Q3 2021 Amedisys Inc Earnings Call
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Greetings and welcome to the <unk> third quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If you would like to ask a question. Please press star one on your telephone keypad, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to.
Introduce your host Nick Muscato Senior Vice President of Finance. Thank you. Please go ahead.
Thank you operator, and welcome to your Medicine, <unk> Investor Conference call to discuss the results of the third quarter ended September 32021.
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 from <unk> will be Paul Kusserow, Chairman and Chief Executive Officer, Chris Gerard President and Chief operating Officer, and Scott <unk> Executive Vice President and Chief Financial Officer.
Also joining us is Dave Kimberly Chief legal and Government Affairs Officer.
Before we get started with our call I would like to remind everyone that statements made on this conference call. Today may constitute forward looking statements and are protected under the safe Harbor of the private Securities Litigation Reform Act. These forward looking statements are based on information available to our medicines today.
Company assumes no obligation to update information provided on this call to reflect subsequent events other than as required under applicable securities laws.
These forward looking statements may involve a number of risks and uncertainties, which may cause the company's results or actual outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our forms 10-K, 10-Q and 8-K and.
In addition, as required by SEC regulation G. A reconciliation of any non-GAAP measures mentioned during our call today to the most comparable GAAP measures will also be available in our forms 10-K, 10-Q and 8-K.
Thank you and now I'll turn the call over to the medicines, Chairman and CEO Paul Kusserow.
Thanks, Nick and welcome to the <unk> 2021 third quarter earnings call. We have a lot to discuss on today's call, but before we dive in I want to express my sincerest appreciation to all 21000, plus our medicines employees whether you.
You were at a patient's bedside or supporting those providing the industry's best in class care at a medicine, we put quality before everything and the unwavering dedication of our entire employee base has been delivering great patient care and this dedication to quality.
Continues to be my greatest point of pride and largest source of inspiration.
<unk> continues to change the dynamics of all of health care and how it has provided yet you all remain resolute and putting patients first and delivering industry, leading metrics for that I. Thank you.
Before I turn the call over to Chris and Scott I would like to say, how proud and excited I am by our performance. This has been a tough if not brutal year. The incoming that's come at US we could not have imagined.
I have a favorite quote from Teddy Roosevelt, which best describes how we are dealing with the Covid era.
Do what you can with what you have where you are.
I've modified it a bit for us.
Yes.
Do the best you can with all you have hold strong and take ground that's our motto.
<unk> did all of that and more.
Good company maximizes on what it can control a great company responds to uncontrollable forces better than everyone else and where possible turns them into opportunities for controllable as we built up our BD heads, we reduced our clinical turnover by 15%.
We saw the labor issues in our industry and accelerated recruiting increasing our hiring 40% and we kept driving our quality ratings higher.
Four six stars by our latest estimate.
What we can't control is accelerated death rates due to COVID-19 hospitals closing units due to labor shortages hospitals cutting electives to make room for COVID-19 beds nurses out on quarantine due to COVID-19 and clinicians choosing not to be vaccinated.
In hospice, there's faster death rates due to COVID-19, which is affecting our ADC, but we're taking share and we're growing admissions. Our admissions are up when others are down when ADC normalizes, which we're just starting to see signs of now our revenue will grow at rates we have.
Typically seen in home health, we lost visits due to quarantine clinicians and hospitals cutting back on electives, but we again gained share and managed to grow.
These results are hard fought and hard one we are a company that wins on controllable and pivots best on uncontrollable.
Can we do better we always try to have we made mistakes absolutely, but so far it's been a remarkable year of performance in a tremendously turbulent time.
Now I'd like to discuss Contessa performance during the quarter, our newly formed high acuity care segment or Contessa experienced continue positive momentum in Q3, offering homebase recovery solutions for patients in need of acute level.
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Total admissions were.
234 for the two months since the closing of the acquisition.
An increase of eight 3% from our original forecast pretty good for a company that joined US just two months ago.
Demand for home based acute services is extremely high across contessa as existing joint venture markets and continues to grow we are working with Contessa. His leadership team to think through innovative ways to access more home nursing so that they can continue to capital.
Lies and capture on this demand the results. So far are very promising as we have largely.
<unk> all of their vacancies.
Contessa continued to demonstrate its ability to drive value to Mark key health systems with the closing of its joint venture with the Henry Ford Health system. This partnership which is expected to launch in Q4 'twenty. One we will combine all three contessa clinical models include.
<unk> hospital at home.
Sniff at home and palliative level care in the home.
In addition to the Henry Ford partnership Contessa, just inked another substantial deal we'll be announcing in a week or so and is actively evaluating partnerships with 13 additional health systems. This will create an opportunity to more than double its footprint in terms of partnership.
And operation we're way ahead of our growth goals for 2021, and 2022, which is very encouraging.
Finally, contessa continues to add payer sources, thus increasing our markets total addressable lives with the addition of the Medicare fee for service waiver in two markets. While also finalizing managed care contracts for the sniff and palliative clinical models in various market.
That's.
We are very pleased with the high acuity segment's performance and we are excited by the new opportunities and capabilities Contessa brings to the table, mainly the ability to take care of sicker and more acutely ill patients in the home the ability to provide this care taking full risk.
And having the ability to incorporate and coordinate all this multiplicity of care across a single platform.
We have doubled our addressable markets with contestants capabilities and we can drive better profits for our hospital and payer partners in these arrangements and deliver better outcomes and higher satisfaction to patients who want hospital and sniff level care in the home at a.
Lower cost I'd like to thank and congratulate our condenser partners on the great start.
Before I turn it over to Chris I'd like to note that as of the timing of the recording of our prepared remarks. The final 2022 home health reimbursement update has not been released though we do not expect much. If there is any deviation from the proposed rule.
Upon the final rules release, we will analyze the <unk> specific impact and update everyone. Accordingly.
I'll now turn the call over to Chris to give us a rundown of our core business performance during the quarter Chris.
Thanks, Paul before we get into our segment level results I want to review how much the operating environment has changed as we exited the second quarter and contrast that with the operating environment today.
As we exited the second quarter elective procedures as a percent of our total episodes had recovered to seven 5% compared to 9% of total episodes pre COVID-19.
We made no assumption about improvements in this number in our revised guidance per Q2 call.
The percentage of our clinicians on quarantine had dropped to 0.7%.
In hospice, our average discharge length of stay was $96 eight days and our median length of stay was 25 three days and there was no conversation about a vaccine mandate and we were only seeing labor pressures in certain pockets of our footprint.
As we report our Q3 earnings today, Here's how the environment has changed.
Electric procedures as a percent of our total <unk> dropped from seven 5% in Q2 to six 5% in Q3.
Our lenders are now starting to come back slightly which is encouraging.
The percentage of our clinicians on quarantine reached 3% up from 7% in Q2.
The number of clinicians on quarantine has peaked and entering Q4, we're seeing the number declined rapidly to less than 1%, which is also encouraging.
Our hospice discharge average length of stay fell to $94 five days from 96 eight days.
And median length of stay dropped to $24 three days from 25 three days.
These dis Chris these decreases were driven by an increased percentage of deaths on sensus.
We're encouraged that we are seeing early signs of this rebounding.
Yeah.
The proposed vaccine mandate was released and we started to see some system wide labor and wage pressures.
But being named a great place to work by modern healthcare and intensely focusing on our people are.
Our labor issues are not as bad not as bad as others are seeing.
As you can see the environment remains very fluid and hard to predict with significant levels of accuracy.
Though COVID-19 continues to impact our business I like Paul and very pleased with how we have continued to make forward progress during this turbulent time.
We've got good metal.
Now, let's dig into our Q3 home health segment performance.
Home Health grew total admissions and total volume of about 1%.
As I discussed home health growth was impacted during the quarter by a decrease in the led to procedures and an increase in the number of clinicians on quarantine, which led to an increase of nearly 3700, Ms total admissions or an anticipated mis growth opportunity of 4%.
For the quarter, we performed $13 eight visits per episode down.
Down four visits sequentially and down <unk> six visits year over year.
We remain very comfortable with our VP levels as we've seen strong increases in our quality scores by our estimates now four six stars.
As a reminder, we've consistently stated we will never do anything to impact quality quality scores and given our continued improvement in home health quality scores along with our decreased visits per episode, we are delivering on that promise.
On clinical mix in Q3, we achieved 47, 9% LPN utilization and 53, 3% PTA utilization.
Both are the highest levels since the start of PDGF.
Clinician turnover has declined year over year by 15%.
We're pushing we're pushing to do better as we continue to steal market share and we need to retain and grow our clinical labor force to service increased levels of demand.
Now moving onto hospice.
For the quarter, we grew hospice total admits by 1% over a 9% Q3, 'twenty comp and ADC was down 5%.
As we discussed last quarter the drop off in hospice growth had been largely driven by turnover in our BD staff.
We knew that hiring and retention where activities in our control and as such we outlined a plan to recover this staff and have executed upon in.
During the quarter, we added 39, BD Ftes and ended the quarter with 523 hospice BD Ftes.
We continue to work towards the exiting the year over 550 hospice BD Ftes and have another 19 hospice BD ftes that have accepted offers that we will be starting in the coming in coming weeks.
Very encouraging.
What we're not seeing recover completely but are starting to see some hopeful signs as hospice ADC.
Despite a 5% sequential increase in emissions due to a continued increase in desktop instances, which is reflected in the drop in our average length of stay in median length of stay our ADC has declined.
Year over year deaths on census has increased 8%.
This is another uncontrollable COVID-19 impact as patients are entering our hospice care much later in the dining process and staying on service for shorter and shorter length of time.
The increase of deaths on census is materially impactful to the hospice segment performance as a 1% change in discharge rate is equivalent to approximately 130 <unk> ADC.
Which over the quarter would have added two added approximately $2 million to the bottom line.
Though predicting behavior is more an art than science.
We do think that the increased death rate as a short term issue and overtime, we will return to normal.
Whenever behavior returns to pre Covid normal and patients' access healthcare like they did pre pandemic, we will see ADC increase and as we continue to hire and retain our BD staff and grow admissions ADC growth will follow.
In summary, both home health and hospice continue to be impacted by COVID-19 issues and their subsequent shakeout.
Many challenges presented in our current operating environment, our out of our control, but we've pivoted quickly those.
Those issues that are within our control have been systematically evaluated and quickly embraced by our teams is a new reality.
The results we have delivered in spite of these challenges I am proud of.
Our teams for what they have accomplished and will accomplish is extraordinary and none of us will truly be satisfied until we return to the growth levels are company is used to delivering.
Pre COVID-19 norms or new norms, either way, we will deliver.
With that I'll turn it over to Scott, who will take us through a more detailed review of our financial performance for the quarter and our projections for the remainder of the year.
Thanks, Chris for the third quarter of 2021 on a GAAP basis, we delivered net income of $1 37 per diluted share on 554 made in revenue a revenue increase of $9 million or 2% compared to 2020.
During the quarter, we did not have any cares act funds available to offset increased costs related to COVID-19, due to the exploration of the use of provider relief funds on June 30th.
For the quarter, our results were impacted by income or expense items adjusting our GAAP results that we have characterized as noncore temporary or onetime in nature slide 14 of our supplemental slides provides detail regarding these items in the income statement line items each adjustment impacts in previous quarters. These adjustments could about the provider.
<unk> funds and COVID-19 related costs.
With the exploration of provider relief funds only COVID-19 related costs are included as adjustments.
For the third quarter on an adjusted basis, our results were as follows.
Revenue grew $9 million or 2% to $554 million EBIT.
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Decreased $3 million of 4% to $72 million.
The acquisitions, we can test that drove the decline over prior year as our legacy EBITDA was flat.
<unk> as a percentage of revenue decreased 80 basis points to 13, 1% and EPS decreased 71, or 32% to $1 53 per share.
As a reminder, adjusted EPS was positively impacted in Q3 2020 by a 72% income tax benefit lights and executive stock option exercises.
The continuation of the COVID-19 pandemic in particular the surge in cases during Q3 related to the Delta very impacted.
Volumes hospice.
Discharge rates and labor costs.
We estimate the impact to our financial results were as follows.
Pilots are impacted by a decrease in elective procedures and an increase in commissions quarantine, which resulted in a loss of 3700 admissions, resulting in a <unk> two.
$2 million impact to EBITDA.
In hospice.
Discharge rate for Q3 was two 4% higher than our expectations as the rate was significantly higher than our already elevated 2020 rates, which impacted EBITDA.
The EBITDA by approximately $4 million.
The lower ADC has resulted in numerous cash centers, having unused capacity based on our staffing model the cost of maintaining this level of staffing and anticipation of normalization and discharge rates is approximately $3 million.
In both home health and hospice confined for additional raises sign on and retention bonuses, which added $2 million for the quarter.
Now turning to our third quarter adjusted segment performance keep in mind segment level EBITDA as pre corporate allocation in.
In home health revenue was $339 million up $13 million or 4% compared to prior year.
Revenue per episode was up $83 or 3% the increase in revenue per episode as a result of a one 9% increase in reimbursement.
An increase in our functional impairment of our patients.
And a change in the source and timing and geographic dispersion of our patients.
I have a limitation of Metalogic care has led to a reduction of six visits per episode, while we continued to improve on our quality scores.
Overall, our visits per episode as down to visit since Q1 2020.
Our gross margin decreased 90 basis points as a result of a 6% increase in cost per visit.
The increase in cost per visit was driven by planned wage increases and increase in new higher pay <unk>.
Significant increase in the utilization and rates of contract clinicians driven by growth in Covid, 19, and higher health insurance costs.
G&A increased approximately 4 million, mainly driven by lower spend in Q3 2020 related to COVID-19 raises. The addition of resources to support growth and higher recruiting fees, which is partially offset by lower incentive comp.
Segment, EBITDA was $68 million with any EBITDA margin of 22%, which is down from 21, 3% in 2023.
<unk>, 3% increase in revenue per episode and decrease in visits per episode were not enough to overcome labor pressures.
Sequentially segment, EBITDA was down $11 million on lower admissions and an increase in cost per visit which was driven by raises new higher pay and an additional holiday.
Turning to our hospice segment results for the third quarter revenue was $198 million down 2 million over prior year net.
Net revenue per day was up 4% driven by a two 4% hospice rate increase that went into effect October one 2020.
As Chris discussed posit admissions grew 1% and ADC declined 5% as COVID-19 continues to accelerate hospice discharge rates.
Cost per day increased $7 14.
Primarily due to planned raises additional attention raises hiring and retention bonuses higher utilization of contractors higher business falling by hourly employees as prior year was impacted by access restrictions due to COVID-19 and higher transportation costs.
EBITDA was $42 million down approximately $8 million.
G&A increased $2 million planned wage increases additional business development resources higher recruiting fees and higher travel costs.
Sequentially admissions increased 5% with ADC remaining relatively flat due to higher discharge rates segue.
Segment, EBITDA increased $2 million, primarily due to lower revenue adjustments offset by annual raises as well as additional bonuses and raises to increase employee retention.
Turning to our total general and administrative expenses on an adjusted basis total G&A was 176 million or 31, 8% of total revenue, which decreased 50 basis points over prior year.
Essentially the G&A is up $5 million of which $4 million due to the addition of Contessa.
Yes.
We continue to generate impressive cash flow in the third quarter, producing $62 million in cash flow from operations year over year, our DSO increased three five days driven by the elimination of the rap payment effective one $1 21.
As a result of our continued strong cash flow our net leverage ratio at the end of the quarter was one two times inclusive of the funding of the Contessa acquisition.
As a reminder, our Q4 cash flow from operations will be impacted by approximately $28 million due to repayment of deferred payroll taxes.
Turning to M&A, we closed on the certificate of need purchase expanding our home health services in Charlotte and Raleigh, North Carolina. These two care centers will essentially be de novo's will ramp in size and profitability throughout 2022.
We continue to focus on our in our granite growth efforts on home health acquisitions and continue to work assets through various stages of diligence.
The industry consolidation has not happened as we originally expected in 2021 does the extension of sequestration in cares Act funds, we believe that M&A activity will pick up as we enter 2022, and our medicines remains well positioned to capitalize on inorganic growth opportunities.
As you can see on page 16 of our supplemental slide deck, we're updating our guidance ranges for 2021.
Updated guidance reflects the impact of the Delta variable in our Q3 volumes will to carryover to Q4, along with accelerated labor pressures.
Our guidance ranges are adjusted revenue of $2 $2 billion to $2.05 billion.
Adjusted EBITDA of $296 million to $298 million and adjusted EPS of $5 88.
To $5 93.
The emergence of the Delta varied in Q3 significantly change our view on the remainder of the year versus our expectations coming out of Q2 as such as COVID-19 continues to impact the operating metrics typically used to forecast growth in cost assumptions for both core <unk> and <unk>.
Contessa.
We are basing our guidance on our current operating environment any future regulations are government interventions spiking clinicians and beating BD staff on quarantine unforeseen impacts of the vaccine mandate reduction in electric procedures change in patient behavior and further decline in senior living occupancy.
Could impact our ability to achieve this guidance.
Some of the items impacting our sequential performance from Q3 to Q4 is as follows.
A full quarter of contests ownership will impact performance by $2 million health.
Health insurance cost increases of approximately $6 million.
There is a seasonality impact Q4, 2021 is elevated due to lower than expected Q3 claims.
An additional month of raises adds approximately $2 million in costs.
Finally, I'd like to reiterate the tailwind and headwinds that impact our 2022 outflows.
Positive rate updates in both home health and hospice offset the impact of the exploration of sequestration relief and leaves us in our modeling net positive position.
The incremental EBITDA impact contessa of which will be approximately $10 million continued wage pressures.
The normalization of growth rates and the impact on hospice is length of stay recovers.
And COVID-19 costs, which had been covered by cares Act funds through Q2 2021.
Yes.
Though there are headwinds facing us as we enter 2022, we are optimistic that we can grow EBITDA as our investment in business development resources mature and we continue our focus on being an efficient provider of high quality care.
Additionally, we remain confident in our ability to deliver on our M&A strategy.
We do not believe that current street consensus for 2022 properly reflects the impact of the resurgence of COVID-19 in Q3, which has brought additional uncertainty to the timing of hospice length of stay recovery and given the real time changing labor demand dynamics.
We will continue to provide color on 2022, as we see trends change.
I'll now turn the call back over to Paul to conclude Paul.
Thanks, Scott as you can see we effectively Fox and muscled our way through.
Another very turbulent quarter as the effects of COVID-19 continued to manifest themselves in new and unpredictable ways.
As we enter what to date is looking like a calmer Q4 and look towards 2022, we are acutely focused on driving consistent growth.
We recognize we cannot control the death and discharge rates in hospice, nor can we control the pressures on the U S nursing workforce from the great resignation as well as clinicians who choose not to be vaccinated.
What we can do is to think differently act definitively and continue to innovate to maximize our clinical capacity attract new nurses to home health and hospice and retain are hard to find clinical staff, we have assembled a differentiated group of.
Assets within <unk>, and we will continue to look for new ways to deploy all of these lines of business as we continue to disrupt and expand the traditional ways care is delivered in the home.
The short term headwinds currently beating as add us have changed nothing about the long term tail winds that <unk> is advantageously setup to capitalize on these include demographics, which are strongly in our favor with the baby boomers, creating a potential surge of <unk>.
Patients in the coming year with more people, turning 65 years old than ever before the outsized growth in the 70 plus market, coupled with an ever increasing unsustainable health care costs put us in a very advantageous in an advantageous position as a differentiated <unk>.
At home aging in place company, delivering the highest quality of comprehensive care at the lowest cost to seniors.
Next psychographics with nine out of 10 baby Boomers wanting to agent diet home, we as the industry leader in quality with national scale and the most comprehensive offerings are best positioned to serve these patients who want to agent place.
Regulatory as we discussed earlier in the call we have positive rate updates in both home health and hospice. This is a trend that we see continuing for the next five plus years.
Market share so consolidation has been slow to occur our annual cash flow low leverage and scale put us in a better position than any company in our space to consolidate our highly fragmented industries and we expect to continue to capture and grow our market share.
Inorganically in 2022 and beyond as the effects of PD, GM and regulatory reform kick in for real and finally, our unique and diversified asset base, including home health hospice personal care and Contessa.
Hospital at home Sniff at home Pally dividend home.
In primary care at home have strategically differentiate aided our med assist from the rest of the industry.
Our goal has always been to drive innovation into care in the home and <unk> now sits poised to change the game, we will continue to take steps towards higher acuity in home risk taking care models and comprehensive care platforms to drive innovation in both how we provide care and.
How we are reimbursed for it where there's change there's opportunity these are exciting times.
<unk> our prepared remarks, operator, please open the line for questions.
Thank you ladies and gentlemen, the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before.
The Star Keys once again that is star one to register questions at this time.
First question is coming from Brian <unk> of Jefferies. Please go ahead.
Hey, good morning, guys good.
Good morning, guys.
So my first question just for Scott So as we think about the guidance adjustment rate. So I get the topline was challenging during the quarter, but maybe you can walk us through how youre thinking about the bridge from.
The old guidance to the new guidance southern moving parts in any incremental expenses that you would call out and also kind of like the stage off point going from Q4 into next year. I mean, you called out positive EBITDA growth expectation for next year, maybe like anything you can walk us through in terms of the operational side of that how do you gain confidence that.
You can grow EBITDA in 2022.
Sure Brian I think some of the just kind of start with your first question around the change in our update to our guidance I think clearly and as we called out in some of our prepared comments the impact of hospice discharge rates would be the biggest issues is really flows through as hospice hospice goes being off of 2% to 4% on a higher <unk>.
Large rate higher than we even saw in 2020.
It was a $4 million impact to EBITDA, which is pretty close to what the revenue drive impact was that because most of that is on a fixed cost basis. So that feeds into Q4. So that's moving over there Chris had highlighted the fact that we missed out on roughly 3700 add meds.
Probably another $2 million.
EBITDA at another.
Somewhere around four ish in let's call it and revenues. So all of those feed into Q4, that's one thing that every quarter builds on each quarter from us from a census perspective, it matters very much how we end each quarter. So that's kind of the pressures moving forward that kind of propelled this kind of adjustment to Q4, and where we ended from a census perspective still saw a nice sequential.
Increases in hospice from Q2 to Q3 from an admin perspective at plus 5%, but just barely gurus centers, so not really enough to to meet where we thought we would be heading into out of Q2 so to speak.
Thinking about coming from Q3 to Q4, just re summarize that theres really three issues that are really driving that numbers at 6 million and health insurance costs and some of that is elevated because Q3 is delta impacted most of our business. It also probably impacted that.
James activity as well. So there is another 6 million incremental while up from Q3 to Q4 as I said 2 million Contessa, we're happy lift in test as EBITDA. They are slightly better only thought but there'll be another 2 million dollar drag on our performance in the Q4 and <unk> 2 million for a full quarter of raises Q3 only has two months. So if you look.
Of that number of the implied guidance gets you from an EBITDA perspective, Brian somewhere around a 62% 63 type number.
And health and surety is so large so when I look at that number versus using a <unk> 63 to build off of kind of back out what the normal health insurance costs Arctic cat.
Normalizing the health insurance spend which is roughly $110 million a year and we're going to spend roughly 34 to 35 in Q4 based on these projections that gets me closer to a 69 million tonnes of an exit rates, which you are looking at a $2 74 to 75 type starting point and with the new.
The whole Nate will getting up about 80 bps better outcome, what we're excited about that and as I've said in my comments look to to grow EBITDA in 2022.
Yes, Brian we're seeing some good good trends we've been seeing in the last two to three weeks. So as Covid has been dissipating in the country.
I'll have Chris disappointed, but we've started to see some really good ADC numbers and thats going to be very key for next year, but the other thing is we're so we've been growing our BD.
Our staff very nicely. We're ahead of where we expect it to be on both home health and hospice and then on the on the hospice side, we've been carrying because the labor market is tight we've obviously done a really good job on turnover and recruiting and so we're actually carrying.
We're about flat in staffing on a deficit of about 700 ADC in hospice. So we've got enough staff, we're starting to see the we're starting to see some sprigs of hope out there and so we we think in general things are really starting to turn.
<unk> crossed.
But the Covid piece hit us hit us pretty hard last quarter, but the key is for 2022 is going to be how well can we position ourselves going into the year with building up ADC and Thats, what Chris and his team are really focused on hey, Brian.
Hey, Brian I wanted to kind of add a couple of little bit of color to kind of what happened throughout the quarter to set the kind of drove the reset for Q4 <unk>.
A couple of key developments one is we gave updated guidance.
Last quarter, we were somewhat normalize on our median length of stay in our discharge rate, but sequentially throughout Q3, our medium weakness stay went from 26 days in July down to 24 and August 23 in September that was a material impact on how we exited ADC wise, we were actually right on top of our admin.
<unk> number that went into our updated guidance, but because of the decline in the medium length of stay and the increase in discharge rate that also increased sequentially throughout the quarter that kept us from growing our ADC as we expected. If we would have kept the same 26 day median length of stay as we were expecting we would have exited the quarter right on top of our.
Our ABC and then what we saw happen materially throughout Q3 was the impact to our staff.
From quarantines related to the Delta variant and accelerated quickly through August and peaked at the end of August at 3% of our staff.
That caused us to Miss a lot of potential admissions on the home health side that would also carried into our start off into Q4 and put us in a different position. So the good news is as we look into early November October started off kind of similar but it has its impact.
Proved materially over the last couple of weeks. So we're seeing good signs now in terms of stabilization across all of those metrics and particularly our staffing inability to take on new patients. So those things are encouraging but it's got a bill that's got it's got to maintain and it's got a build throughout this quarter.
But those.
Kind of how that's what really impacted kind of the the reset that we set for Q4.
<unk> rates, Chris they've gone from 3% to less than half of a percent, yes less than half. So we got our people back.
Our BD folks are starting to kick in.
Once the length of stay normalizes. The other thing that I think I'd add to that Brian is when we looked at the growth of where the fast.
Length of stay of the discharges, where it was mainly in lung disease, or COPD, which means which was pretty much we.
Correlate that to Covid pushing.
Pushing those results.
Got you and then my follow up question just Paul as we think about labor. There is a lot of focus on that obviously.
Maybe you can just share with us what your thoughts are and what the rate inflation number should we should be thinking about and maybe some levers you can pull to manage to that and whether it's.
I know you get raises every Q3, but the other offsets like mix and other things that you can call out.
Staffing or anything like that.
Yes.
Hunt that Chris Yeah, Hey, Brian So, yes, youre exactly right every year, we're looking at about 2% to 3% labor wage increase we did give raises in August of this year like we do every year for our employees.
But we also saw increased demand for either retention bonuses or market adjustments that we have had.
We had implemented throughout the quarter I do think that will tick up the traditional year over year increase for 2022, because a lot of the dollars. We gave out in terms of rate changes was to our home health aides in hospice and home health aides in home health.
Kind of lower wage earners that really needed to be brought up to market.
But also with our with our kind of our clinicians out there our nurses and therapists, we got more creative around multi year retention bonuses. So basically we werent raising the base. So it will be a little bit of a blip. There in terms of levers is still comes down to we feel like we still have opportunity around our LPN RN mix, we're going to get.
Real aggressive on that as well as our PTA PT mix.
Every time, we move that needle is significant to the bottom line that can drive down the drive down the cost per visit and again, we're running around 4% of our business are performed by contractors, which was considerably higher cost than our than our staff so retention.
Recruitment and productivity are areas, where we will focus on to continue to be able to replace that high cost contract business with our own W. Two staff. So I expect that we're going to be able to offset some of those headwinds just by basically executing on those core strategies and I think as I said in my remarks before Brian.
We've made great strides in terms of clinician turnover and the recruiting is going well, Chris has been leading that effort and with <unk>.
<unk> and <unk>.
Our people group and we're excited about we're moving and innovating in some new areas.
Obviously, we talked about predicting turnover some of the other things that we're looking at is flexible scheduling getting more utility out of our PRN pool recruiting out of our alumni base so were.
We are in the labor business and the staffing business and we're building really good tools too.
Make sure we have the right staff, because we're going to see an increase in the business from all the BD folks that we have are kicking in.
We are definitely going to need to make sure that their staff there to take care of the referrals that come our way.
Awesome guys. Thank you keep on trucking.
Thanks Pam.
There you go.
Thank you. Our next question is coming from Matt Larew of William Blair. Please go ahead.
Matt.
Hi, good morning.
You discussed okay.
You discussed that the environment deteriorated much more rapidly from kind of when you gave guidance in early August to now it's been related to Delta, but I'll save last November December and then this January we saw a huge surges in cases, so just kind of curious.
As you are moving now into the traditional kind of infectious disease season, what your guidance.
And.
Scott Your comments about 2020 to take into account from.
Another potential wave of <unk>.
Cases, maybe another inflection of quarantine just trying to get a sense for how conservative and what kind of worst case scenario that's taken into account.
Yes, I mean, Fortunately for 2022, if you think about we're sitting here from our home health side of the business.
The way, we recognize revenue and so forth it would take something really significantly greatly changed that outlook going forward.
Pretty comfortable how we're thinking through that I think the biggest issue that could impact with it more with VITAS theres any other blip in the discharge rate, we have left that in our assumptions at a higher higher elevated discharge rate.
So we haven't taken that back down so I think if that discharge rate improvement.
That could be a good guy a positive for us, but I'd still think we've got a high enough to protect us going into the rest of the year I think if you move into next year I think the biggest thing to watch for and how it can be impactful is what happens around any additional costs around COVID-19 I mean, we're going to right now were using cares act funds we've been using.
We've adjusted some items out there what kind of debt roughly a 3 million run rate between corn team pay additional contract or surcharges.
That we're going to have to overcome into next year. So those are kind of things that I'm thinking about as we look forward to 2022.
Okay, and then just on Contessa, you alluded to the EBIT headwind, but.
Do you still feel comfortable with kind of an average at all revenue outlook.
Provided for catastrophe 2022, I guess, just remind us the portion of the growth youre anticipating to come from existing partners that are ramping versus the addition of new partners.
We think in general I've been out on the road with some Matt and I've just been extremely encouraged so were sticking by our guidance and so.
So expect it to deliver the quadrupling of the revenue up to $60 million.
We actually are ahead of.
Ahead of the game in terms of we'll be announcing something hopefully next week. Another partnership. So we believe with some of the size of the systems that are out there.
It's wonderful hunting grounds within our catchment area. So our belief is that within this area we can.
Just continue to expand and we are expanding within our original partners, but we're also bringing on new partners. So.
Think I think we feel very good about where we are and I think they are ahead in terms of their new business development efforts I know Scott, Yes, I think yes.
So we feel good about the 60 going into next year, just kind of thinking where we are relative to.
Our capture rate did did if you look at our revenue right now is slightly behind where we thought we'd be but EBITDA is ahead.
Really driven by the same labor pressures, we dealt with any other pieces of the segments. We feel great about where we are right now a lot of effort went into that during the quarter to get get some some folks hired to help us increase those capture rates. So we feel good pivoting forward into next year.
Great pipeline that they had that they brought to it.
Kind of help them.
Accelerate that going forward.
So we're excited.
Thanks, Matt.
Thank you and the interest of time, we're asking the remaining analysts to please limit themselves to one question. Our next question is coming from Justin Bowers of Deutsche Bank. Please go ahead.
Good morning, Hey, John.
Hey, good morning, Paul.
I'm just going to pretend that.
Matt I'm going to combine my one and a half wood mats news follow on could you just give us a refresher on the Tam for Contessa, and then if theres a permanent waiver.
On the fee for service side, how that changes and then.
My other question is just can you give us a little more context on how the hospice discharge rates.
Change throughout the year.
And then it sounds like you have extra capacity right now with all of the BD ads and you kind of stymied turnover there so like where given where you are now or what your projected for year end with your BD ads, what's kind of the.
The run rate.
ADC capacity that you could absorb would that staffing mix.
Well, we I think we said that.
There was a SaaS is fundamentally our staffing levels are fundamentally flat and we're operating now with 700 last of ADC. So.
Chris has been focusing on finding out where we have capacity and then we've been doubling down on our BD efforts to make sure that we.
Push those efforts to take extra capacity. So in these areas we've been stealing share. So we're happy with that we call it pitching in catching.
Our BD folks pitch and our clinicians catch so we feel that we're our balance is very good we're building up the BD side, where we did have a deficit.
And.
We're ahead on that and the key thing is on our labor side. That's why we've been so focused we knew the BD.
Functions, we're going to be increasing tremendously and therefore.
We believe we have the labor in place there are tight spots for sure.
Since we're in 40 states.
Largely urban but we've been working through those pretty well on the Tam I'm going to let Nick talk about that.
Yeah, Hey, Justin we think that the acquisition of Contessa and the contemplation of expanding their business into new lines of services, which I think Paul talked about on the call.
Beefing up sniff at home expanding into primary care at home and palliative care at home essentially doubles, our Tam gets us somewhere between 70 and $80 billion.
As we do expand those lines of business and I think the other part of your question was around the Medicare fee for service waiver and what that looks like and what that does the financial profile of Contessa.
We've modeled no expansion of that beyond the public health emergency so as we've talked about our growth rates into 2025, and 2026 I think we put out in our original investor deck, a revenue CAGR that got us to close to $500 million in revenue in 2025 2026, depending on.
If that fee for service waiver were to be expanded that could easily add another one.
$150 million in revenue to that number.
Decently attractive margin profile as well so.
It really would change the game X that though we still remain very excited about <unk> revenue growth potential.
And have been very pleased with from a business development perspective, the number of partners.
That have come to the table in the process of they've made there with new JV partners high quality partners, but.
We'd be very lucky if there was an expansion I think Dave is telling us that it's unlikely but were trying very hard to make sure that.
We have an opportunity there.
One thing that Justin as you know the hospital at home waiver programs are tied to the public health emergency and we see that being extended throughout most if not all of 2022. So.
I think we've got some runway there for that waiver program through 2022, and there are legislative pushes a foot to make those wafers statutory so.
Looks good through 2022, and we will keep pushing.
Hey, Joseph I, just wanted to circle back to the discharge rate throughout the year January was a high watermark for us by far it was 39% of our beginning of the month census had discharged throughout the month and that's also the month that we saw the 18 day median length of stay so significant out of Covid impact there it ticked down.
And bottomed out in June at 31, 3% and then and then climbed significantly throughout Q3, and we have built in our model for the rest of this year additional elevation through Q4, there's traditionally some seasonality higher death rates in November December and January.
And then other parts of the year.
Mainly around the holidays, but so I feel good with what we have built into our our Q4 kind of updated guidance.
What we did see though as we came out of Q2, where we thought we were at a good safe place, but it did elevate throughout throughout the quarter.
Elevated sequentially.
Yes, I would just.
<unk> because that if you look at some of your peers the length of stay had increased sequentially.
<unk> Q over Q, which I guess is kind of counterintuitive in the current environment, but.
It points to you guys as a bit of an outlier.
Yes.
But.
But I'll hop back in queue. Thanks, a lot for the additional color.
Yes.
Thank you. Our next question is coming from a J rice of credit Suisse. Please go ahead.
Hey, Jay.
Hi, Eddie.
Just maybe to think about any updated thoughts you have on the organic growth outlook for the two businesses stepping into 'twenty two and beyond.
It sounds like the labor dynamics.
A fair amount of its short term the quarantine issue and so forth, but it also sounds like there's a little bit more challenging environment that could be a constraint on your growth. So I just wondered if you would give us your updated thoughts on.
Where do you see the organic growth for the two businesses sort of lining up.
Yeah, Hey, Jay it's Chris I think that given our exit rate with our BD ftes on the hospice side as well as we've grown it on the home health side, our ability to retain staff and have clinical capacity, which.
It was a little bit of a wobbly for us in Q3, but we're making great progress in Q4.
We see that where we should be getting to a more normalized environment for 2022. So I think it's fair to look at mid to upper single digits on organic growth on both lines of business.
Probably more challenged on the home health side, just from a Medicare fee for service, which is the better payer of the plans out there in terms of Medicare advantage you are still seeing kind of a decline in the actual total market out there of Medicare beneficiaries.
I would say.
I have to look at mid single digits on both lines of business, if we execute on our plans.
Yes, Im assuming there is no news.
Barry No new variants that are coming through but again I think what we've been doing particularly in hospice because it's a fixed cost model is we've just been holding onto staff. We think it's really prudent and safe to maintain the staff we have going into what we anticipate is going to be.
Normalized growth rates.
Okay, great. Thanks.
Thanks, a J.
Thank you. Our next question is coming from Sarah James of Barclays. Please go ahead.
Sure.
Hi.
Just wanted to understand a little bit better.
The context of the labor trend that you gave US you said it was increasing at about 3% unit cost what is it normally for you guys. And then are you seeing that change reflected in the rates that youre getting from the payers.
Where I guess the rates that you've negotiated for 22 are you seeing it factored in.
Yeah. So so the 3% were two 5% to 3% pretty much every year just through planned raises we think for 2022. This is going to be it's going to be north of that maybe even four possibly 5% in total.
Wage inflation the market has reset in some areas. We think we're going to have to work through that and again the levers that we have to offset that that we feel very good about being able to pull will be lower cost caregivers lpns and ptas versus.
<unk> and <unk> as well as us with our retention and building a clinical capacity internally driving down the contractor utilization. So we think we can keep that down in that 3% range. If we're able to execute on pulling those levers.
Second question.
So I think we're good.
Reflected in Oh, yes no.
No we're not.
Unfortunately, Medicare advantage plans are not quick to say, yes, we see that youre troubled. So we're going to give you more money. So we are basically trying to build in our new cost structure on new rig proposals. When we have updated plans or plans that are going through contracting.
Obviously access to our caregivers and our care is important to them. So there is an alignment there, but right now it's such a new phenomenon I mean, the rate inflation and wage inflation is really only picked up steam in the last probably 60 to 90 days, so there'll be a while before that flushes out we did see.
And the new final rule for Medicare rates.
Up 80 bps.
The increase in the final rule versus a proposed rule, which is inflation related which is which is we see that as a good sign.
Should cover some of them, but I think in general we.
Yes.
Sure.
Kris and Dale Kimberly have done a really nice job.
Getting moving us to risk as much as possible, where we can get some gain share risk.
With the MA payers in the Convenor is we're still working through a lot of this but we're very hopeful that we can move more to risk and outcomes to to grow our level of reimbursement there were very willing to bet on our performance.
And just to clarify you guys mentioned higher signing bonuses for multiyear retention contracts are you expensing all of that right away or.
Allocating it over the multiyear attention here at the.
The multiyear right here and Thats. The reason we're doing it we're not trying to take all the hit now and also give your employees you know kind of reasons.
Through some of this so it can be phased over.
2021 'twenty, two and sometimes up into 'twenty three.
We see the longer we keep people the longer the better the chances the less the turnover occurs so.
Part of the plan why retention bonuses are good thing is you can defer the cost and they have some incentive to stay and once they build their relationships with their patients and the care centers they tend to be.
Tend to stay longer and be better in terms of turnover.
Clear on my comments I called out about $2 million of additional cost that was outside of the planned wage increases about $1 2 million I would call is permanent that was it raises mainly as Chris said around home health aides and some other hourly people the.
The other 800 was it related to bonus retention and sign on bonus expense.
Thank you. Our next question is coming from Frank Morgan of RBC capital markets. Please go ahead.
Frank.
Good morning.
Just a question here interesting your comments you made about <unk>.
Consolidation it seem like you might perhaps be more aggressive in M&A next year.
And I'm just curious.
And my reading that right and if so.
What kind of magnitude of of <unk>.
Should we expect there in a perfect World and then maybe also from a mix standpoint between home health care and hospice.
Yes, I think we plan to be more aggressive into next year, we're trying to be aggressive this year actually it's just unfortunately, we've got a bad start with some deals that we thought we'd get over the finish line that just didn't meet.
Meet our standards.
In our review procedures. So we spent $275 million today that does include Contessa.
Walking into the year, we had said we'd like to spend somewhere around 300 million somewhere around kind of what the year's cash flow would potentially have looked like.
It will still continue to push I would say would be heavily to home health.
But I wouldn't.
We will spend what we needed to get done.
So we can always we've got a lot of availability on the balance sheet to do a lot of things in order to get deals. So I think we'll kind of take a reassess of where we are I think youll see us and we will be active and aggressive were active every day in this market.
What we can get across the finish lines helping.
<unk> 2022 from our home health side I.
I think we talked about the cares act money that sequestration going away. Those two have been dynamics and now you add these labor pressure dynamic.
It's going to affect everyone in the industry.
Our balance sheet has set us up very well.
Take.
When theres availability, we can do some more acquisitions, yes, I would add to that Frank.
I've been out on the road with Contessa and I think there is tremendous opportunity there, particularly in some of the geographies and the partners there.
Working with Theres been a lot of conversations about finding better ways to partner, including joint ventures with some of these big systems and outright purchases. So.
I also think that the <unk>.
<unk> has really added to that.
There's a lot of folks out there now, particularly in the home health World that are starting to look at next year with significant concern. So we're starting to starting to hear so the phone ring a lot more.
Okay. Thank you.
Thanks, Brian.
Thank you. Our next question is coming from Whit Mayo of SBB Leerink. Please go ahead.
Hi.
Thanks.
Just how much more room do you guys think you have to push on visits per episode and Metalogic has acquired some new capabilities. Just curious if you can maybe talk about that and <unk>.
Eddie tools that help enable this change on the LPN and PTA opportunities that you keep referencing thanks.
Yes.
Hey, Whit, it's Chris.
In terms of BP, We do see there is still the metalogic.
Analytics suggests that there still is opportunity for fewer visits without compromising care and quality of the patients.
We are now really starting to expand some use of telehealth and within our within our markets and with our programs that we think will help in some of those areas as well as.
Again focusing on.
The LPN and PTA utilization actually homecare Homebase has a smart scheduling module that we started project we started piloting this year.
In the markets, where we have done it we've seen significant movement in our PTA and LPN utilization. So we're expanding that across the rest of our organization as we speak and then as far as the Metalogic new tools.
Muse hospice product that they had in place which was not really on our radar.
Earlier this year.
<unk> has been a phenomenal tool so we <unk> that starting in September and we've accelerated the rollout of that we will be fully rolled out by the end of this year that gives helps us with actual clinical capacity on our hospice side and it gives us growth capacity within the organization and better efficiency as well as improves the care is delivered.
At the last days of lives. So we're encouraged by all of that.
Got a lot in play right now, but between smart scheduling.
Employee retention launching abuse, I think that thats going to help us with our capacity for next year.
As far as how much more we can go lower in visits per episode.
The data suggests it's.
Probably up to another full visit if we were a 100% optimized but we're just basically continuing to to protect.
Predict the model.
Starting to launch some new tools like the <unk> research as well as Internet episode.
Capabilities that metal largest is working on today. So I think over time, you'll see it just get kind of get into that right spot.
Likely be a little bit lower than where it is right now.
Okay. Thanks.
Thanks.
Yes.
Thank you. Our next question is coming from Matthew Borsch of BMO capital markets. Please go ahead.
Matt.
Yes, sorry had come off mute.
So my question I think you did really start to address it there was about how the M&A landscape.
Yes.
Changing relative to some of the pressures that we then through PDGF to know everything with Coke staying quite a ringer.
But let me, let me refine that just a little bit.
The hospice valuations have been pretty elevated for quite a while and I'm curious.
Where there's maybe been more impact on that business. If you had any sense that.
Maybe maybe some of the hunt for those companies from private equity or wherever has come off of that.
We havent no we havent really seen that Matt at up to this time, they're still pretty elevated their deals are getting done at 20 plus times EBITA.
These I think people believe that like we believe that this is a short term bump.
Reimbursement is going to be good that the demographics behind.
People wanting to die at home is is huge.
What we're seeing is I would say private equity is willing to go in and buy toe holds so very strong regional players and then overpay for them and hopefully amortize that through smaller deals or de novo's around those areas, but those have been very successful strategies, thus far for private equity folks who are doing.
It is a big national place haven't seen it yet.
Right right now in hospice and in trying to value. Some of these deals when you have this discharge rate. This.
Disruption and fluidity and that is certainly can be challenging.
Hospice home health it seems like the right place for us to focus early to get some stability there in the back half of next year.
You could probably see is thought to take a look at some more hospice as it makes sense for US yes. There is a dichotomy that exists in home health.
If theyre under our license area.
It's easy to do because we don't have to absorb the license and thus the liability in states, where we don't have coverage and in other places where we're moving to get coverage. We have to do a lot of diligence. So we make sure we know what we're getting.
But so we also anticipate significant shakeout.
Sequestration is coming back in the payroll taxes due the.
The receivables that people borrowed as do cares act money has done so.
And then there's been some significant issues with quarantine and labor cost for smaller players. So we're anticipating this is the year, we've been saying that for a while but.
We will be right early in the year.
Okay fantastic. Thank you for all that.
Thanks, Matt.
Thank you. Our next question is coming from Joanna could you <unk> of Bank of America. Please go ahead.
Yes. Thank you. Thanks for squeezing me in I guess, a lot of questions were asked but I guess.
One thing I have here I appreciate the comments you made on the organic growth outlook long term for both businesses, where it is mid single digits.
It's been quite positive and then maybe a little bit lower than what you were talking before so just want to clarify that and I guess on the hospice business.
I guess building on that.
Latest Q, but are there any structural changes in this business I mean, obviously I understand the ageing demographic <unk> penetration and <unk>.
Both in vain, Bristol, but but anything can be said in terms of.
Some of those pressure Charles Fisher as all of these referral sources and the hospice currently again into like any anything can be said about those things.
And I guess just to summarize how does this mid single digit compared to how you were thinking about the growth rates for this business as before.
Okay.
Yes.
I'd start off with the one thing thats materially different from what we were talking about about a year ago on the growth rates in hospice is the pull forward of deaths in the acceleration of desk that Covid has actually cause I think you could step back you look at 2021, and I actually the hospice utilization market decline versus an expected growth and its still going.
To be negatively impacted next year from accelerated desk.
Basically the market is shrinking a little bit or not growing at the pace that we were expecting when we rolled out our 2021.
Our plan in terms of the.
The carve in we were utilizing we're having carbon and access through some of our plans right now very very little volume today doesn't look like there's going to be a tremendous amount of pick up and take up of it in 2022. So it really has not impacted the traditional will go from <unk> to traditional Medicare hospice transition.
<unk>.
What we do think we have an opportunity around is just basically identifying our patients to transition from home health to hospice.
<unk> earlier in the dying process, we do a decent J J.
Job of transitioning those patients when appropriate.
But I'm going to say, it's been relatively low so we're working on some programs, particularly metalogic products on that to help us kind of identify those patients a little bit earlier, and then on the home on the home health side.
Growing that market.
Particularly with again, the shrinking Medicare fee for service enrollment population and the aggressive growth of the Medicare advantage population, we still have kind of a rate gap that we're still trying to kind of kind of kind of close as much as possible.
And clinical capacity on home health will probably be much more challenged for us.
Even even with our lower turnover rates and our performance around unlocking new capacity.
Just just just about.
Virtue of the way the industry is so we think that mid single digits in home health as a good place for us to pay for next year could we outperform it absolutely.
Are there things out there that we think are going to be wallboard or just really structurally had structural headwinds not really.
I would say that caution has to be built around the mandate the vaccine mandate, that's coming out because it really likely will not impact us in 2021 Budd.
If the mandate is impactful to the business and that can create a slow start to 2022 first add one piece of color Hey, Joanne It's Dave on.
On the V bid our hospice component for 2022, there are only 13 MAA plans participating in the hospice component, whereas there were nine in 2021, so not a lot of uptake.
They're so hasn't significantly impacted us.
And I think what we'll see Joanna.
Potentially deferred care as these hospital beds free up.
We are.
Watching to see who fills those beds.
And to understand if this is delayed care, if theyre going to be sicker. So.
That's what we'll be watching for in the next quarter or two.
Great. Thank you I appreciate the color.
Great. Thanks Julia.
Thank you. Our next question is coming from Andrew Mok of UBS. Please go ahead.
Hi, Good morning, Hi, Good morning, Thanks for squeezing me in wanted to follow up on some of the hospice comments it sounds like Theres. Some countervailing forces between admissions and length of stay so as trends in length of stay normalize at the patient level. There also might be a moderation ed and admissions due to excess mortality can you talk about the interplay.
Between admissions and ADC and how you see that playing out over the next 15 months.
Yes, so on the emission side, we feel like we are squarely in a market share taking position today and actually adding our BD ftes and identifying new referral sources. We added 1100, new referral sources in Q3, which is exactly what our strategy is.
Do and continue to do so we think that.
Also using data to understand where kind of where the right targeting use from a length of stay perspective is helping us to look at some stabilization there pandemic aside there should be a distinct correlation between admission growth in ADC growth, even though the ADC growth lags a little bit.
As you do as you do that we've had years of tight correlation in the past.
X percent of it.
Emission growth equals 1%.
See growth over time, we think we're going to get to that point, while we are seeing even happened today is.
Our emission growth volume is equally.
It's pretty equal between the northern states in the southern States and right now we've seen median length of stay and discharge rates stabilized in the southern states since the pandemic has kind of moved through their up north.
So even though equal growth rates that we're seeing between both regions, we're seeing distinct ADC build happening in the southern states, which is what we would expect to see so.
I think theres still going to be.
These pockets.
And blips that are out there we're cautious around that it's hard to predict we can't predict discharge rates.
We are not changing the segmentation of where we're getting our referrals from them. So I feel like there is going to be.
Some sense of normalcy that should start to materialize and we're starting to see it even in the south right now.
Got it thanks Niccolo.
Thanks, Andrew.
Thank you our last question today is coming from Gary Taylor of Cowen with Cowen. Please go ahead.
Hi, Gary Hi, Good morning, just.
One clarification and one question.
When you were talking about the growth in EBITDA for 2022 versus the revised.
'twenty one guidance I think Scott said, you would be absorbing some of the COVID-19 costs that you had been calling out in the 'twenty one.
Justice EBITDA and I just wanted to make sure that I had that correct or would you still be anticipating.
Dusting out some of the Covid costs in 'twenty two.
Yes, that's a great question just is everything I would say everything is fluid, but as of right now assuming we stay at that pace and and things without a new variant that really accelerates things I would say we were going to have to consider these costs as kind of normalized operating business going forward. So right now.
My thinking is it goes into 2022, and I don't im not adding that cost back in Toronto, Canada exiting kind of Q3.
Somewhat of a $3 million range on that and.
And we will continue to work that down.
But thats just not getting that.
As it stands today.
Where we think it will be.
And then just my question then is just going back to the possible.
Healthcare employee mandate vaccine mandate do you have any updated thoughts on the timing obviously that was proposed in September we've heard from various sources imminent, but we are hearing that a few weeks ago. So any any thoughts on timing and can you update us on your employee vaccination rate I think you had said.
On the <unk> was just over 50%.
Yeah, Gary I can take the time and as Dave.
The vaccine mandate rule cleared OMB earlier this week, so it's sitting back at CMS. So we truly believe is imminent this week.
We expect that to be released but probably didn't get really shift Jason's to home health rule was payment update release yesterday. So I think it will be literally in the coming days and we're right now around 67% fully vaccinated and probably another 5% to 6% that are either partially vaccinated or have stated they intend to get back.
<unk>.
The last piece I would say, though is we've seen some state mandates come into play already.
That we've noticed kind of acceleration of vaccination rates in those states as the deadlines quickly approached.
And in fact, it hasnt negatively impacted us in those states, where the mandates have come into effect for the most part I would say only on the personal care side in Massachusetts was probably the biggest challenge for us so far but.
We are continuing to educate and focus on getting our employees to do the right thing and get vaccinated saved for their own protection in the patient's protection, but the mandate could be.
Southern states of lower vaccinated states.
Are starting to come online and that's where we're going to have to really be close to it.
And we're trying to be as proactive as possible there with.
Estimating where theres going to be issues in and start to build up our recruiting there.
Thank you.
Thank you I would now like to turn the floor back over to Mr. <unk> for closing comments.
Alright. Thank you I want to thank everyone, who joined us on our call today I would also again like to thank all of our caregivers who delivered yet another great quarter of results. Despite the trials and tribulations that have been caused by COVID-19.
Please keep doing what youre doing first things first keep taking care of the people who need us. The most if we continue to do that we will always thrive. We hope 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 early next year.
We're excited and we hope you are too until then take care.
Ladies and gentlemen, thank you for your interest and participation in today's <unk> Conference. You may disconnect. Your lines of log off the webcast at this time and enjoy the rest of your day.
Okay.
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Non stop to see.
<unk> grew.
Yeah.
And your cash flow.
Bingo.
Hey, John.
Thank you.
Yes.
But on that for women and to enhance our plan.
<unk> and <unk>.
Got.
<unk>.
Dan robotic along that route.
Tom.
And again.
Bob.
Following <unk> remarks.
We are tracking.
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No.
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