EHC - Earnings call transcript Q4 2019 | Encompass Health Corporation

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Operator

Good morning, everyone, and welcome to Encompass Health's Fourth Quarter 2019 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. [Operator Instructions]. Today's conference call is being recorded.

objections, disconnect any this have you you at may time. If

over now Please Coltharp, turn will to go the sir. Officer. I Financial call Doug Chief Encompass ahead, Health's

Doug Coltharp

Quarter you call Anthony, the are Chief and our Jacobsmeyer, Mark Chief of Encompass to President me and today for Home President Executive Hospice Officer; want Call. With Officer thank Health's I segment. Health April Fourth Executive XXXX Tarr, Inpatient Earnings on Hospitals; joining and Barb Rehabilitation

not with already earnings our do a are Before copy, and quarter we you at begin, on fourth have release, related the if encompasshealth.com. available site Web Form the information supplemental X-K filed SEC

detail of statements, page of on the the X you information, the Safe earnings Page release. which will set Harbor also find greater the On are last supplemental in forth

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

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

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

the of is available at available on most directly supplemental the the earnings are site. the GAAP SEC, Web which the information, X-K part of reconciliations yesterday Form of is the and measures, filed with all measure such to our For release end of end the at comparable

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

you additional questions, feel free please queue. yourself to have put the If back in

to turn the I'll Mark. call With that, over

Mark Tarr

and with growth Consolidated you, organic growth X.X% increased our EBITDA everyone. driven EPS morning, across This X.X%. was by XXXX results. adjusted X.X%, financial increased strong business strong consolidated year Thank volume increased revenues was Doug, and all good another lines. of adjusted solid

X.X% health Same-store in growth rehabilitation, growth hospice. the XX.X% beds XXXX, to in three was and hospitals in XXX we our the capacity expanded inpatient hospitals in rehabilitation X.X% home addition Relative inpatient XXX of hospitals. existing and beds, new to by in

plans make acquisition XX the locations, with added our locations year-over-year. to inpatient Advantage continued hospice and with and XX discharges Alacare came health MA July. in home rehabilitation traction home through positive in Medicare majority the In we segment also segment, XX.X% We our health which hospice of growing

also We developing strategic across our from on made In collaboration, and share building a operational initiatives. market footprint continue business clinical progress our XXXX XXXX, and our all we build post-acute strong will continued on momentum of on significant innovative increasing expanding solutions. focus lines, all with to

each been we’ve and regulatory year in segments. preparing a our For discussing for impacting over reimbursement of changes

As we’ve be a stated previously, year reimbursement of XXXX rebasing for Medicare will us.

were as well reporting transition hospitals going purposes we is for for October rehabilitation CMS it Section well and and XXXX. X, GG transition payment to on inpatient the We as Our anticipated. prepared

result decrease utilized X, Medicare post-implementation. X% in to We on staff became home CMS January effective XXXX. feedback X% hospital model as and educate for measures The to implementation or new a locations to continue in we are for health provide XXXX. groupings reimbursement PDGM model pricing net patient-driven estimate new the the of currently functional our XXXX, this us In will

functions. plan half support care for our the and XXXX plans to continue in of first objective each use in portfolio locations will module drive developing health entire to generate our care administrative just the evidence-based Medalogix deployment home of includes patient. we incremental right This help our across to of Care technology the in Operationally, efficiencies us

with will set give that optimization, Homebase we We and working a on volume to on a and are tools manage scheduling Homecare of of productivity focused also are module new staff course further us growth.

will focused leverage us and certain our are scale we in Specifically, increasing overhead. help on density our markets which

admissions We’re from coordinator more acute in to capture program also transition to care our institutional care expanding hospitals order settings. more

outlook. we changes these reminder, a of record have a our proven regulatory track and business have regulatory working As through changed long-term changes not

opportunities of the free In deployment growth will segments. to we to cash both flow continue in XXXX, prioritize

be four open to We Sioux and XXXX, Iowa including South scheduled have new new will Coralville, states which us. inpatient in rehabilitation for Falls, Dakota hospitals

add plan to roughly new to also hospitals, XXX XXX is to We existing which three beds approximately to hospitals. equivalent

to Florida's Additionally, of repeal a we invest million are of pursuing health laws. actively and $XXX growth The given in to million number CON the opportunities. $XX hospice, home we expect projects In the implementation industry PDGM the the by may home of caused likely in opportunities disruption create us. health quarters three present year. of the for opportunities back appealing themselves some potential will within These

acquisitions larger-scale past as in we opportunistically, done have few so years should and such with arise. Camellia the opportunities pursue may any Alacare CareSouth, We

overlap discharges continued Difficulty] to seeing skilled discharges home a quality drive higher clinical Our are facilities. integrated on at focus operational does we lower and collaboration. that our XXXX markets initiatives care nursing [Technical metrics include In

expand rate. We increasing the patients benefits overlap increasing are and of of collaboration markets more by collaboration focused on clinical number continuing to the clinical the to

We focus will also on the needs meeting patients recovering stroke. to of from continue

research due as Branch results and of experienced and the Journal of the that published all with setting Texas stroke IRFs. by greater of Independent the Medical provided parties, to Administration well American have of community better recoveries University rates the a IRFs are AMA Stroke third and such for as the patients Association functional as concluded higher conducted which by the return to intensity therapy in Veterans

facilities with combined inpatient stroke for the growth the stroke patients to treat. stroke in clinical the in treating we patients validation contributing We patients is nursing treating of hospitals believe efficacy number of of over-skilled the our expertise rehabilitation

our X% stroke Medicare XX%. stroke and Our plan CAGR is patients for approximately three-year three-year stroke is for CAGR approximately all Advantage

With are XXX commission, we poised from certification patients. in growth stroke holding stroke-specific hospitals for continued the joint of we our believe

our as We Stroke to we as on will value payers leverage strategic highlight American well as Association, American clinical proposition use to sponsorship physicians, data quality educate our patients. our involving and superior analytics and patients of the Heart stroke continue

focus and lowering and solutions of is reduce and episode readmissions continue patient the that reducing Another risk will lowers our hospital total it outcomes acute implement hospital of post-acute providers proposition across on acute our penalties develop improving all we XXXX, readmission episodic in cost significant of hospitals Therefore, part readmissions care payers. to total to the to lowers as ability value cost of entire by to the care. care for

in hospitals. In practices of readmission in In deploy will XXXX, of a of this hospitals. XXXX, playbook be we our all our part that proprietary piloted we this We’ve and model nine predictive best will rollout. refined our model developed also

mentioned all earlier, we are in process of I module Medalogix health As the locations. to home the of our deploying Care

that not us an for this in resulted Texas judgment scientific guide, they a need saw the in data, patient care our our historical patient the in home module the to module outcome Using tells replace approach needs them developing health in approximately XX optimize right locations clinical of in helps care visit We more when plan. how better, plan These visits patient. It’s used and utilization many patient. for this specific from locations improvement XXXX. each which a

across markets a and the as reach patient’s depth the expand includes highest the to our providers team outcomes look to post-acute quality us patient appropriate the patient determining well tools maximize help of assist care episodic also cost will helping reduce that in of We step in at tools This post-acute each that setting as determine most continuum. our the and journey.

made are capabilities platforms enhanced the and as by IT and our facilitated relationships of in strategic we've tools Medalogix. our these Cerner of well segments the both business as of with investments All

on growth supplemental underway, and the Page are of reaffirmed Doug results these we XXXX that ranges communicated during remarks. as the will found of considerations XX his our in XXXX initiatives earnings January. slides release. our some around reaffirming operational can The discuss prepared our accompanied With be pacing guidance

our about future. excited We’re

excited join event. me you'll that in hosting you New we’re on Investor members tell an I Analyst other X beyond. so Day March & Encompass we’re hope to for and and York Health this fact, more team In of about XXXX management

that, With more of the turn Doug details for fourth I’ll and it on quarter XXXX. over all to

Doug Coltharp

into the good and and the flow cash when I’ll I once so again EBITDA Mark results. EBITDA and the balance begin I’ll Thank segment morning, everyone. consolidated revenue revenue QX discuss move then results, sheet. summarized you, operating and for the drivers with Mark,

year EBITDA was million at increased Growth Adjusted XXXX of offset was flow free guidance adjusted top $XXX.X the our in range. for working net of cash capital. the end by for

the the in segments. XXXX, course increased claims As primarily capital TPE we of reviews discussed working related higher receivable other from accounts both and to through resulted

long-term QX, continued growth sheet opportunities in objectives, During our positioning to strategic segments. we support both our be to including balance in proactive business

of in million beginning of notes of in maturity notes our billion using $XXX successful 'XX, year-end. due QX the from billion $X this Following X.XX% at XXXX XXXX call $X.X of million issuance senior $XXX we new at a completed to

with to returns with increasing facilities, two We expanding date and XXXX the augment also credit operating $XXX the shareholder the our distributions. from from in year at to bank $X amended XXXX, our In investments leverage We X.Xx. ratio we million maturity ended by billion. to our years revolver the continue segments

paid of common on market. shares we million dividends cash approximately the XXXX, common and $XXX.X our on During repurchased million $XX in stock open

as segment increased IRF of now segment a GG segments. discharge was from period Moving The timing X% discharges growth and EBITDA including by in between X.X%. per quarters. increase same-store IRF X.X% increased growth revenue revenue driven for as benefitted growth fiscal increase our XX-basis per and point CMS revenue into reported segment QX adjustments Section discharge business of that cost discharge. X.X%, transition in QX the well to revenue our reflected prior adjusted

bad supplemental new to industry-wide points contractor. review X.X% XX reserves by QX Revenue debt post-payment to in basis increased revenue to a related initiated due review of a

New claims, awaiting approximately sequentially little our and to claims level. remained progress on a in seen of adjudication and we denials resolving have million down denied Collections ALJ the $X.X claims $XXX related again slow backlog million, were basis. at now at substantial TPE of previously year-over-year

IRF segment to increase a points 'XX inclusive FTE, in wages basis due primarily in million $X.X and approximately to per SWB of salaries XX revenue XX.X% training QX of in to X.X% increased for associated due reserve to costs adjustments to years. compensation FTE decreased CMS the QX workers’ claim education Benefits GG. related and over per cost with Section the prior prior transition year

volume, boosted increased revenue and X.X%. including QX XX.X% including XX.X%. for Hospice hospice was growth adjusted In and Home QX and of the segment, QX growth admissions increased XX.X%, by acquisition by our revenue health increased home hospice in increased admissions health Home EBITDA XX.X%, of health midyear driven growth Alacare. same-store of XX.X%. same-store

X.X% health as revenue decreased fiscal mix for QX primarily the Hospice quarters. per primarily of related change Alacare. X.X%, declined Home acquisition in per to again Alacare episode to due the episodes revenue between in timing acquisition of owing as well to QX the the day

revenue integration expenses decline increased group percent the primarily QX increased of overhead XX visit as and of as the the costs medical at period QX revenue Cost visits to in Support costs XX.X%. for segment was services points by higher cost quarter episode. in operating of basis increase a of constant offset per in prior with to a and the year due Alacare. a as per was XX.X%, percent

I his of As would range EBITDA Mark it guidance be XXXX reaffirming are of and they helpful how thought $XXX discuss January, million provided we expected comments, guidance an including pacing adjusted mentioned our some EBITDA. XXXX to in in impact million. the the $XXX adjusted of the considerations we to initially

Section net the fiscal the of for expect XXXX. CMS GG quarters to market we impact approximately we segment, first update X.X% three a pricing on but IRF the QX the basket of In of XXXX, then anticipated increase year expect based transition

a first have and impact half we greater payment the expect health as the PDGM this model. we to In new home in of hospice transition impact to the segment,

half We of productivity Medalogix the tools back also given and the expect the our the benefits associated year, to our cost be deployment with more utilization in of pronounced schedule.

operator, for now, questions. open line we’ll And the

Operator

[Operator Instructions]. Thank you.

of of from Our first William Matt comes line Blair. Larew the question

Mark Tarr

morning, Good Matt.

Doug Coltharp

Good morning, Matt.

Matt Larew

from in for should the I ask wanted on now the in you mix Good I I down QX about a everyone. sequentially payer, patient quarter think contributed to increase Hi. effect I so an us or which about do can TPE, a call recerts the the from know think what have all trend exactly But maybe Is is indicative how home morning, we there’s some recert Alacare your clinicians just quarters. actually and large a been lot several on there’s MA mentioned transient going understand on of help health? and sorting forward? amalgamation this going parts, you there. longer-term this of through of you moving moving more sort in issues think

Mark Tarr

ask April question. answer I’ll to Matt, that

April Anthony

quarters third different a in you Matt, your normal that kind quarter the you included ratios. answered that fact are I that at new situation. that The think recert two in list provided on operating going think what’s kind of own of sort of that recerts with ratio the the we’re like question. Alacare of do impact of their feel and we seeing, we starting over is last course And I the of

what reflective rate say going would anticipate the all you continued sort of we I for what that of quarter in listed four saw into three recerts there. of of the and reasons proportional is we being XXXX So

Matt Larew

And to ask think in right density focus least just Mark, on health, the bit Thanks. capacity in still and a just Okay. have – a to million about I certain you home M&A million about had then, markets. there’s at included alluded XXX but you talked for of scale that Doug guidance. wanted now, XX you the increasing to

more us to capital most for for XXX to the deployment number – is end you where the be conservative? to give a see maybe Just XX and that focus you do pretty whether sense there year, maybe throughout opportunity on up as potential

Doug Coltharp

is this Doug. Matt,

is as where his we’re we hoping novo over the So actually XX of next of the de the I have novo can somewhat of control bit activity Mark is here the expect start days that given de a cash, to that beds deployment wildcard think have in can the to be clarity story CON within to when and comments with is overall and in it’s outlined several to last around the segment terms just The or existing activity capacity to expansion add going capital there in be A familiar IRF again. years. underway going repeal XXX allocated we’ll facilities Florida in to that so. we more piece

least flow resources we because by result going $XX smaller anticipated adding And side, anticipate which platform. of a or phase-out gained On the situation that to step $XXX health breach not market and of whether working it can or market-by-market be to we a be little with the an if into million the to share hit home acquire difficulties the timing will will it’s capital know not that of a experiencing it’s or to simply going it’s portion sense a our the makes smaller uncertainty competitors. the whether spend bit But to be more company those embedded direct business have that RAP the them. on is that that at and don’t existing in million to specifically implications a cash in is PDGM and some determine

the As to PDGM demonstrated to as it anticipate Mark will more potential home It’s mentioned hospice larger that that are equity-backed probably our transactions that in and we’ve transition associated the properties be market predominately with last brought market a companies in come heavily years, XXXX. may PE several his private health. of anticipation that few the comments over towards just maybe we volatility the to given course than those skewed

of that in acquirer relatively been We that and a levels. past. be look high right have they to and will higher even at demonstrated off industry be we’re recently we’ve are candidate to that’s multiples very going But as recognize disciplined now those certainly a we the

Matt Larew

Thank you.

Operator

Our next UBS. line from the of Whit question Mayo of comes

Mark Tarr

Good morning, Whit.

Doug Coltharp

Good morning, Whit.

Whit Mayo

And a is other calculate But, up about Hi. factors, $XX the to X% One tool the Good and per quarter change. Section guys. that million settlements I fourth some be referenced few is, from cost X%, headwind you up GG right? maybe morning, revenue workers’ Doug, discharge report a EBITDA FIM to or so, CARE XX. comp. if in

So I’m the all wrestle to just pieces these moving trying quarter. down in

Doug Coltharp

I think what we – on CMS Section terms it so the of headwind, in you’re too. experienced under size depends it’s comparing pricing the Yes, the actual of GG

points. X.X% we if impact it up I that update basis Section would rate you XX And the so had of to compare terms to an basket the market in initial use marker, GG the the be in right as think comparison

And the fourth so between ascribe points of the at timing in about those discharge and the basis that. quarters, increase when had IRF the segment, the we cost impact quarter look of XX two period of we prior reports pricing to we tailwinds and

So basis I compare that XX the point penciled by to less quarter the increase proxy points basis Section X.X% market XX that a for gets suggest that and the beginning the XX-basis had would the created basket we would that that the in update be transition. at to XXXX the points, of GG headwind you saw we in

Whit Mayo

head’s hitting also on amount report my amount the on a there Okay, dollar and the dollar that. cost workers’ a comp? Is

Doug Coltharp

was the million. the comp for of had And more So that $X for $X.X we a three year was quarter quarter the for a cost workers’ million comp bit was in was the and report year, spread the the quarter very $X.X through year. so first million and strong little it workers’

actually full million was year. the that for So $X

reference that that’s back a know suggested, preliminary there. just the out hitting table that results, news was items our out simultaneously. the numbers there’s XXXX XXXX already comes these aren’t issued that to anybody markets when out Now But in I’ve guidance of I January specifically X-K lot that that were with laid looking of for XX.

Whit Mayo

just now. for quarter-to-date just demo. is Thanks. have, at surprises choice that expectations with And any I you any on And maybe the changes second PDGM, my field developing April, Thanks. this any see you that question any level? the remember review thoughts

April Anthony

Yes.

still it PDGM, early. obviously for remains So

now period just of come We’re the beginning beginning second to into the see mix.

and in the And system as PDGM ramping down in system. old we’re we TPS so work January ramping

mixed bag. which I XXX% would episodes. expect, PDGM So a are you first in it’s would we is as period say what seeing

the that associated bit And until we we’ll we Then also with You periods and second once little reimbursement in, really blended see period. visits but higher a that make January ultimately with the it happen won’t reimbursement which does get a first Again, set not episode. see first set in per of periods first what difficult, added projecting see XX-day March. all really run for it full it a data yet. of long expected higher is have does mean because of

that So, been that side gone both processing happening has expectation. surprised RAPs regulatory the feeling concerning. on we’re system, being we’re actually that few and nothing about paid The good CMS We’ve rates that’s our consistent with finals have so that. a pleasantly are the through been claims

but picture it would and sort say full seeing. I I a situation, of full give of as on be everything’s think about have to us light and well we’ve before of spectrum really then set a pretty still going really as dimly So or analyze really we would we’re the got what it another lit March the month data it’s could, so once

state for. a significant that’s on we’re any for perhaps a timeframe and speed our to nothing going XX% obviously a based and of going we and the March don’t Illinois going had get effort for less piece we’re experience of and through concerned the big preparation for that. disruption, to prepare know April so that Texas We that’s now for But short-term that pretty month processes starts months scale the in So several RCD that. that bit that than area in bump in come to our possibly for in just little cause us. About be It’s in coming Texas anticipate organization. Texas we’ve a got about. our we’ve up significant Ohio to be of to going that’s confident is a in larger

Whit Mayo

Thanks.

Operator

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

Mark Tarr

Good morning, Kevin.

Doug Coltharp

Kevin. Good morning,

Kevin Fischbeck

morning. Good

about would rate I want that sounded guess dynamics; on both that you I to side your those. the potentially to the for commentary the mitigation of guess be be that’s of how there net year about that? pacing the go It that both impact if the you’re two on year. I ending and impact to health guess the year. a X% that there on Because the a I So were about, that saying to half impact X% like that’s would X% X% impact be talking should a how on the would of worse would that home case, first say think that year average you’re And we

Doug Coltharp

to a see lot be a pricing have, I’ll different just that know then and start making behavioral injecting year part and in. second as period we schedule, ascended. of separate end than then by fully will productivity year. it be hung to learning to behavior be to of would of going the because the as quarter. possible the get of to assumed a Care to and to the to course for going And March the procedures. outcomes adjust design mitigation in cost impact, the because markedly it’s of anyway PDGM you’re end jump a of that the and it structure workforce up the pronounced at to or is be an X% unit. least referring related the doing be it deployed a component and X% patients there’s to business it’s anytime by us plans and the our the therefore in generate benefit realize And I’ll two, not. better to but care to you’ll patients large curve don’t into better sometimes deployed second the year throughout for Kevin, first we ask tool pricing to the new expect greater of documentation of it’s April But be Medalogix impact adoption to as the but a it’s deployment It’s a enhanced I we that on there’s a two-thirds It’s just something used necessarily going changes allow part the we as is designed the our we’ll really implementation about to difficult that that XX% more our to to more based be

Given that And period get in an from again me pacing I’ve is curve, and half we the to to and second adoption been to the just where the learning be means I’ll a year. cost and expect benefits going pronounced and productivity ask that it of the with rollout of wrong. both Medalogix correct that, more elaborate April

April Anthony

under nothing right. are that’s think perspective technically to going to half fulsome for. making rate is some behaviors relative focus There’s coding, that possible system. the our a specific PPS in sure more I to to are were that back, on the we’re first going make code, to No, identifying codes different it tuned there There’s sure some but clinicians that certainly required make every have the we’re that from maybe

the are small got that things year. see And and more improvement But improve more would I referenced consistent will with hopefully of the as would is that be time we’ve to say we there, X% right. intangible course certainly over Doug materiality that get work relatively the of be out the X% that’s just relatively that So team and our there education on and more that we some to slightly. we’ll

possible PDGM tool things we’re care that do and PDGM what model. the creating of want need a that’s needs. greater to about the really Medalogix I it tool nor in it’s to not specifically of patient highest outcome? that the is It’s the to the finding tool issues their it is specificity say is, model what under Care was say, tool planning for a designed deployment designed tuned tied patients the specific One achieve And to much of is

in But that. past. we it’s opportunity. that’s the so finding a do it’s an than done It’s do we cases And in done than a it’s have suggesting need, In more tuning fewer the many care not cases, outcome suggesting visits really in visits we’re patient-specific other PDGM we we’ve past. suggesting that

And is new so I clinicians giving think insight. of the a our level tool

and by mentioned, Of understanding tool sure that clinical to clinically is judgment, all instances of Mark patient have to tool tested their think sort being belt the pressure in course that the tool. in they’re being that they simply as need. overwritten not a It’s about make greatest

And so September, October last super encouraged input. in small have relatively stages our and ended now about got November being the of a tool percentage began of that that We’ve on episodes included then early of year. and

what I effect from we’re lowering visit fully potential it up. think by visits, it seeing at that cost small certainly seeing if there. puts positive of we it’s the results could has universe do we’re per the risk yet deploy to as of subset too we’re a when encouraged our but that, We go but across tool, that extrapolate recognize well that

cost see So fewer could I my if the doing visits staff, per actually elevated. I’m same with visit

that once clinical paid a visit with are as take on tool’s it back basis, decline our versus that has how the time creating clinical result transitional where those our historically. we bit full-time get it may to of some balance being in little deployed been those we’re cost per staff that our line their and well per about a tunings in that positions within growth are smart that right of sure fine we’re of as capacity making visits so for visit balance, staff a our And clinicians creating that

lot a to all take that’s deployed. happening, going good just also ramp get of but to of them So of things completely a little bit a effectively

Kevin Fischbeck

Okay.

little the there actually comments the model heard fact different difference that change given a Doug, you then, in year, if could know sounds I finer model versus okay, than going to. incremental when more guess the wise. that we is we’re I our It years a to pacing it where that in this is first going just I So point I there’s used about don’t have on aware to prior the to throughout a the seasonality thought, or that, seasonality put if guess be year look should of. I

Doug Coltharp

Yes, look it to quarters to is QX. but little think different, I is felt why most specifically need we pronounced the that do are be and think which the will a going And pacing. specifically QX I address

Kevin Fischbeck

QX QX down and you’re and saying? QX up QX;

Doug Coltharp

Correct.

Kevin Fischbeck

Okay. Perfect. Thank you.

Operator

comes question of the next of line Matthew Gillmor from Baird. Our

Mark Tarr

Hi, Matt.

Doug Coltharp

Matt. Hi,

Matthew Gillmor

wanted flow I de morning. especially up Good novo cash Thanks. Hi. follow on on use side. of the to the free

step which up. XXX for year it’s think this I a big pretty is to XXX

but I sort in that think what’s you if and driving maybe of and that? increase mentioned just maybe could you some it’s talk preparation Florida, some for about where activity going

Mark Tarr

Yes.

right got on look that at supply now. XXXX, during demand you’ve from a the response that growing things you excess for lot licensed served in the segment So in two spite fact of that U.S. in IRF tailwind by in to the is One and a to believe of between cohort of supply timeframe X% decade age IRF increased took X%. growing beds place of to and we attributable imbalance that about by the XXXX that being demographic IRF overall what the beds, be the to if going

that’s an led So to imbalance.

some novo de for enter. of markets you’ve decided and creating the across we’ve of that’s So seen to the newer nation, kind opportunities

able is we’re includes XXXX. Tampa actually to to during we’re that happened. to right opportunity to no and can which Florida construction repeal built So whether is trying in the July as determine that we were And that baseline already or CON we four XXXX that on new open the What on specific is of would IRFs that’s XXXX online have pipeline ability date Florida there the is new that the procure XXXX, place the the projects. now we only date. doors a where some but four and ambiguity bringing facility work start before beyond building not means work been for for have a as date when meaningful can take that start or whether until And

us here get put near are in interim, a expect We Florida. that term. in to some clarification steps we taking the to the in ready position on In

already out presence we down markets and could many because time, in And begins the of road. that the securing that immediately we land whether know of state or looking have land have are as enter. significant had for available instances be you wanted at Florida. We long We to we the now a in construction prioritization a a

in, what accelerated and more of in cash a in our outside lighted earlier flow there’s get pipeline guidance could XXXX reflects be than anticipated Florida building Florida. in of green the XXXX if that it use we you and really for see penciled So terms the potential of of

Matthew Gillmor

couple you that maybe number you company the Got a just Florida, beds sense impact specifically can you as get in estimate it. over for years don’t. of up, from this, share then so a to the And next could that terms do But market of follow have the of within maybe within maybe care add the we change?

Mark Tarr

I have for to something Investor Day. save

Matthew Gillmor

Okay, fair you. Thank enough.

Operator

Deutsche Our next question comes of from Pito the Chickering of line Bank.

Mark Tarr

Pito. morning, Good

Pito Chickering

I line or fourth even quarter first bottom fourth by does through visits is of the Medalogix for to from a you home a what full fall per what differently. Hi. nursing to as the excess nurses little to taking more organic talked rolled Good of because the that catch percent up the quarter frees pretty which sites XXXX you I Medalogix? but But capacity that the in don’t missed The more timing quarter, Medalogix year? improve and health it, importantly my let X.X episodic see out what’s we benefit dramatic. sequentially dig go, throughout the visits about thing up guys. and of Thanks episode nurse is story? Medalogix of any declined capacity, seasonality for You but growth want the morning, questions. at point efficiency to Maybe into it the to wanted do the rate

April Anthony

deployment, a and start think occurring We of end can fall to were so we created that the a think of I occur rightsizing by end visit that of we’ll XXXX. capacity the about savings. that second of of can we as as Currently, the to see of catch get attrition up deployed. that half combination the that’s in through XX% growth the organic perspective we that the year accelerated through the first we’d little we’re program, by bit January, of the first end And to of then actually the of and where early quarter deployed quarter, finish originally I on of May. up by think or April the to end over be we track XX% XX% deployed. we’re we’ve XX% because of little From be by a the and a kind thought closer success of late

with savings half returning cost balance will encouraged us take second between visit I per but the before visit really to that find we think and the norm. we’re So it the into pace,

Doug Coltharp

-- think I

Pito Chickering

quarter then -- fourth by So

Mark Tarr

not We the would to related fully tool to XXXX. the all in anticipate benefits we’re this have that of of deployment recognized going

April Anthony

That’s correct.

don’t first cost see coming rely the though start visit think you impact and I much I our in this, that I half and in see clinicians over it the like effects I successful second we our we’ll as declines the because do they the ability a think trade-offs half. of I to outcomes. even and see the mentioned. the sharpens in, may on tool time really expect of to early think see for of to that it really it But accuracy trust it grows

So outcome we as the continue it’s and we’ve think adherence of predicted ramp and benefits volumes greater I of seeing that steady to impact XXXX, being adoptions relative success and greater XXXX with clinicians start into the ramp the will accuracy in I really think where as get greater the some greater to suggested see the making. but and half what’s we’ll improvements a well second got

Pito Chickering

been of perfect those of you last, class this of sort you third the of quarter Which rolled to at you seeing versus segue look months second in is out a where a 'XX, sites sites? follow say, sort class from the the over is a five, guys reduction how of six which much have up, as newer

April Anthony

Yes.

not October completed on again, quantify that we’ve really XX-day only their tool now So in first to have but cycle. wave started that seen episodes yet, ready November and the an September, the update that we’re

beginning we’re now to so just And see that.

So not want to that not it’s too to small of a dataset it’s disclose yet enough that from. would because extrapolate we

Operator

from Our the Suisse. next of question line Rice Credit A.J. of comes

Mark Tarr

A.J. morning, Good

Doug Coltharp

Good morning, A.J.

A.J. Rice

did first for a guys preparation ask lot Maybe about everybody. PDGM. of you to – so Hi, just

really very of and got what’s a detailed this analyzed lot and You’re all happening. information as in of to

assume up mentioned they they you Doug, prepared of now as course significant Do change year some they’re with a this? better you for over regional them? that their experiencing freeing to point the is them of might how think, you health understanding? that kind you I of smaller how in know acquisition have any opportunities your what are may are home right players and What business. And smaller to discussions the what see Do have having the remarks or grab sense now you of to experiencing?

April Anthony

to for if what’s bleed about smaller say system I the fully would system. old you new into have down. to of the it, we Yes, recognize impact of yet providers really us those bleed think got out the you see and And coming

they’re And so really getting method. old in really January and under still February, payments the

still that paid way. that those being in episodes are they’re still December, payments. There in episodes So started getting old RAP

the only coming on episodes rate of the receiving be impact really off the new XX% claims going March old and reach of and final RAP and completed that payments that begin fully being the coming you pinch when the when sort the think through. and feel able I into to the to of of system are and is not bled is cut fully to feel are system they’re timeframe April that

more when cash impact maybe I full cash quarter I their second they go? until the my they small they realize to of is anticipated it going really realize lower that than we’re had think see that And moment say, providers to that really account mid not timeframe it. it’s a guess So late that of oh-oh, begin those where would did to all

be in say that’d a of are always stay sure predication. also we opportunities, nearly would We’ve agencies. home pipeline but locations leadership so the in These of that definitely our trying in health to of not And close. other pipeline staying are those my clinical the market. friends are all in but to teams teams tend very hearing are close to also we tuned all XX got they’re that work to have our making throughout I And in robust that only what our field, folks the

so message, sure And calls. word they heard can about make the hear how us are competitors get exactly struggles we that to when to they start making that that the so quickly to know they trying inbound that having

that really April-May So I think up timeframe. in that’s going to ramp

A.J. Rice

that what SNFs up up your PDGM of is sort of what’s I’m are XXXX my I just And over seeing on we then have because some around, on been been X.X% wages a discussions what X.X%. you that If that of running. excess you’re tell might capacity average the experiencing, increase suggest available. There the some bit and us therapist right, had a Can follow change you Okay. for was slight little think behind guidance see labor that? about side

April Anthony

experienced regard. hear nursing anticipate or expect certainly zero we happen sector home and that about certainly have We read in Well, what to like in to We therapists. a relative don’t doing is lot the anything you, therapy layoffs the division.

be for supply-demand the subsector that I a for it’s any of may we moderate I therapy because intention compensation anticipation to Also, future therapists say of have industry, in anything that single-digit our seeing do area. It within say bring in to certainly would our our we have attrition because lowest no group. would we turnover that like the us will so We not don’t lowering turnover sooner our group. that have bear in yet rates begin and that to to not that have are imbalance. this the

improvement just for other benefit possibly little from that less we’ll expensive so past. in than I new perhaps hires a don’t And slightly discipline, anticipate that better net really than much that see the

Mark Tarr

A.J., with our it’s something hospitals. tracking we’re

perspective. in therapy ask to on weigh a what seeing from hospital Barb I’m to Jacobsmeyer So going we’re

Barb Jacobsmeyer

we Yes, XXXX. kind mentioned, was X% like therapists. turnover have low It in April very of our for

never I to mention competitive at The we’ve rates that therapists very with thing settings are the are paid that other different. The is be tried the the facility. would skilled to

never rate. skilled to though even the competitive so we rate, tried And compete a we’ve therapists with do hire at

for perspective us. a from really rate doesn’t create an it opportunity So

Doug Coltharp

to of segments And and to is increase due to results been – XXXX. Doug last in X% has it for our you’re that X.X% getting XX%, – that, I that instances both the with range thing reason benefits in is would business to assumed the this is higher then the in A.J. XXXX part than add is recently both favorable of up is because

had year quarter. On IRF to benefits though increase home health and the claims that in the we for anticipated related segment prior the workers’ lower was than from in medical we an expense referenced fourth adjustments even compensation XXXX, on the group

year, group anticipated. was the we better than medical For

in around benefits. some there’s So assumption the XXXX of reversion anticipated mean element

A.J. Rice

Okay. Thanks.

Operator

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

Mark Tarr

Brian. Hello,

Mark Tarr

Hi, Brian.

Brian Tanquilut

as your Good ahead listened opportunities without the growth I Investor to about we credit XXXX Florida be thinking steal these the thunder in increasing to trying is and that Day, so accelerate talking business? after and of morning. things, expected of to Mark, on all Doug the facilities both sides should

Mark Tarr

just hospitals part beyond. and do on we’re we think We’re talk that. very think positive IRF about the hospice home on side we side. growth Florida We outlook XXXX. in on for bringing and XXXX have in We our the opportunities Certainly is new health that of the

the bringing itself. about on. touched the Florida them states excited We’re upon Doug new we’re

is have XX of the growth. terms dealing population hospitals That a have long agencies That’s a state there’s with where where the there. population a history in we Florida. going to aging of state We in state continued be and

our for positive very we’re as company have. as we initiatives outlook the about well the growth strategic So that

Doug Coltharp

will anticipated we detail Day. at Brian, the some more be about growth Investor providing

Brian Tanquilut

that. is Barb. I appreciate I follow for my guess up

had cost. some we think into obviously impacted on heading the guessing Section productivity GG, you Xst. October implementation as of that it of So the and about implementation training I’m

about your training we that as should that off out new reimbursement of capacity for are trained and just tapering from the be nurses the pulling drag how So system? thinking

Barb Jacobsmeyer

education October be the to September trained. that in of had now more So going over obviously your bulk education. inconsistencies XX,XXX major some be that to all maybe join mentioned more reliability our to hospitals on new because show as but happening also quarter, the do we some the and that reporting that October of our be The obviously we timeframe need third of live to there’s Xst, timeframe, had where was is go or now training clinicians trained, of point, that employee-to-employee will to can employees inter-rater about opportunities that

taper folks it continue from quarter, saw be see and to making but certainly third educated in pretty what to we’ll off get to sure competency. our going we in diligent about continue So fourth we’re we

Brian Tanquilut

appreciate Congrats. it. Thanks. I

Doug Coltharp

did portion as If year. I as because again to would cost we elimination that But how us. have training in the have big spend potential GG things as in well not go of fourth a view and they we is XXXX. related the of the to to right right that that throughout deploy much XXXX, education we’re course expect a tail-off to tailwind to incremental going I or don’t the benefit will for the quarter, it’s of for training just now now know some think the prudent

Brian Tanquilut

guys. All Thanks, right, got it.

Operator

Our Frank of Morgan RBC Markets. line next the from Capital comes question of

Mark Tarr

Frank. Hello,

Doug Coltharp

Good morning, Frank.

Frank Morgan

in mechanically year reflected cases, element over the with just make the course the quarter, sounds rate questions here. just change of it healthcare mechanics the the about is fully there home might not or that when like also there of of growth a than or some Good it A but IRF some more worse you other the exclude this XX have in these one, my been are you two might I the levels; business? new But impact in if that similar but stroke stay year? like bps rates of site, other better in Advantage had vein XX over the IRF GG business is on that the the side average I’ll benefits. in is growth pricing bps into I you the might of wondering of side one-time talk I’m morning. lot the guess answered, guess the of that Thanks. The Medicare baked on the GG anything

Doug Coltharp

XX of think up quarter quarters The the didn’t we and both payment first XX this you the in estimate the timing So, Frank, change if three pencil a basis quoted. this impact points been is out the between period point as the I you comprehensive of retro for pricing, the versus quarters was cost on a year reason the to strip fourth adjustment, system. report IRF fiscal rate of that the discharges that because has

data quarter’s we move raised what and looks trend still as and fiscal points basis with out So see new up the from we of seasonality now the can’t one up normal year the results like progression through adoption the XX range why established there to necessarily that’s to basis has end we’re worth we suggest that a points. need and of albeit having XX the that range, higher of and the

in bear the other we expect terms Advantage that to discharge of In pricing, on that outpace volume come XXXX fee-for-service. things do Medicare growth will to Medicare can continue

these that outpace Medicare in hospital. when in of enrollment And enrollees. which Medicare have Although recent the look think in most a types enrollees Advantage you we period, the and to I continued we beneficiary spoken we’ve venues basis before in every county Medicare a measure new on regular fee-for-service

that in Medicare with XX% XX% neurological, new beneficiaries Advantage to that the on around establish news because at as roughly of plan rate able and good and Advantage. in fee-for-service case the continue stroke we’re Nonetheless, So of value Medicare rate basis most expect specific like of are proposition enrolled diagnoses case a the and level. growth higher essentially is is that Medicare we same fee-for-service. to The those that a basis

GG So in any outside pricing as what we we the cited the that impact see don’t track material should impact. growth of fee-for-service and the Section

Frank Morgan

what rate was you patient dollar higher but I a in stroke discount, stroke said sort maybe know if is payment share, I past a a think MA much guess the DRG can the don’t for a you – is XX% I more of average patient? – like case?

Doug Coltharp

Yes.

going to it per more carries it be slightly stay closer a longer to and of discharge. a a And with it’s regimen. obviously $XX,XXX So intensive length therapy

although is So higher EBITDA you’re take EBITDA a margins that it dollars. in to price discharge of flow-through a or higher that per level, it generate resulting if higher to necessarily in will terms difference EBITDA able not margin material

Frank Morgan

got you. dollars, EBITDA

it. Thank you. that’s Okay,

Doug Coltharp

Thanks, Frank.

Operator

Instructions]. [Operator

of from Matthew Capital comes line Markets. the question next Borsch Our BMO of

Mark Tarr

morning. Good

Matt Borsch

Good morning. I call. Thank I’m you. guess least named Matt the at the on third analyst

Mark Tarr

for easier makes It it us.

Matt Borsch

go Yes, have hog and whole right. We’ll everybody.

which last on on on hospice question I So have the fee-for-service And the maybe side. ask you the Medicare IRF home to negotiating wanted then efforts what on just and the there Can just light of been about in versus your building on of side? PDGM, MA is health reimbursement the side? talk sort MA

Mark Tarr

that do April, you want to take one?

April Anthony

Sure.

in Medicare we’re the home So as the close proximity health unfortunately, not seeing Medicare the sector. to rates a traditional Advantage for

For it IRF the haircut is us larger is segment. that than in

desire grow that remained has sort segment so of limited. And to our

claiming to the or Under well give PDGM, to. even adjusted PDGM are have payers converting the at take least are non-Medicare as seeing improving discount seen PDGM rate progress to of I they’re that, that some about rates. last a would our we XX% but in and in We enhancement the nevertheless or nice had slightly significant say, pretty over year, some have

I their systems pay systems that see lot them but their flow going from extensions and struggle under think to we prepared don’t to that PDGM of a could those they that, haven’t cash the in for fully who want are model to do so yet. tuned payers some

model So of to of say payers. in slowdown payment. But everybody going those we’re kind that from anticipating to they’re convert does payment some

pay episodically those paying were rates. who episodically the under PPS under us rates us PDGM old will the For now

it to a few good component, under take all non-Medicare and out. a will that’s months will do but it at payers least news And I be shake common think those so for

value take working into, in relationships continue leader wanting simply we found help also off. sell we’ll our really that fact It not just low-paying business. So doesn’t about is so physician discerning We’d to a lean proposition. hospital’s that us doing trying good haven’t to or relationships. we’ll We grow can just business being Medicare because very but trade take a identify loss our rather

we’re of be the if it. going up grow a And discerning. business. come so not can for we still But growth very with non-profitable we’re credible with relationship, to And going just pursue sake we’ll to

Matt Borsch

it, Thank you. okay. Got

Operator

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

Mark Tarr

Good morning, Pete.

Doug Coltharp

morning, Good Pete.

Peter Costa

you’ve quarter want of of that just which talked headed visits Is but other looking is of to insight did going to per I’m a another the Good what the government government to to home And try quite little get cut up so see dropped if know keep close hard the of going that might we’re continue bit separate, episode, that wondering they to half whether do, you possible? down. everyone. then that XXXX down, the you but what sort will why this make last sure I to quarters? we the at this it you’re continuing Should to at same on sort wanted any do year trend expect that gauge get morning, it’s for rate down had but to in didn’t about done. health follow to I it’s than is do the but that rate the to to think it and XX.X couple

April Anthony

Sure.

in be we adjustment data be PDGM will the actual XXXX very I predictive CMS rate because that is there set. to with strongly there the and mentioned do starting the what So relative ability rate by an XXXX time that would XXXX, limited available will feel not you think very

to glimpse and net changes was adjustments So opportunity we we the in see basket just will a changes actually downside In the they market get the any do a CMS rate that more authority line get creep data. they’ve significant use don’t we’ll to some positive. in XXXX. have that a in keep actually that along Hopefully that something one-time full the a year of XXXX, XXXX our authority anticipate more and as into exceeded behavior they to year-after-year which to observed the layering see from It’s could of the behavior done the do assumed gave certainly what perhaps case the they that past. statutory behavior belief point year and begin full in baked assumed they’ll don’t a at time PDGM data have they that changes language statutory mix first to system, if they have adjustment at

to XXXX would would we they enough absorbable be first So make the a data think actually have period change.

the it they industry show as fast as think that unlikely moderated absorbable will that highly had behaviors expected. that I is data

in of rate a are I change for truly industry and behaviors stability for rate guess to it and that enough So may be XXXX time see there’s couple would data that probably a years enough to that in timeframe data like we of change. the more a before

feeling market unique being about So well good second come I’m patients say, move time. are get the times occur rate Christmas children know in you – pretty you and during the the I town, the where during my are you fourth can or time, Thanksgiving, we quarter. of about that holiday there per the certainly Thursday, don’t Christmas and Friday will with Obviously all increases or during on. in to visits 'XX episode, holiday often want things relative as question basket to moderate positive for 'XX years some us To excuse me

doesn’t will moderation continue who the initially member lower trading value believe visit Medalogix more per bit fact gets but quarter, improvement visits a create same to fourth we the net that as see fully continuing episode. full-time Again, of we of typically visits slightly in quarter get do tailwind that a rate Care, we the line. deployed fourth to that of and amount we that is then see paid and bottom staff So the little the to some improve also mind of in per that a keep in any episode of

side of per episode, the of up do we those cost in catch full there’s that benefit little but improvements so see visit the that. a we’ll bit a per to in visits So lagging think we get continue

net the to look visit for value let’s that of again, the second improvement. So half

Peter Costa

Okay.

final worse and yet wouldn’t then home to if it the quarter January time up little in a as changes that, tempered the and in pressure the every and into about then January rates better the talk you is even first on say earnings worse why If and seems better, So a just a February about January rate health, don’t me like follow the in being the up that But that little first bit in it mind. about you you you bounces look the talked earnings the worse it Why quarter? the being April. why and be fourth quarter and March in in is best more than first quarter. quarter pressure second talk

April Anthony

first because Well, have it’s tempered bleed in you out. the quarter the still

of under episodes system. they’re pre-rate So the have are December on being the time old days to XX XXst started that in going rate first at cut quarter the old PPS paid that

worth episodes months that of of of episodes in the During benefit the phasing those that all course. kind of gone. the will be get the two February, over time have you end really are you to old PPS of first not quarter, By

You’ll into environment. new cut be the rate fully

have January a so than that a sense? Does rate than don’t at everything level and cut – that better because looks higher a quarter little excuse first yet. little better second out make And episode looks rate me, quarter you’re bleeding

Operator

any our would remarks. Coltharp back additional And over to Doug the to floor like closing I or question. for that was final turn

Doug Coltharp

the way Thank for the we I call. you, that. of not room. that today. they here changed and introduction the a call type actually part company. bit Crissy I’m the the event on at have and In any And difficulties her been we have may feeling call, outset you little our the outset missed operator. capacity Crissy if at doing weather, this apologize is some in so, of I another the did understand has so because of her in is under the with sequestered She

And you anyone March on New we And Pierre join Mark state stated scheduled questions at able and remarks I and We his to to The have to today’s for an call. joining line as Day if we follow you for Crissy York be regarding (XXX)-XXX-XXXX. City again do that in when for Xth is well available hope in your and direct thank her us take will up Investor is wanted that. additional has call, calls this any follow-up that

Operator

this Thank call. conference today’s and you. gentlemen, conclude Ladies does

day. now Have a disconnect. may wonderful You

Encompass Health (EHC) 7 Feb 202019 Q4 Earnings call transcript