EHC - Earnings call 3 2023 | Encompass Health Corporation

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Operator

Good morning, everyone and welcome to Encompass Health's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.

If you have any objections, you may disconnect at this time. I will now turn the call over to Mark Miller, Encompass Health's Chief Investor Relations Officer. Please go ahead.

Mark Miller

good and operator, you, morning, everyone. Thank for Call. you joining Encompass Earnings XXXX Quarter Third Health's Thank

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

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

the are XX, uncertainties and filings quarters subject for the Form September will of developments X-K, we make the differ relating bad which our expectations labor SEC trends XX, from volume, uncertainties, XXXX, filed. our forward-looking the call, release debt to the as risks the many in to XX, for XXXX, cost XX, to materially ended December XX-K statements, and XXXX, that which control. March discussed During are year and Certain and when like company's earnings regulatory beyond estimates ended and the related cause are could well XXXX, in June results included and risks XX-Q as projections, and Form those Form actual

read to We encourage you them.

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

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

question remind question. website. I available to X release the end all a measure end directly X-K of of everyone submit the reconciliation and available to is at of and supplemental to you X the part at of follow-up yesterday SEC, measures, the Form like information such to GAAP the as filed the are most the earnings on rule question allow we will For adhere the comparable to that with our which would

Mark Health's feel Executive With free back and the Encompass Tarr, please in questions, additional have to to the yourself queue. Chief turn President I'll over that, you If put Officer. call

Mark Tarr

and labor with results, morning, volume premium a Mark, reduction driven year-over-year in strong you, substantial good growth We're Thank third costs. our and very by quarter everyone. continued pleased

revenues total XX.X% increased X.X%, third and adjusted X.X%. XX.X%. up EBITDA Our same-store increased discharges increased quarter discharges QX with

Our strong volume underscore patients. value sources, and our growth continues to proposition to payers referral

X.X% and the grew hip continue with and patient normalized acuity relatively system. aggregate flows patient in care Our health the more up through though approximately to fracture XX% year-over-year, year-over-year base. of discharges extremity knee replacement broaden Store discharges lower a the of while were small

additions. services, de the quarter, bringing to demand opened Given novo invest us continued de XX-bed rehabilitation in novos strong for in the capacity We have X inpatient year-to-date. third we to one

the from of additions XX XXXX. efficiencies, favorable Based of third in Wisconsin construction XXXX Fitchburg, opening existing added XXX hospital are our X over quarter XXXX. accelerating also first the hospitals of on for we fourth weather the and of to capacity first total beds beds We quarter to months quarter of conditions

to hospitals, have open to bed our case Three in add projects to QX a due beds X local plan scheduled resulting addition X now we de originally year. of existing each to XXX permitting result, of a As for the for total XXXX in XXXX novos beds in and shifted issues.

beds this of XXXX. hospitals than more XXX existing expect result shift, to As to in a add we

have hospitals. We active build with currently acute of to and announced novo and continue both novos de We maintain with owned opening de beyond care XX pipeline dates wholly projects XXXX. JVs an

bonus and expenditures. while services sign-on shift we demand During increasing the reducing and met QX, labor again our for contract

or $X while and million XX% decreased sign-on of XXXX approximately Contract of ship QX million bonuses labor XXXX. XX% $XX was approximately or down from from QX

resulted is efforts based acquisition factors. talent hires. our quarter, seasonality Choice vary on consecutive from be iterative may documentation Review XXX for and we pre-claim and that for in net or medical as elected potential began on review, over RCD, significantly and results Alabama. XX Please allows that August Demonstration, in believe quarter-to-quarter hiring under process real-time it necessity. We RN same-store second other every a reviewed Recall for mindful adjustments. claim the For more RCD, the

rate The thus Our of the results submitted set encouraging. and during claims RCD our by above CMS X target is that. far are affirmation affirmation XX% months is rate well first under

EBITDA to per billion share Given adjusted guidance expectations results our and include to of QX, for $X.X $XXX revenue are and QX XXXX to million $X.XX million $X.XX $X.XX. $XXX we updating our operating of of billion, to earnings net adjusted

The key the supplemental be slides. XX found can considerations of underlying on Page our guidance

Now over Doug to further with it color. turn that, for I'll

Douglas Coltharp

Thanks, Mark, and morning, everyone. good

stated, QX we Mark are pleased with As results. very our

We to costs. premium improvement continue see and year-over-year significant labor

favorably million compares from ship in last a bonuses. basis Our bonuses modestly labor contract sequentially. million QX represented was XX QX ship labor X.X%, rates decline declined sign-on and Contract percent XX in sequentially. Agency labor a of million of and 'XX, decline contract basis of utilization XX% million and point declined ship and of from $XX.X QX QX contract 'XX and This decline 'XX. $XX.X a labor XX% and XXX $XX.X bonuses $XX.X QX sign-on labor contract were point Contract in QX sequentially. FTEs plus year-over-year to in a total in of from labor year. was decline and an approximately and FTEs $XX.X million and as sign-on comprised FTEs up year-over-year

I'll in the down the clinician are level impacted from of agency specific geographic QX conditions. by market $XXX,XXX QX approximately utilized as rates by 'XX as well Our rate license was for that FTE 'XX. remind you $XXX,XXX, approximately

were sequentially. $X.X bonuses shift decreased and Sign-on or XX% 'XX and QX million from roughly flat

QX, adjustments X% pay in compensation lower SW and contract the labor our coverage holiday to premium the Partially in and nurses, is As increased proactive attributable bonuses primarily requires for sign-on per new in costs we bonuses planned QX over FTE was hires which increase for rate, QX. an consider and shift This was premium offsetting noting it similar benefit internal 'XX, increase worth of labor for QX increases. higher typically shift excludes rates. market The level that merit of we saw increase labor to and contract rate.

to actions in These contributing turnover. and our new hiring are success improvement in

points QX Our result Federal District 'XX updated of guidance have QX this line we Appeals debt appeal a bad to increased in denied QX. Revenue Board, assumes the not to In from XX Court. EPOB quarter the by which X.X% trend with the related X.XX X.XX increase Departmental a to from basis claims X.XX, continuation of reserves for older of an in as expectations, in 'XX. and write-offs elected was

gains. share novo strategy de embedded growth edition Our to and contribute generate solid continues to

performed full ramp-up We Our $X.X de year contributing $XXX,XXX brings and still in due cost million exceptionally of in and in EBITDA. novo of QX, preopening we This million. adjusted hospitals first to to year-to-date $XX expect X expect opening net scheduled has XXXX. $XX QX be to costs well costs to incur to ramp-up QX for open and million preopening the the in hospitals in the half to

pipeline XX% scheduled XXXX on the an $XXX acceleration months flow and cash Page As to Year-to-date information, of XX led from XXXX a projects million. upward million adjusted our into to the for XXXX, of a to supplemental number capital it free and opening Fitchburg million $XXX the revision of the be of has on progress can XXXX. of our estimate represented first XXXX $XXX.X of de increase expenditures novo X seen

XXXX our have to assumptions updated free XX estimate adjusted be on of information, As the for an million Page it flow cash million. we supplemental seen to in $XXX can flow our items, $XXX cash contributing increase certain

Finally, at end XXXX. leverage of ratio we down ended net from a QX X.Xx of with the X.Xx,

positioned. for liquidity Q&A. well balance open remain With and lines we'll sheet that, Our the

Operator

question you At [Operator We to floor we and question. time, yourself will this for the open X follow-up that Instructions] limit ask X questions.

Kevin will with question Bank of Our America. first Fischbeck from come

Kevin Fischbeck

I So the do the wage manage like now. we have How if how progress ability the this labor bonuses, down, about coming and -- overall contract the labor has you expense I quarters and and labor. year. see about of a has into to gone pressure gone you contract guess sequentially characterize through sign-on of a but outlook that for labor think wage labor ask market contract how on lot up labor ability to Obviously, today of you you about think would couple to benefit do would the overall up next

Mark Tarr

Kevin, this is Mark.

base I still going the premium others staffing next of markets segment in would which the find our is place characterize more terms little there. But As are initiatives really labor you staff. systems is put recruitment tight market really at done a know, think point. and job a categories. have tight pay challenging into nice and out our progress RNs, we I strong to the in to hospitals we've of this challenging than most We've very this it be really market. and made side on contract successful bit competing Certain and at nice very a of year, our the

Douglas Coltharp

Yes.

a couple to things that, Just of to add Kevin.

bit that geographies and to all, sequential with you're fact First a think as more in what higher it's tighter. what those we our I we're rates where contract is and labor, at the license has the seeing expensive are in reduce little a of on of do in reliance levels concentration increase more more seeing of terms that

that So some filling. of is kind of self

from under As quarters, we hire X% X.X%. XXX the stable to was think further to SW it's year, don't opportunity That's we've that think pre-pandemic, up but X think the this with going regard further. XXX just that in each X premium able labor the progress? that. was running increase of Yes, new not that we we we FTEs net in to of that -- contract been either also we an minimum, fact per XXXX, getting a back been we've RNs labors, me, excuse kicking the or be evidence we we quarters, Then, right last down been improving that X%. where believe Do we've -- that look a in cumulative. that see to to successful over hit the perspective, last FTE level that were which or We've above there's for the

and top well. our going We the reduced don't We to have X% that has X% able level on right believe think as inflation anniversary turnover we expect been new being those to year. this moderate of as another factors, that talent considerably would in a the that And labor to hit to of next result of procure terms we're we've year.

Kevin Fischbeck

as guess. I in Where -- back to demand? about seasonality That's normalish growth lot do seasonality? we And Are talk of there industry How there's normal a is think as you Is volumes? are here? the Okay. kind of as any seasonality you been far I a go, you pent-up but then, are volumes future helpful. far guess, that also as normal base IRF for as and from thinking growth about this

Mark Tarr

commented chance or other to think real I is take we've areas that that, that pandemic otherwise share gave may past believe show and have types the have post-acute that true market the similar Kevin, taken from patients. settings, a continued skilled I quarters, now, in in we that to facilities IRF of and holds difference nursing

positioned sources so payers. and going provide I to to forward well to referral we're And value continue think the

Douglas Coltharp

challenging for was about more store. we coming comps of more running reported, just total In year, course, the discharge recall growth with last growth half than north last the of same that year. As QX of from you of of our X% X% second from we that up discharge year, are half this against back think

of to that like themselves we And year. With felt no reestablish there's COVID started reduction that half it and of of those pent-up this demand, and flow to seeing feels so second is the increased in this we hip like acuity that seasonal are continuing knee really in offsetting year, described, Mark an is a patients. what's replacements patterns some some regard of the doubt lower that

into than might our the we're seeing that probably feels little kind show actually through bit traditional a back the speaking, like categories generally otherwise it so seasonal total higher those discharges. But flows. And of in is we're demand into

Operator

Our next UBS. question come will A.J. Rice with

Albert Rice

technical. more First was question

you're on like confirm increase for $X.X the you've de this mean actual updated that I to that. project. It is not on one. results so in that the just looks operating know the guidance. include, write-off is of the highlighting is you point -- of But novo don't there's that my little might but move if including to unusual background a forward more that with You're surface want I main any underlying than I sort million

Douglas Coltharp

our the de unusual that And to that in it's That with don't A.J., necessarily EBITDA as and right, we press its that, of scope. I'm mode. sorry, We're is about more pipeline you unusual in see then there of less describe novo And we behind managing didn't exploratory an of that terms forward project are are what write-off you're not XX ineloquently we're the XX clear in fact projects approximately line. terms adjusted below materials. in deciding active make more a what and is

We one have QX. various those is getting forward Midwest. It's project the land. about reasons, elect What time we not in some million. the to an are a have with unusual up to actually sometimes we In was We will gotten was It in from had site had $X partner. were hung in some million. items was We had will venture move that further actually It past work. time almost than it's along. less included We project doing than existing joint that for instances, the approximately acquired this project was all CON $X the of that with. in the process,

refined And way projects. getting estimate some the a weren't used effectively unfortunately, the time our for and in other this of was it use we've on worse we build to able to cost we every offsets other that facility, worse

direction was In labor market were well. addition the an in moving market where to conditions that, this particular a adverse as

it's down continuing the think with concluded we it not anomaly given that far in did do venture our that kind some forward enthusiasm really of had because I write-off. I it to we any don't we at development that so get to partner, ultimately, and talks our highlights as but time path make speaks this sense that to took our together before think to So unusual that press the joint I with we difficult we approach. view of us it the make its lack regard disciplined for fact an pipeline, are decision. size

Albert Rice

or first Okay. maybe develop puts to fourth any not variability, just we're as know what, But you're a this until the and talked we in give All report of your formal de as you are some labor about 'XX right year. quarter in stab at I'll forecast you inflation and the should right. And at think in things you've going one. areas least guidance particular the take of now mind, sit I a moderating follow-up, around keep volume novos, takes mind the about of trying to and next year? around

Douglas Coltharp

that I think against occur 'XX. growth discharge in XX good at be this to benefit moderating as we anticipating novos look end into primary the anticipate the next we'll that do FTE, the hospitals. one, XX comps year. increase we're Obviously, from Those But existing volume we the on we of challenging up beds to we've inflation SW, from is, keys, the you've 'XX year. labor the given growth of X% which we're through maturation going going addition had hit continued anniversary heading added the for drivers. to are were of And XXX be and will de

Operator

take next our Jefferies. from We'll Tanquilut question Brian with

Brian Tanquilut

in far my reported and guidance on the I different is the think from year of about to year. like quarters. The seasonality what you've terms guess first of X little the the so Congrats Doug, revised kind I for contribution typical QX question, your in quarter. a as first

guide what about we is should So just for terms sequential flattening thinking or on of that QX. that like anything the there decline curious, in imply be

Douglas Coltharp

Yes.

not to expect into normalized We we kind to in surprisingly really move relatively because flat QX, of kind from the flows. QX we seasonal obviously from range. benefiting price established would have discharges of as increase, we're So be that QX

getting not you're there So sequentially. pickup a

pretty merit a little chunk which increase the X%. consuming with pricing a You're the good of increase, was over

increase, of It way anomaly increases regular in which see atypical. of of length year bit somewhat an kind just OOE, which seasonality. And then was that stay. to last is not of attributable And and in some a QX supplies you'll some then also of anticipating an little we're is and the

out -- you a QX. So call very not strong there. a to lot again, had it's And

So QX. here not ball it's that the of calling for kind we're surprising

Brian Tanquilut

price Okay. price maybe release then, the slide That in XXXX? on look I strategy at comments makes your the about on about Mark, or we we sense. trend share as And commercial in How thinking the on side. pricing think commercial -- be should -- deck

Mark Tarr

MA had. we've We work payers, quarters continue the to we've done past on as in negotiations contract with

differential and see As between to we Medicare the less the more starting CMG, towards of you're move plans. contracts MA fee-for-service

was or X% differential X% think to I quarter. down this it last

to that we expect there. progress make going see think forward. So you continue to And I

Douglas Coltharp

about Yes, Brian, movement you the the call the to from QX you other think to novos. of is got out as thing QX the de impact XXXX

in discussed But the our quarter the preopening million earlier, in that for the we way $XX in million actually EBITDA. and we're million to strong anticipating in $XX full range, had where ramp-up QX be other $X.X still $XXX,XXX really those contributed implies QX. As million, to we will which comments a that swing in $X.X a year costs

Operator

from comes question next Pito Our Instructions] Bank. with Chickering Deutsche [Operator

Unknown Analyst

for You've Kieran Pito. ] got Ryan [ on

quarter. and demand in patients I mentioned a to good hip know at continue present and that rate the strong out pretty the some knee you in You called XQ, second ortho

other that's that? continued comment into or So I ortho XQ, you that like call stroke could any if to just and anything you specialties want whether there's on neuro, if guess, just strength in out,

Mark Tarr

We our see program. continue stroke growth in to

seen to back normalized I just my to flow of the comments that in I noted around we're pandemic. getting had we the think prior kind as orthopedic,

a base, over program. growing the very nice our that. of and in years those a an off gains categories. neuro growing huge placed past we We've to continue on focus seen large have seen not focus it's nice and several So but gains We've other on that is area stroke

Douglas Coltharp

and are This up a was we a these injury across X.X%. geographies bit very us. discussed was Major is Again, -- but in broad-based to XX.X%. which encouraging across patient some quarter brain up this multiple strength X.X%, there. more lower categories was smaller well, so little discharge our across again, the of and Cardiac QX, as where was categories, up trauma growth

Unknown Analyst

you be quick update And Would turnover. Awesome. then an give a just able to on follow-up. RN

It I little think sequential at running year-to-date a XX% or... bit like more improvement there were sounded after maybe you XQ.

Mark Tarr

Our and the -- with that continued year trend of most seen have RNs, recent on quarter will month we basis XX% most we improvement lot what that. is recent and turnover of X improvement within on. on. of we nurses, an our a on that's hold of think and on knew focus us rate put hiring the We've of we lot or that We've put decrease turnover focus a XX%, progress longer rate. which area that on and seen help could We've onboarding turnover to continuing term orientation a the see

Douglas Coltharp

we on but turnover than nursing, note the year-to-date a our the It's was less of third X%. therapist as to the tend important quarter on to focus well, basis end at

Operator

question from Larew next William Our Blair. Matt with will come

Matthew Larew

strong but on side, quarter patient follow-up it obviously, in been a particular. mix was last A the quarters bit on several the has the as MA for question, really another it

to already particular question, MA call the categories side? any trends or on to so And Kieran's similar out patient

Douglas Coltharp

No.

in stroke with discharge just discharges it very of now quarter, basis. for patient if basis, good broader the year-to-date X importantly, in aggregate that growth be just seems were highlighted up is you and resonating in with overall across under see XX% plans this XX%. spectrum. a MA That MA but for -- the for regard And same on MA growth approximately XX% value us on total at when under we've our MA to the we to to those continue patients, things MA, proposition to year-to-date for was takes the store So a look QX MA, other XX% look in

seeing we're of there broadening So as well. acuity the the

Matthew Larew

from forward you this doing? staffing this accelerate or to related then really you've it that And Okay. that licensing opening to been that on the apply Or put right pipeline now? Is you to can in the prefabrication hospital XX%, follow-up extensive is process? to you XX% what just on of this what And you a more a allowed have place is, issue? depending the

Douglas Coltharp

Yes.

favorable be was The So getting you. factor patterns. with also it to we honest But we'll then are more regard utilization the biggest single was with prefabrication. efficient weather of

along of the all speed improvement stating XX% with realize been that full in and We've to to versus a to cost of moving contributed. was XX% conventional regard terms that prefabrication reduction an objective our So market. to

but So on we're yet we're in not the projects quite the good headway. making of there pipeline, all

Mark Tarr

that to about We've the just construction first staffing it staffing marketplace all or patient. and had in [indiscernible] was take so not -- being that side around prepared

Operator

next will Ann question come with from Hynes Securities. Our Mizuho

Ann Hynes

this then that cost side good for a or ramp-up your And for legislative my is the to regulatory anything year, be million of XXXX? So first million on question. on radar that $XX $XX to would secondly, It is the is use XXXX? there number

Douglas Coltharp

on haven't we're to year, I next good proxy up probably Ann, one, XXXX, pencil the we yet So a to X for think I another it looking pretty this since opened put open and but year. X a quite it's first

Mark Tarr

to focused regulatory right X we the to with MedPAC on we things Everything mine to here there on commented site there, now. RCD and I stay things side. but Ann, neutral are -- out are discussions closest say other continue from those around would

Operator

we Miller back time, will in no additional for call turn queue. this At any closing Mark questions or further the have I to remarks.

Mark Miller

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

Operator

participation. your This you does We conclude call. thank today's for

time. at disconnect may any You

Encompass Health (EHC) 27 Oct 232023 Q3 Earnings call transcript