EHC - Earnings call transcript Q4 2018 | Encompass Health Corporation

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Operator

Good morning everyone and welcome to Encompass Health’s fourth quarter 2018 earnings conference call. At this time, I would like to inform all participants that their lines will be in a listen-only mode. After the speakers’ remarks, there will be a question and answer period.

If you would like to ask a question during this time, please press star, one on your telephone keypad.

You will be limited to one question and one follow-up question. being is call conference recorded. Today’s

Relations any If this Carlisle, may Investor at you I’ll you Encompass now Chief Crissy have time. to turn disconnect over objections, the Officer. Health’s call

Crissy Carlisle

Officer; morning Rehabilitation Corporate Chief Thank Secretary; Fay, and and Officer Price, Chief you Duck, Patrick Health’s quarter Vice in Ed Coltharp, Executive Counsel are Darby, Home Financial call Officer; Hospice Executive earnings Andy Accounting Officer; XXXX Mark is participating Anthony, Thank Hospital; today’s the Financial Treasurer; Senior Health General for also With of on our Birmingham Chief Julie joining Doug fourth call me everyone. Barb and segment, Operations. call. in via Operator, President Inpatient Encompass of you Tarr, April Jacobsmeyer, phone. good President, and today President Chief and

you available the the have earnings X-K we not statements information, are SEC release, Before the find website of in you Page the on will which information, release. supplemental of Harbor X copy, quarter last filed and greater supplemental earnings do if set related Form forth at encompasshealth.com. also on the detail the fourth page are On Safe begin, already our with a

that We Form to and December for in them. ended discussed our statements cause call, encourage we from Form which uncertainties will the are expectations Certain SEC actual are During materially filed. of the the risks results differ including projections, read XXXX make which could uncertainties, control. to earnings and company’s and XX-K when risks you XX, many forward-looking to and subject are related our estimates beyond filings, the X-K and the release year

on today. these current duty place of and future speak and You undue not statements. projections, on presented, of information events undertake We forward-looking the cautioned to guidance are only estimates update which are do based a to estimates, not forward-looking as other reliance

will call measures. discussion Our on supplemental include this financial certain information and non-GAAP

For the reconciliation part the Form website. yesterday directly with to on filed which release of comparable available end is of most information of GAAP the supplemental press measures, end our SEC, measure of the are all as X-K related such at and the available at the the

Before to to adhere to everyone a we and to Mark, over I allow turn everyone to one question. it that would one question remind I the rule will follow-up question submit

you Mark. over that, have With please call If free questions, the I’ll in to additional yourself the to put feel turn back queue.

Mark Tarr

fourth was and conclusion Thank Encompass quarter you, to Health for morning Crissy, and quarter another joining a strong good The call. great today’s everyone XXXX. to

get into I our the to results, Before in earnings financial our highlighted address wanted release. specifics one item I of

an fraudulent accrued Medicaid to We of a and regarding by alleged the Justice Medicare loss have of $XX Department improper investigation contingency or claims. related million

As has pending we’ve we’ve previously and been investigation since fully. cooperated XXXX this disclosed,

value We the of associated company are having on however, investigation $XX or future the estimates recent not and aware distractions continuing discussions and settlement with and million. based of any wrongdoing; now of DOJ the burdens likely evidence of considered the fraud, a litigation, cost with falsity

discussions and settlement. Although of we no ongoing the these we are about conclude provide likelihood a timing hopeful matters, certainty we or nature, can are can

it and discussions, can’t of confidential we say about sensitive the nature Given the more present. at

to fourth full financial in year. quarter let’s the comment Now Doug cover the to comments. move our on on will going his results. I’m

to XX strategic in full Same our our business adjusted revenues four driven cash hospitals by beds beds, hospitals. XX of and in adjusted XXXX segments. our growth, changes X.X%, used favorable free our by Relative growth yielded free consolidated by existing accounts fund increased was was consolidated XXX less in or beds. volume we expect growth rehabilitation adjusted collections growth million invest This in the was discharge more We than primarily EBITDA opportunities of $XXX.X beds health of XXXX EBITDA both along X.X% growth our receivable company initiatives. we and in in working and existing our The our expanded number an both we new that capital XX.X%. was to segments hospitals target admission same for and growth added of improved of X.X%. strong remember year, store in resulting opened XXXX, our increase flow add in and but store XXX growth in-patient our with to organic to During by business home from XXX X.X%. in cash our segment flow to The

also XX acquisition the majority XX locations May. in from of those health locations, home and of coming the hospice We added Healthcare Camellia with

In and terms continued initiatives, our strategic in of our XXXX between rebranding development analytics, clinical post-acute and solutions, increased completed change, advanced data of use our two name our segments. we the of collaboration

increase of who of XXXX, XXX outcomes across number points reduce to a the collaboration of the and Our clinical of over Remember Health objectives XX%. the XXXX of primary clinical an XX%, collaboration the and improve episode. are IRF to experience Encompass for basis patient and benefits rate increased total collaboration post-acute clinical patients cost care receive was the

our increasing and overlap these nursing overlap health markets, are in discharges evidence discharges lower readmission facilities are being to scores home within is decreasing. patient are higher objectives while continue markets in and hospital home to achieved. teams between rates satisfaction We IRF see resulting and skilled to increasing Coordination our

the from XXXX, momentum on Our continue XXXX focused on we In priorities XXXX. to be build carrying for over growth.

Idaho one for open state to new We us. in have new including four Boise, hospitals a XXXX, which is in scheduled

home $XX $XXX have for and to hospice health million million earmarked acquisitions. also We

inpatient excited American to our This XXXX, officially inpatient patient share. hospitals sponsorship and of through stroke-specific to build AHA/ASA holding in stroke market hospital an treated the community patients from we stroke In stroke. awareness are well XXXX that certifications allows with We rather will we continue to to on believe provider, in share build our than joint sponsorship to highlighting also facility. strategic we’re Heart XXX nursing market launch be skilled Association. rehabilitation three-year guidelines rehabilitation strongly our Stroke commission, focus continuing education, Association/American bolster positioned a us stroke With the recommend the

We in of data determine payors and stroke demonstrate value to use patient discharged our and our for analytics being each to will we present markets patients providers will are where patients data those outcome to proposition.

post-acute area Another development our in solutions. XXXX of focus continued is of

readmission technology, our hospitals. leverage of In of it Metalogix. the cost our and with XXXX, piloting data deploy we additional large model the began and solutions capabilities of care. refine EHC sets, we’ve improved partnerships care entire post-acute post-acute Our at developed a it our outcomes strategic strategic and episode EMR hospitals. patient the in facilitated by expertise, will In we drive platforms to two to IT XXXX, across the clinical both post-acute enhanced and lower prediction well in our made relationships are investments continue of as Cerner business model as These and segments, to XX-day

and both scheduled $X.XX year billion adjusted XXXX segments. XXXX Full to full operational we million. on and of Full EBITDA year as become underway, per also XXXX is is for $XXX initiatives $X.X these operating billion our $X.XX share are include year for range is million $X.X to model guidance our reaffirming will EPS XXXX between guidance while focus effective communicated adjusted reimbursement revenue a net and . in for With growth guidance of between business last changes $XXX a guidance payment month.

patient new continues called the tool The questions beginning instrument. be from fiscal previously, the tool are FIM functional forward. with discussed the assessment replaced a assessment CMS CARE tool will the new the to used functional released we’ve measure year be independent CMS or FIM As This XXXX, IRF as the has CMS Guidance October new by the functional patient XXXX. assessment assessment on tool tool. X, tool from concurrently remove from been independent industry established patient brought measure, will since

Our efforts patient’s include functional that of prepare the implementation the system documentation captures improving to abilities. new in each the will XXXX payment for

using the using tool the CARE using is the patients we will patients FIM do functional of to of measured tool. this analytics to ways One status compare by data the

We reliability. be staff ensure across tool with specific will concerns measure can hospitals. shared implementation be between CARE correlation assessments to efforts the our refine inter-relater data patient used address our hospitals to and could the this as to use they All on CMS for our consistent education

concern build CMS case substantial length IRF area to changes of relative as is completeness and system the Our the the new wait new used make with to average is likely accuracy values for primary PPS. system, for the or require stay the and of to the CMGs groups, mix data payment it payment of

patient-driven Among payment a on clinical Reimbursement use with rule system proposed this systems April May. know year pricing to episodic for to model, expect in more and health, and changes released will heavily replacing payment groups once the is impact current home patient’s under eliminates more their current about new mix therapy system or to relies XX-day system CMS XX-day the our health XXXX payment home fiscal groupings We the this PDGM. service prospective periods. new case other also or revise the is IRFs early changes, characteristics In late thresholds. on the

offset In addition, behavioral to the CMS achieve a base neutrality, reduction X.X% changes will budget assumes in rate.

spend ourselves XXXX changes. will preparing these for We

have incremental for June administrative plans July. and include support We evidence-based proposed rule continued in in will the or expect home early released care to is regarding XXXX of functions. to the any until health additional updates PDGM calendar use preparation technology don’t Our generate drive objective, to efficiencies year late

go of individually go implementation as as payment CMS will make assume and Congress place on will the our feedback well we payment providers; change of increasing preparing a does We XXXX work we track part driving systems, record demographic systems continue changes If to predicted little is company, trade work a to to however, and designed, now. these effect trends these and as bumpy the their is these are We associations we so. proven but being our outlook systems could believe demand positioned currently are both to and which in as have we provide through in do to for for for that provide. services long-term company able on a not new

consistently cuts, regulatory quarters. and in payment XX patient produce freezes We of have aging growing adjusted successfully sequestration, a population managed to in high services outcomes EBITDA last through and cost-effective economic an quality necessary recessions, changes, and We provide the Medicare manner. XX

continues demand facility will and enhanced that, with I’ll will As it and to home-based the capacity. With expanded and we demand age, capabilities that over for our turn grow, Doug. services the to meet population now

Doug Coltharp

good regard Mark, to everyone. morning our QX strong was and operating financial you another and results. quarter Thank with

XXXX XXXX. EBITDA terms exceptionally was strong with over changes XX.X% up X.X%, The growth million, flow to an XX.X%. and working had revenues free increased consolidated flow favorable $XXX.X cash the EBITDA flow increase in in by X.X%, receivable. Our for in of and generation related improved QX year We cash of increased collections adjusted adjusted cash driven capital increased accounts EPS adjusted of adjusted primarily

Our X.X capacity well million. at and down of XXXX strong $XXX funded growth, debt in segments positioned million distributions. and continued ratio in capacity support $XX our during the balance ended holdings across the by and health reducing purchases XXXX, investments cash end in dividends at allowed facilitated $XXX X.X us business shareholder to rollover million We in initiatives, common sheet with home while from fund $XX year stock times flow both our million leverage strategic and generation expansions share with times, to

building four XX% our achieved $XXX increasing home by and investments objectives and which XX opening strategic markets IRF XX and acquisitions. scale by now annual These of new hospice revenues. health from we line, XXXX, million grew the furthered in of the for health our to million positioning IRFs exceeds growth and investments, service $XXX in revenues hospice XXXX home our During consummating of and overlap number

denials Florida to business results care segment, related market Michael. Same attributable X.X% by growth reserves QX XX negatively the revenues with QX QX in X.X% and in debt one XX bad to Medicare increase continued primarily organization. post-payment the revenue points Moving claims discharge. discharge basis points impacted to new to to Panama by disruption IRF to due same store by and driven in of store, for by in reserve in discharge X.X%, basis X.X% X.X% claims The patient approximately due was growth revenue a Advantage per grew reviews prepayment City, Hurricane managed contractual increased the net

primarily claims Palmetto. the levels prepayment New to highest XXXX max denials QX reached other due TPE QX for activity at than since

that sufficient made of new still have Our experienced level track the record new little resolving claims a has the a to claims the the positive no experience appeals contractual denials in TPE backlog remains Medicare not ALJ claims with progress been resolving TPE claims The represents to QX event. Advantage process suggest Once generally and prepayment of through process. enormous review we a do to again, rate. is new run

in points medical of both group of stores. over increase year related a in productive a to XQXX extent the the medical and expenses ramp-up favorable to to claims second both in bad most reserve IRF expectations XXXX $XXX.X EBITDA and will discussions of due Our MCO quarter increase to informs to in XXXX offset been guidance in debt with of are costs by a for Nonetheless, We’ve to chronic basis denials and for be on our SWV assumption. XQXX prepayment reserve and as XXXX. adjusted in costs lesser primarily an increased X.X% partially other operating million. XX.X% X.X% normalize with We increased our not segment was SWV with to adjustment XXXX a for lot increased the year, due these talked during activity consideration QX X.X% for increases and costs range. group pronounced to regarding validate a revenue. the this medical far X.X% the and the we have Revenue the new group by to percent growth cautiously a ended the about experience claims served of thus optimistic post-payment QX that XX situation. QX half reviews

X% Our of XXXX is X% believe in inflation. to guidance the which we line with include an benefits level expected increase considerations healthcare expense, in of cost

quarter Hurricane the Michael. in and the EPOB X.XX Panama for repairs improved in City, by operating driven which line our was prior expense hospital, other year. at The from as X.XX to of productivity maintenance by labor the decreased incurrence Our Florida costs was deleveraging the damaged

health hospice and Turning as increased of increased new for same our with hospice to Home XX.X% health home and home growth driven now was revenue resulting strong and both store volume largely store admissions acquisition revenue with growth in Camellia. up health X.X% XX.X% segment, from by growth lines. QX QX the service the

to as primarily generated support are XX.X% and and of The of both market the disruption health our in store progress continue EBITDA we Panama from costs estimate We thus increased far. make and costs. and generated integration cost efficiencies admissions health, Similar growth operating support to continued from leverage across XX adjusted with scale in in the focus services caregiver stems leverage hospice. of scale productivity our the The economies. home is leverage within and cost optimization City segment, on and in Camellia services same negatively results IRF approximately good the overhead we attributable increased hospice overhead and to have by pleased on that basis we acquisition impacted points segment the Home to QX.

few Panama lowest pacing bad QX useful X.X% at significantly in about disrupted and While practice conversely impacting of provide X.X% factors between earnings growth from highest City reserve at a particularly the to and XXXX QX XXXX of we you. quarterly only, bad a believe non-impacted for for the debt reserve to potentially QX of annual market. year revenue reminders our it debt revenue benefited Panama may QX, a had guidance prove is from and City the the market. XXXX,

the run its market recovering, it’s normalized City contributing rate. but XXXX, enter we As is still Panama below

market to we through the progress to recover as We continue year. expect the

the be in operational. approximately online via QX the we enter that factors additions of bed to remains this unknown mentioned None XQXX QX, pricing beds to beds to at in XXX expect bring hope the those and those from beds tool notwithstanding with CARE Finally, XXXX. of on XXX Mark approximately will time. we benefiting The transition impact

we’ll open Operator, Now line questions. for the

Operator

Whit Mayo from comes line the UBS. Your first question instructions] of [Operator of

Whit Mayo

Hey, morning. good

for we but create the patients for neurological all to or cases you stroke the stroke and get and PDGM hospitals, the clear focus opportunities that see it incentive like has as stressed for I patient clinical almost seems every this seems a on think risk rehab an well, that opportunity this this. home they're this health as Is you, between more collaborate hospitals home of a Just a and population see or do health? operator in. your you interested to trying reconcile to the rehab

Mark Tarr

a going April and this We opportunity health an ask we Whit, Hey that, on two stroke collaboration ask our the expand patients our it. coordinated, this from that. collaborative is sites, opportunity clinical to well see have and I’m our been make directly between into home or business then Both home converting comments couple that and benefit April have health from increasing an a our as hospitals agencies segments, opportunity. offer absolute hospitals health our efforts Since clinical our programs With XXXX we’ve Mark. me home expand to into standpoint. to that our the on to locations. let

April Anthony

the take HHRG model to down patients, take don’t competitors create system when to learn right to any to to thing how is try see this definitely continue be in think is programs we shifts certainly payment going PDGM, to we for that patients but there want influence, that stress traditional PDGM, I shift road Whit, us we to we’ve valuable mix to just before, that that patient continue efficient are patients. the diabetic-type even that important to allows that outlier so all are in although heavy and that have do also our been to nursing away, more started and align, that think an in

just some we to our to bring are patients patients to obvious we’ve drive there’s we’re all we pursue, places provide nursing to in opportunities game. use in also want more our health that patients have be services, that going We to playing higher and do care will acuity, to plans that Although that efficiently so to got not we’re certainly patients. those clear and home going cherrypicking operational think our facility-based, quality start for acumen and services a our best going managing to efficiencies for that do we’re

Whit Mayo

on in just had Maybe have bit efforts. little last less you than a one expected. costs one The helpful. come That’s rebranding the

with the this been market field, Doug, what what strategy. acute Just curious, post-acute through partners, the how Mark, future guys learned maybe process, have your the current broadly ties into this in in partners, you feedback’s your

Mark Tarr

as marketplace we all out across our markets job marketplaces. know, various their you to feedback referral It initiative the you, and The initially all, internal of and for went in that in rolling rollout Whit, that back joint has own been staff extremely tell between Encompass I’ll has completed from is successful. the teams January smooth. our a rebrand of any Heath great the did in eliminated first initiatives, we’ve our and the sources HealthSouth. our been confusion brand getting and venture partners very It

brand, We’re service help advance our integrated from and provider. post-acute continuum to now one one will under an name,

Doug Coltharp

it’s Whit, Doug.

what one assets the elaborate our do that all harm, successfully not some to for navigated far marketplace getting disruption words exceeded. for but about goals of can we can competitors that we expectations the Stroke was believe think through in brand leverage a place the and provide through of no confusion course American that to our go-forward Association examples have getting they to been we see partnerships in rebranded, the Certainly of some we we field we the we’d of the basis. do American what an like assets perceive rebranding rebranding. that, We just in of the are like that Heart Association, overall with primary just and the XXXX, effort, have the opportunity and formed first, on Just in field we to, specific thus now rebranding on to high actual had other do,

Whit Mayo

Great, thanks.

Operator

Blair. line question of Larew Your William next Matt the of from comes

Matt Larew

rate margins my associated understand in updates about and Thanks are tool EBITDA XX taking and about EBITDA with because downside could play then good XXXX, PDGM expand Doug, for In are there I better to I just XXXX. CARE the deterioration around morning. where growth. But prep in for did there be talk in modestly opportunities points Hi, you basis upside margin, costs to salaries/benefits I guidance first for wanted so implies question. or XXXX, now XXXX. ask them maybe there of and think right you might

Doug Coltharp

right, Matt, on you’ve and largely and some exactly side, and You’re in be a XXXX discussed, may the we’re just completed branding that Weighing of expenditures - are there the our our positive trickle with embedded as in we takes got bit guidance. little puts first into over first we price On in we’ve full XXXX, quarter and side. both just on in time got XXXX. that, Camellia the in those contribution year will a positive a for from as segments, Medicare also XXXX in of have of you increases so top XXXX mentioned, long time, the are

’XX what any the business in in or effect the from Hurricane segments. impact other of the the of insurance no and in that margin, in of ledger comments assurance Panama lingering and the have on have side recoveries to a potentially pressure proceeds when We Michael City received little both we we On consolidated on we’ll we creating XXXX. have our discussed the hurricane EBITDA magnitude

even will there’s margin more compression. think we’ve and IRF regard the over successful been the XXXX are expect up provided to with making to headwinds QX of on the as bad that little We continue strategic incremental leads model that solutions and with versus be tailwinds, ’XX, again I post-acute soup, evidence TPE debt and investments of potentially in as some implied though the and pressure that item to line segments, both the into that a RCD. to Then against be the making in SWV price of of all the throw you be well preparation because When for bit some revisions, such XXXX with we as both initiatives progress payment then we’ll the MCO. increase, expected level business de-levering benefits even with predominantly of in increases and

fruition, prudent was to way we Let’s for most you. felt hope but to out lay it it the come that doesn’t

Matt Larew

was that’s helpful. Doug, XXXX. understood Okay, That about

what regards lowest to right second of to but now, in I would more you’re written, planning The Obviously with certainly you see for some XXXX. think have do one we’ll and changes, reimbursement be be about about leverage happens five net implemented the as them the years. thinking balance talk accretive positioning into just sheet you XXXX, opportunity could to some the Doug, on an how home encounter going other about where might offset and you’re on might maybe operational headwinds activities the health about you pursue have side you shareholder any to IRF?

Doug Coltharp

clear be for appropriately collaboration, extent and do franchise they opportunities be term, the that into an putting fit or consolidation could about because the increase but there we’re Camellia XXXX, at not of do head could that have little a a of on the it that believe assets think opportunities are Yes, same the position the clinical number pursuing both XXXX. the in cash for strong we also the those to very business to of the be and as number course the we’ll we and us overlap balance sheet I want put brakes absolutely. a Certainly extra even free the sheet helped regard the here opportunity up flow XXXX of in end like think open are both with leverage. within our referenced balance and we through at to pursuing those. We capacity appropriate XXXX Mark that that aggressive incremental of in to and in scale the in some We better overall of near time it’s things segments, actionable markets

to the space, spending cash and continue it’s hasn’t that to believe how excess for of capacity capacity might demographic flow some we incremental to and shifted. the the We sheet in so prioritization share given that appropriate, IRF build use free seek market tailwind, really balance

Matt Larew

Okay, the detail. for thanks

Operator

Matthew Robert next of from the of comes Your question Baird. Gillmor line

Matthew Gillmor

Hey, Maybe that the some curious those conversation, Thanks for is Can the the patients will then three morning. some question. and formally take is My following activity your [phon], remind launching year. kind most partnership going the of talk share about you those years, also about of patients stroke over for good share. still of the you sense next overall of SNIFs just about us talked this place our on overall to are but today. market up what

Mark Tarr

I’m Matt, going elaborate She that. in American is ask one leaders to partnership. on to the Heart the Barb Jacobsmeyer of Association

Barb Jacobsmeyer

there’s available regarding available been everyone all few a Heart stroke are kind spending their providers. as of Women of Red a in as having with years. XXXX, website of our and these the we’ve effort kind things to came then well the an that care. and be caregivers, educate to life the working--actually so again well. to Association’s stroke first our should in out strong a thing other years some of XXXX, ours we on that ago co-brand to been do That’s as really we first to are on. local rehabilitation XX things two continue worked out well come a we’ve that at That’s we’ll Then, awareness with be next on luncheons, usually where Association’s various providers Stroke inpatient Stroke recommendations healthcare where the that’s attendance via co-develop will going survivors we’ve be at will receive Stroke recommendation high work will hospital, healthcare stroke Go luncheons, of pilot rehab be markets leadership as that these in we’ll starting care as to lot and to their the working the guide Part and the for patients, to to year, Association and channels that Yes, reinforce does them receive we’re available of presence, after guide and so this and going reinforcing patients their that stroke

Doug Coltharp

and you clip. about over market for XXX,XXX on that to in that SNIFs those are U.S. us, are stroke who that level headroom There us utilizing for to a proposition think referral growing value three last clinical that are and that IRFs. the of is there’s generating we’ve Matt, of and market of to I that share expertise growth years to currently stress lot to sell strokes too performing we’re XXXX the in currently year treat is we results coming other in XX,XXX there. sources our those, treatment X% the the approximately come other to There Then been with that or of currently the going capture going us patients and that would they a so terms winding efficacy we to and stroke up a of death per aren’t IRFs require, share, number many for spend what to really resulting strokes and average XXX,XXX through they lesser aren’t our SNIFs in aren’t roughly about where getting in

Mark Tarr

saw a a in overall only this market our this as branding our just step as to advance as Health strategic our initiatives next we in opportunity growing initiative not great stroke share, Matt, lever brand. just also whole a but Encompass to

Matthew Gillmor

Got it, thanks.

of and PDGM plans that kind these the still developing? plans. maybe changes of some you about some early, on but evidence-based just describe of may of development of I some up the know be the may those comments, you care take place Mark, you’re care Following talked that it could

Mark Tarr

yet we’re like cause Metalogix it; in another in data this our systems years. ask the of to use Yes, through April right on IT analytics it’s I’m for Matt, with help advance available going to we’re on doing over now, we that opportunity our to that invested our this. but company things expand many us data utilizing the have to

April Anthony

and practices other back best with learn how success and for You in practices fit past saying, the the force into organization Metalogix, same to at had own knowledge utilize our were tool within that ours but it’s use the resources organization’s so the trying from that our the some own and next patient. that the looking to our greatest years same--that really a know, what practice, we it’s not goes uses achieve of with finding best really can we’ve results from past our

on to to we it have to to achieve to this best hone in done in finding the best, the depending opportunity really for patient less, scenario. what the population simply practice on based non-Medicare rolled ability the the months, again. a are this what outcomes we’re begun and is the of beyond now last two we’ve quality utilization and own area. high it do it that Houston consistently beyond our we’ve is visits what the Houston visit out We’ve been really knowledge finding, So practice our we’re area same tool is trying historical population non-Medicare That go expand about XX using the in the leverage,

very it’s deliver making it’s effectively those a to do us we plan that how just not deliver care the sure the knowledge finding our model, we allowing achieve efficient and and more care it’s most history with we leveraging changing of consistently outcomes way in We’re that care, in the future.

Matthew Gillmor

very Got it. Thanks much.

Operator

next line Your the comes Jaffray. question Sarah Piper from of of James

Sarah James

for what idea you the morning. good give us you, revenue then understand and what percent of wanted to an include contracts of admission current the the a bonus, and Advantage Thank bonus health up? your the component home of and per better bonus performance opportunity. percent payments to Medicare discharge I both IRF or makes exposure Can performance

Doug Coltharp

It’s say more suppose couple risk larger on little a of more have sharing a the far. generally some a like, ways plans. it that I side. health we on that bit in our speaking, will component talked say have in interest they side. we’ve of expressed that the contracts to I Advantage there’s a and of home gain one not would that place that thus Medicare would things in have as made an willing the about been on engage just than is we our small well with are before IRF the incentive, which to a the value if really has relatively bonus sharing, experience more perhaps MA Medicare progress I plans but of actually prepared Advantage to proposition It’s sharing in we extent--it’s some have, percentage a risk you’d selling a

QX of that. we perspective business relative from Advantage versus and book in You terms as that well in a were Medicare evidence of payor encouraged the of fee-for-service, our lot saw a in of by growth both Medicare mix

gap fee-for-service and quarter, payments to fourth the Medicare the Advantage narrow. payments During Medicare continued between

diem the gap MA terms that versus of basis is - with continued That’s that selling XXXX, plans, payments but of question actual and approximately quarter, a progress even in value sharing now. reasons, the of a in basis excess year of per - our percentage risk percentage are the was fourth of bonus payments the kind contractual For of your in the XX% is lower right an for indirect and answering proposition. it full XX% low of Medicare of way number Advantage on

Sarah James

context. helpful very That’s

forward Just to bringing XXXX? to XX% that go where could MA payments, in gap that that XXXX, fee-for-service in

Doug Coltharp

serve set specific in the to appropriate the gap encouraging, MA The to in was I for ourselves a quarter progress tell that lot that the are our so in are you of June, we up closer intermediate it’s is contracts an know, most those renewals will You re-cuts objective. as again, fourth gearing for hard XX% we might made objective. of where a and term June.

Sarah James

Thank you.

Operator

next Jefferies. of the Tanquilut from Brian comes question of Your line

Brian Tanquilut

that managed Hey, good offering, new give view I about the can just on initiative talked in service you how will plans, currently of Guys, and that broader roll or can morning over how with P&L plans some care hit terms your a I’m offering health us the so if solutions you differentiated then you ramp, guys. how offering that was wondering color that’s post-acute offer different think that that out you from, hospital does time? your guessing partners and with to

Mark Tarr

rolled we’ll the year, she’s give that, number ask we us go of Jacobsmeyer our to there’s and sites - Barb with pilot on to going I’m to then that been answer. to some this contributing can she out and feedback Brian, going a two Doug. involved be over

Barb Jacobsmeyer

our both home going and we with important after long to home As can for been that value acute more patients term importantly preventing us, really healths get refining sites, are we then patients home using of we side in we’re on identifying collaboratively pilots looking the make and with so get IRF health, to more risk can can even we’re are those specific they’re really we preventing Right proposition, we’re at pilot while readmission highest the sure on do occurring. that we our far care are responding positive how that those at those readmissions. other doing, we’re not now, from on to management of the for home. work that remain readmitting actions greatest that those focus identifying when health so methodology are our those start home back us these that handoff to the in but prevent and things home what two they as case that patients patients only from the in our they things has at what risk do way It’s that how a two when the with stages identify can that

with results that the be here the pleased this of of will months, at few next number pilots in We looking to increase sites we really two but have. the the we’re pilot point

Doug Coltharp

phase in terms we’re of over going right number now, phase how of be one investment. one Brian, we to P&L, to this follow in is see might to years expect impact and a the up

our time patterns, those, as we that I of capabilities, expect appropriately we terms of what called place. course make build investment for XXXX, in of of increased of guidance be pilot considerations, as get terms as XXXX to segments and Just benefit the incremental would our as in two that business them they’re would growth, of Phase required a sure I of part recoup we’re have some through think, to get facilitating the to going systems coordinator these out that a of so and is JV which we in both referral and paid Phase and for source in to will or acute types of on call an opportunities in three results producing is incremental going want, discussed there’s we begin administrator be us terms behalf JV investment our development pipeline. income, and of new fee serving is, to opportunities to post-acute opportunities, as in that there. in networks, capacity care we over allow market, to as the collaboration that, going clinical predominantly us expect particular new serve to

Brian Tanquilut

follow-up appreciate great guess those I are I is for answers. that, April. my

us having you’re the I those OIG, from adjustments think you behavioral on PDGM I updates even in CMS how As and, getting and giving the feedback discussions with going guess, terms maybe and administration? just some discussions the you’re about the do the of are mind

April Anthony

feedback is Yes, they're our at I would this going. say time that

anywhere. know, perspective having receiving to I as relates could some not CMS you always whether - those the how think close cards so We vest their pretty a are conversations or I we’re it they’re conversations, plays meaningful to really on don’t getting good put

hard understanding know I think are credible they’ll respond our but being opportunity points stage, is understood are by this elements certainly are side. having to How an the some share far at will level, to we’re those having and conversations, to we as the rule other ultimately that seem of we’ll they’re that of result some in the problematic. as resonating to our perspectives moderation that be not--they so hopeful be

Operator

next of of Your question the AJ Rice Credit line comes from Suisse.

AJ Rice

everybody. Hi

you in some with making, about XXXX the partnership you’re in I about center Any talked talking of that on that talked we’re update Cerner. investments you’ve the the with of and some post-acute late on the innovation As fits things know about call? how

Barb Jacobsmeyer

Barb. this Sure, is

care record the this able home to that are so we’re innovation our IRF predictive been our well have in the of find care data most post-acute we to helpful of that in been can full working that methodology we’ve to the base as acute all the we on, EMR the for One home things from be have on has Cerner data center able readmissions. information, that that that data gain on using elements as our longitudinal reducing and

Mark Tarr

made post-acute stay be even the an for go those appropriate where we date don’t We another their not to markets them best efficacy overlap. into discharged that the either have are we to if our when ranking sure patient and from good the essential element in care a are that protocols we these importantly clinical the market, join most them want to with any acute scorecard, on adhering and that being to an developed they particular to to be IRF make or come that it’s but of IRF aligned allowing those the is also to on develop that data building absolutely to network market, networks producing as they’re of the providers setting, and in progress making want types to produced. We us results through in sure provider that’s going after analytics

AJ Rice

Okay. growth? marketplace rehab Then with there. a respect and you’re incremental the looking innovative there a follow-up, obviously IRF your being that being hot for Is in a telehealth anything has either business, your home to or health of considered or become a lot business, different of telehealth things facilitator an avenue sort topic at

Mark Tarr

an or We AJ, it to our facility a it’s Mark. in that on technology, aren’t efficiencies about think telehealth advances we is setting. there. shy out all or the whether We and opportunity either level this setting keep care, obviously a utilizing home opportunities increase the operational are of the eye

available anything we segments, application appropriate would and seeing right if in would either there we our think be for and out such roll us, is be would but one be of opportunity. to to that prepared when groundbreaking not move something a an now We’re implement that

AJ Rice

Okay. All right, thanks a lot.

Operator

Kevin of America. the comes next from Fischbeck line Bank Your of question of

Kevin Fischbeck

wouldn’t you afterwards I that morning. line is say impact market the is guess that guys rate the of wants to disclosed that is on two in to then investigation, that a the a today. believe expect for EBITDA are the things: long and run there that running no settlement you a gets from an fair what found settlement. be kind and it actions evidence government forward? had you take this there’s is you going wrongdoing with operations about and any of you investigation the your itself, a the whenever how one settlement a have you I result Is the settlement, going you current of might since business payment Good to and as other question concerned

Doug Coltharp

positioned be, made confident, there as aware need going are any of confident Yes we’ve wrongdoing that well been forward we be and are where we forward. we’ve that not an very and will operations not Kevin, very they moving interruption our falsity, are to stated, or

Mark Tarr

We seriously. right compliance treating those we business have both very We extremely been think settings. patients them We effort. types the robust take a that well both in of and appropriate and of in our segments in engaging have of activities compliance treating

any model of not out that may changes We’re any anticipating discussions. arise to settlement of our business these a as result

Kevin Fischbeck

to for-profit a far a there impact X% that about a data you and different starting point Is see put as as did the from basket is CMS could Then thanks. out rate, be rate that Great, IRF understand reason you analysis that you IRFs do the good analysis kind exact might for the it an of X% off market not number? given cut. need why I has that yourself, again adjustment significantly that the not but CMS saying

Doug Coltharp

flawed. a inter-rater simultaneously certainly data unreliable. payment, the low in that in run hospitals, franchise think FIM. very that believe CMS for the made on different reliability, patients remained discussed out that when it’s was XXXX reasons so a for we based regard previously, there highly different the time the came with CARE being and different the there even of level were at CARE again, being same is is, tool, data across a primary basis within companies, to that was that have guidance that deal manner, with gathered tool It reason FIM our data, significantly that CARE a rated so we the by and that was the ambiguities highly great and data meaning from were in utilization was of of I

no providers resulting a when see in, relative data XXXX CMGs some later We the revision glimpse IRFs in those provision expect April. rule revisions to types as impact by to the is for we’ll is of some and Mark and various the therefore of loaded in of our outlined the terms than the expectation proposed his get of that again of that comments, in

Mark Tarr

initially make was better which as year we ground that not CMS associations only is his may worth They change. you one with a change. year for data out still certainly data, with hard one they but year data worth ideal such recall of to along one a just such of than in of use trade year, than have roll second added the to DC worth to a new that tool and the more lobbied should Kevin, going

Kevin Fischbeck

your is assumption it’s But more data--

Doug Coltharp

well-intended there look those times in all in have cases that there is, those happened and when over ultimately by place, revisions is rectified. time back of has been if resulted system takes consequences, even history, when if a of Kevin, payment what CMS have unintended you period certainly are

will get has that CMS, and in to goes thought temporary but the hopeful better feedback that disruption some data based industry on most at We’re expect new mapping with even been that additional additional CMGs the we the nature. any by provided to if to the would in be doesn’t, the it

Kevin Fischbeck

cut, less is assumption of potentially your a cut? means not of But a better more data

Doug Coltharp

correct. That’s

Kevin Fischbeck

Okay, great. Thanks.

Operator

Craig Your next Kevin of question comes from Hallum. of the Ellich line

Mark Tarr

Hello Kevin. Kevin?

Operator

if please is Sir, your it. un-mute muted, line

Peter the of Your line Costa of Fargo comes next Securities. Wells from question

Peter Costa

you or mentioned ’XX, you maybe not ready spending end get to that how up changes now, some PDGM or a ask ’XX one doing guidance Wanted point, as you for in think that change, that you? get there’s giving in the the some and headwind CMG you’re rates changes ready at you and going do to point up so spending, do you’re that and ’XX this XXXX you’re PDGM positive actually as think with for improvements for that a get to step rate of going CMG know the or morning, in when from XXXX, we you are counteract but changes? productivity you’re negative the show something, the Good ’XX aren’t improvement I necessarily step get as then some changes for or referrals function like at about to can positives that where place make there into function putting before--and are you will to but you XXXX, to go

Doug Coltharp

extent think in way of the is try that But the these and and items incremental line having payment XXXX blow some in business, that model to those course would an investment the considerations of that we our it through to advent so XXXX. we way out we fiscal carved prudent ourselves efficiency things of in it’s progress to year, changes things have XXXX the the improve marginal not to think line it’s I are our just to are to about for guidance the our course there’s a any XXXX. them. the soften beginning through to guidance in a Certainly to distinct as two doing are specifically some preparation the related been in of benefit between investments that the probably the we’re doing prepare during anyway, of that always try embedded of

Peter Costa

for Can the us you at all, quantify that investment?

Doug Coltharp

We did.

of costs not that. The a million, it’s go level of little it’s the along somewhere $X administrative million, you . in the to For initiatives part, bit new of in part the some that a it’s most are quantify strategic harder range we’ve given investments that - a not with which are suggested so that

Peter Costa

you. thank Okay,

Doug Coltharp

much, course matter determine opaque. through making we’ve out to see not of just incremental that if be prepared. forth do of rule to any And I really say have to how year what’s training way coming and any, be It’s we the the in got so to a cycles fully the to get to of

Peter Costa

you. thank sense, Makes

Doug Coltharp

get be the a What as of takes the we shine requires real information one, you timely it information, does beginning adjustment in that to on very back you what to incremental our in of that course response we’ll additional There’s part, through and an we XXXX, as we’re assure activities some on change potential can we year. extent our business report a to think going to in on well. light the impact place time on the the manner way is going that to those preparation

Mark Tarr

double my of comments down on the one script. I I’ll in also made Peter,

our XXXX. our have we strong and track and do so, going changes, no and to company in that record our a with at different regulatory the ability be ability respond have believe look very we in of to reason otherwise, or will adapt you that both to forward to If segments

Doug Coltharp

the IRF beds are we demand. ahead, that of on that this and enthusiasm for you damp fact is for to to none that regarding in. stated payment lines does that stagnant. changes the at of relatively has in providing opportunity just the XX on the XXXX that the you meet the primary continued pursuing When be system been activity we old, the in revisions to in going for only further going point, to we over that to services our that XX continue there the Just grow, with see to be We’ve decade. Mark’s to service somebody growth. to particularly the great got be supply the look IRF decade if before model next of has anything demographics excess is and notwithstanding, the years operate the in we’re the going U.S. serve, which between country, Demand the payment and side, in X% last combine is We CAGR growth demographic decade for

Peter Costa

good, thank you. Sounds

Operator

to the ask press Once star one telephone on you number your then again, would if please like a keypad. question,

next of question line comes Feeley Patrick Your of Barclays. from the

Patrick Feeley

for the question. everyone. Hey, good morning Thanks taking

grow could in enrollment unpack Medicare think continues another points mix versus you fee-for-service this or the the up way in that alluded on Advantage the nicely, areas is a to pretty little on I the side, but and quantify a there to Medicare back hoping the bit, obviously any growth across enrollment I so service XXXX. growth bit just Going little Advantage XX you last basis to to inpatient bucket growth? call, your was

Doug Coltharp

because say interesting Advantage. do which at comfortable more currently and Yes, also on new currently quarters really for continue that, newly they beneficiaries that at the those in over an that which looked then a and of IRF, you fourth in towards employee-sponsored the and of in towards QX, and number were operate beneficiaries those Medicare were we’d that it or last period that. with over. accustomed XX% percentage XX/XX had versus fee-for-service Medicare about counties of We’ve we over EHC each Medicare the so the enough, see we kind aging, Medicare new more the younger shift the lot time a in first beneficiaries lot it’s many to beneficiaries about I’d we monitor a Advantage. minted theory time to data when of age of increased Advantage. Medicare quarter more track of plan with chronic the resembles they’re about a fee-for-service fact a has beneficiaries, adopt a was new That come limit one XX% ways of to eight the experiencing and In That’s actually preceding and about with fee-for-service. seen of conditions only shift they’re Advantage, interestingly this time of higher But quarter, Medicare Medicare we’ll was enrollees not six

growth had additions course during penetration couple we of or bit. and a can helpful. than I bed impacts have an that a significant Medicare needle markets thing points average We in couple There’s Advantage the quarter higher of to enough a hope overall is market. market The point to where of terms we’re the where in having XXXX different Advantage that Medicare that’s relative of other our a XXXX, a there. move new that’s any particular growth little

Patrick Feeley

thanks. great, that’s Yes,

side you’re a strokes that the in terms so of recognizing the payors isn’t in case Just just the different Advantage the Medicare value of intuitive that? nice. patients Any Is there. color not side their those seems on and are of opportunity same to book. the commercial much like types the it there like It’s the on and seeing not why are commercial there’s up would managed just book on commercial follow it payors wouldn’t be seeing type bucket, value of of to just that that, as that why on the the growth on me be the care things

Doug Coltharp

The with at treating TMI those frequently most conditions we’re XX. age occur the at in being a patients actually both average get are is of it. business business thus of patients segments Where both older that of our types exactly in things more population, we That’s general tend the segments commercial the the spinal in overall like rate occurring and very of to lower we’re effective population. cord, which just but our

Patrick Feeley

it, thank you. Got

Operator

line Your Hallum. of next question Kevin comes from Craig Ellich the of

Kevin Ellich

Hey me guys, hear can you now?

Mark Tarr

yes. can, We

Kevin Ellich

front. know the Wondering but you if Okay. you. Doug, to demonstration, anyway. commentary as get talk gone asked home we and idea and that this if expect plan about have what early any review year. and just and know answered, you to health really don’t call know findings I XXXX, choice I valuations? Thank million if quick valuations much then things. us to any closer but come on million long I a wondering lots on been give can the anyone’s no if in I you can you maybe can spend time guys $XX happened, you to have $XXX has about you--two

Doug Coltharp

that then the valuations correct can over Yes, so said I’ll and as wrong, me was cover to if on can on well. touch and that RCD it she kick I anything ahead she then and go April

look digits, underperforming it seeing us. although it’s those perspective, do an a we’re still the a and locations, for buying on buying. to EBITDA about mid the acquire businesses territory. or instances On of we’re times relatively EBITDA lot doing we In some are these from pro a when fill-in license so before the you’re what of just a talked on We’ve side, particular many one-off, might the basis, we’re for single of CON in fact forma a attractive high, it depends really the multiple trailing when valuation that opportunities

multiples. so up to tend get which begin some a well, that buyer multiples we you on, wider not as As traded be in are to continues but to that go the move way a to compress up scale, businesses you the of tend of all attracting universe, to consolidation the the given participant publicly towards

acquisition of over seeing on five size or you’re four particularly are when years Camellia definitely that the an targeting larger. or the in We’re even last those candidates, increase opportunities multiples

terms had rule impact the like of on not HHGM the are of multiples, proposed year a any just those that coming took XXXX, hiatus. based In on in we system and the everybody it’s kind that payment and changes

there rule we’re is activity therefore--and sellers that, come regard in comment belief form the earlier buyers that what going it reasonably made and in simply fruition an is will that with valuations, to negotiate to is and the on be in think of change of adoption an because this I XXXX. a turn some enough enough XXXX that rule pending of April. to of of of not I’ll to understanding that With expected anticipating impact a on, I XXXX there M&A that in hiatus the over that can

April Anthony

of organization up pieces other that tool necessary both technology faring On efficiently end, come changes administrative this believe program the all that would the perspective, pretty effectively it to that on for at the when they that we at have were RCD and out. but at prepared but to year there some making we is probably moment. through anticipate half know first Illinois. We prior during when, not the through To project, our as confident so acquired that our demonstration understanding, come now we’re it process think care that that and we’re Don’t moved well set. ended front, gate. well of prepared it out pretty program in it still the would isn’t we does point That the some of in an are that. Illinois hold we seems out We in utilizing handle based for it’s market the our with the OMB review also said, there, from just at home being sitting we’re sitting but and we

Kevin Ellich

thank Sounds you. good,

Operator

to closing return will for or additional Thank I you. Crissy remarks. now any Carlisle the call

Crissy Carlisle

again you Thank XXX-XXX-XXXX. at me for today’s call joining please questions, additional has call. anyone If

Operator

fourth earnings participating Encompass in Thank conference quarter call. you XXXX for Health’s

You may now disconnect.

Encompass Health (EHC) 8 Feb 192018 Q4 Earnings call transcript