Q1 2024 Encompass Health Corp Earnings Call
Operator: Good morning, everyone, and welcome to Encompass Health's first quarter 2024 earnings conference call. At this time, I'd like to inform all participants that their lines will be in a listen-only mode. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, please press star 1 on your telephone keypad. You'll be limited to one question and one follow-up question. This conference call is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mark Miller, Encompass Health's Chief Investor Relations Officer.
Good morning, everyone and welcome to encompass Health's first quarter 2024 earnings conference call.
Speaker Change: At this time I'd like to inform all participants that their lines will be in a listen only mode.
Speaker Change: After the Speakers' remarks, there'll be a question and answer period.
Speaker Change: If you'd like to ask a question. During this time. Please press star one on your telephone keypad.
Speaker Change: You'll be limited to one question and one follow up question.
Speaker Change: Today's conference call is being recorded if you have any objections you may disconnect at this time.
Speaker Change: I will turn the call over to Mark Miller encompass Health's, Chief Investor Relations Officer.
Mark Miller: Thank you, Operator, and good morning, everyone. Thank you for joining Encompass Health's first quarter 2024 earnings call. Before we begin, if you do not already have a copy, the first quarter earnings release, supplemental information, and related form 8K filed with the SEC are available on our website at encompasshealth.com. On page 2 of the supplemental information, you will find the Safe Harbor Statements, which are also set forth in greater detail on the last page of the earnings report.
Mark Miller: Thank you operator, and good morning, everyone. Thank you for joining encompass health's first quarter 2024 earnings call.
Mark Miller: Before we begin if you do not already have a copy the first quarter earnings release supplemental information and related form 8-K filed with the SEC are available on our website at encompass health Dotcom on page two of the supplemental information you will find the safe Harbor statements, which are also.
Mark Miller: As set forth in greater detail on the last page of the earnings release during the call. We will make forward looking statements, which are subject to risks and uncertainties many of which are beyond our control.
Mark Miller: During the call, we will make forward-looking statements, which are subject to risks and uncertainties, many of which are beyond our control. Certain risks and uncertainties, like those relating to regulatory developments, as well as volume, bad debt, and labor cost trends, that could cause actual results to differ materially from our projections, estimates, and expectations, are discussed in the company's SEC filings, including the earnings release and related Form 8K. The Form 10K for the year ended December 31, 2023, and the Form 10Q for the quarter ended March 31, 2024, when filed. We encourage you to read that. Please use caution not to place undue reliance on the estimates, projections, guidance, and other forward-looking information presented, which is based on current estimates of future events and speaks only as of
Mark Miller: Certain risks and uncertainties like those relating to regulatory developments as well as volume bad debt and labor cost trends that could cause actual results to differ materially from our projections estimates and expectations are discussed in the company's SEC filings, including the earnings release and.
Mark Miller: Related form 8-K, the Form 10-K for the year ended December 31 2023.
Mark Miller: Form 10-Q for the quarter ended March 31, 2024, one filed we encourage you to read them.
Mark Miller: You are cautioned not to place undue reliance on the estimates projections guidance and other forward looking information presented which are based on current estimates of future events and speak only as of today, we do not undertake a duty to update these forward looking statements.
Mark Miller: Our supplemental information and discussion on this call will include certain non-GAAP financial measures for such measures reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information at the end of the earnings release and as part of the form 8-K filed yesterday with the.
Mark Miller: C C all of which are available on our website.
Mark Miller: Today, we do not undertake a duty to update it.
Mark Miller: I would like to remind everyone that we will adhere to the one question and one follow up question rule to allow everyone to submit a question. If you have additional questions. Please feel free to put yourself back in the queue with that I'll turn the call over to Mark Tarr encompass Health's, President and Chief Executive Officer.
Mark Miller: Our supplemental information and discussion on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information, at the end of the earnings release, and as part of the Form 8K filed yesterday with the SEC, all of which are available on our website. I'd like to remind everyone that we will adhere to the one question and one follow-up question rule to allow everyone to submit a question.
Mark J. Tarr: Thank you Mark and good morning, everyone.
Mark J. Tarr: But broad based momentum of our business continued in the first quarter evidenced by 13.4% revenue growth and adjusted EBITDA increase of 19, 2%.
Mark J. Tarr: Owing largely to our Q1 results we are increasing our 2020 forward guidance.
Mark J. Tarr: Doug will cover the details of the quarter and increased guidance in his comments.
Doug: Demand for our services remains strong and we are continuing to invest in capacity additions to meet the needs of patients requiring inpatient rehabilitation services.
Doug: During Q1, we added 51 beds to existing hospitals.
Mark Miller: If you have additional questions, please feel free to put yourself back in the queue. With that, I'll turn the call over to Mark Tarr, Encompass Health's President and Chief Executive Officer. Thank you, Mark. And good morning, everyone.
Doug: Over the balance of the year, we plan to open six de Novo hospitals with a total of 280 beds as well as a 40 bed freestanding hospital to be licensed as a satellite location on an existing hospital.
Doug: With our historical practice the satellite will be accounted for as a bed addition.
Mark J. Tarr: We anticipate adding another 93 beds to existing hospitals in 2024 inclusive of the aforementioned satellite.
Mark J. Tarr: We continue to build and maintain an active pipeline of de Novo projects, both wholly owned and joint ventures with acute care hospitals.
Mark J. Tarr: The broad-based momentum of our business continued in the first quarter, evidenced by 13.4% revenue growth and an adjusted EBITDA increase of 19.2%. Owing largely to our Q1 results, we are increasing our 2024 guidance. Doug will cover the details of the quarter and increase in guidance in his comments.
Mark J. Tarr: Since the beginning of this year, we've announced three additional de novo projects, bringing our pipeline 14 hospitals underdevelopment with opening dates beyond 2024.
Mark J. Tarr: We remain keenly focused on further enhancing the quality of our patient care and resulting outcomes through the deployment of clinical technologies and protocols.
Mark J. Tarr: We have previously highlighted the installation of in house dialysis capabilities at many of our hospitals.
Mark J. Tarr: We now offer this service and 88 of our hospitals and we will continue the roll out to additional locations in 2024.
Mark J. Tarr: As another example of the ongoing clinical project or quality of life improvement project incorporates an individualized approach to inpatient care and which our therapists focused on a specific patient interest lifestyle home improvement and community mobility needs.
Mark J. Tarr: Demand for IRF services remains strong, and we are continuing to invest in capacity additions to meet the needs of patients requiring inpatient rehabilitation services. During Q1, we added 51 beds to existing hospitals. Over the balance of the year, we plan to open six de novo hospitals with a total of 280 beds, as well as a 40-bed freestanding hospital to be licensed as a satellite location of an existing hospital. The satellite will be accounted for as a bed addition.
Mark J. Tarr: The goal of this program is to improve the patient and patient experience and readiness for discharge to their community.
Mark J. Tarr: On March 27th of this year CMS released the 2025 Earth proposed rule.
Mark J. Tarr: This included a proposed net market basket update of two 8%, which we estimate would result in an approximately 3% increase for our herbs beginning October <unk> October.
Mark J. Tarr: October 1st of 2024 based on our current patient mix.
Mark J. Tarr: The final rule is expected to be released in late July or early August.
Mark J. Tarr: The review choice demonstration or RCD began in August 2023 in Alabama.
Mark J. Tarr: Recall that under our CV cycle, one which lasted six months every Medicare claim was reviewed for documentation and medical necessity.
Mark J. Tarr: We anticipate adding another 93 beds to existing hospitals in 2024, inclusive of the aforementioned satellites. We continue to build and maintain an active pipeline of de novo projects, both wholly owned and joint ventures with Acute Care Hospital. Since the beginning of this year, we've announced three additional de novo projects, bringing our pipeline to 14 hospitals under development with opening dates beyond 2024. We remain keenly focused on further enhancing the quality of our patient care and resulting outcomes through the deployment of clinical technologies and protocols.
Mark J. Tarr: The affirmation rate target set by CMS under cycle, one was 80%.
Mark J. Tarr: All seven of our Alabama hospitals ended cycle, one above the target affirmation rate.
Mark J. Tarr: Recycled two in Alabama, which runs from May 1st through October 31, we had the choice of continuing with 100% pre claim review or a random spot check pre claim review of 5% of claims.
Mark J. Tarr: Based on our Psych one claim experience we elected to continue with 100% pre claim review per cycle too.
Mark J. Tarr: The target affirmation rate for recycled two is 85%.
Mark J. Tarr: On March 1st CMS announced it is expanding Earth RCD to Pennsylvania for hospitals billing to the Medicare administrative contractor Nova TASS.
Mark J. Tarr: Our nine hospitals in Pennsylvania will not be subject to RCD at this time.
Mark J. Tarr: They build to a different Medicare administrative contractor.
Mark J. Tarr: During Q1, many providers across the U S health care spectrum experienced significant disruptions due to the cyber attack on change healthcare.
Mark J. Tarr: We have historically used changed for the vast majority of our claims processing across our payer base.
Mark J. Tarr: Our teams and our centralized business office and information technology quickly rallied to successfully implement workarounds using alternative third party vendors and enhancing our own claims processing capabilities.
Mark J. Tarr: We have previously highlighted the installation of in-house dialysis capabilities at many of our hospitals. We now offer this service in 88 of our hospitals and will continue the rollout to additional locations in 2024. As another example of an ongoing clinical project, our Quality of Life Improvement Project incorporates an individualized approach to inpatient care in which our therapists focus on a specific patient's interests, lifestyle, home improvement, and community mobility needs.
Mark J. Tarr: As a result of these efforts we experienced minimal impact to our Q1 cash flow from the change outage.
Mark J. Tarr: We resumed claims processing would change in early April and continue to maintain the alternative channels. We recently developed.
Mark J. Tarr: Across our 160 inpatient rehabilitation hospitals, we are daily providing high quality cost effective care to medically complex patients.
Mark J. Tarr: Our dedicated clinical teams work collaboratively with physicians to administer this care, producing leading scores and patient satisfaction and quality outcomes.
Mark J. Tarr: This value proposition increasingly resonates with patients.
Mark J. Tarr: Caregivers referral sources and payers.
Mark J. Tarr: The demand for inpatient rehabilitation services remains considerably underserved and continues to grow as the U S population ages.
Mark J. Tarr: The goal of this program is to improve the patient's inpatient experience and readiness for discharge to their community. On March 27th of this year, CMS released the 2025 IRF Proposed Rule. This included a proposed net market basket update of 2.8%, which we estimate would result in an approximately 3% increase for our IRFs beginning October 1st, 2024, based on our current patient mix. The IRF Plano Rule is expected to be released in late July or early August.
Mark J. Tarr: We intend to continue to expand our capacity and capabilities to meet this need.
Mark J. Tarr: Now I'll turn it over to Doug.
Doug: Thank you Mark and good morning, everyone. As Mark stated we are very pleased with our Q1 results.
Doug: Revenue growth for the quarter of 13, 4% was primarily driven by volume as total discharges grew 10% inclusive of six 7% same store growth.
Doug: Q1 revenue growth did benefit from both leap year and the timing of the Easter holiday.
Doug: Our Q1 revenue also included a $6 $9 million increase in provider tax receipts, primarily attributable to prior periods.
Doug: Q1, adjusted EBITDA increased 19, 2% to $273 million driven by revenue growth.
Doug: Stable premium labor trends and prudent expense management.
Doug: Other operating expenses as a percentage of revenue decreased 80 basis points benefiting from the favorable impact of onsite dialysis implementation and efficiencies in our recruiting efforts.
Mark J. Tarr: Review Choice Demonstration, or RCD, began in August 2023 in Alabama. Recall that under RCD Cycle 1, which lasted 6 months, every Medicare claim was reviewed for documentation and medical necessity. The affirmation rate target set by CMS under Cycle 1 was 80%. All seven of our Alabama hospitals ended Cycle 1 above the target affirmation rate. For Cycle 2 in Alabama, which runs from May 1st through October 31st, we had the choice of continuing with 100% pre-claim review or a random spot check pre-claim review of 5% of claims.
Doug: Q1, adjusted EBITDA included approximately $5 million related to the aforementioned provider tax receipts.
Doug: Q1, net preopening and ramp up costs were $1.8 million as compared to $4 $2 million in Q1 last year.
Doug: Given the timing of our new hospital openings and the balance between joint venture and wholly owned de Novo's are net preopening and ramp up costs will be concentrated in the final three quarters of the year.
Doug: We anticipate $15 million to $18 million of de Novo net preopening and ramp up costs for 2024 as compared to $6 $6 million in 2023.
Doug: We continue to generate significant levels of free cash flow.
Doug: Adjusted free cash flow for the quarter increased five 6% to $167 $6 million due to higher adjusted EBITDA.
Doug: Partially offset by an increase in working capital, which was unrelated to the change healthcare outage.
Mark J. Tarr: Based on our Cycle 1 claim experience, we elected to continue with 100% pre-claim review for Cycle 2. The target affirmation rate for Cycle 2 is 85%. On March 1st, CMS announced it is expanding IRF-RCD to Pennsylvania for hospitals billing to the Medicare Administrative Contractor, Novitas. However, our nine hospitals in Pennsylvania will not be subject to RCD at this time as they bill to a different Medicare administrative contract.
Doug: And higher cash tax payments.
Doug: Primarily based on the strength of our adjusted EBITDA growth, our net leverage again declined falling to two five times from two seven times at year end 2023.
Doug: We ended the first quarter with no amounts drawn on our $1 billion revolving credit facility and more than $130 million of cash on hand.
Doug: As Mark alluded to based primarily on our Q1 results we are raising our 2024 guidance as follows.
Doug: Net operating revenue of five to five to five $3 billion to $5 billion.
Doug: Adjusted EBITDA.
Doug: A $1.03 billion to $1.065 billion.
Mark J. Tarr: During Q1, many providers across the U.S. health care spectrum experienced significant disruptions due to the cyber attack on healthcare. We have historically used chains for the vast majority of our claims processing across our payer base. Our teams in our centralized business office and information technology quickly rallied to successfully implement workarounds using alternative third-party vendors and enhancing our own claims processing capabilities. As a result of these efforts, we experienced minimal impact on our Q1 cash flow from the change outage.
Doug: And adjusted earnings per share of $3.86 to $4 11.
Doug: The key considerations underlying our guidance can be found on page 12 of the supplemental slides.
Speaker Change: And with that operator, we'll now open the lines for questions.
Speaker Change: Thank you at this time, if you'd like to ask a question. Please press the star and one on your telephone keypad Humira remove yourself from the queue at any time by pressing star to once again Thats star and wanted to ask a question.
Speaker Change: And we'll take our first question today from Kevin Fischbeck with Bank of America.
Kevin Mark Fischbeck: Good morning.
Kevin Mark Fischbeck: Good morning, Thanks, I guess, a little bit more color on the volume.
Kevin Mark Fischbeck: Where I have any details about.
Kevin Mark Fischbeck: The strength you mentioned.
Kevin Mark Fischbeck: The leap year helped.
Speaker Change: There's been a lot of kind of focus on how maybe mark slowed down yet any comments about volume can correct.
Speaker Change: The quarter and how things are maybe trending so far in April.
Speaker Change: The volume.
Speaker Change: Remain pretty pretty.
Doug: We resumed claims processing with a change in early April and continue to maintain the alternative channels we recently developed. Across our 160 inpatient rehabilitation hospitals, we are providing high-quality, cost-effective care to medically complex patients daily. Our dedicated clinical teams work collaboratively with physicians to administer this care, producing leading scores for patient satisfaction and quality outcomes. This value proposition increasingly resonates with patients. Caregivers, Referral Sources, and Payers. The demand for inpatient rehabilitation services remains considerably underserved and continues to grow as the U.S. population ages. We intend to continue to expand our capacity and capabilities to meet this need. Now, I'll turn it over to Doug.
Speaker Change:
Speaker Change: Constant throughout the quarter and so in the month of February you had the extra day because of leap year, which certainly helped volume in that month, and then March discharge volumes certainly benefited from the fact that the Easter holiday fell on the last day of the quarter, which also happened to be a Sunday.
Speaker Change: But really we saw good momentum on volume through the entire quarter.
Speaker Change: Not only was it consistent throughout the quarter, but if you look at it geographically across our eight regions. It was very consistent.
Speaker Change: Across.
Speaker Change: All of our regions and we're very pleased with the progress that we've continued to made on overall volume growth.
Speaker Change: Great and then I guess, Greg payers as well.
Speaker Change: When we look at the total discharge volume growth, we had a 12% increase in Medicare fee for service in North of an 11% increase in Medicare advantage.
Speaker Change: Okay great.
Speaker Change: And then I guess, maybe just to talk about that for a second.
Speaker Change: A lot of focus on Medicare advantage rates.
Speaker Change: And.
Speaker Change: Can you talk a little bit about how the contracting there for you is going and then.
Speaker Change: Are you expecting any pressure or flow through from the negative rate up just I guess, what they're getting for next year is there any concern about how that might slow down through to your contracting or their utilization management.
Speaker Change: So we're right at about 90% of our Medicare contracted revenues.
Speaker Change: Being on an episodic basis versus on a per diem basis.
Doug: Thank you, Mark, and good morning, everyone. As Mark stated, we are very pleased with our Q1 results. Revenue growth for the quarter of 13.4% was primarily driven by volume as total discharges grew 10%, inclusive of 6.7% same-store growth. Q1 revenue growth did benefit from both leap year and the timing of the Easter holidays. Our Q1 revenue also included a $6.9 million increase in provider tax receipts primarily attributable to prior periods. Q1 adjusted EBITDA increased 19.2% to $273 million, driven by revenue growth.
Speaker Change: And the payment differential for the quarter was just over 3%. So good progress there most of those contracts that are on an episodic basis. The the annual increases are tied directly to the Medicare fee for service rule. So at this point in time, we're really not expecting any adverse consequences.
Speaker Change: <unk> from what's going on with regard to the Medicare advantage rule.
Speaker Change: Alright, great. Thanks.
Speaker Change: Our next question will come from AJ Rice with UBS.
Albert J. William Rice: Good morning, Good morning, Hey, Jay.
Albert J. William Rice: Hi, how are you guys.
Albert J. William Rice: I know that <unk> per FTE was about 4% to 5% in the quarter I think thats your target for this year.
Albert J. William Rice: I Wonder when you look at it underlying permanent wage trends.
Albert J. William Rice: Sure.
Albert J. William Rice: Premium labor sign on bonuses shift bonuses.
Albert J. William Rice: Is there any place where you are running higher than the pre pandemic, where theres still opportunities in your mind potentially to improve on that.
Albert J. William Rice: Year to year right.
Speaker Change: Yes, total SW beat for the quarter was actually up three 8% so slightly below the low end of the range that we have out there for the year.
Doug: Stable Premium Labor Trends, Prudent Expense Management. Other operating expenses as a percent of revenue decreased 80 basis points, benefiting from the favorable impact of on-site dialysis implementation and efficiencies in our recruiting efforts. Q1 Adjusted EBITDA included approximately $5 million related to the aforementioned provider tax. Q1 net pre-opening and ramp-up costs were $1.8 million as compared to $4.2 million in Q1 last year. Adjusted free cash flow for the quarter increased 5.6% to $167.6 million due to higher adjusted EBITDA and Adjusted Earnings Per Share. The key considerations underlying our guidance can be found on page 12 of the supplemental slide.
Speaker Change: And the biggest reason for that is that we would expect a higher growth rate on benefits for the last three quarters of the year just based on the positive accrual adjustments we had in the last three quarters of 2023.
Speaker Change: The.
Speaker Change: Both categories of premium labor continue to be elevated above where they were.
Speaker Change: Pre pandemic, although they've settled down quite a bit if we look at what transpired in the quarter in terms of sign on and shipped bonuses. The total there was $14 $3 million.
Speaker Change: It's about a $2 million improvement over where we were in Q1 of last year.
Speaker Change: And it's up just modestly about $1 $2 million from the run rate we experienced in Q4, that's not unanticipated just given our normal seasonal trends and also the.
Speaker Change: The volume increase that we had in the quarter.
Speaker Change: Looking at kind of the same pattern for contract labor dollars.
Speaker Change: We were at $19 $3 million in Q1.
Speaker Change: That compares favorably to $27 million in Q1 of last year up sequentially from Q4, which was $17 $7 million, we again would attribute that predominantly the seasonal patterns.
Speaker Change: And to the volume trend.
Speaker Change: The contract Labor Ftes as a percentage of total ftes for the quarter was at one 6%. That's in the range that we've been we were running at at the second half of last year right around one 5%.
Speaker Change: Again pre pandemic, we would've been just below 1%.
Speaker Change: So we do think that there is some continued opportunity, but it really does feel like at least for the foreseeable future AJ, we've kind of settled into this rate. This range I will note. We continued to make good progress through our recruiting efforts on the quarter net new R&D hires for the quarter.
unknown: Constant throughout the quarter, and so in the month of February, you had the extra day because of leap year, which certainly helped volume in that month. And then March discharge volume certainly benefited from the fact that the Easter holiday fell on the last day of the quarter, which also happened to be a Sunday.
Speaker Change: We're 148 and Thats, a pretty significant increase over the less than 50 that we had in Q1 of last year.
Speaker Change: One final comment on labor, a J is not only on the recruitment side that retention.
Speaker Change: Continues to be a big focus on our turnover, particularly around the nursing continues to trend downward as well as therapy. So.
Speaker Change: We're seeing a lot of positive aspects with within the broader umbrella of labor itself just to put a finer point on Mark's comments, there annualized Q1 nursing turnover was at 22% and therapist turnover six 6%. So those are those are very <unk>.
unknown: Great. And then I guess we'd be......across payers as well.
unknown: I know FWB per FTE was about four to five percent in the quarter. I think that's your target for this year. I wonder, when you look at it, what underlying permanent wage trends are.
Speaker Change: Positive number in both of those would be lower than pre pandemic.
Speaker Change: Yeah, that's a very low number on the therapist interesting. Thanks a lot.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Andrew Mok with Barclays.
unknown: for the last three quarters of the year, just based on the positive accrual adjustments we had in the last three quarters of 2023. You know, both categories of premium labor continue to be elevated above where they were, the volume increase that we had in the quarter. Looking at kind of the same pattern for contract labor dollars.
Andrew Mok: Hello, Andrew.
Andrew Mok: Hi, Good morning, I was hoping you could give us a little bit more detail on de Novo openings. This year, just overall cadence and timing there were no openings in Q1, so how should we think about the six de novo as for the balance of the year. Thanks.
Speaker Change: Yes, certainly as we alluded to at the beginning of the year Youre going to have a different pattern. This year than you did last year last year, we benefited in terms of the annual net preopening and ramp up costs by the fact that we had earlier openings.
Speaker Change: We had those that were predominantly jv's five are the ones that we opened last year were Jv's and you had a couple of hospitals and hospitals, which tend to ramp up faster.
unknown: and Therapist Turnover 6.6%. So those are very positive numbers, and both of those would be lower than pre-pandemic.
Speaker Change: Skewed now with our openings into the final three quarters of this year, which is leading to kind of the the year over year change and particularly over the balance of the three quarters. If you look over the final three quarters of last year.
unknown: Thank you.
unknown: Yeah, certainly, as we alluded to at the beginning of the year, you're going to have a different pattern this year than you did last year. Last year, we benefited in terms of the annual net pre-opening and ramp-up cost by the fact that we had earlier openings. We had those that were predominantly JVs. Five of the ones that we opened last year were JVs, and you had a couple of hospitals, which tend to ramp up faster.
Speaker Change: Preopening and ramp up cost were a negative $2 $4 million.
Andrew Mok: You subtract out from the $15 million to $18 million range. We have for 2024, the $1 $8 million. We experienced in Q1, you are left with an anticipated 13 to $16 $2 million impact in Q2 through Q4, the midpoint of that range is $14 seven.
Andrew Mok: So that would represent a little over $12 million delta on a year over year basis.
Andrew Mok: Okay.
Speaker Change: Got it that's helpful. But if we just take a step back and think about the fixed de Novo shall we think.
unknown: Two per quarter for the remaining three quarters or even more of a backend skew to that.
unknown: You know, we're skewing now with our openings into the final three quarters of this year, which is leading to kind of a year-over-year change and, particularly, over the balance of the three quarters. If you look at the final three quarters of last year, net pre-opening and ramp-up costs were a negative $2.4 million.
Andrew Mok: We've got two opening in Q2 and then the balance are in Q3.
Speaker Change: <unk> got it and then will likely extend into Q4.
Speaker Change: Okay. That's helpful and then occupancy in the quarter ticked up to about 76, 7%, which I think was a notable.
unknown: <unk> year over year increase I know you have elevated bed additions coming online this year, but can you give us a sense for what full capacity it looks like or maybe where your top decile hospitals on an occupancy basis. Thanks.
Speaker Change: Yes, so I can see during the quarter was definitely favorably impacted by normal seasonality as well as the volume increase we saw in the fact that there were no counterweights in terms of deal de novo's opening in the quarter.
unknown: Got it, that's helpful. But if we just take a step back and think about the six de novo, should we think, you know, two per quarter for the remaining three quarters? Or is there even more of a back end skew to that?
Speaker Change: Again, as we move forward, we would hope to see the overall occupancy rate continue to move up modestly over time and really the primary reason there. In addition to the fact demand.
Speaker Change: <unk> remains very positive as we are increasingly seeing a higher percentage of our overall beds and in private rooms.
unknown: We've got two openings in Q2, and then the balance are in Q3.
Speaker Change: Which eliminates the capacity constraints that can be caused by gender compatibility and other issues requiring patient isolation.
unknown: Yeah, so occupancy during the quarter was high.
unknown: And again, the increase in private beds is coming from really two initiatives. The first is that virtually all of our capacity additions, be they bed additions to existing hospitals or de novos, are comprised of all private rooms. And then the second is that when we are doing major remodels and renovations, where we are able, we are taking the opportunity to convert semi-private rooms to private.
Speaker Change: And again the increase in private beds is coming from really two initiatives. The first being that all virtually all of our capacity additions.
Speaker Change: Our bed additions to existing hospitals are de novo's arent comprised of all private rooms, and then the second is when we are doing major remodels and renovations, where we are able we are taking the opportunity to convert semi private rooms to private rooms in terms of targeting a specific theoretical occupancy.
Speaker Change: <unk>.
unknown: It's hard to do that because we still have such a mixed bag within our overall physical plant, but generally speaking in a facility that is all semi private.
Operator: Our next question will come from Ann Hynes with Mizzou Health Securities.
Ann Kathleen Hynes: Good morning. So I just want to talk about guidance. You beat consensus estimates on the adjusted even side by close to 10%. So even by Encompass's conservative history, just the 1% guidance rate seems conservative to me. So maybe you can tell us what the quota actually was versus your internal expectations? And is there anything we should consider as we go out throughout the rest of 2024? Why wouldn't you be able to see this type of strong growth going forward?
Speaker Change: You start to hit capacity constraints north of 80% when Youre in a facility that is all private room, you can run into the mid to high nineties.
Speaker Change: Our next question will come from Ann Hynes with Mizuho Securities.
Ann Kathleen Hynes: Good morning.
Ann Kathleen Hynes: Good morning, I'm, sorry, just wanted to talk about guidance you beat consensus estimates on the adjusted EBITDA side by close to 10%.
Ann Kathleen Hynes: So even by encompasses conservative history, just that 1% guidance seems conservative to me. So maybe can you tell us what what.
Ann Kathleen Hynes: Actually it was versus your internal expectations and is there anything we should consider as we go out throughout the rest of the 2020 for why you wouldn't be able to see this type of strong growth going forward.
Speaker Change: Yeah, and I think you really hit on the key point, which is as a reminder, we issue annual guidance, we don't provide quarterly guidance and I know that creates a challenge.
Ann Kathleen Hynes: For you and your peers, because you need to provide quarterly estimates that are out there.
Ann Kathleen Hynes: When we were thinking about our own expectations for Q1 performance. We were specifically looking at the momentum that we had coming in from Q4, the normal seasonality, but then we we acknowledged the fact that you had an extra day in the quarter due to leap year and that there would be some timing benefit that would be attributable.
unknown: Yeah, Ann, I think you've really hit on the key point, which is, as a reminder, we issue annual guidance. We don't provide quarterly guidance. So yeah, the quarter was still ahead of our expectations, which is the primary reason that we are revising our guidance upward. But there should not be an assumption made that our expectations internally were consistent with the consensus estimate.
unknown: To the to the Easter holiday falling on a Sunday, which is the last day of the quarter, that's kind of a rare phenomenon.
Ann Kathleen Hynes: In the quarter, we also got the unanticipated benefit from the provider tax income so.
Ann Kathleen Hynes: Yes, the quarter was still ahead of our expectations, which is the primary reason that we are revising our guidance upward.
Ann Kathleen Hynes: But there should not be an assumption made that our expectation internally was consistent with the consensus estimate.
unknown: As we look at the back end of the year I think the primary considerations are one that I've already reviewed which is the year over year change in the impact from de Novo preopening and ramp up costs.
unknown: Great. And I guess my follow-up question really has to do with that rate. I mean, I know you're getting a 3% increase from CMS, but it kind of seems lopsided given the labor environment over the past couple of years. Is there a delay in the way the calculation works so that maybe over the next couple of years you should see an acceleration of rates given what's happening in the – just in the labor environment?
unknown: And then really.
Ann Kathleen Hynes: It's a pretty straightforward story, where you fall in the range that we provided or whether we are able to ultimately.
Ann Kathleen Hynes: Advise that range upward through the course of the year is going to be predominantly a function of two things. One is does volume continue.
unknown: We're up against challenging comps, but feel very good about the underlying demand out there and then what is ultimately the dynamic that existed over the final three quarters of the year between the pricing, which is relatively locked in and the rate of labor inflation that we that we experience.
unknown: Great and then I guess my follow up question really has to do with that right. I mean, I know, you're getting a 5% increase from CMS, but it kind of seems a lopsided given the.
unknown: The labor environment over the past couple of years is there a delay and the way the calculation works that maybe over the next couple of years, you should see an acceleration of rates given whats happening in the.
unknown: The sector that has a forecast error adjustment, which means it's looking backwards to say, did we miss a rate of underlying inflation in the provider's cost structure that needs to be factored in the go-forward rate for SNFs, and that dates back to some legislation from the early 2000s. They must have had a good lobbying effort; I can't really tell you anything more about it. So you would hope at some point, those become relatively consistent, but there isn't a catch-up mechanism built into the IRF rulemaking, and then one of them
Ann Kathleen Hynes: Just on the labor environment.
Ann Kathleen Hynes: So when you look at.
unknown: If you look at the rulemaking for all of the post acute sectors.
unknown: <unk>.
Ann Kathleen Hynes: The only sector.
unknown: It has a forecast error adjustments, which means it's looking backwards to say did we miss our rate of underlying inflation in the provider's cost structure that needs to be factored in the go forward rate is snaps and that dates back to some legislation from the early two thousands they must have had a good lobbying effort I can't really tell you anything more about.
unknown: Yeah.
unknown: <unk> Earths.
unknown: There is no catch up and so every year the market basket update is based on forward looking at the anticipated rate of inflation in the next year not what you experienced in the previous year. So you would hope at some point those become relatively consistent but there isn't a catch up mechanism built into the earth, making into the Earth's rulemaking cycle.
unknown:
unknown: And then one of the other Arizona, you never really know when theres going to be some other adjustment around productivity or.
unknown: and the Earth in the future, because our staffing is really already dictated by the mandated requirements of care. The complement of therapists that we have in our facilities is driven by the therapy rules. Again, that's three hours of therapy per day, five days a week. It's got to be multi-discipline therapy, and keep in mind, we're already taking a pretty penny.
unknown: Something that's unforeseen that CMS would apply that would hold the net.
unknown: Rate increase downwards. So that's what makes it a bit of a challenge.
Speaker Change: Hi, Thanks.
unknown: Our next question will come from Scott Fidel with Stephens.
Speaker Change: Good morning, Thanks, guys alright, thanks, good morning.
Speaker Change: Question, just curious on your thinking right now around potential capital return, particularly as it relates to buyback when thinking about.
unknown: The strength of the performance of the business leverage now being at the low end of the target the cash on hand et cetera, just curious on your sort of thinking about potentially ramping up our buyback activity.
Speaker Change: Yes, certainly on the table and is going to be a topic of continuing board discussion for all of the reasons that you cited.
unknown: And keep in mind, we're already taking a pretty acute-level rehab patient that's medically complex, and as part of that, we adjust our nursing staffing to make sure that we can do a great job taking care of those patients and not have those patients go back to the acute care hospital. So there are a lot of either rules of thumb or formal rules that are currently in place around what it takes to staff our hospitals to meet the type of patients that we're taking.
unknown: Even with the.
unknown: Cyber attack on change healthcare, our cash flow remained very strong in the quarter, because we were able to implement those workarounds and because of the strength of the business and the flow through from the adjusted EBITDA.
unknown: All of the points that you noted are are very important ones, which the net leverages all the way down to two five times is $130 million of cash on balance sheet.
unknown: We're generating enough internal cash flow to fund all of our discretionary capex plus the dividend. So it certainly opens up other options for capital deployment and that's very much on the agenda for our board now.
Speaker Change: Okay. Thank you and then a follow up question just would be interested in your thinking on the final sniff staffing rule I know, it's somewhat second degree removed, but just really in sort of two areas in particular.
unknown: One as you've talked about the opportunity over the long term for capturing more volumes from snaps in terms of sniff conversion, whether that final staffing ROE would have any influence over that and then just also whether.
Speaker Change: Any thoughts on this type of sort of staffing mandate at the fed.
unknown: <unk> level that you've heard anything about that moving into other post acute sectors, obviously, Europe's would be top of mind for you in terms of any slippery slope type dynamic.
Operator: Our next question will come from John Ransom, with Raymond James.
John Wilson Ransom: Relating to the final staffing row. Thanks, Yes, yes. So this is this is Marc and certainly I don't know all the details the sniff for all but just in general we.
John Wilson Ransom: Morning, John. Good morning. Hey, good morning.
John Wilson Ransom: We feel like we have done a really nice job with our quality outcomes and making that value proposition that helps separate us from other providers in the marketplace, whether it's other earth or skilled nursing facilities clearly the smiths have been challenged for the past several years through COVID-19 another wise so.
John Wilson Ransom: If you really notice any sort of change or things kind of settle down, and the three legs of Post-Acute kind of have their share, it looks fairly stable when you look at the numbers across the three modalities, but how do you think about, you know, when you talk to these discharge planners, these navigators, how are they thinking about things the same or differently than maybe five years ago? John, I think it's
John: They have a lot of ground to make up so to speak but we were very focused on what we're doing right now around our programming on our quality and I don't see the sniff rule, having any impact on the market share that we've been able to take and it really shouldn't be applicable to two.
John Wilson Ransom: <unk> in the future because our staffing is really already dictated by the mandated requirements of care.
John Wilson Ransom: Yeah.
Operator: Our next question will come from Peter Chickering of Deutsche Bank.
John Wilson Ransom: Complement of therapy.
Operator: Therapists that we have in our facilities is driven by the therapy rules again thats. The three hours of therapy per day five days a week, it's got to be multi disciplined therapy.
Philip Chickering: Awesome. Nice quarter. So digging into the OPEX leverage you guys got this quarter, you talked about dialysis and recruiting it as floor drivers there. What have been the returns on doing dialysis yourself, and with dialysis at 88 hospitals, is it safe to model additional OPEX leverage going forward from that lever?
Philip Chickering: And the preponderance has to be administered in individual versus a group or concurrent setting and then we also have very stringent nursing requirements that are mandated. So this was something that was lacking in the sniff industry, which is why I think youre seeing this come down.
Speaker Change: It is not something that is applicable because there needs to be adjustment in the <unk> segment.
Philip Chickering: And keep in mind, we're already taking a pretty.
Philip Chickering: Acute.
Philip Chickering: Level rehab patients Thats medically complex and as part of that.
Philip Chickering: We adjust our nursing staffing to make sure that we can do a great job in taking care of those patients and not have those patients go back to the acute care hospital. So there are a lot of.
Philip Chickering: Either rules of thumb or formal rules that are currently in place around what it takes to staff for hospitals to meet the type of patients that we're taking on.
unknown: In terms of continuing leverage from that in OOE, we would expect to see that. Now, bear in mind, some of that is a straight reduction in cost. Some of it is also a geography issue. When we contract with a third party, that $600, 100% of it runs through OOE as a contract service. When we do it internally, that cost gets spread out into other line items, the largest of which is SWE.
unknown: Okay.
Speaker Change: Okay. Thank you.
unknown: Our next question will come from John Ransom with Raymond James.
unknown: Good morning, John Good morning, Hey, good morning.
Speaker Change: Just kind of curious.
unknown: Roll of Theres, a lot of talk of years think about the convenience and the navigators.
Speaker Change: I'm just wondering when youre in the fight for these patient referrals.
unknown: If you really noticed any sort of change or are things kind of settle down and the three legs of post acute kind of have their share. It looks it looks fairly stable. When you look at the numbers across the three modalities, but how do you think about.
unknown: When you talk to these discharge planners. These navigators how are they thinking about things the.
unknown: At the same or differently than maybe five years ago.
unknown: Okay, so quick question on that one. How many dial-up spaces do you guys have?
Speaker Change: Yes, John I think it's I think it has settled down a bit when we've seen these.
unknown: Navigators come in the various marketplaces, there might be a short term impact on referrals or their approval for a patient to be discharged to two an earth, but that is usually somewhat short lived.
unknown: And then for the second part here, provider tax revenues. They haven't really been a big driver for you guys historically. Obviously, we saw $6.9 million in the first quarter. Is that right? How should we think about that going forward? Thanks.
unknown: They see the issues quality and otherwise that come in place in the market.
unknown: When they try to dictate where the patient goes according to just the cost of care and so.
unknown: You know, provider taxes, Peter, are notoriously...
unknown: You know that Pops up in the marketplace, then seem to go away within 30 to 45 days so.
unknown: You know, provider taxes, Peter, are notoriously hard to predict in terms of timing and magnitude. And in most quarters where we get that kind of provider tax revenue, we've got the offsetting, largely offsetting expense. So from an EBITDA perspective, it doesn't cause much fluctuation. We haven't baked any net benefit from provider taxes into our guidance for the balance.
unknown: I think it settled down overall compared to where it was three or four years ago.
Speaker Change: Thanks very much.
unknown: Okay.
unknown: Our next question will come from <unk> Chickering with Deutsche Bank.
Speaker Change: Hey, good evening guys.
Speaker Change: Hey, guys.
Peter: Oh good.
Speaker Change: Nice quarter, so taking into the Opex leverage you guys got this quarter, you talked about sort of dialysis and recruiting.
unknown: As Florida drivers there would've been a returns on doing dialysis yourselves with dialysis at 88 hospitals safe to model additional opex leverage going forward from that labor.
Speaker Change: Yeah. So.
unknown: The straight math on the dialysis conversion is when we use an outside contractor on average.
unknown: It cost us about $600 when we do it internally costs about $300. The reimbursement is the same because thats basically coded into the requirements of the patient when they are admitted to our facility so that incremental $300 per treatment as a flow through and then you get the other benefits that are very dip.
Operator: Our next question will come from Ben Hendrix of RBC Capital Markets.
Benjamin Hendrix: To quantify such as the fact that patients therapy isn't being disrupted and you're not having to incur transportation costs to go outside the facility if thats an alternative.
Benjamin Hendrix: Good morning. Thank you very much.
Benjamin Hendrix: In terms of continuing leverage.
Benjamin Hendrix: I think most of my questions have been answered, but I did want to follow up on your comments about the review choice demonstration and specifically your decision to continue with 100% pre-claim review in Alabama. I know you've had periods of elevated denial activity with fiscal intermediaries in the past. It seems like the sampling election would help you sidestep some of that risk. I just wanted to get your thought process there and kind of how relations with intermediaries are going. Thank you.
Benjamin Hendrix: From that in <unk>, we would expect to see that bear in mind. Some of that is a straight reduction in cost. Some of it is also a geography issue.
Benjamin Hendrix: When we contract with a third party that $600, 100% of it runs through <unk> E as a contract services expense.
Benjamin Hendrix: We do it internally that cost gets spread out into other line items as largest of which is W. B.
Benjamin Hendrix: And then we would expect that based on some of the efficiencies. We're seeing both in terms of advertising costs that are out there and some of the different modalities and approaches that we have developed within our recruiting efforts that even as we continue robust recruiting efforts to make sure that we keep pace with our clinical requirements.
Benjamin Hendrix: With new hires.
Benjamin Hendrix: That will continue to see some some efficiencies in recruiting as well.
Speaker Change: Okay and then so quick question on that one I guess I mean, Dallas spaces do you guys have and then as a second part here is on provider tax revenues hasn't really been a big driver for you guys. Historically, obviously saw $6 9 million in the fourth or in the first quarter I guess, how should we think about that going forward. Thanks.
unknown: Yeah, so the relations have gone well thus far around that, particularly among us, the majority of our hospitals under Palmetto. We decided, actually, the team decided, to continue with the 100% review. We felt like we put in a good discipline within our hospitals around documentation and capturing everything we needed to in the chart, and to stray from that just seemed like it wasn't the right thing to do given the process that we'd already put in place. So the hospitals actually helped make that decision to stay at 100%.
unknown: Yes.
unknown: We're between around 3% to 5% of our.
unknown: Total patients.
unknown: Dialysis care either internally or.
unknown: Where we have a vendor come into our hospital. So we.
unknown: We do think thats going to be a continued focus and booked a larger percentage of the population.
unknown: As issues that.
unknown: We'll put them on some sort of dialysis care. So we think it's a growing need for hospitals.
unknown: Provider taxes, Pete, Oregon, Torricelli hard to predict in terms of timing and magnitude and in most quarters, where we get that kind of provider tax revenue we've got the offsetting.
unknown: Largely offsetting expense so from an EBITDA perspective, it doesn't it doesn't cause much fluctuation, we haven't baked any net benefit from provider taxes into our guidance for the balance of the year.
Speaker Change: Great. Thanks, so much.
unknown: Our next question will come from Ben Hendrix, with RBC capital markets.
unknown: The benefit of the 100% pre-claim review is really kind of twofold. One is it allows for a much more iterative process with the MACs so that we can find out if they're viewing anything regarding a patient's appropriateness in our hospital. If they're either viewing it erroneously or if they're perceiving a required change in our documentation, we can make that adjustment. The other thing is you get a larger sample size. So one of the risks that's associated with that 5% pre-claim review is they look at one particular patient.
unknown: Good morning.
Speaker Change: Thank you very much I think most of my questions have been answered, but I did want to follow up on your comments about the review choice demonstration and specifically your decision to continue with a 100% pre claim review in Alabama, I know you've had periods of elevated denial activity with fiscal intermediaries in the past it seems like the <unk>.
Speaker Change: <unk> election would help you sidestep some of that risk I just wanted to get your thought process, there and kind of how relations with intermediaries are going thank you.
unknown: Yes, so the relationship.
unknown: Don well, thus far around appetite declared.
unknown: The majority of our hospitals under Palmetto.
unknown: We decided actually the team decided to continue on with the 100% review, we felt like we've put in a good discipline.
unknown: Our hospitals around documentation and capturing everything we needed to in the chart.
unknown: And they disqualify that patient based on a circumstance and then apply that through extrapolation to a broader base. Whereas if we've got the 100% pre-claim review that is out there, we can line that patient that they may be competing with many others that have been approved elsewhere in their organization and say, you tell us what.
unknown: Two two to stray from that just seem like it wasn't the right thing to do given the process that we'd already had put in place. So the hospitals actually help make that decision to stay at a 100%.
unknown: The benefit of the 100% pre claim review, there's really kind of twofold. One is it allows for a much more iterative process with the Max So that we can find out if theyre viewing anything regarding a patient's appropriateness in our hospitals.
unknown: As you know.
unknown: They're either viewing it erroneously.
unknown: Or if there is if they are perceiving a required change in our documentation and we can make that adjustment. The other thing is you get a larger sample size. So what are the risk that's associated with that 5% pre claim review is they look at one particular patient.
unknown: And just what is the added cost of the 100% material?
unknown: No, it's already in place. Yes.
unknown: And they disqualify that patient.
unknown: Based on a circumstance and then apply that through extrapolation to a broader.
Benjamin Hendrix: Thank you very much.
Benjamin Hendrix: Base, whereas if we've got the 100% pre claim review that are out there. We can line that patient that they may be contesting up with many others that have been approved elsewhere in their organization and say you tell us what's different.
Operator: As a reminder, press star 1 if you have a question. We'll now hear from Brian Tanquilut and Jeff...
Brian Gil Tanquilut: Hello, Brian. Hey, good morning. Good morning. Congratulations on the quarter. I actually just have a little question. Maybe, Doug, could you share with us what it looked like in terms of the growth rates of the different diagnoses of patients coming in? I guess where I'm coming from is that we think of broader utilization strength, you know. Just curious if it's specific to stroke or are we seeing more from elective procedures such as joint replacements?
Speaker Change: So we just think because the infrastructure is already placing pagers already in place.
Doug: This is the right way for us to proceed through cycle too.
Brian Gil Tanquilut: And just as the added cost of the 100% material.
Doug: No it's already in place.
Speaker Change: Yes, thank you very much.
Brian Gil Tanquilut: As a reminder press star one if you have a question, we'll now hear from Brian <unk> with Jefferies.
Brian Gil Tanquilut: Hello, Brian Hey, good morning, good morning, Congrats on the quarter.
Brian Gil Tanquilut: I actually just have a quick question, maybe Doug can you share with us the.
Brian Gil Tanquilut: It looked like in terms of the growth rates in the different diagnoses of patients coming in and I guess, where I'm coming from is when you think of a broader utilization strength. Just curious if it's specific to stroke or are we seeing more from like elective procedures such as stronger placements.
Doug: Now, you know, the story is really pretty consistent with what we saw in the back half of last year. So, good growth in neurological and stroke in the quarter. Neurological was up just north of 10%, and stroke was up almost 12%. We did see a pretty significant increase in brain injury. Other ortho was up almost 16%, but again, remember that's off of a smaller base. So, you know, we are seeing a broadening in terms of some more rapid growth in some of the smaller categories that have gotten deferred for a period of time during COVID, but the strength in our higher acuity categories continues to be there as well.
Brian Gil Tanquilut: Now you guys are.
Speaker Change: The story is really pretty consistent with what we saw the back half of last year.
Doug: So good growth in neurological and stroke in the quarter neurological was up just north of 10% stroke was up almost 12%.
Doug: We did see a pretty significant increase in brain injury that was up 11, 1% other.
Doug: Other ortho was up almost 16%, but again remember that's off of a smaller base.
Doug: So we are seeing a broadening in terms of some more rapid growth in some of the smaller categories that had gotten deferred for a period of time during COVID-19, but the strength in our higher acuity categories continues to be there as well Brian those elective procedures. We just don't see a lot of them a matter of fact, I mean for just <unk>.
unknown: That's one of our smallest categories, but knee and hip replacement was up 20% during the quarter.
Doug: Roy replacement.
unknown: A little bit less than 3% of our total patient mix. So.
unknown: It's not really had a large impact on us.
Brian Gil Tanquilut: All right, I got it. Thank you.
unknown: One of our smallest categories, but knee and hip replacement was up 20% during the quarter.
Speaker Change: Alright got it thank you.
Operator: Our final question will come from Jared Haase with William Blair.
Brian Gil Tanquilut: Our final question will come from Jared Haas with William Blair.
Jared Phillip Haase: Good morning.
Jared Phillip Haase: If you think about how we and how most providers utilize change, it is for two things. One is what's called claims scrubbing, which is just to make sure that as you are sending a claim to any particular payer, whether it's CMS through one of the intermediaries or to one of the Medicare Advantage or managed care players, that you're getting the documentation in the form that is most readily acceptable and desired by that particular payer.
Jared Phillip Haase: Hey, guys. Good morning, Thanks for sneaking me in here, maybe I'll just ask one around the change healthcare disruption and specifically I know you mentioned.
Jared Phillip Haase: Some of the work you did to implement workarounds, and maybe enhance or build out some of your internal capabilities.
Jared Phillip Haase: Be curious any particular areas of interest that you called out where you've made investments are sort of built out those workflows and then I guess the other question is just should we think about any leverage benefits from that just in terms of you're internalizing, a little bit more of the sort of RCM capabilities.
Speaker Change: Yeah. So.
Jared Phillip Haase: If you think about how we and most providers utilize change it was for two things. One is what's called claims scrubbing, which is just to make sure that as you are sending a claim to any particular payer whether it's CMS through one of the intermediaries or to one of the meta.
Jared Phillip Haase: <unk> advantage or managed care players that youre getting the documentation in the form that is most readily acceptable and desired by that particular payer.
Jared Phillip Haase: The second thing is that for us and for others, Change really served as the electronic intermediary in terms of submitting the claims and getting those processed. The primary thing that we did internally was establish our own electronic interface with CMS and now extend that to other payers as well. You know, whether or not there's going to be any kind of leverage that ultimately comes from that, I think it is going to depend on a go-forward basis between the balance that we have in restoring claims processing through change, these other third-party vendors that we identified and put in place during the process, and how much we choose to do internally. It's still somewhat of a dynamic situation. We will refrain from going back to a situation where we have an over-dependence on any single vendor.
Jared Phillip Haase: Thing is that for us and for others changed.
Jared Phillip Haase: Served as the electronic intermediary in terms of submitting the claims in getting those processed.
Jared Phillip Haase: Primary thing that we did internally was to establish our own electronic interface with CMS and now extending that to other payers as well.
Jared Phillip Haase: Hum.
Jared Phillip Haase: Whether or not there's going to be any kind of leverage that ultimately comes from that I think is going to depend on a go forward basis between the balance that we have in restoring claims processing through change. These other third party vendors that we identified.
Jared Phillip Haase: And put in place during the process and how much we choose to do internally, it's still somewhat of a dynamic situation.
Jared Phillip Haase: We will refrain from going back to a situation, where we have an overdependence on any one single vendor.
unknown: Jared, I do want to call out our teams in our centralized billing office down in Tampa as well as our IT staff because they worked extremely hard to minimize the impact of this and figure out workarounds, came in at night and on the weekends to make sure that we were being taken care of from a company standpoint. So I did want to point that out.
Speaker Change: I do want to call out or.
unknown: Our teams and our centralized billing office down in Tampa as well as our <unk>.
unknown: Staff, because they worked extremely hard to minimize the impact on this and figure out workarounds came in at night from the weekend to make sure that.
unknown: We were being taken care of from a company standpoint, So I did want to point that out.
unknown: Yeah.
Jared Phillip Haase: Yeah, that's great to hear. Thanks, guys, for all the color, and I'll go ahead and leave it there.
Jared: Yes, that's great to hear.
Speaker Change: Thanks, guys for all the color and I'll go ahead and leave it there.
Speaker Change: Thank you.
Operator: That will conclude the question and answer session. I will now turn the call over to Mark Miller for any additional or closing remarks.
Jared Phillip Haase: That will conclude the question and answer session I will now turn the call over to Mark Miller for any additional or closing remarks.
Mark Miller: Thank you operator, if anyone has additional questions. Please call me at 2059705860. Thank you again for joining today's call.
Mark Miller: Thank you, operator. If anyone has additional questions, please call me at 205-970-5860. Thank you again for joining today's call. This does conclude.
Mark Miller: This does conclude today's conference. Thank you for your participation you may now disconnect.
Mark Miller: Oh.
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Speaker Change: Uh huh.
Mark Miller: Okay.
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