Q1 2024 Enhabit Inc Earnings Call
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Operator: Good morning, everyone, and welcome to Enhabit Home Health and Hospice'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. You will be limited to one question and one follow-up question. This conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Crissy Carlisle, Enhabit's Chief Financial Officer. Crissy, you have the floor.
Good morning, everyone and welcome to inhabit home health and Hospice is first quarter 2024 earnings conference call.
Crissy Buchanan Carlisle: At this time I'd like to inform all participants that their lines will be in a listen only mode.
Crissy Buchanan Carlisle: After the Speakers' remarks, there will be a question and answer period, you'll be limited to one question and one follow up question.
Operator: Today's conference is being recorded if you have any objections you may disconnect at this time.
Crissy Buchanan Carlisle: I will now turn the call over to Crissy, Carlisle and habits, Chief Financial Officer Christian you had before.
Crissy Buchanan Carlisle: Thank you, operator, and good morning, everyone. Thank you for joining us on our call today. With me on the call is Barb Jacobsmeyer, President and Chief Executive Officer. Before we begin, if you do not already have a copy of this document, please do so now. The first quarter earnings release, supplemental information, and related Form 8K filed with the SEC are available on our website at investors.ehab.com. On page 2 of the supplemental information, you will find the Safe Harbor Statement, which is also set forth on the last page of the earnings release.
Crissy Buchanan Carlisle: Thank you operator, and good morning, everyone. Thank you for joining our call today.
Barbara Ann Jacobsmeyer: With me on the call is Bob Jacob Meier, President and Chief Executive Officer.
Crissy Buchanan Carlisle: Before we begin if you do not already have a copy.
Crissy Buchanan Carlisle: First quarter earnings release supplemental information and related form 8-K filed with the SEC are available on our website at investors <unk> E <unk> Dot com.
Crissy Buchanan Carlisle: On page two of the supplemental information you will find the safe Harbor statement, which are also set forth 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 certain risks and uncertainties that could cause actual results to differ materially.
Crissy Buchanan Carlisle: 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 that could cause actual results to differ materially from our projections, estimates, and expectations are discussed in our SEC filings, including our annual report on Form 10-K, which is available on our website. We encourage you to read them. However, 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.
Crissy Buchanan Carlisle: Surely from our projections estimates and expectations are discussed in our SEC filings, including our annual report on Form 10-K, which are available on our website.
Crissy Buchanan Carlisle: We encourage you to read them.
Crissy Buchanan Carlisle: 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.
Crissy Buchanan Carlisle: 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 and the earnings release. With that, I'll turn the call over to Barb.
Crissy Buchanan Carlisle: 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 and the earnings release with that I'll turn the call over to Barb. Thanks, Christy good morning.
Barbara Ann Jacobsmeyer: Thanks, Crissy. Good morning, and thanks for joining us. Our strong start to 2024 is a result of our team's continued focus on our operational strategy. Additional frontline clinicians, more and better home health payer contracts, and controlling G&A expenses were the key drivers of our performance in the first quarter and resulted in a sustained, consolidated, adjusted EBITDA of $25.3 million, in line with last year's first quarter results. As our employees stated in our recent employee survey, their engagement is driven by the knowledge that our work is meaningful.
Barb: And thanks for joining us.
Barbara Ann Jacobsmeyer: Our strong start to 2024 as a result of our team's continued focus on our operational strategy.
Barbara Ann Jacobsmeyer: Additional frontline clinician more and better home health payer contracts and controlling G&A expenses were the key drivers of our performance in the first quarter.
Barbara Ann Jacobsmeyer: And resulting in sustained consolidated adjusted EBITDA of $25 3 million in line with last year's first quarter results.
Barbara Ann Jacobsmeyer: As our employee stated on our recent employee survey their engagement is driven by the knowledge that our work is meaningful no matter the whole clinical or support staff. They recognize that what they do impact our patients' lives during.
Barbara Ann Jacobsmeyer: No matter the role, clinical or support staff, they recognize that what they do impacts our patients' lives. During this celebration of Nurses Week, I especially want to thank each and every one of our nurses for their dedication to our mission and to our patients and families.
Barbara Ann Jacobsmeyer: During the celebration of nurses week, I, especially want to thank each and every one of our nurses for their dedication to our mission and to our patients and families.
Barbara Ann Jacobsmeyer: High Quality Outcomes is a result of our employees' hard work, and I am proud of our entire team. In our home health segment, we are focused on achieving growth through stabilization of Medicare admissions, continued progress with our payer innovation strategy, and increased utilization of our clinical resources. With our traditional Medicare mix of home health revenue now in line with peers, we are experiencing stabilization of our fee-for-service Medicare mix. While year-over-year fee-for-service Medicare admissions declined 11.4%, we experienced a sequential increase of 3.4%.
Barbara Ann Jacobsmeyer: And habits high quality outcomes are a result of our employees hard work and I'm proud of our entire team.
Barbara Ann Jacobsmeyer: And our home health segment, we are focused on achieving growth and stabilization of Medicare admission.
Barbara Ann Jacobsmeyer: Any progress with our payer innovation strategy and increased utilization of our clinical resources.
Barbara Ann Jacobsmeyer: With our traditional Medicare mix in home health revenue now in line with peers, we are experiencing stabilization of our fee for service Medicare mix.
Barbara Ann Jacobsmeyer: Year over year fee for service Medicare admissions declined 11, 4%, we experienced a sequential increase of three 4%.
Barbara Ann Jacobsmeyer: Our payer innovation team continues to do a great job building our portfolio of payer contracts, and our field teams are successfully shifting admissions out of historically lower paying contracts to these new contracts at improved rates, contracts that acknowledge the high quality care we provide to the payer members. Admissions in our historically lower paying contracts declined from 42% of our total admissions in quarter one 2023 to 29% in quarter one this year.
Barbara Ann Jacobsmeyer: Our payer innovation team continues to do a great job building our portfolio of Payor contracts.
Barbara Ann Jacobsmeyer: And our field teams are successfully shifting emissions out of historically lower paying contracts do these new contracts at improved rates.
Barbara Ann Jacobsmeyer: Contracts that acknowledges the high quality care, we provide to the payers members.
Barbara Ann Jacobsmeyer: Admissions and our historically lower paying contract.
Barbara Ann Jacobsmeyer: Flying from 42% of our total admissions in quarter, one 2023 to.
Barbara Ann Jacobsmeyer: The 29% in quarter one this year.
Barbara Ann Jacobsmeyer: As these results show, our payer innovation strategy is working. We continue to be disciplined in our approach with payers as we work to negotiate new agreements and remain focused on moving volumes away from lower-paying agreements. We are committed to the renegotiation of historic contracts to improve rates while holding firm to our conviction in the value we provide, and we'll make the decision to terminate agreements when necessary.
Barbara Ann Jacobsmeyer: These results show our pair innovation strategy is working.
Barbara Ann Jacobsmeyer: We continue to be disappointed our approach with payers and we work to negotiate new agreements and remain focused on moving volume away from the lower paying agreement we have.
Barbara Ann Jacobsmeyer: We're committed to the renegotiation of historic contracts to improve rate, while holding firm to our conviction in the value, we provide and we'll make the decision to terminate agreement when necessary.
Barbara Ann Jacobsmeyer: Finally, in both our Home Health and Hospice segments, our teams are focused on ensuring that the intensity of care aligns with patient acuity and complexity of care needs within the important context of what matters most to patients on their journey. Staffing challenges and the increased demand for our services have created a mandate for us to effectively manage clinician visits. However, our strategy is not to simply reduce visits across the board but instead to effectively right-size each plan of care to ensure patients receive the right care plan. For some, this means fewer visits. For others, it may mean more, depending on their unique presentation.
Barbara Ann Jacobsmeyer: Finally in both our home health and hospice segments. Our teams are focused on ensuring that the intensity of care aligns with patient acuity and complexity of care need within the important context of what matters most to patients in their journey.
Barbara Ann Jacobsmeyer: Staffing challenges and the increased demand for our services have created a mandate for us to effectively manage clinician visits.
Barbara Ann Jacobsmeyer: However, our strategy is not to simply reduce they're just across the board, but instead to effectively rightsize each plan of care to ensure patients receive a just right care plan.
Barbara Ann Jacobsmeyer: For some this means fewer visits for others. It may mean more depending on their unique presentation.
Barbara Ann Jacobsmeyer: Overutilization and underutilization are equally harmful to our patients and our business. Additionally, some patients can benefit from virtual encounters, which is convenient and efficient for our agencies and our patients, who are beginning to understand and enjoy the benefits of tech-enabled care. We continue to explore how implementing virtual care in a strategic manner can benefit both service lines, as well as the patients and families we serve. We plan to expand the scope of virtual care at Enhabit in 2024 in an effort to improve efficiency, capacity, patient outcomes, and patient experience. Matalogix Pulse supports our visit optimization strategy for our home health team, and Matalogic News supports the strategy for our cost.
Barbara Ann Jacobsmeyer: Over utilization and under utilization are equally harmful to our patients and our business.
Barbara Ann Jacobsmeyer: Additionally, some patients can benefit from virtual encounters which is convenient and efficient for our agencies and our patients who are beginning to understand and enjoy the benefits of tech enabled care.
Barbara Ann Jacobsmeyer: We continue to explore how implementing virtual care in a strategic manner can benefit both service lines as well as the patients and families. We serve.
Barbara Ann Jacobsmeyer: We plan to expand the scope of virtual care I didn't have it in 'twenty 'twenty, four and an effort to improve efficiency capacity patient outcomes and patient experience.
Barbara Ann Jacobsmeyer: Metallurgical coal supports our visit optimization strategy for our home health teams and Biologics me supports the strategy for our hospice team.
Barbara Ann Jacobsmeyer: Leveraging predictive analytics bolsters our ability to deliver a better way to care for patients and families in a more efficient manner without compromising patient outcomes. Our competitive position in terms of patient outcomes, including hospitalization rates and visits at the end of life, is what sets us apart when negotiating with payers and establishing strategic referral relationships. In our hospice segment, our priority is growing the census, which will allow us to gain operating leverage against the fixed cost structure associated with the case management staffing model.
Barbara Ann Jacobsmeyer: Leveraging predictive analytics bolsters, our ability to deliver a better way to care for patients and families in a more efficient manner without compromising patient outcomes are.
Barbara Ann Jacobsmeyer: Our competitive position in terms of patient outcomes, including hospitalization rates and visit at the end of life is what sets us apart when negotiating with payers and establishing strategic referral relationships.
Barbara Ann Jacobsmeyer: In our hospice segment, our priority is growing census, which will allow us to gain operating leverage against our fixed cost structure associated with the case management staffing model.
Barbara Ann Jacobsmeyer: Our sales headcount is now above last year's count, and we are focused on utilizing data from our lost loyalty reports to strengthen relationships with referral sources. In addition, we are working with our talent acquisition team to continue to recruit additional business development team members to grow the business. Additionally, to complement our organic growth strategy in both segments, we continue to strategically reinvest for growth through our de novo strategy. This allows us to enter a new market with low capital costs.
Barbara Ann Jacobsmeyer: Our sales head count is now above last year's counts and we are focused on utilizing data from our loss of royalty reports to strengthen our relationships with referral sources.
Barbara Ann Jacobsmeyer: In addition, we are working with our talent acquisition team to continue to recruit additional business development team members to grow the business.
Barbara Ann Jacobsmeyer: To complement our organic growth strategy in both segments, we continue to strategically reinvest for growth through our de Novo strategy. This allows us to enter a new market with low capital cost.
Barbara Ann Jacobsmeyer: We added two hospice de novo locations in the first quarter, and the work is underway to open 10 more de novos in 2024. A critical key to our organic and de novo growth is our people strategy.
Barbara Ann Jacobsmeyer: We added two hospice de novo locations in the first quarter and the work is underway to open 10 more de Novo in 2024.
Barbara Ann Jacobsmeyer: A critical key to our organic and de Novo growth is our people strategy. We were pleased with our recent employee engagement survey, which saw net promoter score in the top quartile of health care companies.
Barbara Ann Jacobsmeyer: We were pleased with our recent employee engagement survey, which saw a net promoter score in the top quartile of health care companies. We are seeing continued success with our recruitment and retention efforts. During the first quarter, our full-time nursing candidate pool increased 30% year-over-year and resulted in the addition of 151 met new full-time nurses. I will now turn it over to Crissy to discuss the quarter's results. Thanks, Barb
Crissy: We are seeing continued success with our recruitment and retention efforts.
Crissy: During the first quarter, our full time nursing candidate pool increased 30% year over year and resulted in the addition of 151 net new full time nurses.
Crissy: I will now turn it over to Christie to discuss the quarter's results.
Crissy Buchanan Carlisle: Consolidated net revenue was $262.4 million for the first quarter, down $2.7 million or 1% year over year. Our strategy to increase admissions and payer innovation contracts lessens the impact of mixed ship, contributing to sustained consolidated adjusted EBITDA of $25.3 million in both the first quarter of 2024 and 2023. Before I move into the results of our home health segment, I want to mention the reporting change we made in the first quarter.
Crissy: Barb consolidated net revenue was $262 4 million for the first quarter down $2 7 million or 1% year over year, our strategy to increase admissions and payer innovation contract lessens the impact of mix shift contributing to sustained consolidated adjusted EBITDA.
Crissy Buchanan Carlisle: A $25 3 million in both the first quarter of 'twenty 'twenty, four and 2023.
Crissy Buchanan Carlisle: Before I move into the results of our home Health segment I want to mention the reporting change we made in the first quarter.
Crissy Buchanan Carlisle: With an advanced episodic model added to our payer innovation contract effective January 1, 2024, we have updated how we report volume and pricing metrics for our home health segment, separating traditional Medicare from all other payers. The prior periods were changed to conform to the current period presentation and had no impact on the consolidated financial statement.
Crissy Buchanan Carlisle: With an advanced episodic model added to our payer innovation contract effective January one 'twenty 'twenty four we have updated how we report volume and pricing metrics for our home health segment decorating traditional Medicare from all other payors.
Crissy Buchanan Carlisle: Prior periods were changed to conform to the current period presentation and had no impact on the consolidated financial statements.
Crissy Buchanan Carlisle: In our Home Health segment, we experienced strong growth in Medicare Advantage admissions and, as Barb discussed, stabilization of Medicare admissions. Year over year, non-Medicare admissions grew 25.2%, driving total admissions growth of 5.3%, with 5% growth on a same-store basis. This is the strongest pain store growth we've experienced post our spinoff and proof that our payer innovation success will drive positive results. 38% of non-Medicare visits are now in payer innovation contracts at improved rates. This is lessening the financial impact of makeshift changes to Medicare Advantage.
Crissy Buchanan Carlisle: In our home health segment, we experienced strong growth in Medicare advantage admissions and as Bart discussed stabilization of Medicare admissions year over year, non Medicare admissions grew 25.2% driving total admissions growth of five 3% with.
Crissy Buchanan Carlisle: 5% growth on a same store basis. This is the strongest same store growth, we've experienced post our Seattle and prove that our payer innovation success will drive positive results.
Crissy Buchanan Carlisle: 38% of non Medicare visits are now in payer innovation contracts at improved rates.
Crissy Buchanan Carlisle: This is lessening the financial impact of mix shift to Medicare advantage.
Crissy Buchanan Carlisle: During the first quarter of 2024, the shift to more non-Medicare admissions reduced revenue and adjusted EBITDA by approximately $2 million on a net basis. That $2 million is comprised of approximately $6 million of negative impact from the mixed shift offset by approximately $4 million in non-Medicare pricing improvements. Home Health Adjusted EBITDA decreased 1.1 million or 2.5% year-over-year as the mixed shift and increased cost of service were offset by a reduction in general and administrative expenses. Cost per visit increased 2.3% year-over-year, primarily due to merit and market rate increases.
Crissy Buchanan Carlisle: During the first quarter of 2020 for the shift to more non Medicare admissions reduce revenue and adjusted EBITDA approximately $2 million on a net basis.
Crissy Buchanan Carlisle: That 2 million is comprised of approximately $6 million negative impact from the mix shift offset by approximately 4 million in non Medicare pricing improvement.
Crissy Buchanan Carlisle: Home health adjusted EBITDA decreased $1 1 million or two 5% year over year as the mix shift and increased cost of services were offset by a reduction in general and administrative expenses.
Crissy Buchanan Carlisle: Cost per visit increased two 3% year over year, primarily due to merit and market rate increases.
Crissy Buchanan Carlisle: General and administrative expenses decreased $3.4 million or 5.4% year over year, primarily due to a new organizational structure implemented in the first quarter of 2023 to align our sales and operations. In our hospice segment, revenue decreased $0.1 million or 0.2% year-over-year, and increased Medicare reimbursement rates were offset by a decrease in patient days. Admissions decreased 2.9% year-over-year, while Average Daily Census decreased 3.7% year-over-year.
Crissy Buchanan Carlisle: General and administrative expenses decreased $3 4 million or five 4% year over year, primarily due to a new organizational structure implemented in the first quarter of 2023 to align our sales and operations teams.
Crissy Buchanan Carlisle: In our hospice segment revenue decreased zero point $1 million or 0.2% year over year and increased Medicare reimbursement rate were offset by a decrease in patient days.
Crissy Buchanan Carlisle: Admissions decreased two 9% year over year, while average daily census decreased three 7% year over year.
Crissy Buchanan Carlisle: Sequentially, hospice admissions grew 5.6% over the fourth quarter of 2023. We saw a sequential decline in average daily census throughout the fourth quarter of 2023, followed by a sequential increase in average daily census each month of the first quarter of 2024 that persisted into April. As we continue to ramp up our business development team and balance our referral portfolio, we expect Average Savings Census to grow throughout the remainder of the year.
Crissy Buchanan Carlisle: Sequentially Hospice admissions grew five 6% over the fourth quarter of 2023.
Crissy Buchanan Carlisle: We saw a sequential decline in average daily census throughout the fourth quarter of 2023, followed by a sequential increase in average daily census, each month of the first quarter of 'twenty 'twenty four that persisted into April.
Crissy Buchanan Carlisle: We continue to ramp up our business development team and balance our for our portfolio. We expect average daily census to grow throughout the remainder of the year.
Crissy Buchanan Carlisle: EBITDA in that segment increased $0.6 million or 7.1% year-over-year, primarily due to a decrease in general and administrative expenses. However, cost of service continues to approximate $24 million per quarter. In terms of dollars, we were able to keep costs relatively flat, as we have now anniversed the implementation of the case management staffing model, and we were able to offset the increased costs associated with the new durable medical equipment arrangement, as we discussed during our fourth quarter earnings call, with the savings that resulted from the elimination of contract labor.
Crissy Buchanan Carlisle: Adjusted EBITDA in that segment increased 0.6 million or seven 1% year over year, primarily due to a decrease in general and administrative expenses.
Crissy Buchanan Carlisle: Cost of service continues to approximate 24 million per quarter.
Crissy Buchanan Carlisle: In terms of dollars, we were able to keep costs relatively flat because we have now anniversaried. The implementation of the case management staffing model and we were able to offset the increased cost associated with the new durable medical equipment arrangement as we discussed during our fourth quarter earnings call with the savings that resulted from the elimination of Khan.
Crissy Buchanan Carlisle: <unk> labor.
Crissy Buchanan Carlisle: We continue to expect patient volumes to increase without the need to hire a significant number of additional staff, resulting in operating leverage against the fixed costs associated with our case management staffing model. General and administrative expenses declined year over year, primarily due to the restructuring of hospice back office staffing in the third quarter of 2023. Our Home Office General and Administrative Expenses decreased $0.5 million year-over-year to 10.3% of consolidated revenue.
Crissy Buchanan Carlisle: We continue to expect patient volumes to increase without the need to hire a significant number of additional staff, resulting in operating leverage against our fixed costs associated with our case management staffing model.
Crissy Buchanan Carlisle: And administrative expenses declined year over year, primarily due to the restructuring of hospice back office staffing in the third quarter of 2023.
Crissy Buchanan Carlisle: Our home office general and administrative expenses decreased 0.5 million year over year pinpoint 3% of consolidated revenue.
Crissy Buchanan Carlisle: By the end of the first quarter, we fully transitioned off the Encompass Health Transition Services Agreement. Now, let's transition now to the balance. We ended the first quarter with a leverage ratio of 5.3 times, well within our covenant maximum of 6.75 times, and less than our year-end 2023 leverage of 5.4 times. We have available liquidity of approximately $70 million, including approximately $37 million of cash on hand. We believe this is adequate to support our operations, including our de novo strategy.
Crissy Buchanan Carlisle: By the end of the first quarter, we fully transitioned off the encompass health transition services agreement.
Crissy Buchanan Carlisle: Let's transition now to the balance sheet.
Crissy Buchanan Carlisle: We ended the first quarter with a leverage ratio of five three times well within our covenant maximum of 675 times and less than our year end 2023 leverage of five four times.
Crissy Buchanan Carlisle: We have available liquidity of approximately 70 million, including approximately $37 million of cash on hand, we.
Crissy Buchanan Carlisle: We believe this is adequate to support our operations, including our de Novo strategy.
Crissy Buchanan Carlisle: We generated approximately 19 million of free cash flow during the first quarter of 'twenty, 'twenty, four which equates to a free cash flow conversion rate of approximately 74%.
Crissy Buchanan Carlisle: This conversion rate includes the positive impact from the timing of payroll in the quarter.
Crissy Buchanan Carlisle: We generated approximately 19 million of free cash flow during the first quarter of 2024, which equates to a free cash flow conversion rate of approximately 74%. This conversion rate includes the positive impact from the timing of payroll in the quarter. Let's turn now to guidance. We feel good about our consolidated results for the first quarter and remain confident in our outlook for 2024. We maintain our 2024 guidance that includes a range for net service revenue of $1,076,000,000 to $1,102,000,000 with adjusted EBITDA in a range of $98,000,000 to $110,000,000. We continue to expect to generate $36,2 million of free cash flow in 2024. With that, I'll turn it back to Barb, before we open the lines for Q&A.
Crissy Buchanan Carlisle: Let's turn now to guidance, we feel good about our consolidated results for the first quarter and remain confident in our outlook for 2024.
Crissy Buchanan Carlisle: We maintain our 'twenty 'twenty four guidance that includes the range for net service revenue of $1.076 billion to 1.102 billion with adjusted EBITDA in a range of 98 million to 110 million.
Crissy Buchanan Carlisle: We continue to generate we continue to expect to generate 30 states to 62 million of free cash flow in 2024.
Crissy Buchanan Carlisle: With that I'll turn it back to Barb.
Barbara Ann Jacobsmeyer: Before we open the lines for Q&A, as it relates to our strategic alternatives process, as announced yesterday in a separate press release. After the evaluation of a full range of strategic alternatives with the support of external financial and legal advisors, our strategic review process has concluded. There was serious interest based on parties' engagement in the process. However, the company did not receive any formal proposals for a transaction.
Barb: Before we open the lines for Q&A as it relates to our strategic alternatives process as announced yesterday in a separate press release after the evaluation of a full range of strategic alternatives with the support of external financial and legal advisors. Our strategic review process has concluded.
Barbara Ann Jacobsmeyer: There were serious interest based on parties engagement in the process. However, the company did not receive any formal proposals for a transaction.
Barbara Ann Jacobsmeyer: We believe this is largely due to macro headwinds, including, among other things, uncertain regulatory developments, including Medicare reimbursement policies throughout the health care industry and an evolving antitrust landscape, a difficult healthcare and operating environment, and persistently high interest rates. Considering this and other strategic alternatives reviewed with the advisors during the review process, The board determined that the best way to enhance shareholder value at this time was to continue to operate as a standalone business.
Barbara Ann Jacobsmeyer: We believe this is largely due to macro headwinds, including among other things uncertain regulatory developments, including Medicare reimbursement policies throughout the health care industry and an evolving antitrust landscape.
Barbara Ann Jacobsmeyer: A difficult health care of the operating environment and persistently high interest rates.
Barbara Ann Jacobsmeyer: So during this and other strategic alternatives reviewed with the advisors. During the review process. The board determined the best way to enhance shareholder value. At this time is to continue to operate as a standalone business.
Barbara Ann Jacobsmeyer: The board and management team remain focused on operating our core businesses and our financial and operating results. The board will continue to be open to and consider all opportunities to enhance shareholder value. I want to remind everyone that the purpose of today's call is to discuss our financial and operational results, and we will not be taking any questions regarding the strategic review or any other topics. Operator, we're now ready for the lines to be open to questions.
Barbara Ann Jacobsmeyer: The board and management team remain focused on operating our core businesses and our financial and operating results.
Barbara Ann Jacobsmeyer: The board will continue to be open to and consider all opportunities to enhance shareholder value.
Barbara Ann Jacobsmeyer: I want to remind everyone that the purpose of today's call is to discuss our financial and operational results and we will not be taking any questions regarding the strategic review or any other topics. Operator, we're now ready for the lines to be open for questions.
Operator: Once again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. 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. We'll pause for just a moment to compile the Q&A. Our first question comes from AJ Rice at UBS. Your line is open.
Operator: Okay.
Albert J. William Rice: Thank you.
Operator: Once again, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Albert J. William Rice: 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.
Operator: You have additional questions. Please feel free to put yourself back in the queue.
Operator: We'll pause for just a moment to compile the Q&A roster.
Operator: Yeah.
Operator: Okay.
Albert J. William Rice: Our first question comes from a J rice at UBS. Your line is open.
Albert J. William Rice: Hi everybody. Maybe on the cost per visit increase, obviously a 2% to 3% increase is what you've got it for, and you seem to be running at that. I'm assuming your underlying salary, wages, and benefits are running at least 3% to 5%. I think visits per episode were slightly down a tenth of a day. It would look like, looking at your peers, that maybe you've got some more room there. But can you just comment on the dynamics? What's offsetting those labor cost trends, if I'm right about roughly where they're running, and how much more opportunity you might have on driving down visits per episode over time?
Albert J. William Rice: Hi, everybody.
Albert J. William Rice: Maybe on the cost per visit increase obviously in 2% to 3% increase what you guide for and you seem to be running at that.
Albert J. William Rice: Moving your underlying.
Albert J. William Rice: Salary wages and benefits are running at least 3% to 5% I think business for episodes were slightly.
Albert J. William Rice: On the 10th of a day.
Albert J. William Rice: It would look like moving disappears you got some more room, there, but can you just kind of a chrome and all the <unk>.
Albert J. William Rice: Dynamics works are offsetting those labor cost trends, if indeed, I'm right about roughly where they are running and how much more opportunity you might have on the.
Albert J. William Rice: Driving down visits per episode overtime.
Crissy Buchanan Carlisle: Yeah, so AJ, I'll take some of the cost-per-visit questions and then maybe Barb can address the visits per episode piece. On the cost-per-visit, I think the one thing I didn't hear you mention is the elimination of contract labor, and that was a significant benefit to that cost-per-visit number and part of the guidance consideration for the year. But yeah, you're right, the merit market increases are around 3% or so, and then the teams are just doing a great job again, having eliminated all contract labor, those long 13-week contracts by the end of 2023, and then managing productivity and optimizing our staff.
Speaker Change: Yes, so a J I'll take some of the cost per visit questions and then maybe Bob can address the visits per episode piece on the cost per visit I think the one thing I Didnt hear you mentioned is the elimination of contract labor and that was a significant benefit to that cost per visit number is part of the guidance considerations for the year.
Crissy Buchanan Carlisle: But yeah, you're right the merit and market increases or you know around 3% or so and then the teams are just doing a great job again, I'm, having eliminated all contract labor those long 13 week contract by the end of 2023, and then managing the productivity and optimizing our staff.
Barbara Ann Jacobsmeyer: And then on visits per episode, if you remember, we had piloted that for a long time in 17 branches. We would say that right now, when we look at where we are with the rollout, we completed the rollout by the end of the third quarter in all of our branches, and where we are today is similar to where we were when we were piloting within those 17 branches. It means rolling it out and then also spending time with the dashboards to make sure that the leaders are using the visit utilization recommendations, again, to go from low intensity to higher intensity needs for patients. So we know that we still have opportunity as it relates to managing visits per episode, but at this stage, we're where we were when we piloted it in those 17 branches.
Barb: And then on the visits per episode are if you remember we had piloted bad for a long time in 17 branches, we would say that right now when we look at where we are with the rollout we completed the rollout by the end of the third quarter to all of our branches and where we are today is similar to where we were when we were piloting within those 17 branches all it means.
Barbara Ann Jacobsmeyer: Rolling It out and then also spending time with the dashboards that make sure that the leaders are using the visit utilization recommendations again to go from you know low intensity at a higher intensity needs for patients. So we know that we still have opportunity as it relates to managing visits per episode, but at this stage were where we were when we piloted in those <unk>.
Barbara Ann Jacobsmeyer: <unk> branches.
Albert J. William Rice: Okay, maybe a follow-up on your re-segmentation of your home health segment to have this non-Medicare segment, that's going to obviously include MA episodic, which has a fairly high margin or higher margins, and MA per visit, which has lower margins. So, two businesses, two items that are quite different in their gross margin profiles; how do we think about the growth margin of that segment going forward and how is it likely to trend?
Barbara Ann Jacobsmeyer: Okay, maybe a follow up on your re segmentation of your Oh, well segment just to have this non Medicare segment. That's not obviously include rather.
Albert J. William Rice: Product, which is fairly high margin or higher margins than it made for vision, which has lower margins, but also to two babies too.
Albert J. William Rice:
Albert J. William Rice: Items that are very different on their gross margin profile, how do we think about.
Albert J. William Rice: Gross margin of that gross margin in that segment going forward and.
Albert J. William Rice: Our house is likely to trend.
Speaker Change: Yeah, So I think you're right.
Crissy Buchanan Carlisle: Yeah, so I think you're When we think about Medicare and non-Medicare reporting, one, we believe it's more peer-like, so that should make us more comparable to what you're historically seeing from there. You also have enough information within our disclosures to, while we acknowledge that that non-Medicare number includes episodic care, you still have the information you need to get really close to, here's my non-Medicare revenue, here's my total visits, and you can still run it on a per-visit basis to see what's happening from a rate perspective.
Albert J. William Rice: When we when we think about Medicare and non Medicare and reporting one we believe it's more peer like so that should make us more comparable to what you're historically seeing from there you also have enough information within our disclosures to while we acknowledged that that non Medicare number includes episodic.
Crissy Buchanan Carlisle: You still have the information you need to get really close to here's my non Medicare revenue Here's my total visits and you can still run it on a per visit basis to see what's happening from a rate perspective.
Crissy Buchanan Carlisle: And you can see the success that we've had with that rate from, you know, this time last year to now. So, I think it's all there. It's probably a little bit easier to model the way that we're presenting it, given that you're not trying to model three different sets, but you've got these two, just traditional Medicare and non-Medicare. Okay.
Crissy Buchanan Carlisle: And you can see the success that we've made with that rate from this time last years from now on so I think it's all there, it's probably a little bit easier to model the way that we're presenting it given that youre not trying to model three different sets and she's got these two just traditional Medicare and non Medicare.
Operator: Okay, thanks a lot.
Speaker Change: Okay. Thanks, a lot.
Operator: Thanks.
Operator: Our next question comes from the line of A.J. Rice with UBS. Your line is open.
Operator: Our next question comes from the line of a J rice with UBS. Your line is open.
Operator: A.J. was just on, Operator.
Albert J. William Rice: Hey, Jay was just an operator.
Jason Paul Cassorla: Oh, I'm sorry about that. The next call comes from the line of Jason Cassorla with Citi.
Albert J. William Rice: I'm I'm sorry about that.
Jason Paul Cassorla: The next the next call comes from the line of Jason <unk> with Citi. Your line is open.
Jason Paul Cassorla: Great, thanks. Good morning.
Jason Paul Cassorla: Oh, great. Thanks, Good morning, maybe just a follow up on a J.
Jason Paul Cassorla: Can you help unpack a bit on the pair innovation side, specifically on the pricing of those vessels because of non Medicare revenue per visit was up I guess, 4% year over year for your innovation visits grew by 190000 non pay your innovation visits were down almost 100000, I guess could you just to help us get a sense of the moving pieces.
Jason Paul Cassorla: Maybe just a follow-up on AJ. Can you help unpack a bit on the payer innovation side, specifically on the pricing of those visits, because non-Medicare revenue per visit was up, I guess, 4%. Year over year, payer innovation visits grew by 190,000. However, non-payer innovation visits were down almost 100,000. Can you just help us get a sense of the moving pieces around the non-Medicare revenue per visit? It would kind of imply that payer innovation visits in the quarter weren't as significantly higher reimbursed versus the legacy. Just any help on the color around payer innovation and revenue per visit inside the non-Medicare would be great to start.
Jason Paul Cassorla: Around the non Medicare revenue per visit it would kind of imply that you know a pair innovation visits in the quarter. One as you know significantly higher reimbursed versus the legacy just any color on the color around the pair innovation and the revenue per visit in southern that Medicare would be great to start things yet.
Crissy Buchanan Carlisle: Yeah, Jason, one of the things that we have to be very careful of is that these national agreements prohibit us from discussing the details around those agreements. And so, given that we have one large national agreement that is an advanced episodic model, if we get too far into the details, that's not going to be good for other parties. So, we have to be very careful of that, and that's part of the reason, again, that we did make the decision to go with Medicare and non-Medicare.
Crissy Buchanan Carlisle: Yeah, Jason.
Speaker Change: Yeah, Jason one of the things that we have to be very careful of is these national agreements prohibit us from discussing the details around there was agreement.
Crissy Buchanan Carlisle: And so given that we have the one large national agreement that is in advanced episodic model, if we get too far into the details that's not going to be good for for either party.
Crissy Buchanan Carlisle: So we have to be very careful of that and that's part of the reason again that we did make the decision to go with Medicare and non Medicare I can tell you that the historic statements, we've made around episodic pricing and and the discounts as a whole we're still in that kind of zeroed in you know 25% to 30% discount.
Crissy Buchanan Carlisle: I can tell you that the historic statements we've made around episodic pricing and discounts as a whole, we're still in that kind of zero to 25 to 30 percent discount, and that is far better than the 35 to 40 percent discounts that we have historically seen before we had our payer innovation.
Crissy Buchanan Carlisle: And that is far better than the 35% to 40% discounts that we have historically.
Crissy Buchanan Carlisle: Unseen before we had our payer innovation.
Jason Paul Cassorla: Okay, fair enough. Maybe just on the follow-up here on the Medicare episode declines, you know, you've discussed in the past that the lack of MA contracting was a gating factor for referral services. I mean, I guess maybe what's the update there? Is there increased momentum coming out of that national contract that began earlier this year? Should we start seeing Medicare episode declines more in line with your market trends at this point? Just any updates there would be helpful.
Speaker Change: Oh, Okay fair enough maybe just.
Jason Paul Cassorla: Just a follow up here just on the Medicare.
Jason Paul Cassorla: Episode declined you discussed in the past that the lack of any contracting was a gating factor with referral sources I mean, I guess, maybe what's the update there or is there increased momentum coming out of that national contract that began early this year should we start.
Jason Paul Cassorla: Medicare episode declines more in line with your market trends at this point just any any updates there would be helpful.
Barbara Ann Jacobsmeyer: Sure. So when we look at, you know, kind of that quarter three, quarter four, quarter one, we have shown the stabilization of those Medicare admissions. We do think that being on more payer contracts has helped us with that. But to your point, we've just started gearing up the new national MA. So I do think that will continue to help us be seen and has helped us be seen as a stronger provider to our referral sources. The goal is to continue to receive a very healthy payer mix from our referral sources.
Barbara Ann Jacobsmeyer: Sure. So when we look at, you know,
Speaker Change: Sure. So when we look at a.
Barbara Ann Jacobsmeyer: Has that quarter three quarter four quarter, one week, we have shown the stabilization of those Medicare admissions, we do think that being on more of the payer contracts has helped us with that but to your point. We've just started gearing up the new national MAA. So I do think that will continue to help us be seen and has helped us be seen as a as a stronger.
Barbara Ann Jacobsmeyer: Providers are referral sources. So the goal is to continue to receive a very healthy payer mix from our referral sources.
Barbara Ann Jacobsmeyer: Yeah.
Speaker Change: Okay. Thank you.
Barbara Ann Jacobsmeyer: Yeah.
Operator: Our next question comes from the line of Brian Tanquilut with Jefferies. Your line is open.
Speaker Change: Our next question comes from the line of.
Operator: Ryan.
Brian Gil Tanquilut: With Jefferies. Your line is open.
Operator: Hey, good morning. Thanks for taking the question. It's Jax Levin on for Brian.
Brian Gil Tanquilut: Hey, good morning, Thanks for taking the question Jack Lemmon after Brian appreciate.
Jax Levin: I appreciate all the color on the on the review and don't want to dig into the details there, but maybe just taking a step back and as you think about strategic priorities going forward.
Jax Levin: Appreciate all the color on the review and don't want to dig into the details there, but maybe just taking a step back. And as you think about strategic priorities going forward, coming out of the review, do you think there's any change there? Or are the sort of pillars of what you're trying to drive towards still the same?
Jax Levin: Coming out of the review do you think there's any change there or are you just sort of pillars of what youre trying to drive towards still the same.
Barbara Ann Jacobsmeyer: I think the pillars are still the same, but I do think that there are some things that we are going to be focused on from an innovation standpoint. We do now have our own data warehouse as we transition completely off of Encompass, so I think that's now going to allow us to have our own data to build our business intelligence tools. So there will be some focus on using some of that to help us as we look at things like intake, workflow, and other tools to help our team in the field.
Jax Levin: I think the pillars are still the same I do think that there's some things that we are going to be focused on from an innovation standpoint, we do now have our own data warehouse as we transition completely off of encompass so I think that now that allow us to have our own data to build our business intelligence tool. So there will be some focused on new.
Barbara Ann Jacobsmeyer: Using some of that to help us as we look at things like intake workflow.
Barbara Ann Jacobsmeyer: And other tools to help our team in the field.
Crissy Buchanan Carlisle: Got it. Okay, that's really helpful. And then Crissy, maybe just thinking about the balance sheet, cash generation looks pretty solid in the quarter. Can you just speak to sort of what the pathway is to de-lever and sort of how you're thinking about that on the multi-year look?
Speaker Change: Got it Okay. That's really helpful and then Chris maybe just thinking about the balance sheet.
Crissy Buchanan Carlisle: Cash generation looks pretty solid in the quarter can you just speak to sort of what the pathway is to delever and sort of how youre thinking about that on the <unk>.
Crissy: You're welcome.
Crissy Buchanan Carlisle: Yeah, sure. So stabilization of EBITDA and the required amortization of the term loan are expected to help us to continue to delever in 2024. You know, one of the biggest factors in that deleveraging from Q4 to Q1 was the fact that EBITDA stabilized. We continue to have strong free cash flow, as you mentioned, that allows us to make payments beyond the required amortization, which also results in lower interest expense, which in turn generates more free cash flow.
Crissy: Yeah sure so stabilization of EBITDA and the required amortization of the term loan are expected to help us to continue to delever in 2024.
Crissy Buchanan Carlisle: One of the biggest factors in that deleveraging from Q4 to Q1 with the fact that EBITDA stabilized.
Crissy Buchanan Carlisle: We continue to have strong free cash flow as you mentioned that allows us to make payments beyond the required amortization, which also results in lower interest expense, which in turn generates more free casually. So we believe we're getting ourselves into a my good cycle now that EBITDA has stabilized we fund operations without.
Crissy Buchanan Carlisle: So we believe we're getting ourselves into a good cycle now that EBITDA has stabilized, and we fund operations without drawing on the revolver. I want to remind everyone that we have only drawn on that revolver once in the fourth quarter of 2022 when we had over $50 million of stacked payments related to acquisitions and the deferred payroll tax from COVID. So we like where we're headed. I think one way to think about it is if you, you know, historically target a 50% free cash flow conversion, and then you have the EBITDA guidance range, that's how you can think about the cash flow we have to deliver. You know, consider two or three million of that free cash flow for the de Novos. And then the priority, of course, would be to use the rest for debt reduction.
Crissy Buchanan Carlisle: Drawing on the revolver I want to remind everyone that we have only drawn on that revolver. One in the fourth quarter of 2022, when we had over $50 million of stack payments related to acquisitions and the deferred payroll tax from Covid.
Crissy Buchanan Carlisle: So we like where we're headed I think one way to think about it is if you you know historically target of 50% free cash flow conversion and then you have the EBITDA guidance range. That's how you can think about the cash flow we have two.
Crissy Buchanan Carlisle: To delever.
Crissy Buchanan Carlisle: You know considered two or 3 million of that free cash flow for the de Novo's and then the priority of course would be to use the rest for debt reduction.
Operator: Got it. Really helpful. Thanks again.
Speaker Change: Got it really helpful. Thanks Kim.
Joanna Sylvia Gajuk: Our next question comes from the line of Joanna Gajuk with Bank of America.
Operator: Our next question comes from the line of Joanna <unk> with Bank of America. Your line is open.
Crissy Buchanan Carlisle: Hi, good morning. Thank you so much for taking the question. So I guess the follow-up here on your guidance, right? So how was the quota versus your internal? You said you kept your guidance, the range is pretty wide. So any update on your view around, you know, the variability between, you know, the low and the high end of the range?
Joanna Sylvia Gajuk: Hi, good morning. Thank you so much for taking the question.
Crissy Buchanan Carlisle: I guess the follow up here on the on your guidance I suppose how is the quarter versus your internal you said you are.
Crissy Buchanan Carlisle: You know you've kept your guidance the range is pretty wide. So any update on your view around you know the variability.
Crissy Buchanan Carlisle: I mean, you know the low and the high end of the range.
Crissy Buchanan Carlisle: I would say that there's no real update at this point, Joanna. As we mentioned previously, we think we're starting the year in a much better position, with those two national agreements that have better rates and that can help us be a better resource to those referral sources. You know, the key assumptions in the range continue to be Medicare as a percent of total home health revenue, the shift to payer innovation contracts, and then just hospice patient days growth. And I think we covered all of those in our comments.
Speaker Change: I would say that there's no real update at this point Joanna as we've mentioned previously we think we're starting the year in a much better.
Crissy Buchanan Carlisle: With those two national agreements that have better rates and that can help us be a better resource to those referral sources.
Crissy Buchanan Carlisle: You know the key assumptions in the range continued to be Medicare as a percent of total home health revenue I'm the shift to the payer innovation contract and then just hospice patient days growth and I think we covered all of those in her comments.
Crissy Buchanan Carlisle: And in regards to the cadence, you know, Q1 and Q4 tend to be our strongest quarters in regards to volumes because that's when patients are the sickest. They fall on the ice or they have flu-related symptoms and such and need our care. Q2 and Q3 do tend to be impacted a little bit by paid time off and vacation, both of our staff as well as our referral sources. And we think that, again, we're in a better position this year to manage through at least the PDO portion of our staff based on the success that we've had with recruitment and retention of our clinical teams.
Crissy Buchanan Carlisle: In regards to the cadence you know Q1, and Q4 tend to be our strongest quarters in regards to volumes because that's when you know patients or are the sickest. They fall on the ice or they they have flu related systems is such a need or care Q2, and Q3 due tend to be impacted a little bit by.
Crissy Buchanan Carlisle: Pay time off on vacation both of our stuff as well as our referral sources.
Crissy Buchanan Carlisle: And we think that again, we're in a better position this year to manage through at least the.
Crissy Buchanan Carlisle: Video portion of our staff.
Crissy Buchanan Carlisle: Just off the success that we've had with recruitment and retention of our clinical teams you know we've been reporting over 100 net new nursing hires for several consecutive quarters now so again, we feel good about our ability to.
Crissy Buchanan Carlisle: You know, we've been reporting over 100 net new nursing hires for several consecutive quarters now. And so, again, we feel good about our ability to reverse that trend going forward and that we'll have a moderate EBITDA bill throughout the year.
Crissy Buchanan Carlisle: Change that trend going forward.
Crissy Buchanan Carlisle: It will have a moderate EBITDA build throughout the year.
Joanna Sylvia Gajuk: Great, thanks for that. And if I may also follow up, I guess, or maybe you, but around your innovation, So when you negotiate these rates, I guess, so maybe that's separate from your new contracts, but I guess when you negotiate for existing contracts, because it sounds like there's also some of that happening where you try to improve the rates for some of these per-visit contracts. So first of all, like, is that the case?
Speaker Change: Great. Thanks, Thanks for that and if I may I'm also a follow up I guess or maybe you are back around beer innovation.
Joanna Sylvia Gajuk: Hum a plan where the contract.
Joanna Sylvia Gajuk: So when you negotiate these rates I guess, so maybe that's separate from your new contracts, but I guess when you negotiate for existing contracts because it sounds like there's also a.
Joanna Sylvia Gajuk: Some of that is happening and where you are trying to improve the rate for some of these per visit contracts, who are first of all and like you said. The case are you trying to do that too and if you do you know what kind of I guess rate increases are you getting if at all and then when you do that are you also trying to go too deep on the utilization.
Crissy Buchanan Carlisle: Are you trying to do that too? And if you do, you know what kind of, I guess, rate increases are you getting, if at all? And then when you do that, are you also trying to get some relief on utilization management, as in, you know, increasing the number of visits that are authorized by these MA plans? And then I guess somebody was trying to ask the question, like, you know, how much this pricing is improving on these low-paying contracts. Thank you. Sure. So, um, I would
Crissy Buchanan Carlisle: Management of ours, and you know increasing the number of visits that are auto rates, but these AR and MA plans.
Crissy Buchanan Carlisle: And then I guess somebody was trying to ask a question like you know how much you essentially the mispricing is improving on these low paying contracts. Thank you.
Speaker Change: Sure. So I would say that yes, we continue to negotiate and work on new contracts, but as we mentioned there is also a focus on renegotiation.
Crissy Buchanan Carlisle: Sure. So, I'm going to go ahead and get started. Okay. Great.
Crissy Buchanan Carlisle: I would say that yes, we continue to negotiate and work on new contracts. But, as we mentioned, there is also a focus on renegotiation. So the new contracts that we brought into payer innovation since 2022, though none of those are up for renegotiation yet. So our renegotiation is really focused around one large national plan and more smaller regional plans, many of those of which came through acquisitions over time when we go in for the renegotiation.
Crissy Buchanan Carlisle: The new contracts that we brought into the payer innovation since 2022, though none of those are up for renegotiation yet. So our renegotiation is really focused around one large national plan and more of a smaller regional plans of many of those of which came through acquisitions over time when we go in for the renegotiation So weird.
Crissy Buchanan Carlisle: Appropriate just as we do with new plans and that is trying to prioritize getting a episodic agreement. If we can and then if not to work better on the per visit rate I will tell you, though that you know one of the things that we're doing is sticking to our we need to have no more than that 25% to 30% or we know we're in a place where.
Crissy Buchanan Carlisle: So we approach it just as we do with new plans, and that is to try to prioritize getting an episodic agreement if we can. And then, if not, to work better on the per visit rate. I will tell you though, that one of the things that we're doing is sticking to our we need to have no more than that 25 to 30%. Or we would now be in a place where we will walk away; it is many times easier for our business development team members to say we are not in a contract than it is to not accept. So that's where we're at now. Now that we've built up good contracts, we can be a little bit more firm with the legacy.
Crissy Buchanan Carlisle: We will walk away. It has many time easier for our business development team members to say we are not in contract than it is to not accept so that's where we're at now now that we've built up the good contracts, we can be a little bit more firms are with the legacy ones.
Speaker Change: Great. Thank you so much.
Crissy Buchanan Carlisle: Hmm.
Operator: Our next question comes from the line of Ryan Langston with TD Cohen. Your line is open.
Crissy Buchanan Carlisle: Our next question comes from the line of Brian Weinstein with TD Cowen Your line is open.
Ryan M. Langston: Hi, good morning. Sounds like the candidate and nursing pool is I think, Barb, you might have set up 30%, which is good. I guess how to think about other types of clinical support staff like therapists or any of the others
Ryan M. Langston: Hi, good morning sounds like.
Ryan M. Langston: Candidate of nursing pool.
Ryan M. Langston: Barb, you Might've said up 30%, which is good.
Ryan M. Langston: I guess, how to think about other types of clinical supports ethics therapists or.
Ryan M. Langston: Any of them Mike.
Barbara Ann Jacobsmeyer: Sure, I would say we are back into really working to recruit therapy. Now that we have built out more of the frontline nursing to grow, we do need to add some therapy positions. Overall, we do well from a therapy recruitment and retention point of view. There are some key markets where it is more difficult, which tend to be more of your rural markets that don't have a lot of therapy schools around the area. So those areas are ones that we focus on to see if there are other ways that we can, you know, encourage to get the candidate pool. But when we look just from a national level, we do well in therapy recruitment.
Ryan M. Langston: Sure I would say we are back into really working to recruit therapy now that we have built out more of the frontline nursing are to grow we do need to add some therapy position overall.
Barbara Ann Jacobsmeyer: Over all we do well from a therapy recruitment and retention there are some key markets, where it is more difficult tends to be more of your rural markets that don't have a lot of therapy schools around the area. So those areas are ones that we focus on to see if there's other ways that we can you know encouraged to get the candidate pool, but when we looked at from a national.
Barbara Ann Jacobsmeyer: Level, we do well on therapy recruitment and retention.
Barbara Ann Jacobsmeyer: Yeah.
Ryan M. Langston: Great. And just real quick, I had a little trouble getting into the call. Uh, it looked like AR was up a little bit. Uh, Chrissy, I think you said in the fourth quarter about just some timing impacts, but it looks up about 10 million sequentially. Was there any impact from change? Uh, Change Disruption there or anything else to call out? Yeah, well, while change is not our primary focus,
Speaker Change: Greg I'm, just real quick I had a little trouble getting into the call.
Ryan M. Langston: Like Hey, our was up a little bit Ah Chrissy I think you've said in the fourth quarter, just some timing impacts, but it looks up about 10 million sequentially was there any impact from change.
Ryan M. Langston: The change disruption, there or anything else to call out.
Crissy Buchanan Carlisle: Yeah, while Change is not our primary clearinghouse and we don't directly use them, some of our payers do, and so we did have a period of about 30 days where payment delays resulted as a result of the Change health incident. We are getting those payments, just not as quickly as usual, and some of them are coming in via hard copy checks versus some of the automated methods as well. The other, you know, increase that we're seeing is that, again, as Medicare Advantage continues to grow, Medicare Advantage does take longer to bill and collect. There's just an administrative burden associated with it, but we do have some things underway with our revenue cycle strategy and team. I expect to see some movement on that in the coming quarter.
Ryan M. Langston: Yeah, well, while change is not our primary clearing house and we don't directly use than some of our payers do.
Crissy Buchanan Carlisle: And so we did have a period of about 30 days, where payment delays resulted as a result of this change Hill incident, we are getting those payments just not as quickly as is usual in.
Crissy Buchanan Carlisle: And some of them are coming in via hard copy checks versus some of the automated method as well.
Crissy Buchanan Carlisle: The other increase that we're seeing is just again as Medicare advantage continues to grow Medicare advantage does take longer to build and collect there's just an administrative burden associated with it.
Crissy Buchanan Carlisle: But we do have some things underway with our revenue cycle strategy and team.
Crissy Buchanan Carlisle: I expect to see some movement on that in the coming quarters.
Crissy Buchanan Carlisle: Oh.
Speaker Change: Okay. Thank you.
Crissy Buchanan Carlisle: Yeah.
Crissy Buchanan Carlisle: Thank you. I will now turn the call back over to Crissy Carlisle for some closing remarks.
Crissy Buchanan Carlisle: Thank you I will now call turn the call back over to Crissy Carlisle for some closing remarks.
Crissy Buchanan Carlisle: If you have additional questions, please email investorrelations at ehab.com. Thank you again for joining today's call.
Crissy Buchanan Carlisle: If you have additional questions. Please email investor relations at <unk> Dot com.
Operator: This concludes today's conference call. You may now disconnect. Have a good day.
Crissy Buchanan Carlisle: You again for joining today's call.
Crissy Buchanan Carlisle: This concludes today's conference call you may now disconnect have a good day.
Operator: Okay.
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