EHC - Earnings call transcript Q4 2024 | Encompass Health Corporation

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Operator

Good morning, everyone, and welcome to Encompass Health's Fourth Quarter 2024 Earnings Conference Call.

[Operator Instructions]

Today's conference call is being recorded, and 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.

Mark Miller

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

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

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

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

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

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

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

and the question that adhere to X to everyone a question. remind we I allow would X to submit everyone to follow-up like rule will question

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

Mark Tarr

quarter advancement and was revenue highlights a a characterized everyone. positioning. financial growth EBITDA the The strategic EPS positive Adjusted Mark, our adjusted increased XXXX, strength again payers growth strong quarter XX.X%. good and fourth by increased for significant very was to increased across of XX.X% discharge great free QX, volume you, Thank XX.X%. once morning, for Hitting finish X.X%, and broad-based the cash discharge Total patient growth exhibiting Adjusted and Same-store XXX.X%. performance, geographies. X.X%. was mix, flow increased

approximately for X estimated fastest-growing XX the primary been Our remains XX-or-older XX Medicare at at in more Medicare only population older. XXXX, nominally. average on CAGR will growing been And has to of focus beneficiary be patient which the that of Americans XX the a X%. the by in has segment [indiscernible] more license XX X serving has has Yet or is aged a consistently IRFs It population. in the been decade, population age growing our of X%. people range the U.S. than population, approximately than U.S. The increased million

[ such medical this be demand There the benefit IRF is IRF are who in would ] required stroke, necessitating denied intensity the a administered As underserved. an access being treatment too to result, care law beneficiaries complex significantly services conditions for Medicare by are to many of clinical as from care.

attending lengthy to assumptions and is pre-authorization issue IRF by and a addition plans service hospital some by and between IRFs faulty by to of exacerbated In planners physicians. demand/supply care Advantage the SNFs access discharge the regarding Medicare capacity, imbalance equivalence requirements and ill-informed

providers few means very of to equation. alter one with are the this We

to during of community XXX from our have the up basis discharge XXXX, patients we XX.X%, clinical patients. We was expertise points with the successfully to Even rate medically nearly XXXX. acuity complex serve treat high

care Acute without of unnecessary these subsequent and patients number right, hospital helping hospitals know the send to reducing that setting. recover us patient reliably are home in is the them sending when thereby acute can time patients they days We readmissions. relatively XX-day complex acute care expensive

Our by fact as our are of is joint XX evidenced attractiveness ventures. the partner acute XXX hospitals to further that care as hospitals operated a

development to are allows There of our than these other are the serve that state-of-the-art scale our better IRF-specific and protocols rehabilitation best best-in-class hospitals IRF is via need important develop clinical We appropriate enable provider. processes. to enhanced systems and which The record. medical then benefits more inpatient across attendant information electronic patients with we in invested of patients in, extrapolated to us services. clinical continued treat identification, refine including any This protocols, practices conditions our us by implementation have

Our scale of high-quality positioning place IRF low-cost chain. be us efficiencies, also provider contributes in right the the as a services, value significant to cost

we administrative resources the IRF and Finally, have add to to needed capacity operational financial, industry. much the

added years total hospitals, with our did and to million returned beginning beds deploying and beds in X,XXX we We of even our markets to XX capital approximately through funding Act during new extend the XXX our supply to accelerated XXXX increasing so unmet the our not pandemic importantly talent We services. for needs the CARES XX%. bed to growth $XXX approximately opened and we waver have patient XXXX capacity received. commitment been IRF XXXX, existing by services and X of increase as our existing promptly new hospitals or efforts do From we and in into geographies uniquely,

and XXXX In satellite operated hospital expect in Included July and state identified had novo eliminating hospitals. the pending, XXX Florida. our with hospitals of into expansions, XX to announced beds, that then hospitals CON in hospitals. add in requirement hospital XXXX, approximately XXX Florida beds with State with in one During markets $XXX added XXXX, the prioritized than new more to to open XXXX, invested are hospitals capacity for XXX beds X In X we de last existing openings aggregate, new Florida. to new we its in and XX beds million opening activity we XX we existing adding of X we XXX we relocation certificate-need hospitals Prior beds year.

XX year, of to expect Florida development new in CON next Florida opened our state have of we the time pipeline. opportunities the additional have the in this By we requirement, active revocation and since hospitals

one new added We to and Florida beds of plan hospitals so XXXX. have our in already to another do at

now services substantially We will underserved. Florida expand and added XXXX. to IRFs as have our Connecticut beyond new in have add IRF market Rico, XX map Since still continued to states states remains XXXX, we in We well. Puerto in for and X operate another the

to dividends on our approximately through growth stock cash investments complemented XXX,XXX our shareholders XXXX, and our return During we million our in of more of common than with stock. repurchased common a $XX shares

while shareholder and X.Xx free strong generation Our us cash leverage to to still fund net these year-end our reducing allowed at XXXX. flow investments distributions

need quality Our consistently complex, in investments in clinical for high-acuity ability our continues patients produce outcomes inpatient care. innovations medically to to rehabilitation of advance

have For prevention core enhanced our model, clinical modeling protocols. fall example, we further predictive our practice which combines with

decline prevention in fall seen than X% XXXX, days fall was approximately rates more including since have per and initiated our we XX% Our XXXX. an model patient improved in X,XXX by

risk care predictive continue also of our to an ReACT hospital. tool, We acute transferred being a to patient's measures which back refine

more XXXX, Our ReACT point our and year-end through in a X.X experienced January transfer was XXX we acute decline than basis in rate. XXXX implemented care

extinguish from to continues our experience and interventions us peers. clinical Our

year as to details as guidance. XXXX turn provide Now our results about and to over QX Doug well it our I'll full

Douglas Coltharp

Thank morning, you, everyone. Mark, and good

increase quarter for net and X.X% the to revenue growth and XX.X% million. increase billion discharge EBITDA was in XX.X% Revenue of increased X.X% a The $X.X adjusted increased discharge. to revenue per $XXX.X comprised

Adding mix. As and Mark stated, on bit volume growth. color broad-based across was strength payer discharge a and geographies of patient

$XX related contract increases, that million For and revenue XX.X% per neurological from per X.X%, to Medicare per mix, discharge a excluding and included primarily the mix. salaries X.X%. claims and clinical quarter, Net of XXXX, reserve QX debt expense denied our X.X%. XXXX. FTE approximately bad basis XX.X% to increased in Medicare wages adjustments X.X%. and patient bad increased market managed Within for QX increased FTE, change SWB bonuses, X.X%, labor Within discharges stroke a prior QX decrease merit disorders XXX Advantage, debt increased resulting points ship from and to care license benefited Recall this, and X.X%. for sign-on in an

factor our latter turnover results. and increases. believe compensation nursing contributing ladders, to clinicians of career We seek our our related encourage therapy implementation accompanied incremental are which by ladders career improved This is are then to these which accreditations, to

X.X% For the in XXXX, turnover XXXX, to year. to our prior XX.X% compared XX.X% X.X% RN turnover was compared and in was therapist

benefits expense benefits in X.X%. of QX QX increased XXXX, per FTE recall that per Our Please XX.X%. decreased FTE

claims dollar -- we a Similar continue some drugs. lower this to specialty attributable of higher high increase is So year's and specialty group utilization within QX an the our to experience to medical, of base. incidence increase in of large this year, high-cost of

claims the be to claims expect of elevated growth the of utilization and increase is specialty tends mean-reverting, the dollar cost remain such when sporadic through in first prescription we at incurrence half to group drug While large least XXXX of we medical anniversaried frequency the of these drugs.

in per expense QX of comprised million costs FTE increased X.X%. XX.X%. from This contract a in QX, were and this expense of lower as increase XXXX, $XX.X bonuses and benefits sign-on labor comes X of in our per million off benefits ship And very Premium X.X%. base decrease was only labor $XX.X 'XX. years FTE XXXX, For declined XXXX, in increase good the

labor of QX to 'XX During of compared openings QX, from and million comprised costs in as ramp-up adjusted QX FTEs X.X% EBITDA preopening $X an million contract $X.X Net FTEs. XXXX the total in 'XX. were contribution

favorable Our insurance. included professional QX favorable million full programs. workers' in for comp On self-insured adjustments a approximately included $XX for XXXX general basis, year million reserve and the adjusted reserve adjustments approximately EBITDA $X.X and liability

flow. from year cash million, to million, cash a free XX.X% to adjusted significant XXXX. XXXX bringing total increased free increase generate XXX.X% our $XXX.X full to continue We approximately QX flow $XXX

liquidity remained and leverage Our very favorable.

net cited, X.Xx. Mark leverage year-end was As at

to guidance. on Moving

of $X.XX operating a There XXXX $X.X keep leap the the and $X.X billion, on due of as adjusted XX 'XX extra EBITDA of slides. QX Recall guidance to benefited key factors from an $X.XX. Sunday. quarterly day and quarter because mind on that The to billion includes are comparisons. year of considerations in revenue to underlying discharge Easter Our to our billion ended you share contemplate year-over-year earnings net guidance can $X.XX of to per billion, and Page found $X.XX be adjusted supplemental number growth

anticipating are to ramp-up hospital $XX costs. We and net million $XX preopening million of

are second of related general the We professional because September of XXXX costs towards be liability to weighted costs estimate approximately these half hospitals between year-end. in reserve includes XXXX. adjustments openings expect to for X This insurance. our in and early heavily the comp $XX million also included open favorable X expected to year workers' and

and in be NCI XXXX addition Oracle for Our to we million related Fusion open full XXXX $X.X adjusted second $X.X NCI the of costs half Fusion joint the these, cost to to that, year expense which approximately impact $X.X million the joint expense Augusta Hospital approximately in lines Augusta Piedmont Oracle venture. million with a EBITDA for implementation now $X.X million our to to $X implementation include And $X and of venture. to will related million expect in we'll million the Q&A. included

Operator

Instructions] [Operator

Partners. We'll Leerink at take our first question this morning from Mayo Whit

Benjamin Mayo

My such. of trying seeing Is the question to MA denials growth But other certain the This or classes the of come across certain broad-based you're health where as and on level seeing of with outpacing growth. versus payer get trend when first sort a portfolio? just you just it unpack reasons we're apparent obvious business more that the plan growth for has the the scrutiny, all in from? is some more states markets been sense I'm a fewer others?

Douglas Coltharp

bit little both. of a been it's Whit, Yes.

growth Medicare markets. We movement by same-store Advantage being new in well, are definitely it's seeing into assisted but as our

just does exist. some remains Medicare discharge look substantially within because reason that the trends Medicare enrollment continue kind within for rate that to at Advantage our if But than the admissions lower discrepancy we growth and fee-for-service, and also of no both of fact of We within of of due Advantage business, that to patterns. a referral there's really to believe upside lot to there's book the the

was was Advantage growth Medicare XX% we're up XXXX quarter, XX.X%. in X-year of Advantage the And the For for a the X.X%. full same-store growth CAGR up Medicare within at on of a year-to-date XX.X%, discharge looking that basis, the year

really do we're substantial feel we So there. like inroads making

Mark Tarr

with it's been proposition. us in and making for know, multiyear you [indiscernible] that as process of our are Whit, loaded terms sure outcomes a our we value

in lead to we with get and the of what that's and our make go meet able we're we whenever So that sure the outcomes they're plans in facilities. aware with

we'd expect forward. and So that continue Medicare refine we to in going to to Advantage continue process see growth

Douglas Coltharp

it for XXXX, CAGR important is of impressive And discharges that mean same-store X-year I is Medicare the X.X% still XXXX think it the Medicare X.X% up in growing. is up X.X%, that little Again, the year but a year-to-date, note at not quarter which service fee there doesn't bit is full also and to lower, X.X%. for

Benjamin Mayo

That's helpful.

cash X lot earnings number. hear Just an mean the could nice. a as year years But free my forward? cash incremental comment just I maybe on I year. a if any expectations going the is coming investments, total which last And buybacks to flows I flow views over here. larger prior and made, know don't the which caught on just that you follow-up hit I now want CapEx the if of for on investments inflection Doug, priority from in presumably the the with you've priorities capital

Douglas Coltharp

Yes.

to to million. a in be So on order probably CapEx our $XXX It's Most is to going is year. the going related specifically this It's year. about of continued growth-related going that CapEx, be to big be capacity up expansion. of up

as capital deployment. to expect year bed is additions, which returning We of with year this our you and highest both form know, next regard

So -- activity. about We've opportunities the beds bring novo got we're to in got spend more increased an excited on. de also

X timing is it that of we're to additional the that opening XXXX the related opening. this but of year, Some the also fact to hospital gets

rate be that the years. approaching up, several probably will and a be it's So run we what think next number will for

beyond going increase It's we you free on probably consistent and formulaic midyear discretion that time from with at excess did repurchase that, once have likely but authorization not is I XXXX, more to of excess expect cash discretionary to utilizing shareholder move or would perspective do the driven, most flow With we adjusted our continue given to from forward. utilization flow we the of sit flow gets beyond Board. begin we where and deploying of time capital the policy share cash to specifically think spend the growth-related the expenditures, leverage a continued be cash regard And dividend. of distributions. and going free program That cash utilization

Operator

at Next, we'll hear from the Gillmor line of Matthew KeyBanc.

Matthew Gillmor

there and year imbalance. call appreciate wanted the ask Should about about to like of accelerated last compared supply in 'XX. that's to in terms comments the I top It of bit pace even a the Mark's sort Or to the pace additions in is additions more bed pace just move a timing the we discuss good your XXXX seems the little the time? year, issue, this this it is meet a be forward and demand the think about I at over and of and of of accelerate in demand and happens to projects bed to maybe more anything terms of year? ability

Mark Tarr

last Matt, we we're did XXXX year. hospital adding X than more in

We beds. also X We're XXX X on have year. novos de this satellite and adding coming

additional one total number too. of bed additions and it's it's those, of both hospitals higher So a

to one next fluctuations on going just from to see the year You're some that.

done on meet a target terms our really showing our in of hospitals. in growth to new we've nice think and I bringing job ability

said, last that we on. we're help we flow pretty and that X members are had is which yes, start-up to about As pace this what bringing hospital management feel And of the we certainly market the a of pace good higher new than maybe state bit of a some to them density that from year. terms year over hospital X benefit process. experienced staffing little this But we bringing on teams Florida when in in senior we having has see year,

Douglas Coltharp

if on could that. Matt, elaborate And I

expansions hospitals to is are had years than that history. that recent due in fact growth. of off X candidates largely discharge total And for really we've bed are have coming the we years, We that strong of today more X very

all increasing. level If has our way 'XX, XXXX occupancy X.X%. up you result, X.X% been the back X.X%, 'XX, roll And a of and as up to

to push hospitals percentage on more comprised opportunities, expansion. this to overall bed Now some the up, future the of create are continue also of more that that portfolio our of to list period that for started beds our has private is attributable fact we but

is has constraints to second, subject those on permit. of adding That primary our somewhat This but as it number capacity move or but significant this and in quickly is some takes of you're why to on is to have, for the hurdle what still lower it and department. year's the projects quite limited bed see CON a for construction Our number than a the anticipating ability time exists are One navigate. expansion XXXX is in frankly, is that those within X a opportunities And limitations. CON a hospital, number there. new that's We're lot of design high-class it is our to to what resources plate well. and problem starting that we're some

Matthew Gillmor

terms the bit. That's But a I a a asking I great. a unpack that like you growth you can It seeing there growth maybe FTE out guide. that's maybe of that's got benefit that hoping little the wage per in you've you're in at And modest deceleration? hoping in assumption know of X.X% of then, call other whether deceleration anything terms the side. I sounds was to the in down could think, little you've to factors, explain comp or Doug, bit, easy really what midpoint. turnover on SWB is about got

Douglas Coltharp

all I tossed in. of think that gets

that range X.XX% have we X.XX% of to inflation SWB. SWB total that so And is on

in terms an labor those relatively categories. categories still of we're making assumption will And total that constant dollars. -- in spend that labor those premium our So includes also stay as premium

give well. leverage the inflation as to in a that's of point rate So going us

appropriate. benefits is on comment Your

we the through moment to expect the we continue do group you're then And year. related do my second it see medical that of to in As the this I inflation first to to But lower in comments benefits rates. just expect noted half of ago, turnover anniversary going a year. half some

is trends I in So that range call, that witnessed our based carrying QX a on we but all the just higher it's had kind really in range that are in slightly than of what QX will to I the note mix. of XXXX. just as into alluded that potential

Operator

Rice today Our question with from comes A.J. UBS. next

Albert Rice

has beds opportunity great now? risk been does First overbedded of -- all, primary your it market How person state? that and somewhat in or the just once the IRF forth do the to the How still is overall about people up any adding maybe you ask are feel beds per far overshot your your overall a you. you Or for much you has in around Is good stride -- of look will relative -- other so all these thousand target? [indiscernible]. a like and running, tested be of being How and get here. to markets,

Mark Tarr

take So let A.J. your me first It's Mark. question,

in So about feel growth our good we Florida.

for future our the are the an We That which Florida. terms of growth. had adding important the the XX -- estate, the of was we lead have We prioritizing went market, that been state first were there. of we and design. -- bets was marketplaces in strategy in out in stated we When to we're and bought real lead, part taken by we've the

As we legacy hospitals already there. had said, that we hospitals XX were

add we to knew and beds markets would exactly where we go wanted we what So to. into

intentional been our very of Florida. pace So in state accelerated it's the

of hospitals of the we're overbedded, and as state that play demographics into our continue have we or line of Florida being that additional beds don't whether through to anything, as entering hospitals. for state see in growth our I if that's new opportunities the so As Florida strong to markets adding be we business. the you existing There in noted, state know,

Douglas Coltharp

And bit. to piggyback on A.J., that maybe little a just

XXXX, First continues an Florida. that senior the during significantly. of until beds opened the population gap CON grow cap particularly was the number population, of the And period to all, really IRF there of state supply-demand because on the even up pretty artificial amongst place in XXXX, preceding was as a in

significant a in So very they starting deficit. were

pushing even we think of As timeframe. that to of when XXXX it's the important the operating the in April midst to into most Mark near-term kind pandemic the back as comments and in visibility lost his as their in we've operators go of in of business. noted made the all I of counted But previously, a that because doing they trends hit, XXXX. with decision well, Florida shy and de in Obviously, weren't business had And accelerated state capacity purchasing to lot and of effect a first-mover a position away advantage in those of this previously. novos markets forward identified frankly, made program do to things had the begin land so. competitors novo the of our like de because That adding creating for from we

if add just IRF transactions lot would thing by with look for owned equity rate refinancing, final years private The heavily operators ago, current what the a is at been on less sponsors become [indiscernible]. versus was environment that that I you those several reliant have economics it have just the levered are that

construction elevated the leases is embedded enjoying combine higher those economies to we particularly with costs cap without same difficult, of the just do make that scale you in work. numbers If rate costs,

Albert Rice

just It what on mentioned areas seems the you're they like for there's authorization, administration, so list relative any to better reforms my you of that. some new and follow-up. are on a And well MA you as about advocating -- some what's prior Medicaid And particular and where laundry health there forth. Congress on prior authorizations? health for insulated area might chatter launching and the of that? Maybe of focus. the across other prospects care been plans from then Are Great. relief services the But do. you're the there's a focus new Obviously, lot fairly Okay.

Mark Tarr

made watching Dr. as industry, are patients confirmation coming policy And not RFK closely. right are know, chance is a wanting specific from positive the make that the of of benefits a to the CMS HHS regulatory incoming spent and not right will changes to have sure We've on to the so not up some and anything active some specifics no the CMS changes until D.C. now and otherwise. there's lot for there. A.J., there you of we Jr. point relative So the meet and out senior But had Oz. staffers or time we've of of to unnecessary and and incoming expenditures now concern edge it be policy we're overreach, facing those regulatory hearing for We're the of want remain front we CMS. or but meeting involved D.C. IRF and new in leaders absolutely that and

Douglas Coltharp

would before, as think is, should second is for of Medicare Advantage definition an there requirement that, that conversations And is subject Medicare regard oversight be and no that say have in our now, in IRFs the preauthorization with with A.J., on I representatives with simply also focus adequacy. are to then network Advantage, that their primary plans then and CMS processes of include philosophies. corrected. X to we we we've And elected And points the discussed right improvements our that

Operator

Barclays, our with have next Mok Andrew you question.

Andrew Mok

the acceleration. costs to increase a are in out You specific of drug categories group trends increase noted driving 'XX of would medical group seeing you there? you that medical detail to half give before Are the drugs there continue you're on anniversary some the you expected more prescription us bit or first line? any Can the that as the through call

Douglas Coltharp

at of we certainly that are that widely and -- is those just GLP-X, -- no One even be it there the though a even -- are call. to so risk getting or there prophylactic. it X anybody surprise will limit somewhat as on more prescribing much is Yes, have physicians diabetes, largest to this

We're cost will So decrease. is category the given drug into number we're the there, entrants half over increased the seeing that the time, usage that year. that in the on now, counting of Right we're stepped-up utilization of it GLP-X second the expensive. hopeful and what of remains anniversarying

pronounce well. The comments and expensive a are those good -- and utilization we're drugs of, number similar there. are is notable seeing frequently. utilization make to that I And the related a as then and is this there with third trend know there if thing, that is regard specifically trend eye of there that up drug one and don't to little wanted it bit of are sight second can even the a is enhanced increased I'd cancer-related I cost has but a to, popped more I that's eye health name

Andrew Mok

could it. up. helpful. Got And if That's I follow just

total benefit we million, is from totaled these the items be net Is helpful. Any about assumption provider should explicit this recur? And to for year. taxes would think, color there in guidance? How year $XX XXXX that I around the for I expected largely an benefit thinking this in think be XXXX? there

Douglas Coltharp

Sure.

So the net was EBITDA it from $XX.X associated XXXX, so impact provider for taxes, less expense the the revenue million.

as The has and approximately tax that it was And predictability level of XXXX, reason As of XXXX, million. about that was periods, isn't $X we before, we X about repeat reinforce -- we've a we've impact net increase In really To provider prior the million, from years. noted related just of that, then $X of point, prior previously, to of it. itself. to $XX there balance was decrease the in talked million impact the any to expect low provider that would EBITDA a taxes to $XXX,XXX. to in an point portion net

So this to and feels an a we'll bit to wait little like have just outlier, see.

a we taxes for the winds provider as is falling XXXX to in included where that guidance, will obviously of up determinant range. estimate $XX within provider that be taxes EBITDA variable. And guidance a terms land highly guidance wherever we range. XXXX million point within haven't It In

Operator

today next hear from America. We'll the line of of at Gajuk Bank Joanna

Joanna Gajuk

hospital maintenance the follow-up programmatic in major CapEx a you So asset innovation projects the and talk I slides, on guess, first, replacement. about

color Is do So this you than a there. that year little there bit differently of prior's? something

Douglas Coltharp

Yes.

leverage X programs The replace uniformly. have -- lot hospitals more and to buy for patients. across of a to will order safety XXXX years, we've sometimes same to and bed will, The hospitals categories in that in and the that basis, our spend. got utilize for programmatic just fall replaced scale, in and a or equipment of wheelchairs ensure to more specifically spend that cycles So significant replacement. comfort into the all beds relates order Other the to X that our we sometimes every on hospitals be pretty need equipment, category now. that in it About regular occasionally

machinery narcotics, narcotics well. fall term, drugs drugs, dispense that -- will the we is better Sometimes into utilized as not a that category prescription

So we think the we of facets all hospitals. just we important really maintain it's our -- that -- of

Joanna Gajuk

better in came expected in, the helpful. so I That's the call Okay. may, your adjusted cash flow free it, prior year. guidance is than full And million still for if $XXX

what some now in guidance from So 'XX the your 'XX? I 'XX of better. Was so forward drove there client for because kind that? from much 'XX pull sort calls came for of guess Because

Douglas Coltharp

Yes.

it's One in is things. came So EBITDA X expected. than we better really

The result working capital is in the second we than expected. was better favorable

a subsequent will seeing get the you translate we're relates to near-term until that And definitely that some where into periods. of increase doesn't cash be increase activity in into of forward a group medical, pull claims and it and under because our some liability liability

Operator

Mizuho, Ann next you have Hynes at our question.

Ann Hynes

that from the pandemic, is Encompass nursing benefited now? home. So like Is gaining for What I from really a tailwind know the still company? post market that share

Mark Tarr

in acuity we it what neurological That mean in we and able and with higher the versus of hospitals. changing has some get saw distinguish from from increasing our referral in to typically marketplaces. patients the of I homes. be numbers is. previous we as that continue outcomes of are differences our it of patterns that we could stickiness other sources to the had some industry, types think itself, homes the treated, are terms of think nursing nursing along And patients stroke referral terms that we, ourselves see -- Ann, that to Yes, I the in

Douglas Coltharp

we SNF share of means SNFs or is no measure now other market pretty couple indication growth most source there's think patients where market place. share. of were discharge not faster gaining But gains perfect are patients way we've fact And taking so from of I point to but that the eligible quarters a our that's are likely from treating that to for I'd The we that XX from same-store underlying was that which growing the X%. than IRFs. think discharged home, I straight One is good the industry, some a are north we're is market that had things. the demographic, directly share either

Ann Hynes

stage there -- is that they do expansion would that the like that able and you Florida, type that on lift have CON Florida? just similar radar were an like operate just the then laws. be Is state interesting potential the states if Florida company's on And of to not, because in other currently to is other you Great. any

Mark Tarr

Yes.

growth that states our screen. we other Carolina on in of the are Carolina, for North attractive it there a have state have of be one state radar in than a you strong state currently of the Clearly, South we Ann, to only the North us presence state have the at in but greater presence Carolina, look if So we have. very a would have and what

Douglas Coltharp

now, destination are are South right states -- are particularly when really retiring fact they considerably for the North and And Carolina you those consider and Carolina underbedded. that seniors

Operator

Our come from Fidel at next question Stephens. Scott will

Scott Fidel

midpoint, would EBITDA guide. on in touch very obviously, it the the modest year-over-year, points basis a a in imply At XX XXXX. [indiscernible] around year margins contraction implied strong the

on fine guess, of a that. to, put Just pen sort I

Sort some what at year-over-year that? ultimately the see then get of you be potentially you to even landing tangible XXXX. more sort importantly, opportunities of that the drivers or in of say And improving of margins would stable maybe upside

Douglas Coltharp

Yes.

EBITDA pay of tough that number a to margin. So the than things. with is EBITDA margin. better to we a believe continue One are It's dollars bills

'XX. from terms Some in comparison considerations to 'XX of the

I 'XX self-insurance to from Andrew's question. favorable $X out-of-period. in $XX.X 'XX million impact, million in in my responding when included mentioned adjustments as including of $XX we provider we As tax mentioned benefited accrual just were million comments,

September you quarter look is XXXX, about XXXX and If it joint the $X the we XXXX our at owing end of is of cost Piedmont of year-over-year costs in of was and $X than new NCI Piedmont Augusta venture, Fusion up and basis then the and right contribution of to on the of hospitals, of that the implementation ramp-up higher hospitals the delta with start-up will the in in range are -- targeting X the both now, XXXX, new million hospitals of the open specifically impact between G&A And the and X in million. fact first hospital the opening our to year. in midpoint that a expense terms associated

from of the about needs impact, So on got 'XX that I you've EBITDA right tax all moving be to $XX the $X right million overcome math do I if just, say, 'XX. think those to of items, including there, provider out-of-period of million on

Scott Fidel

into if sources sort could to helpful. you have activity of And a for especially sort the the and the prefab would as -- you just of follow-up time putting tariffs all of come And alternative And question, That's guess, then inflation been the dynamics. swinging in any then Trump's of, out. of able just been elements update on there I an U.S. think type around model could It playing great that place, that's be that that, curious prefabs us whether tariffs? you sort international Okay. from have sort by around? do give that development spent of those related lot any given to of analysis options you be about Obviously, affected just of may my construction are

doing any effect curious if sort what even there work side? Just on you've tariff been the of on or is

Douglas Coltharp

$X.X to continued per right around try new I'll absolutely. have construction One Yes, construction is million in to take order. -- bed. stabilize those costs

specific additions, be relief anything, we we're early hospitals, some right the on we that think For $XXX,XXX to bed cost project. And on now. closer shoots seeing not new in that inflationary of seeing lower, pressures bed it call any If may that, too the terms it's depends some maybe ball. of to for but but on overt green somewhat

Houston, pleased we brought we our second The the XX-bed on fully that's Mark with earlier very quarter, remain first hospital, prefabricated in that Texas. is our facility prefabrication effort. fourth in mentioned

day Georgia. prefabricated Athens, open hospitals fully any now to in right second getting Our ready

along the a of which be to of are strategy bathrooms will prefab part rooms continue attached groups corridor. our by Uber to are that construction of So from that with hospitals modules, components that headwalls to everywhere utilizing are

we're to from well. to the The to primary it's on very which right construction low a XX% us right The today insignificant. the getting regard of perspective of and There With on per for that enhancement as the full impose threat in terms you a U.S. of cost, concrete our overall is regard near source small but upon With to is our recycled use much a steel of exposure specialty did very out of it and Mexico terms some be that U.S. the if could of costs. market, essentially speed terms cost in not tariffs benefit design the China Canada supplies. coming and impact broader construction. the Mexico, now of in steel, about out term, comes steel conventional those our component potential is of prefab, a for is of We that's construction we're analysis predominantly of bed around we top prefabrication tariffs seeing in overall

know say it be. difficult comprehensive would how don't look like might because we that to It's what right now

we lot been to that something not invoked, mind exempted tariffs. Having in that believe You monitor. tariffs imposition certainly in should of risk said tariffs. typically, It's there's do to prior also when that, of a those bear near-term supplies been any the from periods medical continue we'll have have

Operator

comes Pito Deutsche question at next from Our Bank. Chickering

Pito Chickering

for looking year we're provider implementation, headwinds the the to Oracle I at that want taxes, losses modeling be with and sure XXXX, the 'XX then startup fees, right. the looking guess with medical I and just and Fusion and then

infusion at the quarter? a any and year year? the is than on leap the first on the back half And XXXX quarterly EBITDA we should if seasonality, about versus year of in so, year the Looking normal think of first half different how EBITDA thoughts and the Oracle

Douglas Coltharp

Yes.

group One from couple Oracle, assumptions to second of things. terms of our implementation those joint Fusion of Augusta expenses you specifically and medical half the the regarding NCI contribution XXXX. in a venture, expense, Piedmont the and had So impact is in

really EBITDA pronounced comparison going XXXX. in be impact it's a to more from on a So perspective

QX preopening is the of heavily half thing ramp-up the The one of and that second reversed then keep back other skewed on more seen that we've what the half to of mind timing QX there's spike with terms in years of the determine had 'XX. costs, see because to second review I which similar the of way by there's in be that subsequently you And of review of timing the to ask remember regard of year. expense bad because that it's Palmetto pattern GPE that is for but historical last just year is the in and the to the based over a couple just going debt Palmetto, year, spike to alluded us and a in you real the the then in in to towards this from And the that I'd openings we of thing no itself in chance 'XX pace that.

considerations are I think can of, Pito. primary those think I the pacing

Pito Chickering

free minimum returned follow-up a calculate the for would million cash ratio seems much it minimum investors EBITDA flow be all deploy where cash guidance your share you $XXX generation, share via of Is and leverage. just ratio and how leverage helpful on Whit's be cash repo. at then there could growth at just to excess And question looking a a like the Just flow leverage into looking repo? to

Douglas Coltharp

say lot but like inefficiency Yes, it's would cost question. feeling fair Xx, capital. certainly, hard our I a there's if draw see drop wouldn't the a that, below I a we there, in line leverage of of it's

Pito Chickering

All right.

is going a Xx where we'll minimum all So model that repo forward? a going into

Douglas Coltharp

my Minimal not is your term, term.

I be As of the an line hard at weighted below Xx, looking we our but unnecessary make I would inefficiency view I hard average observation if what going would capital. there, a then as we're said, fall putting in I'm cost to not

Operator

Our next at comes question from Ben Capital Hendrix Markets. RBC

Benjamin Hendrix

your between Medicare negotiations? guidance ongoing consistent year. the for among quick MA rates, payers, eligibility the seemed care contracting anything changes with historically I margin changing update guys if separately, just how but with rate are in and some know pressure assessing payers And And in patient favorable health any care? we spread maintained get managed last a on could and have wondering Just assumptions environment, you

Douglas Coltharp

new. nothing there is answer Yes. say the I would

passing of managed update of what which to Medicare call to in pretty seeing the history, continue in Advantage with do, the that X%. high negotiations. Medicare to are some just some conditions relates well to we're it, on the somewhere with I we consistent us. of think, So including care, we've regard mid- kind and any The they our that rates is when plans terms they to recent pressure We're contract are seen those the seeing against X% and based on that weren't of Advantage that X% facing increases, not seeing were those fact

that to they're it seeing as pressure. not more appear only that reverse to So this they they well when recognize seems try trend appropriate --

MA they to provide in also our marginal, to just value. episodic continue great more contracting, we converting an progress. diem good team managed Medicare our Advantage it's of basis. improvement got really given and good think our on make understand progress, that care oversees albeit more overall substantial continue per that make We've contracts and a to they finally, we And I our the base

Benjamin Hendrix

to in Appreciate prepared that. And something mentioned follow-up you just your quick as a remarks.

proposition ramping discharge up And involved that what value it think you to new de I I SNF was long how and is muscle take that SNF entering you're some wondering, the planners as in of process? noted And IRF memory does planners care? novos, around among versus care. break IRF education versus the among misconceptions markets, still discharge

Mark Tarr

a Ben, it's great Yes, question.

our our length to there. refined market think -- That at enter the a care, about happens the [indiscernible] differences of an our get is differences medical can on staff, whoever but we've market, I SNF, especially and have and the between priority a we at that's the out patients, yes, the administrative we'll typically IRF Whoever what of So really in facilities discharge. we our of on. a and intensity But market, have have has We'll that no that. to goes just stay, listen what other nurse that a of in vary in new describe gotten we on director. marketplace from can the hospitals whenever will time we'll talking types

I the novos. of in has proven de ramp-up the think that

to the there going hired identified well go what marketplace. that region key priority But You've the several we or a last new seen staff as us years. bring you from existing that come home the office marketplace that educate into the as that's both in is staff newly may on with as are a the --

Douglas Coltharp

skilled They order able overcome have starts as can't a just What process care challenges. rehabilitation to our that, education to nursing be you Medicare are in an great early encounters acute to themselves to frequently to licensed as center. hospital months of of naming opening. the rehabilitation prohibition simple concept related a prior projected no facility it's X that being convention. we of because those as regulations hospital, convention. a But naming as success And as be call from use and unfortunately, the able within some things that IRFs demonstrated calling the to confusion is which And itself all there's a and like we've

Mark Tarr

if hospital, over tour education, they'll real a of a people we home. get the can hospital between big difference that to see and nursing a of Part

Operator

Jefferies. Brian Our next at question will come from Tanquilut

Brian Tanquilut

me. one question Doug, maybe just for

benefits the you how or I the ruling recognizing be on we going that to out, the about guys As ruling you'd thinking caring think how that should about came vital P&L be forward?

Douglas Coltharp

Yes.

with on So great first for ruling a that. really We're all, is us. the This of judge's outcome pleased just litigation. ongoing

out. playing further. to So able still And we're not really comment it's

what able and manner. are you you, it's give can't and a share do so it it ultimately going we as to more So But to with as with we like. timely does we specificity will proceeds, in look any

Operator

will from Jared William next Haase Blair. at Our question come

Jared Haase

today. I'll wanted career of under on made Would And just you the I of workforce. like I the thought is for that's to career one comments just the ladders progression what about mentioned say better progression you up turnover certifications to pursue of versus among was follow percent of clinicians interesting. anyway I if that's the some also. you curious additional stick workforce or advantage that taking to, turnover. that those quantify what terms supporting was unpack wondering I see I guess, there's in you that offer? opportunities those or then And you don't?

Mark Tarr

level terms our can an that the on have if for subsequent I you and to -- down for turnover, for therapist in then turnover don't taken turnover had number you that impact you the participation just of exact we was RNs know Jared, and if take for we our X.X%. XX.X% XXXX, RNs

of in itself them proven a on their to the they're staff to the addressing So but they're is particular way Encompass a of There's has opportunities levels, both clinicians are exposure to we to and whether ladders I downtrend number in lot a providing if playing rehabilitation through improve or of skills effort that at think, a This that put and pre-pandemic to And chance be of effective terms retain one opportunity strong not approach, to to ways. us, in a continue hospital, and in for retention certainly experiences and there's nurses, turnover for years the going that's therapist educational those thought interested really the clinical opportunities provide we to the working or be below the a in rate. members. appreciate different specifically improvement in those and retention, having over them. learn different

Douglas Coltharp

percentage materials both of to nurses have and within given on as you've turnover caught at know to because also in therapists in off groups. now here, know preparatory I'm programs. those participate be I change sitting disposal, we that our guard that those need question HR add future I the Jared, our periods. these simply our tracking they're won't but to the in don't that our something I tracks that clinicians, us we team

So thank you for asking it.

to note XX% going and FTEs about FTEs in hospital hospital that XX% about our overall our consider of I therapy comprised a be are just staffing, when do FTEs. are about -- that nursing you want to a reminder, of

So specificity be answer that again, prepared with in better to we great will question, and periods. future

Mark Tarr

for Jared. us metric, giving another Thanks

Jared Haase

work course. you. on to appreciate you I all Of give the context here happy thank Yes, more --

welcome. You're

Operator

conclude additional Mr. it back session. closing today's And Q&A or turn pleased this you, Mark to for remarks you does sir, Miller, have. to I'm any

Mark Miller

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

Operator

conclude all your do teleconference, gentlemen, participation. thank does Ladies and this for today's and we you

now disconnect your lines. may You

Encompass Health (EHC) 7 Feb 252024 Q4 Earnings call transcript