LHCG - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the LHC Group Q1 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today's call may be recorded. I would now like to introduce your host for today's call, Mr. President Vice Senior Elliott, of Finance. Eric may you begin. Sir,

Eric Elliott

of to Thank quarter conference earnings you And may a ended If copy last everyone you, welcome LHC copy received call have with XX, obtain Everyone Group's earnings not, XXXX. release night. Sherry. March should our along Operating for a the and In we'll hear Chief from other key and and Group President moment, LHC Officer; Officer; the industry Stelly, Myers, Chief a of Chairman Chief Proffitt, information about on Executive Don our Financial website. Group. LHC Josh Keith and Officer first

beyond. I Litigation to in for and included update in our that, reflect Act. but include, Actual because LHC materially provided number statements Reform of events. differ statements limited everyone SEC to quarterly have a and of in may release that Group this call meaning those on constitute which information subsequent forward-looking These forward-looking in filings. comments results statements Before statements financial shall uncertainties, no would from not projected regarding results annual like and our press within could obligation risk the XXXX are call Securities this are factors to, Private of conference and to our the remind discussed the

Now the Keith and Chairman to Myers. I'm introduce pleased CEO of Group, LHC

Keith Myers

you thank Thank and Good for joining us. you, everyone, morning, Eric.

this years much joint a asset through segments, healthcare being business, with mission compassionate across and Almost the commitment community as delivery namely, of pursuing that from significant to on I began our by on is success broader a as all Family, individualized, making quarter XXXX efforts goal outlook been. our strong all my having of to and the strong the in tailwind in focus platform. opportunities new acquisitions topics, of for hear ventures with a You'll services an of and high-quality in-home we're the our a comments others of growing robust our to service want today it's integration our home. morning us Nearly ago, difference we're across of ever story the healthcare few first XX behind growth the of pipeline integration as the the lives

unnecessary This to calculating years, as geographic increasingly merger care. in-home of especially industry. It cost as and a It high-quality reimbursement when the reduce highly of is at overall healthcare role the the policymakers true operator Over payers we in settings long-standing which our to include boomer adjustments health but lowering Congressional is precisely industry's personal cost the scores gains, the and ability track Office XXXX. terms services, evolution will area proven on is the and story of vital showcases developed in higher Medicare natural spending baby to clear enrollment the wave increase coordinated projected and demand of that spending, a rank decade more in of Almost of continuum while and decade impact improving and quality equals that in well-documented next the quality us recent strong consolidator model record a our value-based the market population the in services recognized Budget recent subacute A same the aging our for of have was thus lower doubled and care hospice in of there as much outcomes high business hospice nearly in a success benefit specific share health growth I strategic systems, $XX high-quality can increase rate care. and pursue our or care, personal any quality inpatient to study goal transition care value-based our a those plays enhanced data well. reimbursement this because community-based service cost. and comprehensive didn't deliver on CBO care, Family, over that that payment another thus who satisfaction. leader how position with will The of further patient an would note was by that CMS' report by through also home model billion higher industry and reaching

merger. diligence but existing ourselves assure is the up same significant track integration transaction continue across on what Group, platform. efforts. level will with I be had outline But time, our to support tremendous. merger has in like in and growth as early what some planning implementation left the perspective relating the while role, and that apart. our activity advisers has our with been integrate with lined also operational, last we you quarter to the and where of integration sales integration our merger work the due we we've this been efforts plan. gave that been from focused our confidence who regularly on number done. Almost and third-party to surprises an can operation We're is the specifics is and company streams turn I operations us on efforts separate advisers mentioned Family Don excitement the important haven't many the could we It and a there set sales scores, introduced initial on quality with any our initiatives Along strategy. the involved across are Family, stand the has now biggest from merger what we identified smoothly and helped we've an Let's Almost transactions in These partner play instilling venture complement stay effort to combined ability joint a where at Berkeley that of we the Research that to do

it XXXX companies Family shared overlap footprints but our year merger in due pipeline small growing to have a not our us and laurels, DNA. increased the our on parallel the pipeline. of activity, and that's rest on the might in acquisition and been enabled merger off to in and integration completed Coming laser-focused having the continue to bit our developing existing back stay X with tempting be these and Almost broader hard accelerated in able sit already of the and to We've of joint a venture All on operational capacity. reach our of upfront XXXX, geographic work actually record integration our cultures

hospitals And With the systems tuck-in service on pronouncements venture front. topic year. With our reimbursement week, is X.XX% net a currently budget-neutral XX highly were There over blended its XXXX fiscal in should with on the XX% The base positive ability One points closely increase us neutral to continue proposal increase partners we substantial our something pipeline a have the is can from joint the months. industry their consisting our comment individual quality, of Our growing elimination across XXX agencies. and area to result X.X% coming cover hospice approximately important colocation rule is to that for joint growth other credit have organic coordinated also and through that forward by systems basis like strategy. we of CMS last accounting that regulatory in I'd a impact. update work hospitals dry a as drive care look LTCH rate efficiency such XXXX. released capacity XX-state partners. of They ventures can its last XX before new with been a patient XXXX. in the drive site proposed turning increase to that hospital expanded accelerate of Josh that of the large this on well our are health some of them fiscal reporting changes as which extension to for last to partner in it rate progress XX should our payment ample CMS for manner, of our has comprised couple released -- brief and creation pushing highlight a Last for models a to growth. After time. acquisitions this innovative policy of for satisfaction is the proposing attest have the to date, PPS proposal facility, powder as month, We

negotiations the clear hospice was to and care the with believe fulfill healthcare That increased healthcare partner in-home health care the in settings. is for health, hospitals their integrate home much on that systems patient government a with care for and with of managed personal satisfaction the clearer of program. and how coordinated desire who exceeding an work and front quality aligned reimbursement payers contract critical demand we Act, way much runway to Given months we continue Budget have

for privileged to that your for XX,XXX-plus we're dedication you commitment serve. you our to Finally, and and employees, those do thank for all

this You Josh to possible. Josh? XXXX. now provide family. you And to LHC on here's choosing Group make all guidance our for part color be results of some for Thank and financial our

Josh Proffitt

morning, call. Thank you, our you, good and joining all, Keith, everyone. Thank for

developing is remarks share. come. in months that to how and we Home our in years. service special. patients, from XXXX diluted provide I've was revenue who and grew growth of of which take same-store and of must you continue professionals all our financial appreciate communities so income LHC after transaction-related same patient look with With regard other many health net revenue of high the share, I in all always, in in As and to you an clinical quality to in the I first by begin very first year-over-year health families that margin each my our do relationship revenue to per with say our quarter compared of we Group every the new first of exceptional years XXXX to million day basis. already care saying quarter supporting to for and prepared in To welcome contribution Group period you due begun LHC the service period due are increase members you compared a much I moment heartfelt XXXX. much The makes net to of all are $X.XX income home gross all would XXXX to who quarter our adjusted X% XX.X% to and XXXX $X.XX also all to forward appreciate support blessed diluted the costs members consolidated mature to and revenue very decrease another the in to XX.X% Group gross a adjusted than and Because Family. last increased on coming per and quarter successful rapport from XX.X% of them our our same-store LHC as of results, working the net the a family poised like tax that the and more closed increased truly to quarter year. lower-margin our for, are Almost merger for shareholders daily for so you family success the X.X% so of first same of the $X.X margin or to of and basis, acquisitions acuity all you, admissions One, on that thank a to excludes family future report quarter in able XX.X% to of On couple a our was and I as and in margin agencies. factors. gross all, and compared

gross XXXX XX% be those first consolidated would quarter. our the for Excluding acquisitions, margin

quarter for XXXX price on approximate in health implicit over the for home an to of I health reduction concession Home finally, formerly is XX% XX.X% rule; debt the Medicare period X% XX now will QX Second, provision basis increase margin moment. compared 'XX. was bad an of XXXX the known the in rates points and from as in our This for first XXXX. gross in same touch a included to revenue, which reimbursement

reduction period our same gross XX.X% first XX.X% a for you concession adjusted first and XX.X%. is margin health quarter attributable price remaining margin the for However, home again, that the Hospice the gross implicit gross I was the Medicare adjust The for rates mentioned. the acquisitions, difference margin in for the was points X% the fourth the to recent just when first XXXX. basis, Once is sequential for hospice compared was in quarter adjusted, XXX for On when gross XX.X%. again, from basis quarter. the of 'XX quarter hospice the XX.X% to margin up in difference

few more in see minutes. just the our We from continue general as of to hospice hospice in a Don expected pleased you'll service service hear and positive line improvement as with line trajectory in our are

margins QX quarter from in we acquisitions in year. margins Gross acquisitions those the acquisitions are of gross you. each previously reported in the XX.X% to for While XXXX up seeing XXXX sequential on and are margins, consolidated to as we a XX.X% this depressing still QX, QX were XX.X% improvement

lot We quarters confidence trajectory of have acquisitions of margin positive the gross continue into that, improvement will those and in a third this that year. on second

Moving on expense. and general to administrative

as merger Our in same was revenue and in to G&A in G&A XXXX quarter recorded percent in XX.X% of compared year. $X.X last expense was the XX.X% period expenses that in million the of acquisition The is first revenue year-over-year of Almost Family due to as a increase G&A.

quarter, of be down our as basis a costs, revenue of the first QX consolidated XX G&A expense from percent for these Excluding points would XX.X% 'XX.

adjusted. debts. formerly XXXX-XX bad The from with XXXX, contacts on once category, expense basis, moving customers known on which for revenue as called a retrospective adopted present the to standard Now required the did company provision January price the in to number All on of adoption X, full comparable the classified company prior are as as the amounts ASU on again, the statements. impact company's period concessions not debt revenue. now transaction previously price net for The classified of a the provision bad financial implicit as the determining service have company's material

XXXX, the new the net provision prior concessions million service as implicit been as the $X.X XX, standard. reduction bad For have recorded that price would months a for recorded ended of we revenues X to March debt adoption direct of of

in implicit quarter from of acquisitions. of compared quarter adjustments bad X.X% for debt revenue a as of in represented recent same Included reduction price the in the 'XX X% revenue concessions concession provision to approximately in was the first related XXXX. to price the Our of to first $XXX,XXX period implicit of

million partners as quarter, comments be expected would new about new more seeing a capital Excluding to M&A Chase credit we accordion secured concession $XXX plenty facility JPMorgan in the take joint system feature. which credit This new like led additional of and discussions potential been of currently X.X% million echo Keith's and full for for expansion gives us. our which pipeline freestanding hospital the X-year On advantage group senior April in facility experiencing overall revenue like and Bank, bank are our have banks entered of by strategy we the a opportunities. momentum an would within X, cannot I to and implicit us is of includes $XXX with in moment top and momentum price these the would into our your are excited I adjustments, our take a line. we for in health potential your our to range the to thank our percent year. partnership confidence of our continue ventures earlier and each

Turning now to XXXX. our annual guidance for

Family regarding of passage The XXXX, year synergies was million per on be $X.XX of for in the with We recent diluted X range million Family in our share $XX an the billion $XX million has million a earnings to revenue adoption the merger of $X.XX to on revenue ASU of recognition, is $X.XX. no of and $XX to revenues, $X.XX to impact the projected effect $XX on per guidance previously with but of per the includes total completion to achieving billion assumes to related a conjunction shares adjusted This Almost guidance to $X share pretax from expected estimated XX% the includes the issued the final Almost guidance financial million are quarters XXXX-XX in in reflects which tax for approximately Jobs the effective and Cuts million X And expected merger. realized XX%, impact be of XXXX. diluted results to earnings XXXX; the Tax service the average the now rate range of fiscal for year. positive April reaffirming Act weighted which share. in previously an and of this net Net of is XXXX; XX of service which approximately

its if Our novo Due changes, the de if merger Almost in future estimating do future future if reimbursement difficulty the in XXXX. legal modeling. adjusted guidance Family made; income for and expenses, providing help acquisitions, the only opened; for to certain the GAAP margin if ranges locations, impact take cost any; are where the account guidance your not to necessary. into of of: my or our of net prepared on would impact section with I Normally, you is we earnings earnings, all this to remarks on guidance give ranges

going However, second merger, mapping of between discuss combined general still and now until the report That off prepared call pleased due of concludes on happy Group administrative turn I'm are LHC service we're classifications of we and first over we ranges remarks, and the to and during quarter post cost my will those providing fact Don. Family, to I different working the to between quarter. financials time legacy Almost be am and that to next hold some on the the expenses further Q&A. to

Don Stelly

Josh, and you, everyone. Thank good morning,

are start thanks, direct to one up a you of and by new make sincere one a lot that's who My We way family, of work hard congratulations strong to and life. all. company, team of one XX,XXX-plus for focus a and our members XXXX, off result commitment

that they quarter first very our reflect promised pleased going and the to results, to Turning are what we excited say year. into we

organic and When few steady we in to admissions turnaround the we over again, care nonorganic that last growth add and To admissions with the we've color once to recent period home In quarterly growth home differentiator report begin were predictable I'll committed year. recent in to Quality quarter most division. of these to the acquisitions, our in CMS patient admissions. it results results, both excelled out our organic increase prior satisfaction. and get I'm the segment. ratings the and health hospice, X.X% number pleased laid it quarters, be for XX.X%. this same the both expected total of with and continues facility-based Star consistent from the is behind from one our up the For service, saw quality We in our contributions combined a to health. And in

for for quality have health On our for greater. of LHC, April which quarters. improvement stand-alone quality report. And a number and from an locations for for X.XX score acquisitions course, care, is that recent been stand-alone the is patient report, with the X range compares or stars last LHC favorably the XX%. of of that national a excluding home produced over of has For basis to January XX% X within X.XX of X.XX satisfaction, X.XX This, the rating, we average the a

out Our growth the patient strategy. the last the our Organic quarter, with of consistent to team line up sequentially we've to fourth from out and is and place average market we with what admissions which was from pivot the star score and continue We're of as compared X% scale X.X%, we year-over-year and happy growth the were up last quarter. our this have months for right X% grew the laid year, industry a in up trilevel census that satisfaction feel most ago of and I targeted to part hospice a few that in admissions X.XX laid stars In segment, rating recent X.XX. quarter. with

only strategy, side colocated health XXX XXX trilevel a with ideal hospice, legacy yet the of for XX quarter-end, As but locations we've at were identified this to as colocation. note home

to tremendous markets growth Now solid [indiscernible] platform, going to personal aboard the and a care provide into as out using years Almost health Family, this home including months ahead. internal opportunities approach building bring

into These a our modeling contribution LifePoint improvement, build now the we With back year, of the integration. our margin and of CHRISTUS great expansion during we look and go to and forward point-of-care and to and year. into was our in that this innovation these last extremely Erlanger, operations, partners supportive each buy as attention of model, on well. of to half integrated and new mark period. shy is just are fourth approach. quality portfolio added and been quarter are fully which Next, through as partnered have We care their turn

Lastly, with Almost and the in regards Family. merger to

work can it's with gave that plan. point colleagues integration confidence same our stream plan the to ahead. group where we'll to Keith alongside us riding As stand right that a on, road pull and stream and that and BRG our track the A each each to out work detailed XXX-day map. say following has master the weeks detail attention on is Family the get plan first sidesaddle in date, months XXX-day post of when we're lead, touched with our Almost do to the I

division, operational we've for note, date to we we to company sharing on details of Hospice into and have every a Keith is of but we for question, transformational. now to ahead, and hard with every wins structure. something to work a what best turning merger cultures practices of detailed passing operations and was conducted the and inside begin few Without lot great as date. thousands transformative a the opportunity day, to review is enhance priorities futuristically. the in Personal unified as a first are and Just each. service two as service service celebrating we're patients quality already care a merged specified, lastly, alluded, lodging also consolidated And

one a on and you of listening So to thanks you family today. my in sincere call all our again, colleagues all of for thank to

We for will over now, operator, Q&A. the turn floor

Operator

Brian from Jefferies. Instructions] with Tanquilut comes Our first [Operator question

Brian Tanquilut

for to what close you about team the your just then management think at that after the remaining of process, as of it's what are level? have thank the agency disruptions where reaction color but the do? to surprises lift you regional on AFAM, you needs or the level, do call see one ask, today, integration wanted in Keith, And you ground out all terms I or the big a we whether you of that sort month at you seen? What -- guys can

Keith Myers

surprises, that seen -- that up think So in overcome mean, honestly, come Don, I approach. be I like able surprise don't been to Keith? XX I surprise. to not and anything I just and I streams have feel from part, were dealt the process with I I you say but that a work there would missed? challenges I've with should none mean, something, integration, first within a anticipated the have but Take Brian,

Don Stelly

No. I everybody are on Brian. off the they agree, hats to with colleagues riding us. [indiscernible] And honestly, hats the diligence we again, that to had along process and the in AFAM because off

would about even The to Here's processes it. the their Homecare big Homebase. the field system how is I think next In some this say the I payroll to first XXX thing bit of their instances of a than told different inside system, kind lift that is but that in is and course, effects but from [indiscernible] rooms X the CLASS which because days, own really having would go are, though nothing Almost home it's which Homecare little And I've of on that they it, walls Homebase, same different like different. people the dimensions Family have ours. of the

is reporting CRM it's that I some mean higher sales, revenue we but of is quite the growth no as not have that ours. that the And side, are getting limited trickling tools, of sales And and number so cost overlay model, that including, different, our of net last product tweaks, on we than so their our switch. and we comment few our it's sequentially my operating we're their require the a I through to to, think to much going the flip but percent point, when there's

and to planning is circumstance, and first methodical we XX-plus to have that, willing So an at say map census all of proven I look the see quickly the in really that going to those shown say capacity growth. and out not risk a days we're that that's agencies been of opportunity true But effective. this some too that without think I take,

heavy-lifting on no lot and So of surprises, a lot track, of upside. a

Keith Myers

MORs if like Brian not Let my teams cultural a the the me -- overlap and varying cultural and -- is my was the a what synergistic two around to in together perspective, I the than from new between from this mentioned the organizations it Don one from in between it's biggest hoped of even there's have room transaction can, [ph] two country together, that all lack because working the alignment because for alignment could less That's see better than to perspective, team energy leaders hoped already as risk earlier, I great these month we of for. the and have in a of geographies if and -- in.

Brian Tanquilut

That's good.

that. on follow-up for Josh. guess, a Just I

to or If it's financials. versus reported not put Even of financial it's just you modeling QX were AFAM performance obviously, look of where at would have your you the QX been And in you expecting? a kind qualitatively, like what black box. AFAM's

Josh Proffitt

their the QX last the going for that we just of trajectory Yes. Brian, that talked into in performance kind good were say that's momentum good at Keith quarter. Don and We about. in week would bridged the question. I it's for much bridged March and MORs they very line just some that and have where QX April

going the their we QX. about of got feel So ended and into where real kind they good momentum quarter

Brian Tanquilut

Appreciate it.

think, me. for last question Keith, I

you then your read morning. Clearly, As your press release to you are night of sending Where then your the well. part the interest I message call a and listened And as timing of in last do this in that as JV on level? comments that that terms comment is you leg M&A. and stand

we us JVs, organic of don't thinking on you brings the should ramp them of what color growth? how to about you the and giving mind board long-term when bring If you remind us that more in terms

Keith Myers

sure. Yes,

the run that point because transition that a of ever a part at wanted think bring big quite that we any in BRG -- up to just I want don't we to That's that emphasize did I help to anyone the bit that pipeline. head X So time, why work last to months, to -- cease in over team.

up. And lines, now we pitches And when -- are course, move exceed in expect hospitals would So varying joint XX just was $XXX tally across this We time we're discussions people XX discussions and the the that little active of the -- in year, We're it, we systems way I states. making pipeline, over different in last were at to. guess right of just but making acquired at all million, say I with of to year. that venture. people and negotiations majority These we're $XXX that I'll fully with. million this that and aren't revenue those health these a

color. freestanding this little time. health So and XX% is Hopefully, of hospital activity. system ventures at joint that you Very that give some pipeline will

Brian Tanquilut

And guess, then roll what kind you they're on business? normally they just once be about point And do growth should the I tied into we organic into of how see once on LHC? your that JVs thinking

Don Stelly

kind of ones would by rates Baptist CHRISTUS recent of organic to have hurdle than it's because even Well, we of side far Yes. and and LifePoint, Erlanger. bigger answer the like hard on

many -- that, they because digit, it would starting a growth, they're I growth can upper-single second differently, takes and from. that, They're facilitates say, wouldn't what third X% Here's And our we it if to and about us the which still it double-digit money them we -- then are get of hit X all at usually in usually portfolio months. surprise losing year only X%. the Brian, of be where of guess, stated would I see once double-digit

Operator

Thank you.

Our with next question Kevin Ellich from comes Craig-Hallum.

Kevin Ellich

questions. Good I following guess, on off. morning, of Don, some guess questions. the I for up Brian's starting thanks taking

Family cost higher than of and and growth of sales as much about a for Group's. LHC You side percent commented revenues the Almost sales

can forward? is some I gross the should margin with help wondering, So don't too. chime and going need we just in about for be if How thinking know Josh there, what that? in QX

Keith Myers

to Josh we'll reverse. of take and to I'll get to the I'll end how. throw the in the move, fact, In it it take

Josh Proffitt

the at that the anything few mean to bake sales then aim gross got, see think as would improvement there, but don't at will continue go of sales this I Kevin. Yes, you're ours think to doing higher force a to any Almost I fast we're cutting listening percentage you revenue, that Family. to I call their time, cost time wouldn't going growth experienced I improved incremental we get on get an years, don't margins to a in the to I want we quarter-over-quarter. the over the past or of as out has of be down, think down I trajectory percent rate over out as of to I mean, that for going gate but definitely think But by the

Keith Myers

Yes, to numbers, time, and planning, proprietary at it's that to more do as is a bit differently, curve hit we their CRM less are bell going of a think it executives a matter anything. they we're fact, But and same have the not weren't meaning overlay going is to shift, we're got in production it that of hiring little in couple there that We've as things that a us, of are route but really production cutting their little when What to total accordingly. that. grow we sales going our product enhance has that a percentage capacity. of to we're plan

Josh, on year. to echo, any wouldn't plan of coming of late I half what So the that and this back until fruition said, you I

Kevin Ellich

and Keith, have comments it And assume in some to of are your Got from you pipeline going transaction? you May closed and you since activity, M&A increased deals helpful, already, the back you. JV the the sizable? since top even on that announced is That's to Family and it's then guys. safe activity the system or pipeline partners that, of have And seen hospital Almost interest very health then,

Keith Myers

question. really So good it's a

is So the answer yes both. to

with where larger specific larger a the not And these targeting of the what's State Family, that's that system. up, in But picked Family pipeline assuming are to Almost of fact existing begins. we normally important about successful have, some that's is that we those in an how footprint So Almost are normally, hospitals our very we to lead unusual, happened example. unique in relationship for that's some within states, we're doubled systems us Florida, could that past, nearly geographic

that locations So not add organization of freestanding target with our to end larger hospitals have are with markets Almost health we a agencies. home number that do Family,

of as freestanding in together the we see put align our interesting that So those a strategy. market-leading opportunities our to of agency a part long-term health market, some there very systems are with with and and system

Kevin Ellich

very helpful. Sure, that's

terms wondering the your could us Josh, of cash give little to in back you flow outlook just and help maybe Going any, a expenditures if year? capital for for and

Josh Proffitt

saw, question. good as a you free that. little We great And flows, feel over real for No. quarter about Yes. we a had million. strong cash $XX Kevin,

Our cash the for collections continue just XXX%, a in a to run just right all out a notch above company. XXX%,

bottleneck, some joint of some last of now that through. seeing at have of been we be the continue Our more channels from year cash cliff a collections the DSOs you of ventures did, will, if of running we're the larger a come healthy and that processed, lot to

to gives for I about at in So confidence our less debt flow, quarter, able the really year, you you hopefully, look pay of feel down but in how the it's going that the at you when some how look cash and free much we're good look first it. to rest and

Kevin Ellich

presentation going think QX that, mean, the with in, presumably, the target? Is your and of still flow. million in we that Almost cash $XXX be stated mean, kind Family coming to right? can't than I guys it's I free I you annualize just of had greater

Josh Proffitt

Yes. That's right.

Kevin Ellich

Great. don't and issues to it expecting and then Almost billing last year little any Will with did or Family, collections? want you the about the you Okay. say big a I time? bit with deals integration are And Thinking take issues now of

Josh Proffitt

running and a a it's had a, really being sophisticated the office actually support over it system still Almost really the There's very kind would and take since clockwork April most was [indiscernible] They and hiccups imagine it there good X, largest. robust envision current about like impressing of company, We back enhancements. public you have although make don't that. collections before both be up and as No. Louisville feel the best of they Family billing able That time, and we'll any to so is worlds like some all. in at

Operator

Bank question comes with next from Joanna of Our America. Gajuk

Joanna Gajuk

commentary that X% and mentioned improve because you may, you particularly of it did I what year, were X% follow-up growth. the with the in for the about thinking the line to some hospice, around if So a on they were of sort

major AFAM health, the previously growth X%? segments, home think closed, for terms hospice So should the about year talked in for organic with and X% how these rates to about the we of deal

Don Stelly

all question, hospice because they, thanks. locations, can again, bring LHC brought Well, think Joanna, the same good number into wouldn't that with we've their Group along the of cliffs. I that already we at those change structure, we with and

X% So things that's and QX with but quarter. see then a sort, in pick and I seasonality X% the is that probably number, always still we'll that the that good of one we'll obviously, coming think number annual fourth the up to dip, up

the So number for I still thing. feel to very good about X% X% whole the

Joanna Gajuk

the about terms And growth home what health organic of there? in

Don Stelly

thing, now, you close QX, X% were at on but We far bake summer right not number an X% higher are to health. annual for X% tell the the we guided out we'd that same top any for that be than would really X% date. I the to we we months of where in QX number sit exact I'll got home now, if to so But we and to happy X%. again,

Joanna Gajuk

go sorry, ahead. front, the on And

Josh Proffitt

Joanna, kind Yes, Don. Josh. I of piggyback this on to wanted is just

spoke seeing been know the to, team prepared addition hospice about he month-over-month but want growth on just we've start last half that I we the call it for really lot the really for side. of into in in incremental the to talked really the his that and we're margins upside of the to momentum of trajectory, going year as have to digging and and think seize when it ago, remarks, year we're August, back to few well. weeks I hospice and you the past the trimming hospice, the September improvement in back mentioned opportunity a quarters on X I side So applaud just margin the Don

Joanna Gajuk

the how for year? I we I the hospice. very should the nice for front, think about margins a And on definitely improvement mean, guess,

I can cut you flat, about the health, home being hospice? margin then rate talk So the maybe Medicare the of also And on compressed too guess, there. because

number and in we should how think for year? the hospice So home health margins the ballpark of terms

Keith Myers

you're both lines. I going say that see Yes, to on service continue would really -- to just

fold the that are to due health, the part upside And the to large climb margin then and on think to hospice those well, on in the On especially, CHRISTUS one improvement throughout real you're year the last in home see improvement there just there came you're gradual margin see continue the as going I to year. going continued some incremental acquisitions. front. throughout the

Joanna Gajuk

that's seen me, is here companies haven't kind that turnover? employee in hear that guess might to many help there have appreciate you a that terms helpful. question fact the but know got be management I regional together. the give have follow-up it's too? [indiscernible] any so integration both in the color the so Great. I in, If I side, issues. good going for kind color may have just on one there you of at X you is room, I of month employee But more only one last sense are would I you working Elliott any guess, or increased to on and surprises that Eric using the seen But

Don Stelly

and that. not it's that short, itself, some but say problem turnover, anyway Obviously, as a you aside, bearing of on always the absolutely whatsoever. transaction because I just we see not transition in would don't have

conversions fact, that of other going of things have matter some other we help actually our that side playing a take the effect on can some As some with through we that employee things and of come PTO those with and benefit here to of in think with benefit the October. are our

Keith Myers

I Donald's just Yes, echo would comment.

Family picked in all to of Almost seen we haven't that the of but experienced team I up. just that, out had want new point these We any also geographies

area would health in just and an not been organization, the a is I home license time a that service around industry. be mean the it's long leader great, this but agencies. So and it's

geography, Florida, picked very a states like in up we, in so we the team And don't just up we experienced pick place.

good if a we get systems, things experienced do is you feel don't now. within exactly to approach health and right And the it. on team board that about we second hospitals really chance So

growth engaged So bullish team, kind harmony that our in of and with we're opportunities. really in on very have when you our working talent, existing they're

Josh Proffitt

it's been ground on last have is one Don is know been I having the the I Keith palpable. the Keith, days a roadshows at would I on here Josh. thing local but also and is week, around William going of this Joanna, literally and the only the not some have each markets, that just energy And were for add leaders regional that, level. local to and the few

can You it. feel

see So incremental just that not level, any you wouldn't positive at energy lot I expect in of a field turnover to the transaction. do really really and out think the regional there's momentum the and from

Joanna Gajuk

you. Thank

Operator

Thank you.

with Our Morgan Capital RBC next question comes from Markets. Frank

Frank Morgan

with like to pipeline, it start With venture related. I'll development clearly regards a just questions. it's of looks joint couple your level out higher

transactions I'm compare curious, of looks those inside able joint just freestanding in do healthcare valuations valuations like one when how home to to freestanding that been is, larger to have but say do versus acquisitions? you're So a and on here least just Certainly be the that of transactions, ventures or portfolio couple acquisitions? question how that at hospice first big plan my compare with does especially would

Keith Myers

larger our higher strong freestanding have that will acquisitions so be be Yes, will priced. earnings more,

market So all have in use where to those fair valuation of with we systems trades. health hospitals and

hospitals approach health to health and freestanding existing are performing mean below systems say most money. earlier, of have mentioned organization. that the it safe actually home agencies we they're That's Don many in as So cases, losing

cases, if those that's in a suggested on for need non-CON state it's and have go based to, region [indiscernible] the state. provider multiple we or a largely So to revenue density

quality And efficiencies efficiency. the joint begin to enter. have and you course, all in and So place. the venture, a they have business turn quality aggressively if lower to bring to operational seek less expensive and point table, the of to experience scores are of terms entry once year in around have we the then the into that it then you, value our more ability, and

Frank Morgan

Or the is both? a non-JV one blend that or home is hospice it focused of backlog, is that on in areas health? And primarily, at

Keith Myers

Yes.

freestanding backlog? So say it's you said, side. hospice primarily on When the you did

Frank Morgan

Yes, in the of deal of that said bulk was JV. just terms it opportunities, you

it the is of more So it opportunities, mix the a of is X? home or backlog non-JV or hospice health for

Keith Myers

say I And good of Yes, on bring the to that. up. is it's mix more X, hospice a a point that, would but so this

with acquiring of term. market, So we're or attaching some so some long freestanding of goal to greater systems the acquiring, health a in that a opportunities them hospital we're

just health market service market be that we or don't in systems that lines. a don't it's those and yet there hospice health may hospitals home have So or have

Frank Morgan

you. Got

of are the of that obviously, of and of, to leverage here long sort out terms I your is In you balance guess, like terms be funding new in to sheet you in limit terms a then want long-term put opportunities And long-term in facility in what the But related in place. acquisitions, seem term there? near given where strategy these term? all

Josh Proffitt

It's a question. great

entered As new you credit million. the from below $XXX starting to into facility, under available can deal facility, we see get our old the before was credit new our amount

with easily the us in all and and over mean, we've levered of you the I'd -- I to we've could paying to flows and years, over for With more the but with north know $XXX credit leverage capacity. that that got the currently we even see over a down pay mean look freeing up know I tended Keith, standpoint, we'll cash From us to I X a time. Xx opportunities, be right getting down how to that conservative available about million earlier, be consolidating debt, facility, new you talked the strategy

us up for in not You're opportunities. of right the Xx the Xx going see us or range, could north to getting but Xx I see

Frank Morgan

then one And just the on more high-level acquisitions. at you. Got

SG&A up Or SG&A do rate? positive leverage your layer incremental in like to in but you You G&A have think you can costs these because I'm with an expect in extra you'll you to equal curious, of more to and did sounds call it -- How more layers out we much come. off just costs at build G&A, get maybe deal, AFAM see infrastructure? Can of some these as the growth? deals, your scale do up of deal-related step the think you

Keith Myers

spoken , mentioned. and to hosting if our that the the sales home in Great Frank, in biggest all [ph] about, I'll topic kind MORs conversation office you operations we've will, of question. addition MORs in is infrastructure support the of be you just X one weeks,

on ability anywhere very feel infrastructure it bullish of for office the lever the on are X%, no X% size call depending to to the incremental We our our higher to acquisition back if X%, and X% from X%. incrementally, like add we're, than

to you some think the could years over grow. and next I into out future we see these leverage So as move really few continue

Frank Morgan

seen decline, growth. to like nitpickers to two that, ask in unusual there that to just hop high. I caused anything know pricing would then there it hospice have I'm it don't going anything and off. that I've ever seems I'm Okay. that Was One, I say going the want was do that year-over-year? just growth? like think I'll there. almost you to of sustainability growth? Can And the then it episodic enough So reserve off. get the really as really you two, call X% rates can organic help ultimately close continue admission to number hop drive

Josh Proffitt

take Frank, and cater no. the This second. question is Josh. for to I'll the first Don

hospice X%, per admissions. So from of the XX.X% increase called One on an the reimbursement rate of just revenue that's the the is in XX.X% increase the the on really two probably X.X%. what's model day growth also of it's But and factors. that Tier new due in X we patient to had year-over-year days experienced hospice, we growth

patient goes new revenue. Tier per day see helps your you grow, our which X So as the percentage admissions days' continue to up,

Don Stelly

good And observation. on the second question, really a that's

other that because to As our get about case a factor a of whereas mix to you're you X.X the and backfill X.XX looking make subsequent first to on down, is episodes, at pricing we're just research X% on go to running X%, at a point of as X.X. episode the X.XX

with really your are to to per changes of as on that. decrease the shorter quarter-over-quarter same census we've offset X% diems seen that And pricing that but yes, landscape going number certainly stay. length and your you So that the X%,

Operator

[Operator Thank Instructions]. you.

from Our Blair. next Matt Larew with William question comes

Matt Larew

there the us service contribution appreciate Thanks if morning. better are on your you're feeding lines I in expectations line this detail the doing joint ventures. some worse me color or top margin at are for particular that Good ventures to expecting? hoping Hi. progression could on joint the any relative and in. I you at was than give

Josh Proffitt

last any Erlanger were Yes. CHRISTUS I Matt, with year, of LifePoint, top mean start. from the ventures Baptist, I'll in a all across From is specifics. line can Josh, jump line. this perspective, and Don and right in joint

are we different and for Don? about and there of but the some growth and of downs lines, performed Now kind we markets good at each modeled and ups line really really out those, in feel top service they're how different coming well.

Don Stelly

health to question CHRISTUS and And of answer the or both were let on that. the qualify we about JV There a some any early that those But doing me disco. drag some had is, drag operations knew locations worse. on, and there doing are our than because times drop the thought, But them worse LTCHs in we've in couple home we of in meetings, community, would down we that are board issues a kick months. closure

thought. longer what we than bit a just that So flushing little drag is through

we'd get in so that them to drop going of and and you'll of I'm right that itself quarter And bat where off second eliminating start get be -- we what see that'll accrete us myself, couple the thought to with. in disco, and ahead back of probably to the into a

Matt Larew

wanted with And the the your in initial have you develop? and fold then plans from to geographic recent how or pay question Okay. thoughts Medicare reach with that on might started can market Family that I payers appreciate care, broader that. a CMS particularly the high-level Almost the just higher-level opportunity announcements just for, non-skilled think with whether grants conversations on you

Don Stelly

and what we that my went I -- Almost I the XXs. care said non-funded the care now were a number that business, platform. prepared of to the Yes, trilevel from the low approach comments earlier in a personal is great opportunity Family bringing huge in inside their excited the teens with locations we observation. this mean, for us. And that of of

can the Steve the coordinate I'll one brief and the would, and So these skill trilevel are of talking you kind gang make literally we it opportunity to markets. it's non-skill now bundle, payers to in how saying right all in be absolutely, if of and an

Almost you recent it's just care So could opportunity. not tremendous news the a at it's a footprint have The tailwind personal with better to. with Family's great time a alluded and come that

Keith Myers

for a the time and I'll or Steve add you do no with Steve, that's just add, lot to our more Guenthner. one Steve where of organization. Steve his is experience I'd Don -- know phone capable echo of Yes, to what There's on than Many that like said. spending And more now.

those only the discussions personal to So platform, care -- but the care he's not as having driving speak. build out strategy managed we companies having with personally

Operator

Thank you.

Our next question Stephens. from comes Dana with Hambly

Dana Hambly

Thanks Hey good in. morning. getting me

Just it hasn't been ask. so must I asked

the on that On When understanding, be discussions we'll line rethinking HHGM, there you services? that should hear more in anything delivering your current expect have events anything is time what's the way of home do we you're of the this? about And based for? health looking you happening kind and

Keith Myers

Home I with and very the involved Home answer Quality for and and industry, mean, Partnership we're But is Quality Health Alliance know, the in short The No. there for as you really no. isn't so. with, Innovation. Health

group the legislative of Friday year the process of fact, the now that. finalize we our developing we're for have in and to So a in remainder policy and right strategy meeting on

would good again our us no certain relief some clarifications something end and So this we're, to the mean, to some pretty areas, hope attached at opportunities that. year surprises. regulatory but to of I we in and about get no, in give that legislation something do feel I mean would

all would if be we done. those but So, them get wins,

Dana Hambly

you you get synergies next closer and there be get to I $XX misunderstood right. close Or little that was, it Had some will something All guess, to that original I the synergy million. lower-hanging my very this $X you mostly would this is for year, I then found was fruit? Okay. million And on the year as that? thinking year.

Josh Proffitt

a what great you Dana, question, said. it's No. just it's and

would $X more million and to million when $XX million in, range So to earlier that as were to felt thinking. but that we this all the year getting feel $XX confident our good we came with real we about closer range we million we out still in guidance, opposed get the maybe million we were very $XX as $X

that. we So good feel about

Dana Hambly

the gross And it. margin lastly, The your, think gave on Okay. missed the revenue? acquired I but you I it, on then margins

Josh Proffitt

XX.X% from Yes. the It's up the XX-and-change fourth for quarter. quarter, in

points. up incrementally, So XXX-or-so it's basis

Operator

Brian our with Jefferies. Tanquilut final from And question comes

Brian Tanquilut

hear as the as and re-planning we re-discussing the, of having a on bring to rest of to just and they direction we as as they're I question is? that follow-up to about part Yes, firm that, that's Is a taking? should think And your industry reform. on interpretation the guess CMS Or we wanted lock? Dana's that regulatory budget-neutrality the What Keith, the budget about just payment be you I front. thinking the mean, bill. is? put your, is that as the views of is your it the too then, just in think provision how that

Keith Myers

let here, chime at in. you to looking who's, I'm to, Richard MacMillan Richard, going we're going I'm

Richard MacMillan

any are year. CMS truly rule payment us industry would this with be that budget up Yes, interpreting that Sure. Pardon in neutral change budget in neutrality, the all would the, proposed me. this it of come the

Brian Tanquilut

terms Got take it. to looking then, industry CMS, just discussions does is of payment the where mean, reform? want what I or to Keith, And industry the in propose the with

Keith Myers

prefer large At -- in direction. partnership on They page, work Well, those the think so same sometimes try industry We understand, association organizations to discussion at the that. the But that goes unified there's are CMS. smaller pace I move -- about the the the we collaboratively the move we support we the value-based that level, -- about of we organizations would is we and see think in agencies. we generally, we that concern at But which national over there partnership level, payment. directionally to accelerated. times, towards stay concerned we that to so

anytime value-based up So an table an negotiate to payment offset pricing as put reform on to as cuts, having to for them. like comes we alternative just against the

if where are. So don't question, we I know your that's that's but answered

Operator

our any closing conclude Myers Keith back to turn remarks. I that session now question-and-answer today's call. and Ladies for Mr. call does like gentlemen, would to for the

Keith Myers

everyone, joining our thank Thanks, Okay, operator. call. you, for

available any make you again. if self the to for please reach any always, to have need if questions, and management As team, you. you to our Thanks, out Elliott Eric speak member we'll of

Operator

conclude gentlemen, day. wonderful and thank disconnect a and you Ladies you the for participating today's have does conference. all program, in This may

LHC (LHCG) 6 May 182018 Q1 Earnings call transcript