LHCG - Earnings call transcript Q3 2018

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Operator

Good day ladies and gentlemen, and thank you for standing by. Welcome to the LHC Group’s Third Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode to prevent background noise. [Operator Instructions] As a reminder, this conference is being recorded.

Now I would like to turn the call to Eric Elliott, Senior Vice President of Finance of LHC Group.

Eric Elliott

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

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

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

Keith Myers

on administrative Family are this good CMS comments you to morning dedication responsibility. pulling morning’s you and are like for participating take on extremely I’m you But respective wrap personnel as those our levers was the organically of for announced call. their Thank up integration areas morning we of that in everyone. thank privileged you you, country well then perspective XXXX support this many rule my and care for and an our the acquisition; serve and who as Eric each LHC that from throughout in final clinicians recognize from externally to XXXX; I this the communities for PDGM growth evening. first, by begin exceed I both all and for do, consistently in and and our all efforts year of Thank with our dialing Almost the focusing expectations exceptional and in want I’d grateful activity yesterday and to to we and day.

Group there to extra those your blessed be LHC to Our family by entrusted sleeps commitment healthcare personal never to care. go is you. needs XXX the organization XX/X, our meet on of Thank is to to that always promise a and the deliver mile our

and the in one on question is the Almost single Given is, this largest annual integration? a get Family number question. that’s investor revenues, Moving calls million to where we valid to-date completed you at the $XXX we’ve integration, meetings on are acquisition conference on

every is Our time. same answer the

schedule. on right are We

resources to weekly leadership integration. and daily, assisted the process, basis XXXX. path revenue LHC of Almost ended of April Health Strategic date in stars months the the as as the team compared in Almost September were to and According hospice Almost original three acquisition or the operating a have as will for integrations we QX, the rated done XX, our XX, from ended we throughout Almost points improvements QX Family percent XXX XXXX. better analytics integration compared see model. We tracking have These in a all period monthly to margins of to have providers continue admissions XX% in four we’ve line monitor from and are past. through vendor, X.X% our and basis with April to gather health Family we points grown on greater Family KPIs September improved on QX operations the same the experienced are months Family data by in contribution in data projections. QX. BRG, in move to to exceed XX.X% and the are those are of demonstrate the synergies improved a we place, few are XX% contribution home on from XX, three where a here we in To accelerating margin seven-tenth XXXX, the Partners, of agencies

quarter for This begun LHC the Homecare of in Almost conversion the the is what have of will As agencies convert left last we to Homebase. instance to integration, do Group to through Family second XXXX.

and Overall, standards integration we’ve accomplished of we our and of turn The which out growth to able layers more the smooth will enhances continued phase expansion, our adds our our and the deploy transformation plan will to tuck-in This six through to be processes, to synergies, on joint a allows similar up of and at what we scores. in quickly growth the start addressing convert, schedule. phase ventures acquisitions. locations bringing by joint strategy co- of increasing and operational our us ahead the workflows months the to moved additional earlier stabilization market quality integration As extension have organization us integration with phase, improvement for growth, opportunities plan. and growth quality tri-located keep drive has much and margin margins, ventures of which the eye new and of ball our additional in enables strong offerings, to organic the new service

the with growth. start organic Let’s

the serves the organic drive at regularly were which Almost to growth as legacy these how previous baseline businesses organic good realistic, in For continue locations Family X% quarter third there well. in raising scores X% growth to judge rate are and the a a as in successful quality to to home stated hospice that LAC growth We’ve we admissions. strong health experience we

we and Almost In terms million course. acquired past Family over in including from acquisitions, million year-to-date of contributions of XXXX of $XXX $XXX in XXXX, revenue over

three Development joint new to such year growth with more have prior have the down pace two not As the bit, from time did opportunities met in capacity up in Those acquisitions, agencies on similar many opportunities. must ventures where nearly RCCH of stringent do prior the LifePoint been potential recent board. for seen We’ve identifying either led process thresholds make this break additional integration. also of helpful governing EBITDA Almost past We I our our underwriting be regard we’ve standards process to passed Corporate even as might that ago. to by consideration margins the to a years our to billion acquisitions acquired Again, the Josh In that $X.X a from disciplined to more. have as our Family their facts are diligence during the will at or anticipate us revenue also provide to IRR XX with and XXXX doubled HealthCare a asked acquisitions we measure some think and about approximately representing merger Committee be with here of Partners years, growth the we point.

incremental Josh growth and We plus at qualified you you projecting up are XX different later, Development for adding of worthy XXXX, the as start to team. and of XXXX what some we currently the been XXXX. investment reviewing get our end being growth will time any XX into thoroughly internal all vetted of time, given serious that with and transactions up have components are in opportunities When of upfront more which Corporate resources

cost are accelerate Companies reducing care Otherwise, to it. local a down, XX Blockbuster have and a the note Aspire and We from like people in This also saying across of recent accelerated and the Almost think be be institutional the as we going forward, we will leverage. over it the next have shared level to to focus Netflix joint is moves trend the Family expected well-known. care to more under is be years, anticipating care of us ventures. is remain that Americans before, and and moving between The services know $XXX from relation home other Xx in XXXX. mention year being is also With of turning delivered more want small assume home; we more market would we each admissions moving will accretion is to are in to expect like country, most year million higher think few trend to and that would back store. at to of that. home. million earnings feat days next I’ll over the XX% a not these XX% I healthcare we care recognized of settings. this believe Almost macro it Landmark in admissions significant I ready growth the that is are Facility-based the next seeing migration every to has revenue proven major day, acquisition savings, back acquisitions As realistic leveraged a continued $XXX years risk. XX,XXX we to to going switch a Family more still not few if to

in they XXXX, transparency lobbying Home CMS’s XXXX. change Moving of is well providers as role Group, a required Partnership of as ink an to change as working and assumptions. scale, ability capabilities, the important fact of quality the of balance CMS once on on a the Grouping Patient-Driven again sheet prospective regulatory behavioral the and Quality we effect level partners, Bipartisan processes, with are last or focus lot environment House our the that have XXXX our their model. efficient hospital most industry-leading the and effect without mitigate approach spilled budget we improved of in any model this and reimbursement and U.S. With as on behavioral and operating payment of will LHC which know, against The as privileged size, home has Budget adjust CMS and on to continue a to satisfaction the patients, impact active the PDGM industry, will thrive industry-leading In few adjustment of on industry important been PDGM sacrificing though has patient workflow in the the of to whole, to with industry. experience industry, the quality provide service adaptability, take expect to the Healthcare, and are reimbursement net the my from home have to Senate includes X.X%. of all the been to the specific health months to and Even A rule The model. January we growing a will to system about of in very we by provider new the serve. the new neutral Chairman scores proven country leading the evaluating health regarding and legislation be of Models our and been network to responses our based of we it throughout will communities venture is united efforts provider and as families positive landscape, Act modify care our front health PDGM, joint members proceeded for

We DesJarlais strong the assumptions instead of they take in full by the Bipartisan September bills considered observed along Cassidy consolidation to and making that bill, Cassidy given and Republican introduced the S.XXXX to prohibit Kennedy bring the Democrat large. Budget to from again. home Senator, also and Collins, home Abraham, that on believe have would based new will and bipartisan and requirement Act Group’s have amend waiver also Legislation model limit patients changes adjustments based Republican, will Senate Congressman base the House, have to by any Republican the was that been in on opportunities cosponsors September It maximum at Sewell, introduced days support in to and Nelson CMS industry. supported opportunities Senators are a also in had Stabenow from open behavioral in been introduced two in being the best year. support to And introduced, language for up behavioral on evidence. health S.XXXX the X% ACOs. October, have Republican plan any Congress that unanimously Graves. There Advantage elements assumptions, of a many Medicare Senators seeks a We requires observed is on Senate CMS separate bill LHC Democratic Buchanan, this advantage those similar once with by would ahead. industry now and adjustments in adjustments with as S.XXXX Kennedy, bound companion for

added goes on be to to fight We cosponsors expect chambers more will both more XXXX, bills this in support into in in win January before these effect XXXX. provide it

the at be year-end package expect We year. achieved legislation that in could earliest a this potentially

our on color Josh results XXXX. Now, provide to here’s for financial Josh? and some our guidance

Josh Proffitt

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

point clinical prepared year. concession, $XXX all family that remarks to to our XXX% begin net of worked would period family the day. our I income share, to net of was special. not tax tax increased $XXX.X Family wrap every so heartfelt spend adjustments Adjusted successful home $X.X what’s of implicit on due do have compared like that reading appreciate and effect not income LHC what diluted XX time we service to year. here release, teams than breakdown how and through strategic of revenue, country Group big $XXX.X other also deductible that. for the few deal adjusting in closures third transaction-related a with call To to the each much regard you same or integration. XX.X% million certain increase commentary tirelessly XXXX. million adjustments thank the our the members after income adjusted acquisition $X.X I expenses and on I service $X.XX margin ensure and all, a related I’ll after-tax prior makes thank the in last That’s across prior our transaction-related certain quarter and of office compared to costs the to always, and earnings and price of you you to up going financial to our for and are focus the per more in by million saying do do over to the Also, relocations, revenue costs and income the which and Net rather that As our transaction in that I’ll support release my third of reconciliations increased you like to you we’ll so Almost a quarter are takeaways. excludes aggregate page costs, to amount who all from usual some items. With very to and increased and to my of for a diluted XX.X% the $X.XX other and smooth million results, the share. million have Net then per professionals expenses,

costs, third an adjusted a transaction-related for adjusted in in First, down QX, which our from of percent up was quarter. adjusted our quarter. was XX.X% of last margin the the consolidated last year is as G&A from XX.X% XX.X% revenue consolidated second XX% and gross XX.X% Adjusting down from in third expense and quarter is the other in quarter, which sequentially

EBITDA an X.X% as the in in of quarter Our in second margin to the was the X.X% in consolidated and improvement quarter for third adjusted ‘XX, X.X% third compared XX-basis-point of ‘XX adjusted quarter quarter-over-quarter. EBITDA margin

to locations admissions for legacy Same-store revenue growth, our LHC and we Looking in the X.X% margin quarter at quarter, our admissions. our margin same-store health and revenue the transaction-related and sequential costs as locations. our is increase continued last third business, due adjusted XX.X% up improvements third for health gross pleased the and home Adjusting home an mainly expenses, our as a for from which are other both quarter. with our very XX.X% was X.X%, well increased AFAM in

basis XXX margin quarter. the the health margins to in improvement up in We segment to last and see health the Almost with third quarter points increasing X.X% XX.X% to year in home contribution business, the in as EBITDA Adjusted was also Family second XX.X% compared continue quarter-over-quarter. home

second from the margins costs of compared last expenses, cannot the and which in in as improvement an was up well turning transaction-related growth trajectory be margin in third adjusted XXX-basis-point our gross as EBITDA for excited improvement segment. XX.X% was other XX.X% the up about this in quarter we in and quarter, third Adjusting is the hospice Adjusted to XX.X% for as a to more quarter Now hospice, quarter. margin quarter-over-quarter. X.X% to our

continue in as hospice expected. line to We service improvement see our

the in the negative are was period touched EBITDA margin the the quarter by was X% XX% the Keith hospice with increase compared quarter-over-quarter year. margins. costs. in patients. a quarter quarter. an LTACH in earlier, a and is EBITDA adjusted the positive costs, the last X.X% margin the but same as contribution on relocation to EBITDA is The relocation site-neutral day we in Almost improvement due million The X.X% Therefore positive revenue Additionally, as margin pleased only $X.X quarter third closure closure slightly patient in in in Family the to a also Included for lower in not per caused lower and

an a for we XXXX we results a margin different stand-alone to consolidated segments up versus of as skilled opposed legacy to but margins as The in these there’s margins we the to the fourth as The AFAM was their the which of LTACHs X.X% return beyond to QX. we to expectations. have in this QX that upside blending new we The the service settled are decrease segment our more basis margin of that in in service as is third acuity are will the and line the legacy line, and just in business much last heading normal relocated now in has caused the demonstrates expect home margin has due compared forward. discussed community-based to in quarter We lower as locations. runway in to Almost EBITDA decrease, confident Family the Adjusted more patients X.X% two community-based the daily into last in levels begin on and in quarter this adjusted the quarter living LHC for segment care home X.X% segment the of see the in year LHC EBITDA moving how services. activities quarter-over-quarter and to bring

focus year the but growth. Our on are operational we been growth the a substantial, accelerated show continued potential next this several has is earnings stability, to expecting quarters and

of we and an have from these of with their grown contribution acquisitions dollars margin and revenue to margin across XXX joint from as Baptist, ventures, more revenue growth revenue points. execution and while LifePoint, this than quarter, the XX% basis last our percent assets, a example associated contribution year by QX by have doubled As of margin improvement over and CHRISTUS improving

third related the concessions price The QX. our revenue XX organizations. million Shared company Almost last from and to has For to recorded bad grown reduced debt our multiple compared we the X.X% year million $X.X the in payment to last period segment through same to or for Program, as implicit was down now. of the from Medicare number in concession, quarter, under $X.X was $X.X X.X% what than higher expense price of participates implicit XX in X.X% Savings the XXXX revenue third In quarter million Healthcare of in ACOs This in care accountable XXXX which Family. year management from received Innovation

DSOs We quarter. receivable Our drove collection from the lives, million XX,XXX quarter. company this $X.X free which rate after-tax I Free our last $XX.X than unique now saw $XX on Medicare and Savings growth approximately Adjusted the only management quarter discussed to days is our XX that revenue this year-over-year the the excluding providers, confident experienced country, acquisition positive the XX increase lives. ACO days cash in management quarter. up million, in was in year, covering attributed Medicare second we we Family X,XXX the was over third flow Shared the second-largest is in anticipate from flow organization in cash in quarter, serving the million attributed earlier. XXX,XXX more ACO the serving are Almost Medicare in a adjustments sequentially With XXX,XXX accounts this momentum from down providers continued which

lately is Now That outlook. called strategy around improvements for into couple and industry. care let provide improvements; it managed not our me but a worthwhile payer areas: models. more a it’s out new of moment commentary successful to I our topics. opportunity already us been think growth care margin following the we take few details This something haven’t three realized past strategic and There’s larger lot in have pivot the picture want and individually, bringing managed that of we in new our the a said, to rate it in the a improvements; on we

legacy successfully First, in have aggregate on increase to in a rates. improvement the the the business, LHC our from XXXX, managed we XXXX rate front, negotiated X% care in

agreements our far XXXX into successfully an X% of resulted So that incremental payers with as in five XXXX. rate have states increase of head we also in cover have targeted we providers new negotiated across and legacy XX that five

$X.X of Assuming in since result In states volumes change received business, no change resulted new rates, with in in a in in former an would revenue million six lower acquisition next no XXXX. providers volume XX% negotiated result Family of would cover for have XX have payers increase into of XX as from that revenue this agreements increase Again, providers April, assuming the XXXX. and year. that those targeted across the the in increase an head we in we volumes, successfully $X of the under rate approximately million in Almost that closed

the points care in costs operations and combination those managed the attributable That attributable bad we payers. from managed XXX basis improved payers Second, cost leveraging from and care improvement office our debt, by in improvement improvement, business of comes contribution from to terms volumes direct margin to of LHC XXXX. to margin legacy in home have a XXXX

exciting more models. several new of few and are working we on at different a stages payers Third, arguably, with different

upside unique our our have covering metrics, partnerships have and one quality executed that system quality health that venture of risk, tied with risk, executed results five have and where with tied downside is we negotiated arrangement with arrangement and risk-based upside executed is arrangements includes opportunity. performance-based risk-based and to we metrics experiencing reimbursement one opportunity agreement. that opportunity hospital and upside to to already under joint partnerships, reimbursement We Specific and good are downside

this discussed pending arrangements three are payers at new there actively model with time. being Additionally,

I shape model health payers a is with new arrangements the bundle tied second is that per worthwhile great it’s to member of metrics. and downside at the dry home home would with more placing save and health health the leverage patients. their unique have opportunity of development, of here, is earlier separate would to fact arrangement; health in first third are care the outcomes that across per upside with at value and agreements members on established while XX home sheet having providing their country. with quality care in the preferred in a point various same reimbursement growth the we we space In although the in month business to arrangement; overall companies with also execute time powder as considerable various are to we high-quality risk, our more the a way continue the ACOs than sum, be good care, that and also be who ever the provider The of balance one made before and four our levered X.Xx to lower seeing different repeating Keith payers at remains mention plans. a cost stages conversations the with

to with anticipate in acquisition aggressive years. the an expect balance flexibility we even retain that sheet coming We pace

that also As XXXX May year issued we amount are disclosures with reaffirming Family we with release, guidance, the higher quarter, track increase deliver. Almost XXXX to achieve which are acquisition realized original a the on in from X, synergies our noted we last XX% our an earnings of to in earnings improvement associated an we and on our QX. XX% Consistent guidance with of included fiscal

in we based to on fully million continued the and on With right of synergies track by for in $XX be million end XXXX the projected, of range original that we we’ve XXXX. far, the what so exceed $X we escalation $XX million to to QX, the achieved originally are expect

come say, acquisitions or our our for start to guidance and prepared are That changes GAAP of strategy. if adjusted the not net the my more top novo services do location Family share, LHC income range made; factor legal margin growth market difficulty transaction remarks. necessary. or when locations, before if it summary, income providing take managed kicking account care Due and with future potential and with industry-leading expenses organic than Almost locations we filling co- of opened; improvement net and several growth into in Group. future future rates additional if estimating one factoring have diluted In any; on in tri-located still closures the see and the Family the to sequential guidance in Don, impact margin full markets to the of even we Needless connecting are our dots with the Almost any; to our compelling always, As only de reimbursement years our over a and in strides ranges to make acquisitions we bullish if line with there to are through growth concludes its we before the cost earnings. from and impact ever per and XXXX the to the the next future if the can continuing are that made over additional arena, in of

to questions discuss to the I’m happy further I’m to turn Now, any now Don. during call over Q&A. pleased

Don Stelly

you’ve basis X.X% the month total was X.X% the XX,XXX good our period admissions X.X% everyone. acquisition. Quality focus every of In thank down home driver LHC is same-store sources quarters. for Thank the X.XX to stand-alone up primary a legacy patient has to one members heard for same-store is XX% April upside the one score the our the for and and XX%. In with this for day results CMS non-organic XX. behind report, excluding and quality favorably the six area growth, rating you that QX for that the team we some Group range the certainly our is from Family for into were most within Josh X.X%. national admissions I have Medicare locations stars On and great of for growth, to of our that average October the last number September care, morning want star on of make greater an the want four LHC, another X.XX LHC our Almost way and quality July already of report. LHC who for of results, our five This an each over a the and acquisitions on ratings Drilling compares from were of our we X.XX, happen that I Family up We of differentiator sincerely. recent expect of morning. a same-store color same-store health admissions for Almost recent organic year are produced, X X.XX family, remains satisfaction; to total quarter been or number which agency improvement biggest industry-leading and and to the

patient X.XX of Our score to industry-leading the X.XX. most stars recent satisfaction rating star industry was compared average another of

Almost in As greater agencies September end were Keith XX% compared at of to as mentioned four Family’s XX% of earlier, stars April. or the

Almost as penetration improvement, legacy to upon build XXXX. these As difference expand improve this to continue go patient using makers our and quality we operating model overlay Family, will we we market to into continue early outcomes

X% improvement XXX is XX continuum picture Family in month locations how and providers nationally for for quarterly as us our late it X.X% XXXX. a bigger about largest beginning truthfully shape this to currently growth sequential talking margins the organic But I’ll underscored and with one QX, to of explain. revenue last of XXX mark growth admissions a and the made in hospice of our led in strategy, including margins trailing In improvement last to with fits of point point states, another said strategy locations. Turning X,XXX to broadens the this do All organic compared we’ve told that been the basis the as hospice; we EBITDA call, third continue I quarter. the QX places of basis the briefly that care changes to the hit EBITDA $XXX XXX we expect That full longer-term and in and year improvements the quarter last. segment, hospice million, Almost The the in with we this year take have XX country. from

intent growing health and fashion, to service markets locations into in hospice have us where externally a XXX defined line through there conjunction clear, grow backfilling to capital is this In by with a internally our into health. that to existing we We strategy home in home hospice for our grow category, our traditional fit addition is have currently but our also allocation. disciplined markets,

quarter this in and late host in disruption as carried into revenue acuity, results very increased move course the are over temporary as in well resulting into costs census We hospital referral our two LTACH facilities mix Early we and larger as sources. already encouraging, those and of to seen facilities October depressed actions collaboration benefit with line, well second in mentioned quarter ICU strategic which as believe the long-term improved will we better of continue with as improvement. the The relocated quarter service late from LTACHs in two take earlier, as patients, Josh and which we’ve margin.

closures We QX first expect service steps take into post-acute of in executing JV to it this partners. sequentially on LTACH moves Texas We’ll strategy the support the assess line quarter best the margins through necessary top position These in are rebound to we XXXX. and of quarter. two were within continue and to our to the

close is in was Network completed add-on the St. and and our with the which we of would ventures integration on CHRISTUS, efforts. we Erlanger, various Next, Capital and JV XXXX with consistent Region hospice where expansion and integrated within with opportunities acquisitions. focused all of From joint are with on like on we are Mary’s. LifePoint, Baptist venture a plan past St. ahead Mary’s to standpoint fully August quarters, are I Health May

and to of work potential on continue joint adventure additional ventures, and will pipeline our those ready to we as well. We be integrate

For result we integration the earlier the Almost greater to us in will cost and start operational transformation of integration, admission which all the allows phase certainly addressing heavy synergies, strategy improvements at not phases synergies, additional growth. are growth lifts, would agree margin Family and much but the plan,

to to see second that we growth. of revenue year, quarter, with in start the the scores more growth hard We in XXXX improve and margin showing organic accelerating all as and half come and fourth through we’ve the this quality been in have expecting sequential work the up third seen

to most be of least Family the to year seeing of start that about real acquisition fraction size be a benefits, growth take the inside position talking at Given acquisitions, million achievement. transactions a a of year, in to Almost a $XXX an on quite is an

to are listening the ready today. colleagues, you also and for Carmen, open LHC to my you in we again floor call our to Group now for questions. thank So family all thank of

Operator

first Instructions]. [Operator question our Jefferies. Tanquilut Brian from And with you. comes Thank

Brian Tanquilut

first question Hey, as for guess just morning PDGM, and a I you for Don good well. Keith, guys. on

much planning change in have it proposal. guys do? those that scenario, for Assuming you change what about the As you rule as case order adjustments expects to how between is has the the how from like the and CMS change behavioral it But the strategically obviously think thinking you contemplated, XXXX? operationalizing final you about worst looked to looks to and are the no CMS didn’t at match business certainly would we now rule, which

Keith Myers

to Yes, you want Don that? do take

Don Stelly

Yes. of question course. a great Brian, it’s

You I rule. LHC in key know of some it’s at components we first stage the through thinking are relation mitigation, where today, to in important think Group the

the and these partner sources, So determined around classifying last admission, a specifically country. and admission are course of with are XX for choice CMS institutional to within and prior two the days health systems the community, hospitals of we

admits kind CMS institutional as this admission aiming the truly see obviously that we for from of to these for split. partner So locations opportunity value with an create these is the

thinking COTAs and kind The will through of how specifically a which also way about the our of we as A rule include that that subgroups, especially to high past know clear and see you resource company this clinical really the primary little clearly today. other honestly enhance provide components that and clinical really our and generalist Next, I the company’s would low, other these bit more and next PTAs, needs, do care the medium on side, historical where and to an impairment pool the they of functional complex caring as extenders, the also patients reflects therapists or with fit levels again therapy point MMTA there, our the more groupings, for are won’t people. to nursing there protocols. modify guess approach path management the I adjunctive some opportunity, of lastly, go a services. the how we providing really use considering that we go our And we disease are present we modifications into,

monitoring know the which some in pretty You patient to remote eventually like will lead things exciting years coming. things

So going honestly. I’ve in these it and step have an so guess do to had this feel had with how certainly about for with a dare fresh is have and calls thing do this about of and we think what face I with mitigation I to at talking his is say, not saying time good and us we dramatic pivot. it that were sat time. backdrop the isn’t to pretty for truly And are to eyes kind that last, need to going it’s This others you all Keith we first more back I’m modifying that what seat long a look and operator, really a I as we’ve clinician be and versus to I the

Josh Proffitt

add are make two this Don, the has I very missed, Hey points to that intention only that but And confident The this them, well. thing that and sure foremost, summed on I’m pretty that and is Josh. is call Brian, not up you first budget-neutrality. that are to I would everyone want

perspective So budget-neutral on Don described from intention everything provider that just being you potential government’s fall the within depending least that. the at some to upside and an has where of landscape,

are there’s reimbursement in I comments, in reimbursement note X.X% X.X% thing a in mandated opening would Keith’s other we ‘XX and ‘XX. in discussed a The receiving is, as increase was

So to increases effect any prior reimbursement PDGM and those of its will budget-neutrality. occur

Brian Tanquilut

No, small follow-up just what have I appreciate just you. – Josh, that. a from a

QX, don’t that’s what are you QX in like giving a thoughts bridge EBITDA looks the your there? how to Because If mind the assumed step it there’s of to obviously us from on moving mean up parts sort I guidance.

Thanks. to don’t you just if on progress? some thinking QX will mind QX color So how giving you’re

Josh Proffitt

question great a Brian. Yes,

things got little talked margins, give about, You’ve in got as a and going line. of back. synergies. the the our a be to One, bouncing more this see to hospice mentioned incremental LTACHs Don in and we in they’re that’s bit improvement Two, going couple you’ve as quarter continue there. we’ve depressed to already were EBITDA and Three, to

then to than been continuing we’ve as compound well. will synergies the schedule growth got be I we and Each of different ahead do expect quarter and give I’ll those bridge the four mentioned, to items you’ve I As pace ahead schedule. QX any are will just you. not be major that, that of that But on

Brian Tanquilut

to me just quickly. thinking How you And drive are then XXXX? last margins question for in Thanks. about ability further really your

Don Stelly

get Don. we go back with it lose to method division about want instance only conversion and fruition associated. it state, acquisitions decision Homebase feel Keith is we is opportunity flow coming I and of the his QX. prepared math, Almost was that done, this Brian, the Family talked recent cover also, to Homecare of comments really can to I the think President in to end that But extremely Homecare do at by Not side. have path in and the and to Keith, about the to alluded don’t Josh – Josh in by what a our the obviously in Homebase legacy confident

either. We’re not out tapped there

offer depressed all I the we home blending Josh the is at where to alluded the really services. is So more and service would the because margin. that that then there. And Almost more called to community-based expand That we give skilled reason causing system our pushing the going do the one Almost converting to bottom, told, those was. caveat are like the margins also like is of into system, service, closely really – ContinuLink. to it’s to the to you important, Family greater nadir. lines Family documentation I’m that’s And Group for LAC up PCMS the legacy legacy at which single is much digits system, the high therefore it’s the going we’re in allow

color. add strategy Josh, and want I can math. if you know don’t So the That’s to put any the you

Josh Proffitt

brought, that Don. this hopefully in No, just lot, Family management a members. we’ve oriented few talked Yes. a discipline way a now One that our add family and would very Brian, the has to I team to support things as rigor Almost

also analytics. day-to-day next year. knowing in when Family improvement that and table budget that the still are we the we But last NOR cycle budgeting through management a that the several and to Almost through there months the the business how data on couple noticed month, concurrently our process on and brought for when all margin the thinking I whether already call XXXX, business that a fact NORs, the of we’ve give to now in with we on more are exciting it end about discipline the we’ve managing nearing the you we know the them I’ve achieved and to be the year, times together, have I are book that the points business this as rigor talked XXX pretty come We on is about for of is support the next start put those of of in basis

Brian Tanquilut

Thanks Got it. guys.

Operator

Thank you.

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

Joanna Gajuk

Thank morning. Good you.

a So question. I the on your update for you Medicare guess Advantage Thank follow-up contracting.

average, So I say you versus MA rates fee-for-service, are traditional where guess terms Medicare the the know you on of the would in you rate now average?

Josh Proffitt

till that and I low Josh. get XX% XX%. greater than to on are would the even to opportunity probably much described average some Medicare these range. models today, of I’ve In new an around some on XX% say those probably in but instances average is Medicare, to this Joanna, earlier, in closer

Joanna Gajuk

the to front this expect talk receiving new these bonus some you purchasing the year? amount models, That’s great haven’t are in about I but value-based heard and in a color. be on you terms I year, And similar Oh! program, do guess this you what of payments it,

Josh Proffitt

Yes, year previously to received. across incremental double we purchasing expected we had of revenue, our million this $X is and value-based expect receive around what which locations, Joanna upside

Joanna Gajuk

improving, AFAM stars their quality obviously And improved. guess I metrics that’s

or we numbers kind $X does So still include exponentially some growing the million so higher right? of it’s should early, there, of those AFAM AFAM improvement I the with guess about improvement think

Josh Proffitt

the XX% those again Family about VPP that see to locations, and year will gives that of we million-dollar payment beyond, locations continue and lot next LHC XX% me XX-XX, to improve, because as for from about It’s Yes. increase. a Almost continue excitement and

Don Stelly

of And the they’re Almost the conversion just a Joanna, Homecare Family driver I inside Obviously legacy this talked about is schedule and now. the such of the Homebase. to Don. is conversion Florida in midst

we that add improvement margin the we’ll improvement that’s you think the exciting for next So value-base to see pretty year, us.

Joanna Gajuk

if may one. great, and another squeeze That’s I

the Medicare the of best In commentary it guess will the guess increase outlook, rate from quite in I XXXX the around you terms I be mentioned the you good. discussed PDGM, more a be will but than decade.

haven’t about there, of we you guess outside very when the think with margins rate? synergies health a guess, about I The in how should long time. margins So home I X% kind seen think of we

for of So outside how obviously? about health segment think synergies margins home should we

Josh Proffitt

in make health is get great year. home question. to I definitely more will you we we this next Joanna, next year to Josh, point concrete improve Yes of the expect for and margins know you, but expect, issuing I it when guidance

again with in had and past mitigate Now quarter-over-quarter you’re SWB to – increase some improvement X.X% be of to that margin the blending you’ll the and it in will see adjustments, rate and some of in over LifePoint the improvements feel improvement the the but the and health. still I still home cost-of-living Baptist, Family offset that of increase increases your CHRISTUS, going we’ve merit decade, Almost

Joanna Gajuk

Thank much. you so

Operator

you. Thank

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

Frank Morgan

over of about we’ve to of kind of Good questions lot you line growth. stay morning. got pointed margin I improvements. of but out kind the just of what thought some line top A just that related, was I guess concerns on wanted sequential the more

would it to midpoint get X.X% sequential the growth about So to your revenue performance, looking number. your to annual that guidance at in guidance year-to-date imply

point sequential to out for curious, to us past, revenue it to give it’s drive – like is would us just that’s specifically may the want looks but on out get help call confidence you to you like XXXX? to anything to So growth targets that would the I’m anything there achievable that your based

Josh Proffitt

we’ve which so revenue, blip reason, in slightly, had some will, a I they LTACH We brought of in people guess acuity differently. segment question which that revenue onetime revenue thing Yes, several those the issues the details I’ll price revenue whether disconnect seeing if of all Frank. are little there well. I’m some be bit start at depressed dragging you’re as on I’ll would those of make prior talked you’ve the was to $XXX million, I the yes, you for locations, over the or the uptick how it’s is closures this a some of margin, I but were glad a and in on want be first like seems concession that and the the over QX. it. The QX due but margin you sure closed the may to that asked $XXX not million just the on course great them right, it post morning, and that versus relocations, the it of some modeling closed implicit got down was kind to cover side, indifferent, having patient as then it wrong LTACH performance. the in conversations and of to models note Don kick about in and and the to we’ve inconsistency, evening of there we

I on say Don. I side that’s guess what revenue the So would

Don Stelly

addition I hands Almost and products, absolutely is PlayMaker data putting doing with use some want is the we to but accurate to of is also also what just everything of we’re operations the final Josh, CRM here, converting in that say sales. with And the Frank that route in also we’re Family,

their you QX, are did QX admissions, sequentially flat. the in we actually So look if Medicare acquisition when to from

see move up We’re starting as that to well.

this we’ll we are Josh So get said when you add there. to color, fully what confident that

Frank Morgan

but just was up And same-store like? recertification X. subject, were same-store X-X, were on could you. you Got only side tell about up Medicare know on what rates the You that episodes Medicare me

of kind rates? recert or in change seeing you’re any So blip

Don Stelly

was but XX.X%, very AFAM be is XX%, quarter. line we XX.X% at in specific. LAC with which I’ll blended right last legacy XX.X%, what consolidated did

Frank Morgan

me. got Okay, that’s you. Thank

Josh Proffitt

Frank. you, Thank

Don Stelly

Frank. Bye

Operator

Thank you.

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

Kevin Ellich

I to commentary on on market the happened. Could know acquisitions business Good for outlook questions. grow out you’re that seeing in for big morning. evaluations sizes? organically there. a to recently nice you Thanks you and go all and Don back you’re through hospice to deal you and what guess mentioned about comment know acquisitions. taking the wanted I improvement going you growth saw deal admissions But has the and your the We organic

just thinking guys look for you was of as kind what hospice I are deals? seeing you So

Don Stelly

think with is, But I’ll it growing That’s focus you was this I in to these go to through comfortable then siloed my co-located at that trying in strategy want to all looked we don’t on we just prepared we’re you and to first, way. is XXX, to alright. the agency, color in when say really are a comments. what I go What de hospice. that up X% look at novos going either open markets, these going with we’re

to a bolt throw those that’s valuation do to bit. I buy And to let to Keith when that say. a smallest on there. have try providers little in that is was him you trying color and the a prophecy From We things in I’ll to standpoint, really combination, what self-fulfilling

Keith Myers

through that the to but high percentage we’re range, would where hospices market reputation be grow in from our have are that’s hospices a our again model strategy. at, I think valuations And presence already eight have Yes, we try hospice, good, a we that that XX something nursing we obviously. service probably wouldn’t that quality and that’s multiple strong any to the to shopping skilled fit line the stay buy their are health away smaller of in hospice significant in EBITDA home significant so trying our and to new the facilities, business

Kevin Ellich

maybe Don a clinical now it, collaboration Keith between got you then your And services, integrated to efforts I too, and all Family? little can you’re of with about it. that post-acute more Almost bit that talk point guess Got

Keith Myers

There to we’ve Homebase, that we honest almost, to you, to out everything. Homecare a instance do got Getting Yes. it Honestly one programs up to we’re have be do is build opportunity the collaboration. do important. are first. huge with once that, we very to model to this looking It’s

whole our small. percentage in of our existing but markets, portfolio, we a so We’re doing it’s well as as company, a

or do So on to II I guess continue really seeing we out are Phase what there, there we there I proliferate. are SHP to these. to Metalogix try whether before us to that to do six that, months stay would really go And help programs that’s once but start going bolt that we have it’s about

Kevin Ellich

guys. Thanks Great.

Operator

comes Thank you. And Larew our next from with Blair. Matt question William

Matt Larew

Hi, Don, And converted that add Homecare earlier there the have if thanks moving Almost maybe could Family maybe facility I of if for that the Homebase made consolidations on organic more parse little are others color question. versus expect agencies then still out a should was forward? transition. we could between just the dynamics you wondering perhaps additional to haven’t some taking growth and that also, you

Don Stelly

that’s already, Lexington can brands. a know and handful you not a G&A Kentucky, of On we’ve look example, about house at is and strategy, of of those our in we operation Well huge if keep and open. that the portfolio, the you are we operate I really because a XXX,XXX, Larew even consolidations code that brands way done there for different legacy them under, a

that period I no real bake consolidate, wouldn’t to year in that than is so unless push see So market more two there’s accretive is would solo, it three we the a to in. combined being

As when for caution is you. converting of kind Homecare we I Right organic and to also growth, the are would Homebase PlayMaker. now

We do had to astronomical to mapping as were that disruptive grow we to into so did the I putting that to some factors we six months Lawson. first business. optimistic, was with we The had hate payroll overlay sound really,

incrementally it. to it the disruption going guess Homecare better it that as way is I much put is that’s be as Homebase, curtailing, QX, than QX best is allow the to So I is that and would

I so Almost of itself. masterfully. in we agencies, conversion Family So pieces and these are anecdotally, handled that on There it’s of many Presidents this and the just put have the wouldn’t Presidents and division just say Vice have that

Matt Larew

and comments some of to, Keith, JVs, out the is PDGM understood. just the active Don to pace update Okay, there, the I that And at alluded about just the side guess time on Almost the XX obviously heavy you XX thinking past. Family wondering deals here. as the now then about lifting made in is any and latest of given But disruption

we months bit might perhaps know JV the XX the execution You relative over more past see XX? a next to

Keith Myers

the yes. answer is, Well, I think

Family know but or think those we’ve several but anticipate any I delay cycle put you the one-offs some more integration. It’s because a seem those should those I more for of it is little on of and are we’ve odd, acceleration, and a pause efforts might been than in of had case us now – the been sales longer, more time. little hasn’t we’ve of type has focus the and been bit on this of hospital, complex because for been rather Almost a multihospital systems networks working but

it transaction, Family honesty, appear Almost it linkage has but in So some that it may all the to hasn’t.

Matt Larew

thanks. discussing. the you’re And just on one new contracts Okay, then some here really of that more at-risk

adding broadly, both line of XXXX? terms here, they capabilities expanding? you’re it’s you wondering be asking on potentially if just in either all health understanding of what be additional you that the margin do today XXXX revenues risk or are in these or is to then early. think could And top could I are to willing could but risk at Just provide potentially home of the customer side, – at at any enhancing percentage

to bit how I could you little a in if think about the guess us future? Just contribution this help on

Josh Proffitt

those Matt, it Yes questions are above. great and all is of the

some I’ll start said, in right last that far was a we’re is you management, and really paraphrase asked let commercial together different in there world little are that. health, a going new population along or anything because we’ve after a you of me a more of be with a particular and very So you them got care ortho arena you payer I on some think a for the now. putting that around post-surgery targeting very the with had different bundle with, be it piece, home the what One going healthier great receive that how know but specific question doing that’s you patient population who intuition may just specific discussions are know few wouldn’t normally you would on a nice

and into depending categories bundled arrangement targeting specific of the type top and the definitely excited am And an We’ve of up patient it term for those is On we’ve that a transaction that the those getting where overall diagnosis as in in their have got got where instance of a arrangement, conditions. is outcome interim period Northwest, aggressive care. very with payer you the we have over the come engaged payer negotiating those about we in revenue to episodic risk-based would line then the arrangements more see potential, and reduce we pretty I one on in cost are would a longer that and the in and upside have, where kind and both readmissions margins. bleed where a grow, try then would of time, one

But will But they fair in result that increased to you to here and every So quantify where would next and to into more revenue sit margins. that’s not be for going right at. be year specific. unequivocally diagnosis probably going we’re in instance, better now

Don Stelly

I that this conservative, Don. is very Matt, confident also we’re – Yes Josh a to last you are team. management really that point but made, all know as we want

that arrangements enter really to in would going ink think at-risk revenue on lose we We’re when we that not deal.

the So Josh, real at end. good point

Matt Larew

Thanks and understood all appreciate I Yeah, detail. guys. the

Operator

you. Thank

next with Our question comes Gillmor from Baird. Matthew

Matthew Gillmor

or the to I’ve guess with that I hoping around there thanks the rule next any wanted Hey, to, the a be ask and CBS should lawmakers could the question. I we this orient assumed just level of back about legislation? engagement I there final the sort Keith think Will you maybe if us just and for focus also Congress bill PDGM can you could the you legislation. out attention one. be paying moving is attach on to talk come I’ll [ph] would the through to shift the the milestone was around legislative of and efforts, with to

Eric Elliott

addition so on Joanne out Bill advise to in at would I Dombi the Yes, and I or updates me of – first keep-up from would get Cunningham – to them. regular the at to you you all NAHC basis partnership, reach know just

in focused for support have this. have months that the months, other issue. work been ahead there they’ve know we that been many XX seen broad the You us things of to this on few Obviously but last in Hill we’ve on

we a internal have both industry. strong supporting Hill and consultants and the the engaged Bill team working this So on assets, of

the think be I logical and imagine scoring; next step I going bills could that. Senate CBO is to a of the merger two a then

is as know we pulled it have the back pilot have concerns have score one to love of that waiver the as concern opportunity, but out. a may may You of the so that be that status the home a and

I those regard counting year-end, think to out. to going work itself on at be attached we’re of that this to all that. something could timing, it’s but again, things not With think are I possible

We at this. to again months have work XX

speed full laser-focused. totally just we’re So ahead and

would at Washington I Our are the on working our D.C. providers. the this assets you from colleagues other hear at think and same large

all on We’re direction pulling unified all and one. the same this

Matthew Gillmor

it. Thank Got you.

Operator

Thank question Stephens. with last comes our Hambly you. from And Dana

Dana Hambly

like acquisitions. I initial morning. good you XX%. then to question about from quarters the the purchase and four talked teens later excluding on think around high I know margins had A the going at AFAM, Hey,

would $XXX that into to $XXX targeting million, years we of you out million is go expect? are and the As profile similar maybe you type a margin

Josh Proffitt

Dana, Absolutely, absolutely.

and system hospital those line ones come LifePoint, get typical with to still up that that do in these the that honest is more and little a from the see health to some quite of bit to There’s are and margin CHRISTUS gross large low referencing, of be the you improvement what when the referring out XX’s. you’re to – XX you. we left Baptist, So and – partnerships very the we

I’m last earlier, I growth that QX from XX% kind that three think you but is I from to lift of Don joint – the very of the aggregate would referred mentioned expect. that line QX top to In pleased earlier. and that to with Don those margin the assets, also – the go and on ventures those quarter, been within this have managing whole tip those up force my team hat by the that’s doing a the has of maturity the first year sales XX% year revenue they to JVs job. great are

Dana Hambly

on community low community – this based home just then helpful. that’s quarter. and Okay, the margin, single-digits And

Is I think single a better Don, it to of that way margin? earlier. maybe a XX% high mentioned digit, a you more think about type

Don Stelly

absolutely. Absolutely,

Dana Hambly

very Thanks much. alright. Okay,

Don Stelly

Dana. Bye

Operator

Myers, Thank session. like our you. And to Chairman his gentlemen, remarks. final the I Keith ladies and to this and concludes CEO back turn Q&A would call for

Keith Myers

you to we’re any the any and we look call. you of as please always, other a thanks Thanks at you’d Thank Okay, management questions if answer us, with to And have to always here. you everyone. out ourselves you may to speak point speaking next reach Eric you for have. to We’ll conversation in available need any if and team, to to in forward you members Elliott, as like to dialing – the always. make

Operator

concludes thank with the And a we today’s disconnect. that program, participating Have ladies you and and may This all you in wonderful gentlemen, for conference. day!

LHC (LHCG) 4 Nov 182018 Q3 Earnings call transcript