capital we're generating.
Yes, Jay.
And we feel good about the price of what's out there as we've talked about.
Focus has been home health. So we've got a lot of those out there and yes, I think youre right on I think the sequestration has made and youre not seeing the incoming and I do think that delays that but really from our assessment will still be active and pushing for those areas. We identified for geography perspective, we wanted to be and and the targets that we've laid out so.
Certainly go different routes on a life of processes to start and to try to hit some of these off so feel good about where we are and we will continue to push and.
Looking at a very successful and.
We move through the rest of the year from an M&A perspective.
Yes, a J I don't think I answered your question, specifically, but I do think the delay of sequestration.
And we'll delay roll up opportunities with mom and pop industries, not the midsize to larger deals that are out there. So I do think the.
And the roll up opportunities will be delayed until sequestration.
Gets re implemented.
Okay.
Okay. Thanks, a lot.
Okay I appreciate it thanks.
Thank you.
Once again, ladies and gentlemen, as a reminder, we ask that you. Please limit yourself to one question. Our next question comes from the line of Joanna <unk> with Bank of America. Please proceed with your question.
Sure Hi, Joe Hi, how are you. Thanks for taking the question here, so but can I still have a follow on for a short one.
First on that Okay, and just start at this.
And you talked about debt reductions there I Wanna say debt.
See that well for for asking this reduction in visits per episode and I guess.
When do you expect that to happen and what is kind of the target for the year in terms of visits per episode.
Sure before Chris jumps in with the specific numbers.
And one thing I'll say is while the visits per episode did go down.
Out of our home health and home, how 320 care centers 316, 99% of them were for Starz and above.
So.
And so.
What we always the first thing we always look just to make sure that our quality is sustained actually our quality.
In concert with reducing some of these visits per episode were actually increase so that to me is something that I'm really proud of what we've done as a company and I'll, let Chris talk about the specifics.
Hey, good morning, gentlemen.
So from a $13 nine for Q1, a little bit less and what we had kind of modeled out.
And that would be about 14 and a half for the full year. We did expect a ramp as the year went on to get to that 14 and.
And.
And I do feel like Q1 was a little impacted by the pandemic, particularly around nurses on corn seed and as well as access to facilities, both of which are much better shape today than they were earlier in Q1.
We are I think will land for the year it'll be around low.
Low fourteens around $14, two five could get up to 14 and a half.
We will exit the year closer to 14 and on half than where we are right now and.
And as we get into more of a normalized environment net.
And logic data suggests that it's where we should be.
And I wouldn't anticipate going down and the further.
And I'm looking at $14 two for long range.
Okay. That's helpful and my question was on topic with them.
And I've got to get in terms of Medicare advantage plans and I guess.
The pricing on the rates in the home health business can you kind of talk about any updates there in terms of closing the gap on the rate.
And <unk>.
Increasing penetration I guess all of this.
More at risk or value based type structures wood and wood.
Thank you.
Chris Thats you I'll, let you do that.
Yes, it's still more of the same story and nothing kind of.
And for breaking ground, breaking and last quarter, we had a couple of contracts continue to renew and we're able to typically get reasonable.
And a great update but still.
Significant GAAP for a Medicare fee for service basis.
The name of the game still remains.
So more share per visit where <unk> been on.
And also give us some upside that we have to go earn based on quality metrics.
<unk> and the plans for doing that is very strong so we're able to beat on pretty much anything new.
Renewal when new contracts will bring your unit.
As a component, but unfortunately still significant GAAP.
From the actual blended net visit.
Revenue per visit and what we would get and that didn't happen.
Good morning.
Since we're seeing our business groups and come down and that's driving up the revenue per visit.
Pure math.
Net revenue per episode would be and up as well.
The GAAP is not getting any more any narrow, but we are getting more rate better rate from the plans but.
Nothing.
It's nominal and it's not as much.
And I think that's going to change Joanna over the years as.
As the higher quality folks.
As the plants desire to work with a higher quality folks and some of the convenience are pressured.
And that had been acquired on.
Some of the convenience are pressured to contract with higher quality folks.
To get better outcomes, there will be a capacity limitation, so with capacity and limitations theres going to be price increases. So I think we're in good shape again, if we just focus on the quality on delivering what the plan is really like which is high quality readmissions reductions.
The other metrics, which show that we can deliver very good outcomes for them, we're going to continue to try to go at risk.
And continue to try to make sure that debt.
And then we get paid extra right now its about $125 average rate.
On a on a Medicare advantage versus about 165 on a fee for service.
But the net portions.
We're looking at about 25% risk.
Our risk based on our MA book of business.
Okay alright. Thank you so much thanks for the color Thanks, Joe and I appreciate it.
Thank you. Our next question comes from the line of John Ransom with Raymond James. Please proceed with your question.
Hey, John.
Hey, Paul remember, we have our venerable B podcast, and we have to do and original.
Paul.
And Youre right Youre right were going on.
Mr Elliott and ghost on that one yeah. There we go.
Yes.
Good.
And you guys had on that then it won't be there and that's a good solid Liberal Arts education.
[laughter].
No.
My.
This is kind of on the market share gains just trying to if we think about the totality of volumes versus the debt.
And the disconnect with your volume growth.
I mean, that's at least 10 points and share gain.
But maybe Scott you can sort of help me with that math I mean, how do you how.
How do we triangulate between electric and stay on 25.
Offset other sources, but then your 5% organic growth how should we think about market share gains and what you're using.
And using that math.
Yes, John.
And I haven't really I think Chris you've kind of back to some of those and your thought process, but I mean, I think as electives move we're always going to follow behind that a little bit I think from a from a.
And what's going to come to US perspective, Chris I don't know if you have some.
Specific perspective on where you see that.
Yes.
Hey.
I think with.
Hospital volume being up year over year, I think thats pure market share taking.
I think that it can also be some still some smith bypass as well.
Year over year hospitals were up about 4%.
And.
And volume inhibition volume physicians.
Slowly fill it.
And for your growth there is not one percentage right now on.
For the year.
Year on year for Q1 is around kind of market share as well because not all physician volume.
Two for sales.
And on a full prepayment levels, even though our raw volume is back above that.
We're adding those loans.
You know kind of on those.
For all sources, but we're on.
We're all set and the opportunity set and that.
And then that senior living community.
Undersea rehab, that's down 20% some of that you'd like us can be counted and accounted for in that area as well.
And those licenses and actually stepped down.
And then it comes to the home and that could be and additional upside for us but.
We really haven't penciled it out and just kind of been hit those two and ground on on.
On this pretty pretty.
Straightforward sales.
<unk> and growth strategy.
Perhaps I didn't and referral sources.
Making sure that we're selling on quality.
We haven't paid attention to what's happening around us with with our competitors, but we think that there is going to be.
Nick and upside as we as we move through this year.
Yeah, and I think what you are trying to stabilize out on I think what youre trying to smokers out on John which is smart.
Is the is.
The balance is bigger than what we're saying and I think it is I think we've stolen a lot more share than we really have tried to.
To calculate and also I think we're following the business better than most.
A lot going with ASC for example, a lot of these places so that's getting involved with the Bundlers that's being as fast as we can to try to figure out where the business is it's like whack a mole COVID-19 has been like whack, a mole and I think we've been fairly adept at moving around figuring out where the business is we still are.
For some work to do in terms of our value proposition on some of these places but.
I think we're learning.
Sure.
I mean my my.
And I editorial comment as I've never really understood 28 days and nursing home for Apollo Joint rehab vs couple of home health episodes and.
And one third the cost or more.
I guess I'll take the pandemic to sort of make that more obvious to people. My my second question is that we look at 'twenty two.
And Theres some comparison difficulties with respect to the sequester, perhaps going away and.
And that you'll be lapping these big Metalogic staffing gains so.
How are you guys thinking about them and there's the obvious answer of M&A, but is there any other.
How else is.
Team thinking about.
Try and to not have a big air pocket as we look forward. Thanks.
And I would take that.
Got it yes, I will just kind of say youre right about that sequestration right now John on a full year, that's roughly $36 million. So you got to think as we walk into next year, we've got to deal with that issue I mean, I think for us for a good and then the PDGF gains you saw us really.
First we will see good year over year comps and the first half of the year, but then we'll get to a normal pattern and so some of those levers will have run and run its course at that point in time I think then you look for.
How we built this model and Youll see continued accelerated growth on our acquisitions I think thats little help give us continued use and the 2022 and then we will continue to trade up for it and some more M&A I think that's kind of.
And we'll file our rates closely I think productivity around acclimation as we get that right I think thats certainly.
Will be helpful for us I think we have some <unk> leverage there as we get it more and more our staffing versus contractors, but yes, I think thats some of the difficulties and moving into next year.
Great. Thanks, so much.
Thanks, Sean.
Thank you. Our next question comes from the line of Frank Morgan with RBC Capital markets. Please proceed with your question, Hey, Frank Alright, Hey, Frank How're you doing.
Great. Good morning to all he wanted to go back you had talked about business development turnover.
And not being able to reach your targets for growth there I'm just curious.
Is that.
What side of the business is that more.
And is it on the home health care side or the hospice side or is it both and then do you see a.
And I think about turnover always think more on the clinical side, but just maybe an update there.
And then finally just on the.
Some of the things that are slowing down the pace of the.
<unk> and home health care I would've thought with the rack kicking in and this year the elimination that maybe that would be a bigger influence, but do you think that's more than offset by the effect of this push out of the sequestration.
Thanks.
And then the no pay wrap I think is quite severe I think again Scott showed how we've come through that we were anticipating would be a five day increase in dsos, but it turned out to be I think $3. Seven. So I think we performed very well against that I think the industry is working very.
We're seeing mixed results out and the industry.
And I know Scott anything on that.
No I think Thats right I mean, I think we've done well on it but I still think that prop up and sequestration and depending how funded you still have some cares acknowledged you've got those funds and your pocket right now.
That makes it more challenging and it gives you and the ability to kind of withstand that.
GAAP hit early and this year so.
We think it's still shakes out but.
And it makes it a little bit of more and more difficult.
Yeah, and I would tell you on the BD side ill, let Chris talk a bit about it but.
On the BD side, its hospice, we lost some people and hospice due to the transition.
And COVID-19 and we're going to make that up I think Chris mentioned, we will make that up by May and may.
And turnover.
Turnover with BD is generally pretty good.
We've but we've reduced our turnover so much that.
We're going to take it to BD.
So Chris any comments in terms of how fast the buildup and then what that's going to do for and admit and ADC growth get us back on track.
Yeah, Yeah. So so frankly got up to about a 10% vacancy rate on the hospice side. This is squarely on hospice issue home health and so.
Two 2% so we're in good shape there.
And it was a combination of the turnover spiked on us and Q1, and we had a couple of.
Fairly sizable regions that had some leadership vacancies have since been addressed and for.
Filled.
On boarded.
Really comfortable there.
Focus on driving down that turnover has been a little bit of a shift for us over the last couple of months.
And we've increased on a re.
Sure she's around hiring and you're bringing in new day. So I think we'll be we'll be getting this thing back on track.
Relatively soon just go and get the honors and get them out and killed and deployed back to your clinical question will.
And out of countless organizations for slightly too that the clinical on turnover, we've driven that down significantly and again, our nursing through what was and the high 20% for range, 29% I believe for last year.
And we drove that down and Q1 and two to around 20% which was great.
Eight feet for this organization and will continue to drive it down even further and.
As I mentioned in my prepared remarks for total turnover for Q1 15, 9%.
Which is which is a real good sorry.
And we're focusing on the right and needs and we're retaining and are good people.
Thank you.
Thanks, Paul.
Our next question comes from the line of Justin Bowers with Deutsche Bank. Please proceed with your question.
Hey, Justin.
Hey, good morning, everyone.
So just quickly.
Can you talk a little bit about your thoughts on the competitive landscape with.
Some of the strategic activity going on and then.
In terms of.
And to grow and home health it sounds like it's more of a demand issue than a dinner.
On a supply issue just in terms of like the electives and the institutional stuff coming back.
Versus on.
Being able to staff up is that is that kind of a share care Bruce characterization.
Yes, I'd say I'd say on the latter part of your question I would say it is it's going to be a supply issue its getting to be a supply issue and certain of our regions. So again I think are are we saw the we saw whats well ahead on the road, which is if we don't have the excellent clinical staff.
And and productive clinical staff.
We are seeing.
We don't think we'll be able to keep up for certainly post the growth that we're anticipating to post this year and next year and actually for the next five years. So it's largely going to be a supply issue and that's why we're so focused on turnover from a competitive landscape perspective, My guess is youre referring to.
Probably hca's acquisition of Brookdale, and and then humana's buying out of the kindred assets, Yes, I think I think and a lot of ways. It's a validation of the fact that things are moving into the home.
Particularly with the demographics that are out there with the baby boomers were seeing very very strong demand for and the plans are telling us there is very very strong demand to provide home based care.
So I think you've got two of the most respected.
Players out there basically validating what we all know that things are moving into the home so.
I'm, not particularly worried about about any other competitive issues. There there is a.
You know, it's a highly fragmented industry and both home health hospice personal care palliative care.
And I think quality is going to win and I think also being able to execute and have capacity due to supply.
Services is going to be the winner there.
I'm not particularly concerned.
About what these two folks might come up with and I think integration and figuring out.
And how these folks integrate with their core companies will be something that will probably take a little while to occur and we will keep.
Doing what we do every day and.
And getting better and better and better.
Yeah.
Okay, Yes supply issue and then just on the and kind of on the labor.
And the labor dynamics is that has that pressure eased at all and more recently versus kind of what you saw early in quarter and then lastly, just any notable kind of the swing factors as we move from <unk> to <unk>.
I would tell you from a labor perspective.
We don't see.
We see it ballpark on it.
We don't see labor inflation for contractor, which is again a capacity issue, that's where we've when we had COVID-19 heavy COVID-19 admissions going through that we have to go to contractors.
In general that's why we're focused so much on are fundamentally we're a human capital management organization and we have to make sure that we have enough people to supply the market with what the market is demanding and we can't get caught on.
And but we don't see the market being inflated like Youre seeing and the hospital side of the business again, when you have high quality.
And I'm sounding like a broken record you have high quality.
99% for Starz and above people want to come and work for you all things being equal they want to go to and employer that delivers high quality that we will not compromise on quality that will do the right things for the patient and do the right things for the employee and therefore, we don't seem to have big problems with recruiting as I said, except there are some <unk>.
And pockets that where it's just tough for everybody.
I have actually my head of HR here, who is in charge of it so did I get that right.
Yes, she debt okay. Good Sharon gave me the thumbs up Chris.
Chris I Miss anything on labor.
No you got it.
For good.
Thank you. Our next question comes from the line of Steven Valiquette with Barclays. Please proceed with your question.
Hi, Steven Yes, thanks, and good morning, everybody or almost good afternoon now.
And you touched on this a little bit, but maybe just tying a lot of talking points together.
And we do think about the 9% home health same store admissions growth guidance for 'twenty, one that's unchanged.
And last quarter around the seasonal trend that <unk> can be a little bit softer <unk> the strongest with the easiest comp and then <unk> and <unk> I guess relatively in line with that full year guidance.
And Andrew is all coming on at 5% to 6% growth on <unk> seems to correlate with that but I just want to confirm whether your view on it that same way and our <unk>.
And just better or slightly more cautious around that 9% in either direction based on everything we talked about on this call. Maybe the same question just on hospice and personal care to just on that key metric so for hospice for 18%.
And number there, you're feeling better or worse or about the same and the same thing on the 10% billable hours on personal care just to summarize all of that thanks.
We balance we balance hospice with ADC ADC is our most important number and since Christmas responsible for the numbers and runs the business is and I'll, let him answer, but we feel comfortable in general and.
Unless Chris can say otherwise Chris yes.
So going in line with the questions on whole mill I would say.
We feel slightly better than going into the year based on the first quarter, just kind of how things are shaping up and it's been a lot of this is going to be dependent upon some other senior living coming back and that's taking us taking our share in that area as well and just continue on and to actually and so cool.
And I feel I feel strong about the non pursuit could come in better than that for us some good about debt on.
On the hospice side also and I feel better about the 8% ADC growth and not do 18% admission growth just given the soft Q1, and a little bit of a ramp that up kind of built and we got a buildup here in Q2, but.
I think what you will we will get it on track.
The 8%.
We're getting we're getting the tail winds up.
On the leases linked to stay coming back faster than we had modeled on them.
But I feel like we're going to have a really strong exit.
And second half of the year two.
2022.
Should be able to deliver on kind of our financial commitments on the hospice side and feel pretty good about that on the personal care side.
And we really continue to struggle to grow that business and it has been cash.
Has the most linear because even when the pandemic is gone and you still have labor issues at that wage level. So. Good example is the stimulus checks went out last month, our turnover our turnover spiking on a number of new application dropped significantly so.
And as you have a difficult labor market and most of our businesses and Massachusetts, which is also a little bit of a difficult time and labor state.
We still got some headwinds we've got to work through and to be able to get where we are growing our caregivers and assuming we can grow on caregiver base.
And we'll be on a growth trajectory.
For the business so on still looking at second half kind of momentum there.
And some challenges today with just kind of access to caregivers.
Yeah, and I guess, just I'll add a comment Steve to that on personal care.
I'm, so happy to be on personal care, we're in a tough state, Massachusetts.
We do mainly Medicaid, but the fact that we're able to use personal care and show that we can drive homebase dialysis. The fact that we're using personal care or personal care assets with our partnership with <unk>.
With sound physicians and the sniff and home project is something Thats fantastic. The fact that we're building a network and personal care assets.
Is something again that provides national coverage and thats growing nicely, although we want to grow it faster, that's something I'm real proud of and.
And we're learning every day and the business.
So and it's a very small business as you know, it's about an $80 million business, but I think doing all of that we're learning just about the combination of all these services and how when you put them together they can be really beneficial to patients and provide tremendous value along the care continuum.
So I think that we're very committed to.
To the personal care business, particularly in an innovative way so.
That's what I would say on that.
Okay perfect. Thanks.
Thanks, Steve.
Jen do we have anyone else and Q.
Shall I start reading Tsla it Ken.
Okay.
Or are we off.
No.
Operator are you there.
Everybody.
Okay.
Yes.
I think we have two more questions I can't get in the queue.
So guys and Q.
And we apologize for the technical difficulties.
I think we're going on I think we'll call it and we've got to folks I think John had.
And I had a circle around it and then bill.
And the queue. So we'll call you write up afterwards, we apologize for this.
And I Shouldnt have this happen, but I want to thanks to everyone who joined US on this call today.
I'd like to thank again, our incredible employees, who delivered all this great value and wonderful results. Please keep doing what youre doing and take care of the great people are patients who need us the most.
And we hope that everyone has a wonderful day and we look forward to updating you on our ever evolving progress and purposeful work on our next quarterly earnings call. In July until then have a wonderful day and we look forward to talking to you as we progress take care bye.
Yeah.
Okay.
And.