Q1 2025 Enhabit Inc Earnings Call
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Operator: Hello, good morning, everyone, and welcome to Enhabit Home Health and Hospices First Quarter 2025 Earnings Conference Call. At this time, I would 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.
Speaker Change: Hello, Good morning, everyone and welcome to and had to home health and Foster as first quarter 2025 earnings Conference call.
Speaker Change: At this time I would like to inform all participants that their lines will be in a listen only mode.
Speaker Change: After the Speakers' remarks, there will be a question and actually period.
Operator: You will be limited to one question and one follow-up question. Today's conference call is being recorded.
Speaker Change: You will be limited to one question and one follow up question.
Speaker Change: Today's conference call is being recorded.
Operator: If you have any objections, you may disconnect at this time.
Speaker Change: If you have any objections you may disconnect at this time.
Jobie Williams: I will now turn the call over to Jobie Williams, Enhabit Senior Vice President and Treasurer. Mr. Williams, please go ahead. Thank you, operator, and good morning, everyone. Thank you for joining our call today.
Speaker Change: I will now turn the call over to Joe be bullish and had senior Vice President and Treasurer. Mr. Williams. Please go ahead.
Williams: Thank you operator, and good morning, everyone. Thank you for joining our call today.
Jobie Williams: With me on the call is Barb Jacobsmeyer, President and Chief Executive Officer. and Ryan Solomon, Chief Financial Officer.
Jacob Meier: With me on the call its Jacob Meier, President and Chief Executive Officer, and Ryan Sullivan, Chief Financial Officer.
Jobie Williams: 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 investors.ehab.com. On page two of the supplemental information, you will find the Safe Harbor Statements, which are also set forth on the last page of the earnings During the call, we will make four looking statements which are subject to risk and uncertainty, 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 filing, including our annual report on Form 2.
Jacob Meier: Before we begin 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 investors <unk> com.
Jacob Meier: On page two of the supplemental information you will find the safe Harbor statements, which are also set forth on the last page of the earnings release.
Jacob Meier: During the call we will make forward looking statements, which are subject to risks and uncertainties many of which are beyond our control.
Jacob Meier: Certain risks and uncertainties that could cause actual results to differ materially from our projections estimates and expectations are discussed in our SEC filings.
Annual report on Form 10-K.
Jobie Williams: which are available on our website. We encourage you to read 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.
Jacob Meier: <unk> on our website.
Jacob Meier: We encourage you to read them.
Jacob Meier: 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 out.
As of today we.
Jobie Williams: We do not undertake the duty to update these for looking to take Our supplemental information and discussion on this call will include certain non-GAAP financial measures.
Jacob Meier: We do not undertake a duty to update these forward looking statements.
Jacob Meier: Our supplemental information and discussion on this call will include certain non-GAAP financial measures.
Barbara Jacobsmeyer: For such measures, reconciliation to the most directly comparable GAP measure is available at the end of the Supplemental Information and the Earnings With that, I'll turn the call over to Barbara.
Jacob Meier: Such measures reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information and earnings release.
Barb: That I will turn the call over to Barb.
Barbara Jacobsmeyer: Thanks, Jobie. Good morning and thanks for joining.
Barb: Thanks Debbie.
Barb: Thanks for joining us.
Barbara Jacobsmeyer: In our year-end earnings call, I outlined how executing on 2024 strategies laid a promising foundation for 2025. Our team has done a tremendous job in the first quarter building on that foundation. Our first quarter home health performance is the result of executing on our payer contract initiative. We started 2025 in a stronger position with our payer contracts, and we're able to fully focus on growth. Our admissions from Q4 to Q1 increased by 8.1%, with fee-for-service also growing 4% sequentially. Our year-over-year admission growth was up 0.7%. When normalized for leaf year and the impact of our closed branches, growth is 2.5%.
Barb: And our year end call I outlined.
Barb: Getting out of 2024 strategy latest promising foundation for 2025.
Barb: Our team has done a tremendous job in the first quarter building Foundation.
Barb: Our first quarter home health performance is the result of executing on our payer contracts initiative.
Barb: We started 2025 in a stronger position with our payer contracts and we're able to fully focus on credits.
Barb: Our admissions from quarter four to quarter, one increased by eight 1%.
Barb: Fee for service also growing 4% sequentially.
Barb: Our year over year emission growth was up seven.
Barb: 7%.
Barb: When normalized for leap here and part of our closed branches.
Barb: Two 5%.
Barbara Jacobsmeyer: Our total home health census was down 3.4% year over year due to a low entry point in January. Sequentially, total census was up 3.7%. Census growth occurred each month in Quarter 1, exiting March at an average daily census 9.8% higher than January. Our non-Medicare admissions were up 7.4% year-over-year, mainly driven by our payer innovation contract. We increased the percentage of home health visits in payer innovation contracts. In the first quarter of 2024, 38% of non-Medicare visits were in payer innovation contracts. That rate grew to 44% in the first quarter of 2025. Payor Mixed Progress to Payor Innovation Contracts resulted in a 7.6% improvement year-over-year in non-Medicare revenue per visit.
Barb: Our total home health census was down two 4% year over year equal a low entry point in January.
Barb: Sequentially total census was up three 7%.
Barb: Each month and quarter, one exiting March average daily census, nine 8% higher than January.
Barb: Our non Medicare admissions were up seven 4% year over year, mainly driven by a payer integration contracts.
Barb: We increased the percentage of home health visits.
Barb: Based on contracts.
Barb: In the first quarter of 2024, 38% of non Medicare or impair renovation contract.
Barb: That rate grew to 44% in the first quarter of 2025.
Barb: Hey on its progress to pair innovation contracts resulted in a seven 6% improvement year over year in non Medicare revenue per visit.
Barbara Jacobsmeyer: A just-right care plan for our patients continues to be an area of focus. With over two-thirds of our payer innovation contracts in episodic arrangements, managing our visits per episode while maintaining high-quality outcomes is an important part of our strategy. Total visits per episode declined 6.7% from 14.9 in quarter one of 2024 to 13.9 in quarter one 2025.
Barb: It just right care plan for our patients continues to be an area of focus.
Barb: So about two thirds of our payer innovation concepts and episodic arrangements managing our visits per episode, while maintaining high quality outcomes is an important part of our strategy.
Barb: Total visits per episode declined six 7% from $14 nine in quarter one of 2024.
Barb: Two nine in quarter, one 2025.
Barbara Jacobsmeyer: Continued progress with managing BPE creates additional clinical capacity, as evidenced by our decrease in cost per day, year over year, and Moving now to our hospice segment, the sequential monthly census growth that started in January 2024 has continued throughout the first quarter of 2025. Total admissions grew 8% year over year, with same store ups 5.2%. Census group 12.3% with 10.6% same store growth. Our admission departments continue to focus on timely responses to our referral sources, driving a 310-basis-point improvement year-over-year in referrals to admission conversion. Census growth continues to create leverage on the fixed cost we added in 2023, resulting in a cost per day decrease of 0.8% year over year and a 2.7% decline sequentially.
Barb: Continued progress with managing GTE three additional clinical capacity.
Barb: Evidenced by a decrease in cost per day year over year and sequentially.
Barb: Moving now to our hospital segment the sequential monthly census growth that started in January 2024 has continued throughout the first quarter of 2025.
Barb: Total admissions grew 8% year over year with same store up five 2%.
Barb: That's it grew 12, 3% with 10, 6% same store growth.
Barb: Our mission departments continue to focus on timely responses to our referral sources driving a 310 basis point improvement year over year and referral to admission conversion.
Barb: Growth continues to create leverage on the fixed cost we added in 2023, resulting in a cost per day decrease.
Barb: One 8% year over year, and a two 7% decline sequentially.
Barbara Jacobsmeyer: To complement our organic growth strategy, our de novo strategy is positively impacting total growth. In quarter one, we open one hospice location and have 13 projects underway. Turning now to our cost structure strategy update, as anticipated, we completed the transition of all branches to the outsourced coding resource in the first quarter, which we estimate will deliver 1.5 million in cost savings for the remainder of 2025. Additionally, seven branches were closed or consolidated in the first quarter, and four remain on track to be closed by the end of quarter two, 2025. We continue to focus on new technologies targeted at improving efficiency, productivity, and cost reduction.
Barb: To complement our organic growth strategy, our de Novo strategy positively impacting total growth.
Barb: One we opened one hospice location and have 13 projects underway.
Barb: Turning now to our cost structure strategy update.
Barb: And as anticipated we completed the transition of all branches to the outsourced coding resource in the first quarter, which we estimate will deliver $1 5 million in cost savings for the remainder of 2025.
Barb: Additionally, seven branches were closed or consolidated in the first quarter and remain on track to be closed by the end of quarter two 2025.
Barb: We continue to focus on new technologies, pocketed, including efficiency productivity and cost reduction.
Barbara Jacobsmeyer: We are currently piloting two internally developed apps. One of these is designed to improve clinician and patient communication related to scheduled visits. The other is designed to improve communication between our business development and operation team members regarding patient referral to admission process and status.
Barb: We are currently piloting two internally developed at <unk>.
Barb: One of these is designed to improve clinician and patient communication related to scheduled visits.
Barb: The other is designed to improve communications between our business development and operation team members regarding patient referral to admission process and Seattle.
Barbara Jacobsmeyer: On the human capital front, we just completed our annual employee engagement survey with results above the health care benefit. There were two drivers to our engagement success. Employees Finding Their Work Meaningful, and collaborating with colleagues to deliver quality outcomes for our patients. Survey results are critical feedback to help focus management on priorities identified by our staff as important to their success and continued engagement. We are proud of our inhabit culture and the impact it has on our team and on our patients.
Barb: On the human capital.
Barb: <unk> completed our annual employee engagement survey with results above the health care benchmark.
Barb: There were key drivers to our engagement success Oh.
Barb: Hawaii, finding their work meaningful.
Barb: And collaborating with colleagues to deliver quality outcomes for our patients.
Barb: So their results are critical feedback to help focus management on priorities identified by our staff is important to their success and continued engagement.
Barb: We are proud of our habit culture and the impact it has on our team and our patients and their families.
Ryan Solomon: And now I will turn it over to Ryan, who will cover the financial results of quarter one. Thanks, Barb. Q1 2025 financial performance delivered strong sequential growth, margin expansion, and continued deleveraging of our balance Execution in the quarter on our broader 2025 strategic priorities has enabled a strong start to 2025. A few highlights before reviewing the segments include the following. Home Health Performance returned the segment to sequential profitability growth in Q1, with segment EBITDA improving 7.9% sequentially, while also setting the stage for continued growth in 2025. Hospice momentum continues to be very strong, delivering year-over-year segment EBITDA growth of 65% on both ADC volume growth and margin expansion in Q1.
Barb: And now I will turn it over to Ray who will cover the financial results of quarter one.
Ray: Thanks, Barb Q1, 2025 financial performance delivered strong sequential growth margin expansion and continued deleveraging of our balance sheet.
Ray: Execution in the quarter on our broader 2025 strategic priorities has enabled a strong start to 2025.
Ray: A few highlights before reviewing the segments include the following.
Ray: Home Health performance return the segment to sequential profitability growth in Q1 with segment EBITDA, improving seven 9% sequentially. While also setting the stage for continued growth in 2025.
Ray: Positive momentum continues to be very strong delivering year over year segment EBITDA growth of 65% above ADC volume growth and margin expansion in Q1.
Ryan Solomon: The final highlight is our Q1 2025 leverage ratio of 4.4 times. This will allow us to benefit from improved pricing under our existing agreement and provide additional flexibility as we now exit our covenant relief period restrictions under the agreement a quarter earlier than required. Shifting to our detailed Q1 consolidated results, in the first quarter, consolidated net revenue was $259.9 million, an increase sequentially of $1.7 million or 0.7% quarter over quarter, while a decrease of $2.5 million or 1.0% year over year. Consolidated sequential revenue improvement reflects growth in both home health and hospice segments, with particular strength resulting from continued strong momentum in our hospice segments on both average daily census volume growth and favorable unit revenue.
Ray: The final highlight is our Q1 2025 leverage ratio of four four times. This will allow us to benefit from improved pricing under our existing agreement and provide additional flexibility as we now exit our covenant relief period restrictions under the agreement a quarter earlier than required.
Ray: Shifting to our detailed Q1 consolidated results in the first quarter consolidated net revenue was $259 9 million, an increase sequentially of $1 7 million or 0.7% quarter over quarter, while a decrease of $2 5 million or 1.0% year over year.
Ray: Consolidated sequential revenue improvement reflects growth in both home health and hospice segments with particular strength, resulting from continued strong momentum in our hospice segment.
Ray: <unk> average daily census, volume growth and favorable unit revenue.
Ryan Solomon: Consolidated revenue growth in the quarter translated into improved profitability sequentially with consolidated adjusted EBITDA of $26.6 million in the quarter, an increase sequentially of $1.5 million or 6.0%, while growing to the prior year by $1.3 million or 5.1%, with overall EBITDA margin as a percentage of revenue coming in at 10.2%, an increase of 60 basis points to the prior year.
Ray: Consolidated revenue growth in the quarter translated into improved profitability sequentially.
Ray: With consolidated adjusted EBITDA of $26 6 million in the quarter, an increase sequentially of $1 5 million or 6.0%, while growing to the prior year by $1 3 million or five 1% with overall EBITDA margin as a percentage of revenue coming in at 10, 2%.
Ray: An increase of 60 basis points to the prior year.
Ryan Solomon: For more information visit www.FEMA.gov Now shifting to our home health segment, performance for Q1. Revenue came in at $200.6 million, an increase of $0.2 million, or 0.1%. Volumes were up sequentially with a 3.7% increase in average daily census, somewhat muted by fewer calendar days in the quarter, leading to overall patient day volume growth of 1.4%. We saw growth in all payer types sequentially, with outsized growth in non-episodic volumes in the quarter, as we saw the benefit of a key national contract signed in December 2024. The growth in average daily census in the quarter allowed us to deliver a cost per patient day improvement of 3.1% sequentially as we were able to improve clinical staff productivity on the additional volume.
Ray: Now shifting to our home health segment performance for Q1 <unk>.
Ray: Revenue came in at $200 6 million, an increase of <unk> 2 million or 0.1%.
Ray: Volumes were up sequentially with a three 7% increase in average daily census, somewhat muted by fewer calendar days in the quarter, leading to overall patient day volume growth of one 4% we.
Ray: We saw growth in all payer types sequentially with outsized growth in non episodic volumes in the quarter as we saw the benefit of a key national contract signed in December 2024.
Ray: The growth in average daily census in the quarter allowed us to deliver a cost per patient day improvement of three 1% sequentially as we were able to improve clinical staff productivity on the additional volume.
Ryan Solomon: Home Health Adjusted EBITDA totaled $38.3 million in Q1, reflecting a sequential increase of $2.8 million, or 7.9%. The breakdown of the $2.8 million of sequential improvement reflects $1.3 million related to volume, yield favorable by $1.0 million, and favorable sales, ops, back office, and G&A related costs of $0.5 million. Q1 Gross Margin as a Percentage of Revenue came in at 48.5%, an improvement sequentially of 110 basis points. As we delivered lower cost per patient day on improving clinical staff productivity as we grew volumes in the We were able to pull this gross margin expansion through to adjusted EBITDA margin, finishing the quarter at 19.1%, an improvement of 140 basis points sequentially.
Ray: Home health adjusted EBITDA totaled $38 3 million in Q1, reflecting a sequential increase of $2 8 million or seven 9%.
Ray: The breakdown of the $2 8 million a sequential improvement reflects $1 $3 million related to volume yield favorable by 1.0 million and favorable sales ops back office and G&A related costs zero point $5 million.
Ray: Q1 gross margin as a percentage of revenue came in at 48, 5% an improvement sequentially of 110 basis points as we delivered lower cost per patient day on improving clinical staff productivity as we grew volumes in the quarter.
Ray: We were able to pull this gross margin expansion through to adjusted EBITDA margin, finishing the quarter at 19, 1% an improvement of 140 basis points sequentially.
Ryan Solomon: A few key items to highlight in home health outside of our broader revenue and adjusted EBITDA performance include. A key priority in 2025 was slowing the rate of decline in our Medicare patient volume. Our teams were successful in executing on this strategy in the quarter, with Medicare ADC improving sequentially in Q1 to $20,110, an improvement of 1.5% on sequential admission growth, of 4% representing back-to-back quarters of growth in this key metric. Combining ADC growth with our continued focus on optimizing productivity of our clinical staff and lower visits per episode allowed us to achieve a lower cost per patient day than what we saw in any quarter throughout full year 2024.
Ray: A few key items to highlight in home health outside of our broader revenue and adjusted EBITDA performance include.
Ray: A key priority in 2005 was slowing the rate of decline in our Medicare patient volume.
Ray: Our teams were successful in executing on this strategy in the quarter with Medicare ADC improving sequentially in Q1 to 20 110 in.
Ray: An improvement of one 5% on sequential admission growth up 4% representing in back to back quarters of growth in this key metric.
Ray: Combining an ADC growth with our continued focus on optimizing productivity of our clinical staff and lower visits per episode allowed us to achieve a lower cost per patient day, and what we saw in any quarter throughout full year 2024.
Ryan Solomon: Now shifting to our hospice. Revenue came in at $59.3 million, reflecting strong growth, both sequentially increasing $1.5 million or 2.6%, and to prior year increasing $10.1 million or 20.5%. Volume growth remains strong with average daily census totaling 3,809 in Q1, an improvement of 2.1% sequentially and 12.3% year over year.
Ray: Now shifting to our hospice segment.
Ray: Revenue came in at $59 3 million, reflecting strong growth both sequentially, increasing $1 5 million or two 6% enter prior year, increasing $10 1 million or 25%.
Ray: Growth remained strong with average daily census, totaling 38 nine in Q1, an improvement of two 1% sequentially and 12, 3% year over year.
Ryan Solomon: Q1 2025 unit revenue per patient day benefited from the reversal of aged Medicare cap liability of approximately $1.0 million, which, after normalizing for this benefit in the quarter, we would have seen relatively flat unit revenues. Hospice adjusted EBITDA totaled $15.0 million in Q1, reflecting a sequential increase of $1.7 million or 12.8% on increased revenues combined with gross margin expansion of 260 basis points as we saw improved unit cost per patient day on increased volume. A few key items to highlight in hospice outside of broader revenue and adjusted EBITDA performance include I also suggest that EBITDA margin as a percentage of revenue at 25.3% in Q1 reflects five straight quarters of sequential improvement.
Ray: Q1, 2025 unit revenue per patient day benefited from the reversal of aged Medicare cap liability of approximately 1.0 million, which after normalizing for this benefit in the quarter, we would've seen relatively flat unit revenues sequentially.
Ray: <unk> adjusted EBITDA totaled $15.0 million in Q1, reflecting a sequential increase of $1 7 million or 12, 8% on increased revenues combined with gross margin expansion.
Ray: 260 basis points as we saw improved unit costs per patient day on increased volume.
Ray: A few key items to highlight in hospice outside of broader revenue and adjusted EBITDA performance include.
Ray: <unk> adjusted EBITDA margin as a percentage of revenue at 25, 3% in Q1 reflects five straight quarters of sequential improvement.
Ryan Solomon: and the highest adjusted EBITDA as a percentage of revenue for this segment post-spend as our operational leadership continues to realize leveraged benefits from average daily census growth. Growth in average daily census combined with a lower average length of stay sequentially and year-over-year continues to lower our overall cap liability risk.
Ray: And the highest adjusted EBITDA as a percentage of revenue for this segment post spin as our operational leadership continues to realize leverage benefit from average daily census growth.
Ray: Growth in average daily census, combined with a lower average length of stay sequentially and year over year continues to lower our overall cap liability risks.
Ryan Solomon: Shifting to our home office and general and administrative expenses totaled $26.7 million or 10.3% of revenues in Q1. a decrease of 0.3 million or 1.1% year over year. This decrease reflects targeted cost savings initiatives somewhat offset by merit and other inflationary increases year-over-year.
Ray: Shifting to our home office and general and administrative expenses totaled $26 7 million or 10, 3% of revenues in Q1.
Ray: A decrease of <unk> 3 million or one 1% year over year.
Ray: This decrease reflects targeted cost savings initiatives somewhat offset by merit and other inflationary increases year over year.
Ryan Solomon: Transitioning now to the balance sheet and cash flow.
Ray: Transitioning now to the balance sheet and cash flow.
Ryan Solomon: A key strategic priority in 2025 is using free cash flow to continue to leverage our balance sheet. In Q1, we generated approximately $17 million of free cash flow, a 63.5% free cash flow conversion rate. During the quarter, we reduced our overall bank debt by $25 million. We did this through the combination of free cash flow generation and utilization of $20 million in proceeds from the sale of our investment interest in Metallogy. We ended the quarter with approximately $40 million in cash, a $12 million sequential improvement. Additionally, our liquidity increased approximately $30 million sequentially to $111 million.
A key strategic priority in 2025 is using free cash flow to continue to deleverage our balance sheet.
Ray: In Q1, we generated approximately $17 million of free cash flow of 63, 5% free cash flow conversion rate.
Ray: During the quarter, we reduced our overall bank debt by $25 million.
Ray: We did this through the combination of free cash flow generation and utilization of $20 million in proceeds from the sale of our investment interest in Metalogic.
Ray: We ended the quarter with approximately $40 million in cash a $12 million sequential improvement.
Ray: Additionally, our liquidity increased approximately $30 million sequentially to $111 million.
Ryan Solomon: Improved profitability, coupled with these balance sheet improvements, results in a leverage ratio now of 4.4 times, which is below our covenant of 4.5.
Ray: Improved profitability, coupled with deep balance sheet improvement results in a leverage ratio now of four four times, which is below our covenant of four five times.
Ryan Solomon: Later today, we will deliver the Q1 Covenant Certificate to our lender group, which will effectively end the covenant relief period we entered in Q4 2023. Since Q4 2023, we have successfully lowered our leverage by one full term. A meaningful benefit of exiting the release period is improved pricing under our existing agreement and added flexibility around tuck-in We remain committed to strengthening our balance sheet and improving profitability.
Ray: Later today, we will deliver the Q1 covenant certificate to our lender group, which will effectively in the covenant relief period, we entered in Q4 2023.
Ray: Since Q4 2023, we have successfully lowered our leverage by one full turn.
Ray: A meaningful benefit of exiting the relief period is improved pricing under our existing agreement and added flexibility around tuck in acquisitions.
Ray: We remain committed to strengthening our balance sheet and improving profitability.
Ryan Solomon: Now, let's briefly turn to guidance based on our consolidated first quarter results and the momentum in the business. We reaffirm our 2025 guidance.
Ray: Now, let's briefly turn to guidance based on our consolidated first quarter results and the momentum in the business, we reaffirm our 2025 guidance. Thank.
Ryan Solomon: Thank you for the time today.
Ray: Thank you for your time today, operator could you. Please open the line for questions.
Operator: Operator, could you please open the line for questions? Thank you. If you would like to ask a question, please press star and the number one on your telephone keypad.
Ray: Thank you.
Ray: If you would like to ask a question. Please press star and the number one on your telephone keypad.
Brian Tanquilut: And with our first question, this comes from the line of Brian Tanquilut from Jefferies. The line's open. Hi, good morning, and congrats on the quarter.
Speaker Change: And with your first question. This comes from the line of Brian <unk> from Jefferies.
Speaker Change: Your line is open.
Speaker Change: Hi, good morning, and congrats on the quarter.
Barbara Jacobsmeyer: Barb, maybe as I think about the performance in Q1, and as we think about the United contract coming in, I mean, how are you thinking about the ramp in further volume growth within the non-Medicare book of business, especially as we give consideration to, in theory, volumes coming through that specific client? Sure. So, well, I think first, you know, just to note that, you know, obviously the goal of the field is really to balance that admissions to make sure we maintain a very healthy payer mix. When we look at, you know, obviously we had, you know, negative growth year over year in Medicare.
Speaker Change: Bart maybe as I think about the performance in Q1.
Speaker Change: And then as we think about the United contract coming in I mean, how are you thinking about the ramp.
Speaker Change: Further volume growth within the non Medicare book of business, especially as we give consideration to.
Speaker Change: <unk> volumes coming through that specific clients.
Speaker Change: Sure. So well I think first just to note that obviously the goal of the field is really to balance that admissions to make sure we maintain a very healthy payor mix when.
Speaker Change: When we look at you know, obviously, we had negative growth year over year and Medicare areas that we positively girly, a payer innovation and and some of the other contracts outside of payer innovation payer innovation was 82% of that positive growth. So it really shows that the field is doing a good job balancing that.
Barbara Jacobsmeyer: The areas that we positively grew were payer innovation and some of the other contracts outside of payer innovation. And payer innovation was 82% of that positive growth. So, you know, it really shows that the field is doing a good job balancing that.
Barbara Jacobsmeyer: The focus now really is now continuing now our hiring so that we can continue to improve that average life census and those admissions. Got it.
Speaker Change: The focus now really is now continuing now our hiring so that we can continue to improve that that average daily census, and those admissions.
Speaker Change: Got it and then as I think about the labor profile or the labor market in the March.
Barbara Jacobsmeyer: And then as I think about the labor profile or the labor market in the market, you know, in the business lines that you run, how should we be thinking about the kind of like the inflation expectation for the rest of the year? Sure, so we we do believe that we're kind of back to that, you know, normal of that, you know, two to 3% from a salary market and merit. There are some markets where it is becoming a little bit more difficult. And we're going to we're focusing on those at a market level to see if there's additional compensation adjustments that need to occur.
Speaker Change: The business lines that you run how should we be thinking about you kind of like the inflation expectation for the rest of the year.
Speaker Change: Sure. So we do believe that we're kind of back to that normal of that 2% to 3% and for Mustang.
Speaker Change: My salary market and merit there are some markets, where is becoming a little bit more difficult and we're getting that we're focusing on those at a market level to see if there's additional compensation adjustments that need to occur.
Ryan Solomon: And Brian, with that, I think we're also demonstrating the ability with normalized market rates to build capacity. Building on Barb's point earlier, we were able to grow our end capacity from December to March by approximately 4%. So we're really feeling good about the market normalizing and then the ability to build capacity behind that to set us up for growth through the balance.
Speaker Change: And Brian with that I think we're also demonstrating the ability with normalized market rates to build capacity building on Bob's point earlier, we were able to grow our incapacity from December to March by approximately 4%. So we're really feeling good about the market normalizing and then the ability to build capacity behind that to set.
Speaker Change: US up for growth through the balance of the year.
Unknown Executive: Perfect.
Speaker Change: Perfect. Thank you.
Unknown Executive: Thank you.
Speaker Change: Thank you.
A.J. Rice: Our next question comes from the line of A.J. Rice from UBS. The line's open.
Speaker Change: Our next question comes from the line of a J rice from UBS.
Speaker Change: Your line is open.
Barbara Jacobsmeyer: Hi, everybody. First on the hospice side, obviously, the ADC growth has been, is really good there. What, is that you specifically, initiatives you're putting on gaining share, or do you think there's underlying, you know, improvement in the overall market that's somehow helping drive that? I think it's a combination. I mean, our referrals were up in first quarter year over year about 3%. But if you recall, last year, we put in regional admissions departments so that we can have a very quick and timely answer to our referral sources. I do think that has helped the conversion rate.
Speaker Change: Hi, everybody.
Speaker Change: First on the Omaha.
Speaker Change: Excluding the ADC growth has been really good there.
Speaker Change: Is that used specifically our initiatives you are putting on.
Speaker Change: Gaining share or do you think is underlying.
Speaker Change: <unk> in the overall market, but somehow helping drive that.
Speaker Change: I think it's a combination I mean, our referrals were up in first quarter year over year about 3%, but if you recall last year, we put in regional admissions apartments. So that we can have a very quick and timely answer to our referral sources I do think that has helped our conversion rate our conversion rate was up 310 basis point.
Barbara Jacobsmeyer: Our conversion rate was up 310 basis points. Our conversion rate is, you know, 79%. So it was nice, strong conversion rate on those referrals. So I think it is a combination of the referrals, but also on some of the work that we put into that timely response. Okay.
Speaker Change: Our conversion rate is 79%. So it was a nice strong conversion rate on those referrals. So I think it is a combination of the referrals, but also on some of the work that we've put into that timely response.
Speaker Change: Okay, and then maybe obviously one of the.
Barbara Jacobsmeyer: And then maybe, obviously, one of the areas on home health is your business per episode continues to trend in a good direction there. Maybe flesh out some of the dynamics behind that. Are the newer contracts allowing you more flexibility on business per episode? Are there other things you're doing that are driving that? The continued use of Metallogix PULSE has been the critical piece to the visit per episode, you know, really making sure that we're giving those higher number of visits to the higher acuity patients and moving visits away from patients that, you know, either have less acuity or that have progressed quicker than anticipated and really adjusting that plan of care so that both can either be moved to a new patient or to a patient of higher acuity.
Speaker Change: Arizona Home Health is your visits per episode continues to.
Speaker Change: The trend in a good direction there maybe.
Speaker Change: Some of the dynamics behind that oven.
Speaker Change: Newer contracts, allowing them more flexibility.
Speaker Change: And then for episodes are there other things you're doing that are driving that.
Speaker Change: The continued use of metal Isaacs pulse has been a critical piece to the visit per episode really making sure that we're getting those higher number of visits to the higher acuity patients and living visits away from patients that either have less acuity or that have progressed quicker than anticipated and really adjusting that plan of care. So that those can eat.
Speaker Change: There'll be a move to a new patient or to a patient of higher acuity. So it's that continued focus on the biologics pulse tool at the field level.
Barbara Jacobsmeyer: So it's that continued focus on the Metallogix PULSE tool at the field level.
Barbara Jacobsmeyer: Okay, all right. Are you pretty much fully penetrated on the metalogics? Just to put a finer point on that? Yeah, so that's in all of the branches, and we continue to, you know, work with the branch directors to make sure that it's being utilized as intended. Okay.
Speaker Change: Okay Alright.
Speaker Change: Are you pretty much will you penetrated on the Metalogic right.
Speaker Change: Minor point on there.
Speaker Change: Yeah. So that's in all of the branches and we continue to work with the branch directors to make sure that it's being utilized as intended.
Speaker Change: Okay, alright, thanks, a lot. Thank you.
Unknown Executive: All right.
Unknown Executive: Thanks a lot. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you art.
Ryan Langston: Our next question comes from the line of Ryan Langston from TD Cowan. The line's open. Great, thank you. Sticking with hospice, you know, obviously nice growth cost per patient day down 80 bps.
Speaker Change: Our next question comes from the line of Ryan Langston from TD Count.
Speaker Change: Your line is open.
Ryan Langston: Great. Thank you are sticking with hospice, obviously nice growth cost per patient day down 80 bps I know you've centralize some of the operations. There I guess, how much ability is left to sort of sort of leverage those operations and I mean, its ADC keeps growing nicely like it really has at some point you got to make sort of a step investment in there.
Ryan Solomon: I know you've centralized some of the operations there, I guess, how much ability is left to sort of sort of leverage those operations? And I mean, if ADC keeps growing nicely, like it really has, at some point, you have to make sort of a step investment in those operations just to support all the Yeah, and Ryan, good morning. Thanks for the question. Yeah, I think ultimately, you know, as we think about that, we've done a really good job, to your point of really creating the leverage and kind of improvement and profitability. You know, I think as far as the, you know, investment and kind of how do we think about that going forward?
Speaker Change: Operations just to support all this new growth.
Speaker Change: Yeah.
Speaker Change: Brian Good morning. Thanks for the question, Yes, I think ultimately as we think about that we've done a really good job to your point that are really creating the leverage and kind of improvement in profitability.
Speaker Change: I think as far as the investment and kind of how do we think about that going forward.
Ryan Solomon: You know, when we look at the margin profile was really healthy in Q1. You know, we think that we've started to kind of, you know, fully, you know, generate the leverage profile on the volume. There will be, you know, what I'll call minor incremental investments as we kind of go through those step function growth phases, but we wouldn't anticipate a material deviation from the margin profile that we saw, you know, really in Q4, continued into Q1. So we'll continue to monitor that, but it feels like we're in a pretty good glide slope from an overall margin profile along with the growth trajectory that we're on.
Speaker Change: When we look at the margin profile was really healthy in Q1.
Speaker Change: We think that we started to kind of fully.
Speaker Change: Generate the leverage profile on the volume there will be what I'll call minor incremental investments as we kind of go through those step function growth phases, but we wouldn't anticipate a minute.
Speaker Change: Material deviation from the margin profile that we saw really in Q4 continued into Q1.
Speaker Change: So we will continue to monitor that but it feels like we're in a pretty good.
Speaker Change: Cash flow from an overall margin profile, along with the growth trajectory that we're on.
Unknown Executive: Got it.
Speaker Change: Got it and then just you know obviously the growth has been very impressive I think it's 14 months of straight ADC growth in hospice I guess, where are you running from a capacity and sort of productivity standpoint in terms of sort of on the ground labor and I guess is there any reason, we shouldn't sort of assume that this ADC growth won't continue through.
Unknown Executive: And then just, you know, obviously, the growth has been very impressive. I think it's 14 months of straight. Hospice.
Barbara Jacobsmeyer: I guess, where are you running from a capacity and sort of productivity standpoint in terms of sort of on the ground labor? And I guess, is there any reason we shouldn't sort of assume that this ADC growth won't continue through the rest of the year? Thanks. Well, first, from the capacity standpoint, that really is kind of at a branch level. You know, we do look to make sure that we have the capacity to grow at our branches. And so, because we're on this case management model, you know, you can really start to grow into that case management model while adding additional resources, but ensuring that you have that referral flow coming in so that you can have that strong productivity that we've seen.
Speaker Change: The rest of the year. Thanks.
Speaker Change: Well the person that capacity standpoint that really is kind of at a branch level. You know, we do look to make sure that we have the capacity to grow at our branches and so because Ronald case management model you can really start to grow into that case management model, while adding additional resources, but ensuring that you have that referral flow coming in so that you can.
Speaker Change: That strong productivity that we've seen him you know I do think again because of the work that we've done to diversify their referral sources and the focus on the admission departments. We don't anticipate any change in our growth trajectory, yeah, maybe just to build on that.
Ryan Solomon: You know, I do think, again, because of the work that we've done to diversify the referral sources and the focus on the admission departments, we don't, you know, anticipate any change in our growth trajectory. Yeah, maybe just to build on that, you know, so if we look at our ADC growth up year over year at 12.3%, if we look at the R in capacity that we had exiting March year over year, we were up 16%. So, to build on Barb's point, I think we're staying ahead of the curve from an overall kind of R in capacity in front of our volumes.
Speaker Change: So if we look at our ADC growth up year over year to 12, 3%. If we look at the <unk> capacity that we had exited march year over year, we were up 16% so to build on Bobs point I think we're staying ahead of the curve from an overall kind of oriented capacity in front of our volumes that we feel confident that.
Unknown Executive: So, we feel confident that, you know, the team's executing at a really high level. We've got a really strong operating team in the hospice segment, and we have a lot of confidence we'll continue to execute. That's great. Thank you.
Speaker Change: Teams executing at a really high level, we've got a really strong operating team in the hospice segment and we have a lot of confidence that we'll continue to execute there.
Speaker Change: That's great. Thank you.
Speaker Change: Thank you.
Operator: Again, if you'd like to have a question or if you have further questions, please press star and the number one on your telephone keypad.
Speaker Change: Again, if you'd like to have a question or if you have further questions. Please press star and the number one on your telephone keypad.
Whit Mayo: And our next question comes from the line of Whit Mayo from Learing Partners. The line is open. Hey, thanks.
Speaker Change: And our next question comes from the line of with Mayo from Leerink partners.
Speaker Change: Your line is open.
Barbara Jacobsmeyer: Hey, Barb, I'm just curious now that you're lapping sort of a year or two of some of the original contracts from plans on your payer innovation strategy, what the rate increases are looking like? Or do you have annual rate escalators or anything on these contracts? Is there, you know, any protection you have around, you know, keeping up with inflation that would be helpful? Sure. Well, most of our contracts are two to three years in length. We do right now have 43 in our pipeline that we're working on, the renegotiations. A few do have escalators. Some of them are tied to quality metrics.
Speaker Change: Hey, Thanks, Hey, Barbara I'm, just curious now that you are lapping sort of a year or two of some of the original contracts from plans on your peer innovation strategy. What the rate increases are looking like or do you have annual escalators or anything on these contracts is there any protection you have around keeping up with inflation.
Speaker Change: That would be helpful.
Speaker Change: Sure well, we most of our contracts are two to three years in length. We do right now have 43 in our pipeline that we're working on the renegotiations are few do have escalators some of them are tied to quality metrics and.
Barbara Jacobsmeyer: And we do bring a lot of data to show not only what has happened from an inflationary impact, but we kind of know on the flip side what Medicare Advantage has been receiving from CMS. And so we like to bring a lot of that data to the table as we work to renegotiate to move to not only better pricing, but continue to try to shift to more episodic payers. Thanks.
Speaker Change: And we do bring a lot of data to show not only what has happened from an inflationary impact, but we kind of now on the flip side, what Medicare advantage has been receiving from CMS and so we'd like to bring a lot of that data to the table as we worked to renegotiate.
Speaker Change: So not only better pricing, but continue to try to shift to more episodic payers.
Barbara Jacobsmeyer: And then maybe just on research, the research just keeps declining. I thought you seemed fairly confident that you had some initiatives that would start to stem some of those losses and maybe reverse itself.
Speaker Change: Thanks, and then maybe just on research.
Speaker Change: The research just keep declining approach you seem fairly confident that you had some initiatives there.
Speaker Change: Start to stem some of those losses and maybe reverse itself. So just maybe some color around the recertification rate spikes.
Barbara Jacobsmeyer: So just maybe some color around the recertification rate. Sure. So, you know, we do follow how we are compared to others in our Home Care Home Base system, and we still are within in line. In fact, a little bit above kind of our peers in Home Care Home Base. Our focus has really been on, you know, using Metallurgics Pulse that will do a recommendation on whether the patient looks like they're going to need a research or, you know, making sure that in the team meetings that they're discussing those that could benefit. But we have obviously seen, you know, as Medicare Advantage grows, even if we believe the patient needs a research, we're not always successful in getting that research.
Speaker Change: Sure. So we do follow how we are compared to others in our homecare Homebase system and we still are within in line in fact, a little bit above kind of our peers and homecare Homebase. Our focus has really been on you know using biologics pulse that will do a recommendation on whether the patient it looks like they are in need of <unk>.
Speaker Change: So making sure that in the team meetings that they're discussing those patients that are that could benefit them, but we have obviously seen as Medicare advantage growth, even if we believe the patient need the research we're not always successful in getting that research will focus has really been on growing senses, because ultimately that's going to be the driver so weather.
Barbara Jacobsmeyer: So, the focus has really been on growing census because ultimately that's going to be the driver. So, whether that's through admissions or research. We've also put a little bit of more focus on early institutional, which does have, you know, higher revenue, but the early institutional does not have the same research potential that more of your chronic community-based patients have. So, we're seeing a little bit of the research impact based on the blend of the admissions we're getting. Thanks. Thank you.
Speaker Change: That's through Ignitions or research.
Speaker Change: We've also put a little bit more focus on early institutional which does have higher revenue, but the early institutional does not have the same research potential that more of your chronic community based patients have so were seeing a little bit of a reset impact based on the blend of the admissions were getting.
Speaker Change: Thanks.
Speaker Change: Thanks.
Speaker Change: Thank you there are no further questions I'll be.
Operator: There are no further questions.
Jobie Williams: I'll be turning the call back over now to Jobie Williams for closing remarks. If you have any additional questions, please email investorrelations at ehab.com.
Speaker Change: Ill turn the call back over now to Joel <unk> Williams for closing remarks.
Speaker Change: If you have any additional questions. Please email investor relations at <unk>.
Operator: Thank you again for joining today's The meeting has now concluded. Thank you all for joining.
Speaker Change: <unk> Dot com. Thank you again for joining today's call.
Speaker Change: The meeting is now concluded. Thank you all for joining you may now disconnect.
Operator: You may now disconnect.
Speaker Change: Yeah.
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Speaker Change: Okay.
Speaker Change: Yeah.
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