Q1 2023 Ensign Group Inc Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the Ensign Group, Inc. Q1, 2023 earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
I'll ask a question. During this session you will need to press star one one on your telephone you want.
When you're an automated message advising your hand is right to withdraw your question. Please press star one one again please be advised.
Today's conference is being recorded.
I'd now like to hand, the conference over to your Speaker today. Mr. Keetch. Please go ahead.
Thank you Gigi and welcome everyone.
We filed our earnings press release yesterday and it is available on the Investor Relations section of our website at <unk> Dot net.
A replay of this call will also be available on our website at five PM Pacific on Friday May 26 2023.
We want to remind any listeners that may be listening to a replay of this call that all statements made are as of today April 27, 2023, and these statements have not been nor will be updated subsequent to today's call.
Also any forward looking statements made today are based on management's current expectations assumptions and beliefs about our business and the environment in which we operate.
These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call.
Listeners should not place undue reliance on forward looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results.
Sept as required by federal Securities laws Ensign and its affiliates do not undertake to publicly update or revise any forward looking statements where changes arise as a result of new information future events changing circumstances or for any other reason.
In addition, the Ensign Group, Inc. Is a holding company with no direct operating assets employees or revenues.
Certain of our wholly owned independent subsidiaries collectively referred to as the service center provide accounting payroll human resources information technology legal risk management and other services to the other operating subsidiaries through contractual relationships with such subsidiaries.
<unk>, our wholly owned captive insurance subsidiary, which we refer to as the insurance captive provides certain claims made coverage to our operating companies for general and professional liability as well as workers' compensation insurance liabilities.
Amazon also own standard bearer health care, REIT, Inc, which is a captive real estate investment trusts that invest in healthcare properties and entered into a lease arrangements with certain independent subsidiaries of enzyme as well as third party tenants that are unaffiliated with the enzyme group.
Enzyme company, we our and US refer to the Ensign Group, Inc. And its consolidated subsidiaries all of our operating subsidiaries. The service Center Standard-bearer Health care REIT, Inc. And the insurance captive are operated by separate wholly owned independent companies that have their own management employees and assets.
References herein to the consolidated company and its assets and activities as well as the use of terms, we us our and similar words. We may use today are not meant to imply nor should it be construed as meaning that the Ensign group, Inc has direct operating assets employees or revenue or.
Or any of the subsidiaries are operated by the enzyme group ALM.
Also we supplement our GAAP reporting with non-GAAP metrics when viewed together with our GAAP results. We believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports a GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our Form 10-Q.
And with that I will turn the call over to Barry Port Our CEO Barry Thanks, Chad and thank you everyone for joining us today.
Our local leaders and their teams continue the examples of excellence in health care services as they navigate through constant changes in each of their market.
Yet again, our locally driven strategy led to continued improvement in occupancy skilled revenue and skilled census.
We're particularly pleased that we achieved sequential growth in overall occupancy for the ninth consecutive quarter with same store and transitioning operations, increasing by $4, two and five 4% respectively over the prior year quarter.
As of the end of the quarter, our same store occupancy reached 78, 8% and we continue to get closer to our pre COVID-19 occupancy level, which was at 81% in March of 2020.
Our record results are leaders achieved this quarter are particularly impressive given the ongoing disruption in the labor market.
Although we still have headwinds from these labor market challenges, our turnover is improving significantly year over year over year and our utilization of agency labor is trending down for the fourth month in a row.
We also continue to build stronger relationships with our managed care partners due to better coordination of care increased clinical capabilities and strong clinical outcome.
As a result during the quarter our same store operations grew skilled mixed revenue in skilled mix days by five 4% and three 5% respectively over the prior year quarter.
In addition, we saw increased volume in our same store managed care centers and managed care revenue, which increased during the quarter by 9% and 11, 9% respectively.
As we evaluate our expanding portfolio, we see more organic growth potential within our existing operations than ever before.
We relentlessly follow and protect the cultural fundamentals that got US here. We are confident that we will continue to consistently achieve outstanding clinical and financial performance.
As we indicated last quarter, we continue to see that our skilled mix for both revenue and census remained elevated when compared to pre COVID-19 level, showing just how important high quality post acute services are within the continuum of care.
We are pleased to see this continuous continuous growth in skilled mix as it demonstrates the increasing and sustainable demand for skilled post acute services.
Throughout our history, we have demonstrated the ability to find transition and improve our newly acquired operations.
This ability combined with a strong balance sheet allows us to increase the number of acquisitions, we closed in times of market turmoil.
When many operators are either choosing are being forced to exit the industry.
Most of the operations, we acquire are struggling clinically and financially at the time, we acquired them and they can often take many quarters to become a facility of choice in their communities and it contributes to the organization as a result.
In some cases, however, it's a foundation for solid clinical performance is in place at the time of acquisition the performance can sometimes happen more quickly.
During the quarter, we transitioned 17, California operations that were previously operated by North American Health care.
When we announced the deal that last year, we indicated that we were going to inherit operations that for the most part came to us with a strong clinical reputation and an outstanding team of clinical leaders.
We also noted that like most of our recent deals we expected some challenges related to higher than normal aging.
Agency staffing prior to the acquisition as well as some additional opportunities on the expense management front.
We are pleased to report that with just two months of operations under our belts.
A large acquisition is performing ahead of schedule and is already contributing to our results.
While these operations will face some continued challenges during the year, including some potential pressures on occupancy there typical during summer months we.
We are really excited to have the opportunity to work together with our new partners to drive more efficiency.
We look forward to the contributions they will continue to make to this organization over the next 20 to 30 years.
And our new business ventures, we've seen greater improvement and better momentum.
This entrepreneurial incubator program is one of the elements of our culture that helps us attract and retain outstanding leaders, which allows our proven leaders to explore new post acute care businesses and give ensign great investment opportunities.
While keeping the opportunities within the Ensign family.
While currently these new ventures collectively represent a very small percentage of our overall business as we've shown in the past with our home health and hospice business.
These opportunities have the potential to become significant.
Due to our solid skilled mix at very strong sequential occupancy growth as well as stronger than expected results from our recent acquisition.
We are increasing our annual 2023 earnings guidance to between $4 64.
And $4 77 per diluted share up from $4 $64 74 per diluted share.
This new mid point of our 2023 earnings guidance represents an increase of.
14% over our 2022 result, and is 29% higher than our 2021 results were.
We are also raising our annual revenue guidance to between $3 68 billion and $3 73 billion up from our previous guidance of 355 billion to $3 62 billion we.
We are excited about the upcoming year and confident that our partners will continue to manage and innovate draw the lingering challenges on the labor front.
Our organization is extremely healthy and our local operations and clinical leadership has never been stronger.
Our culture and local approach that we've practiced and $19 99.
Given us confidence that we can and will continue to innovate and grow.
While market dynamics can lead to some near term quarterly fluctuations, we remind you that our model is built for times like these.
We have seen and fully expect to see that continue throughout 2023 and beyond.
Next I'll ask Chad to add some additional insights regarding our recent growth Chad.
Thank you Barry during the quarter. The company added 17 skilled nursing operations in California, adding 1462 operational breadth of the portfolio and two skilled nursing operations in Colorado, adding an additional 302 new operational beds.
Reevaluate growth over the last 12 months, we can see that our discipline is paying off as we have added 42, new operations totaling 4640 beds.
While we have literally been presented with several hundred opportunities over the last 12 months to 18 months, we remain patient and we're careful to stick to our fundamental growth principles and are pleased to see most of these operations already contributing to the bottom line.
We remain confident that our operating model will continue to allow local leaders to form their own market specific strategies and to adjust to the needs of their medical communities, including methods for attracting new health care professionals into our workforce, while retaining and developing existing staff.
We continue to expect all our transitions to take time, particularly given the current labor labor markets, but with each acquisition, we are creating new opportunities for the next generation of leaders I look forward to working together to help each operation reached its enormous clinical and financial potential.
We continue to see a wide range of large medium size and small portfolios.
And have recently seen the pace of these new opportunities picking up over the last few months.
We always place the highest priority on growth opportunities within our existing footprint and are very excited about the additions to some of our most mature markets.
<unk>, Arizona, Washington, Texas and Colorado.
As we carefully select acquisition targets.
Prioritize those that give us exposure to new markets and states, we already operate in or the and enhance our service offering offerings and markets we've been in for years.
We continue to look at new states as well, but as we've said before entering new states is challenging and can often take time to gain the trust of the local healthcare community.
With the success that we continue to enjoy in South Carolina, We hope that we will be able to continue to build the enzyme footprint and nearby southern states.
Our real estate investment Trust standard Bear is now comprised of 103 owned assets, which are leased to 75 affiliated skilled nursing and senior living operations.
29 senior living operations that are leased to the pennant Group Inc.
Each of these properties is subject to triple net long term leases and generated rental revenue of $19 7 million for the quarter of which $15 9 million was derived from ensign affiliated operations.
Also for the quarter standard bearer produced $13 2 million in <unk> and as of the end of the quarter had an EBITDAR to rent coverage ratio of two five times.
Looking forward, we are prepared for even more growth in 2023.
With the recent influx of new opportunities in some of our core states. We are seeing some compelling opportunities on both the operational and the real estate front, and which we hope to participate if the pricing is right.
With our locally driven offered locally driven operating model, we have lots of bandwidth to grow across dozens of markets and with our increased credit agreement and a healthy amount of cash on hand, we have a lot of dry powder to grow <unk>.
We expect some of the industry wide changes on the horizon to lead to even more opportunities in the near and long term future.
Lastly, during the quarter, we paid a cash dividend of five and three quarter cents per share.
And as a reminder, in December we increased our annual dividend for the 20th consecutive year.
And given our strength, we plan to continue our 21 year history of paying dividends into the future.
We also continue to Delever, our portfolio, achieving a lease adjusted net debt to EBITDA ratio of two six times.
Which is particularly impressive given the amount of growth we have taken in the last year.
Currently we have over $590 million in available capacity under our line of credit, which meant that when combined with the cash on our balance sheet gives us more than $900 million in dry powder for future investments.
We also own 108 assets of which 103 year held by standard bearer in 84 of which are owned completely debt free and are gaining significant value over time, which adds even more liquidity to help us with future growth.
And with that I'll turn the call over to Spencer Burton, our COO to add more color around our operations Center.
Thank you Chad and Hello, everyone.
In his opening remarks, Barry emphasize the significance of locally driven leadership and our ability to thrive in spite of the significant market challenges.
I'd like to share a few facility examples that illustrate how leaders are finding ongoing success customizing their operations to the needs and opportunities in the communities they serve.
The first example comes from West, Texas Medical large of Amarillo was acquired in November of 2020 during the height of the Covid pandemic.
On the transition date. This 102 bed facility had a census of just 38 residents to have them skilled patients and the operation was struggling mightily with clinical challenges low staffing in a poor reputation in the community.
In spite of the challenges our local team went to work building, our culture and strengthening clinical capability.
Over the past few years its results and reputation have drastically improved.
For example staff turnover has decreased as the medical lodges become an employer of choice for post acute professionals in Amarillo.
With increased clinical talent the facility has been able to improve census, and skilled mix significantly while also completely eliminating contract labor.
The emphasis on quality is naturally driving financial results and Q1 occupancy averaged 83% up from 61% in Q1 of 2022 and.
The facility now enjoyed the skilled mix of over 50%.
As you would expect quarterly net revenue and EBIT improved drastically up by 69% and 324% respectively over prior year quarter.
The results are impressive, but CEO , Chris Cantrell, and Carol <unk> arent satisfied yet they and their team remain humble and hungry to learn and to apply new approaches to improving outcomes and results.
One example of that occurred last year, when apparel traveled from Amarillo to Mesa, Arizona to visit Montecito and Ensign affiliated facility that leaves us.
The entire organization and monthly admissions by providing high acuity solutions to hospital and managed care partners.
Carol was inspired and since that visit she and a nurse leadership team have worked relentlessly to build clinical competence and to offer unique high acuity programs at the medical lunch.
The Amarillo health care community is taking note.
Medicare days have increased by 78% and managed care days have grown by an incredible 120% as the facility has gained preferred provider status with multiple plans.
Not only does the medical large story illustrates the enormous upside and transitioning operations. It also demonstrates the endless opportunities for improvement.
Come as our operators seek for and share best practices peer to peer even across state lines.
And speaking of best practices. Our second facility example is an operation that's been affiliated with Ensign since 2004.
During that time, North mountain medical in Phoenix, Arizona has innovated and raise the bar over and over again.
During the past decade, 15 has accomplished multiple deficiency free CMS surveys and consistently maintained five star quality and overall ratings.
Done this while carrying for an ever increasing level of acuity.
Today, 100% of their patients require complex respiratory care, where many of these residents also received bedside dialysis.
Facility also has an in house wound care team that allows them to care for and heal wounds that would normally require patients to stay in a much more expensive <unk> or acute hospital.
For years, North Mountain has been one of the top performing facilities and the entire organization as it is grown acuity skilled mix and added clinical capabilities that serve the community needs while concurrently growing revenues.
Spite of Vista facility continues to find ways to improve performance.
It is the quintessential example of the boundless potential that exists in even the most mature same store operations.
For example in Q1 of this year the North Mountain team led by CEO , Jeremy Bowen and CLO, Jackie Greene through occupancy from a respectable 81% to an incredible 96%.
Also increasing skilled revenue mix to over 94%.
Occupancy increased the team concurrently focused on hiring and retention and successfully eliminated their dependence on agency nurses.
Team proactively developed innovative processes for attracting and training caregivers and then supporting those caregivers as they gain additional skills and credentials.
Despite being a very busy environment North mountain makes each employee feel like family as evidenced in the facility, having the lowest turnover rate among skilled nursing facilities in the Phoenix market.
As North Mountain continues to achieve excellence in clinical and cultural measures financial results invariably follow for.
For example in Q1 the facility grew its total net revenue by 21% over prior year quarter, while EBIT increased by 63, 9% for the same period.
North Mountain continues to provide an example of excellence to the entire organization, while demonstrating the enormous potential that legacy operations have to continue to grow results.
We hope that these examples are helpful in illustrating some of the many different levers are.
Our local operators are pulling in order to meet the needs of their health care continuum partners.
With that I'll turn the time over to Suzanne to provide more detail on the company's financial performance and our guidance and then we'll open up for questions Suzanne.
Thank you Spencer and good morning, everyone detailed financials for the quarter are contained in our 10-Q and press release filed yesterday and additional highlights for the quarter include the following.
GAAP diluted earnings per share was $1 five an increase of 18% adjust.
Adjusted diluted earnings per share was $1 13, an increase of 14, 1% Consol.
Consolidated GAAP revenues and adjusted revenue of $886 8 million, an increase of 24, 3%.
GAAP net income was $59 9 million an increase of 18, 9%.
And adjusted net income was $64 6 million an increase of 14, 6%.
Other key metrics as of March 31st 2023, and <unk> <unk>.
Cash and cash equivalents of $327 million cash flow from operations of $48 3 million and $593 million of availability on our revolving line of credit.
We also wanted to address the current status of the state of emergency and reimbursement models.
But the public health emergency ending on May 11, 2023, the majority of the states, we operate and have adopted programs that will either increase debate net Medicaid rate.
Sure.
Enhanced Medicaid funding throughout the end of the year and showing a relatively smooth transition.
As Barry mentioned, we are providing updated annual earnings guidance at $4 64.
The $4.77 per diluted share.
Our revenue guidance of $3, six 8 billion to $3 73 billion.
Evaluated multiple scenarios and based on the strength in our performance and <unk>.
Positive momentum leasing occupancy and strong skilled mix.
Well have some additional things in Medicaid managed care program has led to the increase in our guidance.
Our 2023 guidance is based on diluted weighted average common shares outstanding of approximately $57 7 million a tax rate of 25%.
The inclusion of acquisitions closed to date.
The inclusion of managements expectations of Medicare and Medicaid reimbursement rates net of provider tax.
And with the primary exclusion coming from stock based compensation.
Additionally, other factors that could impact quarterly performance and cleared.
Variations in reimbursement systems delays and changes in state budgets seasonality in occupancy and skilled mix the influence of the general economy on census, and staffing it start to impact of our acquisition activity.
<unk> an insurance accrual.
And COVID-19, and other bucket.
With that I'll turn it back over to Barry Barry.
Thanks Suzanne.
It's always important to us that we take just a minute again to thank our incredible team members facility leaders field resources clinical partners and service Center support staff.
Can't emphasize enough how incredibly honored and grateful we are to work alongside them and to witness their amazing sacrifice effort and outcomes. Many of them have picked up extra workloads in the face of staffing challenges rolled up their sleeves to help us transition dozens of operations in the last many months and they've made other sacrifices for the <unk>.
Benefits benefit of their co workers patients and the organization there.
Their commitment and serving their communities and one another has blessed the lives of so many it's absolutely astounding to witness and an honor to be a part of that effort just as we've seen in the past. We most certainly expect some challenges ahead. However, we will lean on the lessons that we've learned and we'll continue to build on our.
Our foundational strength.
We're excited about our future and look forward to continuing our.
To show our dedication to all those that have been trusted us with the care of their loved ones.
And now we'll turn the call over to the Q&A portion Gigi can you. Please instruct the audience on the Q&A procedure.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.
Our first question comes from the line of Scott Fidel from Stephens.
Hi, Thanks, Hey, everyone.
First question just wanted to hopefully taken a little bit just to the <unk>.
The Medicaid Rebating process Thats underway, just asked the enhanced that maps.
Wind down and in particular.
Obviously, a lot of a lot of focus on taxes and how that process is.
It's going here, so would be great to get some.
Some updated in Cal from you in terms of what Youre hearing from us from taxes around.
The efforts to get those rates.
Rebased for after the wide data that maps and for the underlying cost structure.
Yes, you're facing in the market.
Okay.
Yes so.
Okay.
Texas is.
A little nuance in that.
Kind of the stepping down of F map support there.
There's not like a cliff per se, but the new rate structure won't go into place until September .
So.
That means there is going to be kind of.
A gap between what.
Where we have been and where we are headed.
Potentially the caveat to that Scott is how we've been accounting for F map.
We've been accounting for.
Expense related events, that's when we apply the match funding and so there is a natural lag that exists there between when the expense occurs and how we accrue for it.
Which also means that there is.
As a natural kind of reserves that exist. So it won't be a stark drop off but there will be a gap there.
We won't have the continued revenues coming in to offset all of the all of the expenses. So there will be a combination of cost.
Cost control and kind of again.
Conservative accounting method, we've been leaning on that said, there's still some unknowns.
The legislative session is still still ongoing and there is still discussion about some bridge funding some some potential for some additional grants. So theres a lot that we don't know about worst case scenario, though there might be a bit of a gap in funding, but that said we've accounted for that already in our.
Our projections and so there shouldnt be any disruption and how we kind of see the outlook for the year and just to be clear in the low end of the guidance we have the gap.
<unk> from the end of the state of emergency care.
The rates that we're anticipating will happen as of September 1st.
So that's kind of in the low end and the high end with some continued support.
It's kind of summer months, and I'll talk about that more.
That's the part coming through so.
All of that and planning for in the guidance that we've provided and putting GAAP data guidance.
Understood and I appreciate that color on the bridge dynamics.
Maybe just in terms of just when we ultimately get to the FY 2024 rates just stop any updated sentiment that you have around sort of confidence that that those rates will be rebased.
To the.
To the extent necessary to cover the.
The wind down and match on a permanent basis.
I mean, I think some of them and I'll start and Gary can add color on that I think we talked about it.
Really with the largest as Arizona, they've already done a great job they actually get that increase last year Theres still looking probably again this year at another nice increases what we're starting to see.
From them as well.
Well as kind of phasing out the App nap.
Distant with the wind down.
Yes from the six <unk> down to the 1% traffic quarter. So that's one of our largest it hasnt been talking about California.
Thing that kept it in place for the entire year Theres a lot of discussion on California with regards to Rebating.
We're optimistic about.
And then Erez, yes. So those are the big ones in Texas, We just talked about Utah same thing theyre looking at going through the process of.
How that gets some additional funding in place there and they're offset given the wind down for <unk>. So we feel really good about where the states are positioned.
And some of the smaller states not as positioned as well, but there are also smaller states for that show they are impactful at Danske Bank.
Sure.
Okay.
Just a follow up question just around margins and sort of what youre assuming over the course of the year. Obviously you did mention some of the bridge dynamics that will be playing out in the second quarter as we move to the Rebased Medicaid rates that will be coming in later in the year.
Clearly in the first quarter.
Also we're incurring probably some additional expenses still around.
Integration of the North American properties in and we did see the EBITDA margin.
Climb year over year, maybe if you could just walk us through.
Any any extraordinary or.
Additional expenses.
For example, it looks like SG&A actually bumped up year over year I'm, assuming there may have been some.
Unrelated question there.
In terms of the comp show any visibility into that would be helpful too.
Absolutely.
With the cost of services and as we've been talking for years, obviously, when we have a large acquisition that is going to drive that cost of services, a little bit higher and I think even more particularly in the last couple of quarters, what <unk> seen as those acquisitions have a higher level of agency spend that's going to even drive that cost.
Services' op for a period of time and so as we continue to get those acquisitions.
And then really get agency to be lower in quarter. After quarter. We would expect that agency can't go down over a period of time and so kind of have that going to help offset maybe some of the funding gap that we have with us with the SG&A.
Couple of things one is the additional cost associated with the acquisitions in Q1, but on top of that we also have our annual meeting that bumped that up and the current quarter. So kind of all of those things together. It makes the first quarter, a little bit higher than some of the other quarters that we would expect throughout the year.
Got it and then if I could just squeeze one more in here definitely caught the comments chat around still a very active pipeline and it seems like theres a lot lot a lot of deal still potentially to be done here just interested in your thinking just as clearly the industry is still waiting on the minimum staffing.
<unk>.
Requirements that are expected I guess quote in the spring.
From HHS.
Does that influence your thinking on approaching deal is that something that you'd want to have visibility and before doing large transactions or would you sort of look to maybe factoring in some additional conservatism just since the deal pricing.
Or just generally I guess, how you're thinking about approaching deal pricing given some of those variables that are still out there.
Yes, great Great question I appreciate that and certainly have seen an uptick in opportunities just even in the last month and a half or so.
They're excited about it.
I think I'd just say Scott.
We're long term investors.
So when we're looking forward.
Yes.
All of these growth opportunities.
We're not necessarily going to underwrite to just core.
Order or a year or even two years, we're looking 510 15, even up to 30 years down the road.
And so with that in mind.
Certainly.
As we've talked about as we acquire we even sometimes expect that that will have a short term drag on our earnings that's just part of the deal so.
Yes.
So.
Staffing in.
I mean COVID-19.
We grew even through through those challenges and are continuing to grow through that.
I think what happens in terms of pricing I mean, certainly as the supply of deals increases that's going to have some some impact on the pricing.
And we've already started to see that I think I noted in my comments just how pleased we are with the performance of the deals we've done and a lot of that does does.
To start with the prices we pay.
We're always really.
Careful to not pay for performance that we're going to create.
So.
Certainly I think our operator driven acquisition program.
It gives us an advantage because.
It's not Suzanne and Chad and Barry and some Ivory tower.
Our forecasting and looking into the future. These are operators on the ground.
No.
What the outlook is for for their markets and so they're heavily involved in.
Developing those pro forma that ultimately lead to the price that we're going to pay in.
I think our conservative approach.
<unk> has served us well and will continue to service well minimum staffing requirements are.
Whatever other change is inevitable in our industry and frankly, those those changes are what create such great opportunities for us.
Okay, great. Thanks.
Thank you one moment far next question.
Our next question comes from the line of Ben Hendrix from RBC capital markets.
Hey, guys. Thank you very much I was wondering if you could talk a little a little bit about the agency labor exposure in the new California assets last quarter, you'd noted significantly higher agency in those facilities. So I'm just wondering if there was any sequential improvement there and then how generally youre thinking about the runway to bridging the California labor backdrop.
We're off to be more in line with our legacy operations and what you described at your Amarillo facility.
Yes, great question.
Then I'll, let Spencer chime in if he's got anything to say, but.
There is certainly certainly still.
A lot of wood to chop and are those those new acquisitions there is.
And look thats its reflective of the overall environment as you mentioned I mean, we we have a lot of opportunity in the state of California to improve and the good news is we're on a path.
A pretty steady improvement I think.
Oral months in a row at least now in the state of California on a both a whole dollar basis, so not on a per patient day basis, which is really encouraging to see.
But this is this is this is a challenge that will deal with throughout the year. It won't it won't go away quickly.
Just just just because of the nature of the number of workers in the space are.
More strategic efforts around how to attract workers back into the space and have programs that allow us to get get CNA certified and get them into our facilities. So we have we have efforts around that.
Efforts around how to enhance our benefits and how to have incentive programs and just our cultural principles strengthened so that we can.
Get people excited about the space, coupled with how we how we spend our time.
Recognizing and rewarding our employees and sharing best practices around how to keep them engaged so we don't lose the ones that we have so it's a.
It's not a simple answer on what we're doing about.
The labor backdrop, but but needless to say progress is being made and we're encouraged by its Spencer you have anything to add to that yes just.
We have some really great clinical partners that joined US through this most recent acquisition and Thats exciting because as we give those great clinical leaders additional tools additional abilities to really fine tune their staffing measure of their staffing, we've really put effort into developing our our data capabilities around optimizing staffing.
All of those things have the effective hopefully number one improving care and number two you eliminate agency thats being used on staff that really isn't needed to provide great care and so we're seeing is some of those things come to play.
We're encouraged like Barry said Theres a lot of work to be done on these acquisitions it across the board, but I think we have ever more tools to use and we've got a lot of energy going into it. So I'm confident we'll continue to get better and I think that applies not just at the California acquisitions, but we're seeing that across the board.
The acquisitions that we have so I think that's where our outcome right.
Sure.
Thanks for that and just if I could sneak one more in on.
On the regulatory backdrop from Medicare.
Re proposal heading into the second year of the PD PM parity phase and I just wanted to get your thoughts on how youre thinking thats going to impact enzymes, specifically and then I have to ask just what your thoughts are.
What could come out of the CMS minimum staffing rule.
So on the first part it's very consistent with what we thought.
We ended up with a higher market basket increase which is what we would expect because of the increased labor and then offsetting that a parity adjustment. So we're ended up is very consistent with where we thought it would end up with.
Recently released guidance.
<unk>.
And look forward to cash having that be part of the final rule.
On the on the federal staffing minimum.
I would just say this ban.
It's clear that CMS is following the directive of the White House.
To move forward with this.
We actually expected something on this sooner.
We are very involved at a national level.
Giving our feedback and providing some ideas on.
Pragmatic ways too.
Discuss this or implement something like this.
And.
I imagine whatever is released in the next weeks or months will be something that the starting point that we will then go into a phase of much more discussion and.
Our hope is that we'll have a seat at the table with CMS and be able to try to find.
Our solution that aligns with.
What the ideas are behind this and make it something thats practice.
Practical and something that can be implemented.
<unk>.
I would also imagine that there would be a long phase in with something.
Round.
Minimum of any sort there'll probably be a host of exceptions and other <unk>.
Details around that but it's really hard to give you anything.
Concrete around hypotheticals, we ourselves don't spend a whole lot of time.
On the what Ifs.
We've historically been pretty good at adapting when when things come out.
It's not that we're doing nothing I just think.
Worrying about what what we don't know yet is it isn't always the most productive use of our time. So long story short we were watching it closely we're giving feedback.
We will see what comes out and we'll adapt accordingly.
I appreciate that commentary thanks, Ken.
Yes.
Thank you I would now like to turn the conference back over to Barry for closing remarks.
Thank you Gigi and we want to thank everyone for spending their time with us today and joining us on the call have a good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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