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EHC Encompass Health

Participants
Crissy Carlisle Chief Investor Relations Officer
Mark Tarr President and Chief Executive Officer
Doug Coltharp Executive Vice President and Chief Financial Officer
April Anthony Chief Executive Officer-Home Health and Hospice
Barb Jacobsmeyer Executive Vice President, President Inpatient Hospitals
Whit Mayo UBS
Joanna Gajuk Bank America
Matt Larew William Blair
Brian Tanquilut Jefferies
Matthew Gillmor Baird
A.J. Rice Credit Suisse
Ann Hynes Mizuho Securities
Pito Chickering Deutsche Bank
Frank Morgan RBC Capital
Sarah James Piper Sandler
Andrew Mok Barclays
Call transcript
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Operator

Operator Good morning, everyone, and welcome to Encompass Health Third Quarter 2020 Earnings Conference Call. At this time, I would like to inform all participants lines will be in a listen-only mode. After the speakers’ remarks, there will be question and answer period. [Operator Instructions] Today’s conference call is being recorded.

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

Crissy Carlisle

Officer Earnings Anthony, on Thank Patrick Rehabilitation Thank Tarr, Chief Encompass Corporate XXXX Financial you and operator President Darby, for With Chief you, and Health Officer; and & of Jacobsmeyer, Secretary; joining General Health good and Chief Officer; Encompass Third Counsel Doug are, Barb call Home Hospitals; today the morning, Executive Executive everyone. Call. April Mark me Coltharp, Quarter Inpatient President, Hospice.

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

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

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

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

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

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

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

Mark Tarr

Thank you, morning good Crissy, everyone. and to

working and and XXXX, add We have economic managed through list. cuts a freezes changes, pandemic record have regulatory Since to now, Medicare we of payment we and sequestration that through proven successfully situations. track global can an difficult recession, a

the Our extraordinary job COVID-XX doing through managing an teams various in are challenges.

our confident remains what remain our While It's and continue to in to to we our grow. both do. due we operating difficult ability in segments the environment challenges. and we the prospects of business adapt, these overcome We of pandemic, persevere, we

Let's Rehabilitation talk first about Inpatient segment. our

the in Many cases. the joint to to of elective have of primarily third orthopedic a and decreased patients lower patients decline. lag decrease entire ones patients, quarter, XXXX, that rehabilitative Rehabilitation to recovered for X.X% in elderly quarter same-store Inpatient than medical XXXX, number XX.X% volumes down to X,XXX the our The continue to accounting of prior particularly X,XXX from same significantly limited third quarter related did remaining returning the ago, inpatient volumes to discharges are were discharges improved this replacement extremity third for quarter in experienced full Our this and in patients of need while second QX To of of is we post surgery. period compared conditions. the we treated XXXX. XXXX. the lower substantially compared replacement In year the total orthopedic extremity fewer to the These XXXX markets perspective, we same-store the complex third volumes quarter tend with surgeries, by with year services put

our patient shifts quarter. We Florida, Factors of patients in positively post-acute temporary of also restrictions in to per a have where saw year-over-year the important role sequestration factors responses as higher limited such to from decrease. market. revenue we by We can We geographic third in and specifically, XXXX. by quarter It's pandemic is this are COVID-related increase quarter, a and these and temporary pandemic. we the Net hospital when hospitals. to elective mix of structural the of positive trend significant discharges a being in to the acuity patients expect decline continue indicative impacted that discharge experienced acute Florida quarter surgeries the of second COVID twelve not in resulting to this fourth markets, the in on acuity the continued inpatient rehabilitation experience played and XX.X% transferred volume an are challenges in a the continue the be in remember and certain XXXX patient third from in setting suspension

As earnings release, slides you expenses accompanied pandemic. COVID-XX of can increase that see on our the primarily our did to Page percent XX of the due revenues, as supplemental a

cost, job done significant have a our Our hospital tremendous labor. managing teams most

measure knowhow of which X.XX metric in to to compared XXXX, with third our real-time is combined our believe we third was are clinical our quarter pandemic. of protective per our staffing can operator equipment, at us even to our in any bed, best-in-class hospitals a that and utilization X.XX, employees use and how obtain, evidence levels supplies associated adequate occupied This data, what XXXX. levels technology efficiently as elevated adjust efficiency makes We to aggressive the the a For the effectively our also we the environment. actions know and taken to We've of personal with volumes. quarter our manage

whom over help, we limitations back rehabilitation rehabilitation. elective in our cognitive to their ventilators on COVID COVID-XX, extended to but weak have growth, recovering intense communities space to when, of believe not volumes in confident These hospitals treated They patients, post-acute of the expect to acute recovering for quarter able multidisciplinary It's facilities spent to long-term these care We April, return. hospitals. their XXXX, the outlook rehabilitation the return stays regain some returning time patients challenges been matter we hospitals. impact the the endured both faced abilities. in a extremely if. certain In following remain are volume have procedures with X,XXX independence. on to XX% and of fourth have inpatient continue markets we will While Since in and significant patients, strength many require our have

so, national throughout continued our expand So we've this that to much pandemic. footprint

in opened mid-November. three have in expect We another to Toledo, we far XXXX new hospitals in one and thus open Ohio,

year-end, expect beds approximately In with we XXX addition, already existing to added hospitals to XX of have by added. those

to new not For hospitals that. We've eight eight scheduled and XXXX, we've we're build announced to also in done making hospitals. plans new open XXXX announced

All of this fully demonstrates our our commitment in and future. confidence

our Home to now Hospice and move segment. Health Let's

the stronger when XX.X% substantially Health admissions third decrease year-over-year approximately of XX%. of from admissions for admissions. of quarter procedures to than in And this in we Home significantly were growth entered month to down X.X% quarter we we the they same-store September. volumes year-over-year same-store with related down the Our while elective of of XXXX, XXXX, saw of quarter quarter achieved improved recovered compared a XXXX success admissions out the second X.X%, third the our it with We came even

approximately admissions access negatively living down or assisted facility facilities. the continued our of these independent onto volume restrictions Additionally, who And admitted service XX% has impacted patients reside in year-over-year.

were We also COVID-related in experience markets, XXXX XX% third where in due our quarter elective procedures. continue limited admissions of to geographic certain in to levels at Texas, challenges XXXX, the mostly of specifically

elective some they nicely quarter dipped in above XXXX levels September sources, in in and with of per Health associated staff level. of the of and with strong our COVID-related referral of face historic August, cost admissions. in our of limited Florida markets, Even controls of in a spite almost rebounded remains PPE X%, XXX% the in to Cost admissions with continue our XX% access down While perform visit restricted we in QX quarantine. Home to high expenses historic procedures to finish at in to many

our so to us therapy allowed decline compensation out therapists productivity productivity adjust compensation in and for keep furloughs, from pay shift for elective our We compensation been save therapist’s in XX%, this, shut period and physical therapists, To not facilities. made do structure flex it staffing lowering in allows therapy additional a by their did us May, This pay their in in to our any allows broad to living structure change most expectations each being result by due assisted manner and the lowering exceeding and volume this procedures has decline as plan Our in a to turn, in each better the significant for levels. terminations. discipline we layoffs that in or to forward XX%. earn going cost by base

& efforts Medicare in value-based interest Encompass and has partnering we Home the with some pandemic arrangements. Although strong among payment difficult necessarily segment there virtual and a in seeking believe more ACOs Hospice is made nature, Health Advantage collaboration Health payers

around of anticipated health home this by list our revealed the remained two than the quarter we year-over-year. to more of beneficiaries more of continued the enter grew coming the industry XXX XXXX payers program, arrangements of savings QX in in addition Similarly, of efforts A data ACO recent ongoing shared contracts We yielded with and with ACOs rest partnered in flat claims the the adding in whereas contracts have versus quarters. XXXX over analysis nine Advantage value-based ACOs Medicare Medicare additional XXXX, XXXX. our payment with to new discussions result to XX% third that country, share new

care rates for payment and at activity focus is clinicians for a are readmission the effective to readmissions segments. regional us. continuing the more is for of patients, of both M&A America's acquisition level, for we the patients scale pipeline care risk-based in ways remains to models combination and clear seniors. several choice and of engaged opportunities industry-leading the prior provide success support hospice. organizations the arrangements healthy for density the the business home and With our Despite particularly in our Health risk-based after Reducing slow Encompass home in find to are payment in sector, encouraged at pandemic, we hospital that a And months our new unusually to resulting days in commitment rebuilding,

we act to in home markets, you a care XXX,XXX This from our patients a of transfers, probability electronic records patients. This potential overall Readmissions and hospitals. patient's prevent determinants our Prevention estimate readmission clinical many need inpatient using social of and is score, working In who with a preventing being and emergency patients ensure patients occurring. inpatient have information predict acute to after to for the more ReACT medical health This segments and mitigate health a rolled overlap for our from our out discharge. We act to our we our from are established home timely than are data rehabilitation help month, uses to know, in rehabilitation on our way through on model manner care together have both is a combined it. another and and health teams decline been while smooth high-risk home risk which focuses both and patient's prevent As judgment in this of hospitalization good a agencies are and of health to for payers. to our hospitalization or estimate from hospitals clinical the hospitalized transition hopefully program, use protocols hospital status

While for we managing information in Therefore, experience had operations we our more XXXX. during our pandemic. exist, guidance visibility the improved have and many to fourth continue of quarter and uncertainties issued has the

well page see that this You can as the release, our as supplemental accompanies release. earnings the guidance of XX in slides on

year a a at position full XXXX outlook guidance our and the We expect longer end term full XXXX January. report be in year when to provide we QX earnings and of to

to is While many our still company long-term well-positioned growth. drive uncertainties exist,

through challenges the proven record of adapting at this to we comments, pandemic. and beginning mentioned including I working of a have my As track

changing. aren't fundamentals business Our

hospice the increase. fact, bright. the hospitals and stronger of the level high-quality high care care And of our believe the has In provide service demand an ages, awareness our inpatient the health we as is our will pandemic lines. of and value I for future in our created population rehabilitation even home

in I integrated end, all our Encompass has of to been I leader Health, make employees who to continue XXXX Before year. unprecedented a want thank healthcare. an

them other enough to compared care it grateful nation has With I thank our settings. that, I'll striving have patients turn a to over their of been are yet lot our can't and too. Our through and employees for care Doug. continued those for our to better I patients, outcomes, know efforts for

Doug Coltharp

good Thanks, everyone. morning, Mark, and

just are with response to evidenced our very reiterate what has said, continued pandemic, we're team’s is of and our very pleased This me results. the Mark proud Let financial we of demonstrated. improvement in resiliency the ongoing organization the our

revenues consolidated year Even essentially net our to $X.XXX billion challenging consolidated for prior For to million. in QX, QX these period flow. X.X% increased adjusted QX our $XXX approximately times, over cash and EBITDA the flat to generate strong at was business continues our XXXX

Our QX our XX.X% flow increased year-to-date cash cash million to free QX flow $XXX bringing approximately free million. adjusted of $XXX.X adjusted XXXX, over

$XX million the approximately growth in in three and supports strategies quarters of Our strong million first have shareholder approximately in growth we $XXX complementary flow and investing consistent and XXXX, distributions. our investments distributions. cash of provided opportunities Through shareholder making made

expense manage early lower structure attractive in X.XX% adequate debt unsecured offering all any to of capitalize lines. balance in to reflected $XXX to ensure of with and our duration this notes to three of and markets, retire navigate used accessed our of the settled is and not transaction The from balance we maturing in senior resulting of our our in X.XXX% continue both QX opportunities we late debt our million capital. through on proceeds liquidity XXXX, raising approximately in the longer coupon on the in September, a proactively hand be million again due EO capital a $XXX business service to challenges notes with This We see together thus October flexibility growth XXXX. on senior cash interest will and our sheet. In

discharges important X.X been have upward quarter business an of growth of other. facility. offset decline the Texas, the facilities from nadir of pandemic billion reached in new certain to in the and X.X% The the some of Our times, same-store credit the total on partially our X.X% with Florida stems in trajectory in revenue net This on XX.X% was was pandemic have leverage XXXX. offset a we volumes by amounts by XXXX a in IRF reduction over closures attributable lesser and same-store unit segment, mid-April. suspension our at segments XXXX was spite markets. no units finished of and intermittent the a with outpatient drop the drawn our of decline inpatient to high. in Both our the with permanent QX outpatient discharges, in in QX end in revolving response of to revenues where in most has partially QX surges Much declined continued $X case and as store contributions. the of following extent accomplished COVID the been X.X% increased effects X.X% Beginning in our

census increased on As Page our can quarter. patient materials, seen the be throughout X of supplemental the

in discharges continue business We our MA QX. Advantage in XX.X% increasing see to growth Medicare with strong

higher stated, Medicare suspension increase together increase QX. per for of acuity increase sequestration X.X% offsets we The this benefit. acuity, patient an primarily acuity length partially revenue with stay, Mark As higher drove The the pricing which our our in in responsible continue in average were discharge. to average in experience

Our QX than $XXX.X patient X% for prior EBITDA less for X% over revenue year. declined IRF XXXX. per increased of segment million day QX from adjusted the QX

the points of Hospice period. of episode X.X%, X.X% the & Health The QX per QX expenses in based sequestration, increase revenue in X.X% to over the and revenue SWB the the Home revenue Home operating is admissions, supplies suspension These of have XX revenue. as QX X.X% episode very admissions decreased decline on the the and the declined notwithstanding the per percent XX quarter. benefited of productivity quarter. in by primarily prior to implementation decrease the in percent basis effects in in the prior in efforts a late a PDGM, segment and labor Medicare as a pandemic. from year increase as attributable manage well episode. in to effects caused drop the increase revenue which from continue of been Home per hospitals year Our effectively Health revenue as points to of during pandemic the exacerbated basis revenue period Health

revenue to X.X%. QX but in Hospice resulting in QX due admissions up mix. declined a patient lower same-store Hospice increased length XX.X%, change Our X.X% of stay were a days our patients average from

lower point percentage due increased, EBITDA QX During cost our and access declined This QX sources referrals structure year declined labor average of QX, Business million, stay this in basis length while have increase QX the have the from of $XX XXX management percentage pandemic. to services referral period. combined QX. a Health, which effective implemented from led in for Within This an cost typically stay in referrals XXXX owing senior higher $XX of of in institutional the XXXX focus a productivity, the cost in facility settings, of drove year compensation earlier senior changes visit from X% length to episode XX.X% to typically QX reduction to a per living per segment-adjusted facilities, from in which XXXX. of prior living $XX.X over XX.X% of restrictions on many with is decreased. continued our Home

the As includes supplemental we the an XX achieved million million on $XXX.X in guidance Mark is range key $XXX Pages issued guidance considerations QX stated, to EBITDA $XXX of found for on adjusted can The compared of to have million, and The XX based and XXXX. materials. which QX. guidance QX as be

And not do questions. expect the on million XX, operator, last to items benefited QX repeat year EBITDA adjusted noted in open for Page year. this we'll we of now As line $X.X from

Operator

of UBS. from your question the And comes Mayo Whit Instructions] first line [Operator of

Mark Tarr

Good morning, Whit.

Doug Coltharp

Whit. Hi,

Whit Mayo

from to that to of more for morning. we be trending XX% wanted as or might year-over-year forecasting Health assisted high if But or that senior for I just the that color the more outside with makes the I make start am maybe that all And the could forward? difficult. hear very does the negative April, COVID decline referral isolate, volumes. I outlook adjust this mean, Florida you Hey. curious for Texas favorably? and markets the just what If volumes be? we declines, in mean you get the would me Home going on experiences I optimistic I share just strikes living, volumes Thanks any

April Anthony

Whit. Yes,

that, community AL/IL been country. across I pretty the and think has impact So, significant consistent pretty the

really certain openly, haven't country. had been pretty in. much We across consistently have regions welcome come in that just the a It's lockdown

in the as things in to of little are, we spike, kind of a markets now, late sort greater feels in. into Northeast, your As move a we seeing, bit some in begin your in they're and to period July workers certain up hospice, access. won't therapist, start in, ease of or the let little we'll your chaplains but let beginning we'll nurse saying, your timeframe, again, But see get particularly we let a like it August, social of bit again, lockdowns nurse to we not definitely and kind but

down from lot the the pick September, into is a we of pretty and got to to of starting just think are in bit been even mitigating of revenue. electives We've some up first these be positive us that centers month-by-month, a increased for and July, cause look some a that we electives, that more it's What by movement August, consistently area flow seeing And we are bit. surgery looks three decline much pre-COVID is compare continue from think only disruption that new October market is, like using was opportunities bag a sources so, as in market-by-market. weeks out the some from pretty think, well, timeframe. of our probably And to to mix I where I in of to to going really a where XX% alternative though done, we've it February levels, create going is January, down it for challenging a electives one about little

continue we are consistently of but to about are bit trajectory downstream. AL/IL, other seem be encouraged still seeing we little So, than the the to a that everywhere which on roller-coaster, a pretty should

Whit Mayo

declining So there just to assisted the be to referrals, is would or in the number about exclude a clear, if think be business how terms could of now? increasing living right we

April Anthony

– and can top look off that the have of back but don't try you that detailed don't we my right I I information at it something. head, with that count to certainly to way, get

Whit Mayo

both helpful. what just be for of point, Okay. to And to ADC monthly just be at better September get any Doug, how appears for kind exit there look one sense Is disclosures number of October a last spot a businesses, versus at this to one, just the we may trending are rate?

Doug Coltharp

good. Trend line is

Whit Mayo

Okay. I'll that. take Thanks, guys.

Mark Tarr

Sure. Whit. Thanks,

Operator

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

Mark Tarr

Morning, Kevin.

Doug Coltharp

Good morning, Kevin.

Joanna Gajuk

Joanna morning. filling for Good today. Actually, Kevin is this Gajuk in

So the question appreciate here. taking

after Can thank very pricing worsened you for it in X% the about So, year-over-year. trends in volume was - like about being Health? of a Health. So, I we X% guess talk a explanation trends little the down it Home QX down in bit, Home little bit

just you parse can mix will PDGM, any be But there? items any provide in any is great. color probably that kind out? to can there on anything So, of you hard Is or change which around flag

April Anthony

by of procedures PDGM. in to revenue to the tend under the joint episode pretty sources elective higher even affected is the one be those significantly replacements be obviously, per revenue - Well, particular electives Sure. tend of one

in that than PDGM, it category is Although lower PTS under XXXX. back was

in got and they XXXX worth factors. proportion XXXX, a than XXXX PDGM would made others. compare this electives, those, higher combination less to lower So, One, look in see a year; at those is when than procedures we had in still that have kind we decline but the two of secondarily, we've you been prior of to have also, of

revenue rate in proportional of sources. a kind And implications make that on and sense? Does both so, that PDGM the we see the the combination side of relatively procedures, are high decrease elective it's which

Joanna Gajuk

impressive commentary on on for the inpatient – if – the And in the other on new Yes, plans plans segment IRF can the obviously, of, other just the follow-up development terms I that very segment. rehab, side on makes sense.

fair there you that of terms to COVID completing say terms any actually these in spiking that markets time? on in some these in seeing projects is of a cases Thank much these So, of slowdown are of – you. of not

Mark Tarr

not. fundamentals the IRF the COVID basic just that business side to near-term We strong, of a see will and think on We challenge So, get we the us continue both through. be as near-term do we for long-term.

As anything, caliber a COVID given has us can the of of if opportunity an matter provide fact, to in high-level our marketplaces care the to we show acuity of patients.

COVID any efforts. development So, don't see we impact our with on

Joanna Gajuk

you. Great. Thank

Operator

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

Mark Tarr

Hey, Matt.

Doug Coltharp

Good morning, Matt.

Matt Larew

I Doug, strong nice the side. IRF Hey, guidance detail for and Obviously, morning. October, a couple now pricing have on boost. about little bit very just calendar into did the the last get starts want for QX. that moving pricing the thanks IRF a good year quarters you in for on ask to been all the

growth maybe sequestration help the quantify were understand give just the a or IRF? what look us onto that quarter? you and can like pricing could what in extent So, benefit quarter acuity in us fourth might some for window Maybe

Doug Coltharp

Yes.

regard that to the to may is are acuity We've patient on comments. reviewed few So, are that that and see. his amount acuity got you out that it's related pricing, right. With this with in to acuities. the pretty X% the to COVID difficult going be COVID-related little driven is a the by That's straightforward, Mark sequestration separate regard that specifically things

because that that will the number same got dropped of is of patients you've lower and patients you've those we've coming the portion that a episode. patient those is, along but relatively mix revenue out COVID payments patients, and payment that the that there seeing Mark recovering in also first acuity from with about. are comes talked got stroke or co-morbidity The neurological But in boost the change extra an patients are with per the we're orthopedic those

impact the those. expect thing continue are there I you had that in We is of revenue together, to to then episode difficult the mix separate throw lift from is, for we if adoption of And quarter. the think about an to from GG were But the other combine per mix and trends those is XXX wanted patient those of the basis into – GG. likely of element Those still QX. Section out about responsible fourth it's in for points the this, COVID

Mark Tarr

color more little what Matt, to just back a talking Doug's about. bit

just ran index. of a case mix this X.XX X.XX index. think and year, mix from over X.XX, a ran and you years If QX, number at mix a index, in about case we right QX, for Starting a into we case the X.XX carried

seeing directly acute indicative we just into care out come of it's that of that So, the acuity are admissions that's care coming our come our Remember, of X% acute hospitals. hospitals. IRFs from

the sicker just So are are whether COVID patients just these and to they higher across acuity board. we're specific or not, seeing a

Matt Larew

maybe any XXXX, Any And you But this slower? it I from I away then give next speaking going changed, outlook point long-term sounds are year said the coming those the you next you'll be That's of Texas Yes. my might Florida. update terms about sort what on-ramp looking reason at to I you at qualitatively? think was call are half the long-term think about of locations like then, and facilities in mentioned think IRF And this about guidance to for. Thanks, early that take year. is on of board Mark. in least nothing and has that plans your

Doug Coltharp

Yes.

late largely that coming on we time. are it's think most of the two those new on regard of that hope next and ramp the come some pandemic or QX with in up opening expectation effects our the either the are QX I of side combination scheduled of the that our on to going board, in facilities board of by other that to the or think the are be year. I of are We've got

anticipating different in. long-term we really and anything has to businesses and growth ramp up with enthusiasm there. prospects the the not nothing the we're And commitment regard So, to our that regarding are absolutely, changed

down started novo continue And so, regard the segment. an in will de that have with development we of IRF the we on to pipeline increased the course

Matt Larew

Okay. Thank you.

Operator

line comes And of next of question your Brian Jefferies. the Tanquilut from

Mark Tarr

Brian. morning, Good

Doug Coltharp

Brian. Hey,

Brian Tanquilut

Good Hey. morning, guys.

Just grow both question, for QX about be you a next that guidance right, that we as the a you guidance drivers what guys, follow-up I the And thinking am are should as algorithm, is about using growth year, on XXXX? kind to of I like Matt's the as think if of it QX top be growth assume for would that? I baseline, to if right of guess without mean, going of into I – able on

Doug Coltharp

continuing look then particularly those you the would pandemic place at growth some and a our if QX way XXXX provides capacity in a made in system. and vehicles bed XXXX, course in its mean I have hit put and going expect of much the for certainly of XXX of for COVID additions of some because, are are another we recovery, at then, markets works you level these in those XXXX growth. that the board in We've its bed coming effects harder we on additions XXXX. through And same-store XXXX the as that room in organic over pretty lingering significant to aside think again, it's probably QX. anticipation I through

back half we good the prospects there in particularly growth, XXXX. think So, for are of

Brian Tanquilut

Got exit X% know thinking to year, for then, thinking when we’re mitigation we calls where to the started about Because question think about zero we guidance I I I of it. PDGM to gradual your the and you for for efforts, XXXX. get right? headwind mid-year are how X% have PDGM a from mitigation a I And to guess QX the April,

$XX of to changed? that structure, know and visit? sustainability the thinking cost comp is just mean, that's thinking anything per the there right is that about going also I Or curious your how changed forward? you're I you that So, about be number

April Anthony

Yes.

think it the So, I as to revenue the I mitigation that volume-based really up pretty spite able X% to the it but the to am mitigation, to been whether the rate-based were able or of down X%, in in do do quarter. we what be challenges earnings we've see relates to proud speaks PDGM of

PDGM from had that exponentially perspective to has the difficult in proven we of some do obviously, a environment. pandemic Now, to things be planned

assumed related actually try the were way behavior that on during to been some has pandemic. us the change that For other as going we realize lupus to example, to it of going

coming has So, significant have in discipline, in particularly through adjustment a you one have were to a to do within to would know, cost in we January as environment. COVID strategies that of But those gotten the we I have as comp said that think that able be improved of things that see things other and going in been number those the difficult go place per as are maintain visit. we do been to continue been plan. we there savings our that's resulted forward comp therapy we've

the going However, savings we think are some to as it I to see relates nursing of that discipline. mitigation

staffing As particularly you've likely heard, across nursing challenged. is the country

We go are rates seeing compensation up.

the on savings And picked we therapy some in so, see increases the disciplines may we'll we the equation. mitigate would the some visit in up of of per cost expect that side nursing that

So, cost as a year. move little climb probably of and XXXX into we the throughout bit

Brian Tanquilut

it. right. you. Thank All Got

Operator

the Matthew comes Gillmor line Baird. of And next of your question from

Mark Tarr

Matt. morning, Good

Doug Coltharp

Matt. Hey,

Mark Tarr

Hello, Matt.

Operator

open is line if your phone your is Matt, mute. on

Matthew Gillmor

Hey. morning, Good I was sorry. I am muted. everyone.

Doug Coltharp

Very good morning.

Matthew Gillmor

I hoping are maybe for some standpoint on us Mark wide ask you It's range about relatively the is can give Doug assuming what all, the guide. guidance. a understandable, sense to fourth which was EBITDA given a pandemic. within I certainly volume the quarter either from you for hoping or was

how So, it. sort of we are could just you approaching understand

Doug Coltharp

broader have COVID. that the we volumes difficult surging the was this That's any to impact related reason that that in is environment kind is on is, this of predict most case experiences of is the thing wildcard range to the and a

see our of range type to that that segments both recovery, assumes of pullback. assumes business range of volume some of the we've we continue QX the top-end QX bottom-end is gradual and the there the the through that So, experienced and

Matthew Gillmor

Okay.

Mark Tarr

momentum came we made has out as very and that over into went QX progress said, we and with But the October. of than we we stronger carried in are certainly into September pleased

but mean, QX – momentum we the the wildcard around QX. have we over So, COVID, into is Doug with surge the we pleased like are assumptions that made certainly I carried and said, the or through

Doug Coltharp

variability for Matt, that EBITDA self-insurance into other accruals. The relates the QX, thing the injects to range some

I in to families had claims system reasons. lower different up we workers' of the to quarter, is we open is, claims but that QX COVID beneficiaries guidance who there had the were we in some expected up larger and year who the that did or back in considerations, activity medical substantially. activity claims group lift recall of indicated We related positive as start from we including XXXX. to accrual demand, began we comp. out elective one And have plan difficult see we back, were that, go One QX And as some to under medical it both more who employees to in we both adjustments people medical if number programs, not and and group their see would workers' we And So, had predict acquired $X seeing see come million comp maintenance of also those for our pretty and this a services on second knew we was bit in little a expected in acquired our fully facilities. nice a of and the surgeries. pick under employees did deferred

is claims in know though work-related. what short-term was they tend nature. claims But they payout is be those that that So, number and those higher be lower, even there cases severe to substantially the a to not we on because is tend of

the we our than move So, against to and QX sure accrual we claims to bit QX. creates the think And what in a in little to thinking variability we a embedded was are activities favorable XXXX adjustments into EBITDA. we those that normally regard broader with more with for range that that as have about had regard not

Matthew Gillmor

one Okay. the in the Advantage follow-up mix And on Medicare then, IRF segment.

I the preauthorization waiving that think said, these a requirements. were some and maybe to trend think plans where COVID. said you prior are then, I certainly, big acceleration up And from you past, was of in that MA XX% volumes that's

to get trend, hoping if just can? So, some insight into the that of sustainability you

Doug Coltharp

Yes.

we in So, was volume MA remember, XX% the and were driving QX. what higher up

in down conversion bit It rate. on increase came remains that XX%, higher and admits in an a to a in increase an referrals but very high QX. So based both was little

and on our admits reinstated expectation in QX. and last largely with the conversion us going preauthorization to in because been So, increase are QX, most our up up essentially place done year markets they've into rate. was place referrals for that XX% QX a for without XXX all QX it's That were stay that are based in XX% the basis over requirements point right the now, were preauthorization waivers during

expect to throughout We monthly what on the we these, based trend regard saw with QX.

the if come growth but XX% I in to payer We And in estimate volume expect which closer expect rate to you it's remain QX, XX% to an to to see probably means were MA give is would QX, going range. high, to just to the mix down. a right growth normalization MA in our I discharge see now, going

into the to that slightly in sustainable level would deem So, growing we a elevated still but range, least clip XXXX, in that the XXXX. good at something from, be maybe we at XXXX, probably and averaged

Matthew Gillmor

Okay. Thanks a lot.

Operator

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

Mark Tarr

morning, Good AJ.

Doug Coltharp

Good morning, AJ.

A.J. Rice

de to slide missed is think and all, I have XX think think of still that's but acquisitions new But M&A $XXX guys? just any because $XX deck have the in talks the in there novos. there, that you in I hasn't are I been in XXXX you million it. I just First million I so and – – And I've curious, a maybe far. and about – that your How you, Hey. am

the And So, You million you the them in fourth the be quarter does has there assume well? I something that as update? de one coming? novos mean Or just the slowed million coming to year-to-date. $XX any would quarter process And there down? to at you is point, bolus of on a had it de see in, COVID in on $XXX novos, going is think fourth million $XXX is that

Doug Coltharp

Yes.

are what busy of So, are on this pacing little I'll first, has part $XXX year. which into the But range that related be expect been is there and right million Mark the de would Home start to in deal in in oriented this reflects is a numerous activity with number be bit are QX million going still seen second means that fourth a Health. But a in more million Then on get $XXX on done perhaps It's pipeline. in see that fall impact we his to $XX the or in of than we heavily busy able optimism we going pickup doing there we the Health, the pretty mentioned based the to still quarter. comments, we Home to an quarter are COVID XXXX, two degree that acquisition for novo $XXX to on out now. pretty toward as is projects. have to some There it fourth million we Hospice that's to

A.J. Rice

know, looking that been there come out, have or in Okay. some at original was That's there follow-up interested potentially maybe and that Congress you improved know don't whether the adjustments have the of think, and have season, I'd behavioral any your as in be, maybe are about come front? PDGM behind this proposals seeing good. been question legislators developments I would individual we on And legislation some have from be rolling that? And to rather. election regulations momentum my favorable discussions, some out studies see prospects the that you we'll Do back

April Anthony

are What that I conversations I and rate. XXXX conversations they say, we're do expect some think good affect having is don't I the Washington. data-driven would it in that very will

to days. as proposal XX rate soon next certainly as within the that expect We but XX out Friday, to perhaps come

flawed adjusted the don't I that that. for rate. in think very going But good rate have assumptions position see so, of year's change XXXX for think this being a to be I do we And we're behavior the coming recognition are to

A.J. Rice

a Thanks lot. Alright. Okay.

April Anthony

very to others COVID is fact And were support not and founded you them, of the try strongly data mark. and data and in well way provided assumptions accurate, DaVanzo the by be were would the proven even off not the Dobson have their suggest they if adjust I think the that

A.J. Rice

Interesting.

lot. Okay. a Thanks

Operator

from Ann Mizuho line Securities. from question next your Hynes And comes of the

Mark Tarr

morning, Good Ann.

Doug Coltharp

Ann. Hey,

Ann Hynes

good morning. Hi,

can drag two first over eight new you opening XXXX, after with And us an the and we contribution years or the with should about de novos, do we perspective, class hospitals EBITDA expansion open to as the a negative has how question in being positive? that the you from contribution novo? view remind EBIT first my the view just should margin EBITDA de So,

Doug Coltharp

Ann. Yes.

So, class to going they in I EBITDA a are XXXX. would that negative expect be an

four-wall depending a long activity circumstances four-wall period the historical which shows on And of EBITDA depending if EBITDA. the the facility. rate, hospitals about run don't typically market, And in hospital we You our to book, XX at the we’d about typically reference you contribution that advance didn't with on months of the happens nine refer positive kind is begin which then terms for to expect class. of to that we we've market, other regard different the earliest know any achieving million odd expenses hit the with opening usually, about associated related historically date, And slide that our this $X it'd that of XX time, included within we've the investor published And from six be months. information pre-opening to per up a regard be with ramp months. positive that to to in

So, it's that in range. somewhere

Ann Hynes

on some other All guidance. address can address you in key maybe then, right. PPE that And ongoing call? But my question. particular, Obviously, not tailwinds the second headwinds haven't costs? you discussed Thanks. you are yet Thanks. we giving And and XXXX can

Doug Coltharp

to anxious is everybody thinking know I start Yes. XXXX. about

done We into year. ready who nobody done call there and is get is with next are – to on be this - XXXX

the not call. we've there color could other budgeting to companies So, find the process, more in during of of our on ourselves time. even we of operating two of a late lot and throw of think And the one in now. that on I by whole right a good handle there new terms the in, maybe With we formation about the giving as like essentially want the based be regard into we're both that got XXXX assumptions. lot normally, position we business felt a certainly this year, out deferred like, are very timeline caveat by you we where to budgets a which Probably, the the regarding of share done the to new we capital on a view. budget as pretty because work expenses, course and pandemic, is this budgeting a the we've find budgets months, expenses just only we base, assumptions, set we depending was that of to as had why entered set would

first to labor half. we would be and both pandemic to we half, efficiencies we supplies move regard think if half kind in So, about expect right pandemic the what with into that with experiencing continuing now in beyond of we’ll And the proxy cost. the good then, of we to the for some runrate is see as first are second to regard able the probably XXXX, the a realize pretty

Mark Tarr

And finding out even book, that to PPE to to help expand needs. earnings on cost then I'd the put a and in we ago going and eight team we and – to just are XX six we say secondary than has and check out a try in slide slide and much better suppliers our position demand or done now were meet PPE months great our job we relative our

Ann Hynes

XXXX of into just I a see and did that this transitory slide. Or cost in do you more was headwind nature? going extra I be if, wondering is all do would No, Yes. think it think you XXXX? for even

Doug Coltharp

bulk none prudent. are us there that pre-COVID stays we us with probably back this be organization, though, healthcare heightened the in some to world basis. going a And I go-forward That absolutely believe more as guess that, think to use is going think on is of it normal. previously, my of we've in the I is of PPE transitorial, said that's

Ann Hynes

All right. Thanks.

Operator

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

Pito Chickering

point cost talking me putting nursing help months? per Or in at are per us grow it relates going visit you the as that questions or $XX the for just should of forward. April. visit moving conceptualize A quick what over XX we Good the couple you Hey. for next are There some on Conceptually, morning, about view disciplines as Thanks to works? parts it X% here. and X% how a can about starting guys.

April Anthony

Yes.

As on saying for I wrapped are our Doug some process like side, think certain mentioned, it broadly are that going year seeing we and of significant staffing are can't out. that markets, challenges feel is our that. some really to everywhere next and they yet. in seeing say are we we there certainly drive planning that But budgeting costs the but up and I

will So, some this XXXX. goes it's a may bit playing I the assume reasonable return away previously quicker, course it retired, that little to of be that see over pandemic think up nurses have If of we a to bit. the think But a increase market bit to probably the of in like and course of a it's a little things XXXX. ease playing little of the nursing assume I sort steady just reasonable throughout could discipline of up

Pito Chickering

XX in Great. were quarter per have third should seen some I How MetaLogics would months that we sort then, first of the reductions sort visits. Okay. And so? – episode that visits the declining would thinking or have episode assumed about quarter. rollout, of per the visits these the be unchanged we over next versus in relatively with

April Anthony

Yes.

bit we delayed prior mentioned As the pandemic. in little a result of a deployment got the our of as tools calls, MetaLogics

a and deployment takes until people deployment just approach. hands didn't we versus get it change June-ish think then, fully while was practice a on a deployed I in, face-to-face when little virtual get And timeframe. especially your training it to

began we and fully really improvement surface MetaLogics I with continue our our baked approach. of quarter-over-quarter the have will opportunity into to see thinking the that So, processes, that as think and to fully scratch not we get our we

Pito Chickering

assisted Great. right. at business? looking one that. came growth All business of of of then, Thanks type your quick I to your much. if And for what that apologize missed I is percent tied from living? percent last And What you. here XXXX, so

April Anthony

that in right to kind XX% the of reasons discussed the me, XX% earlier. is Don't off one category COVID in we have front XX% but communities around XX% the data in the in for of range the right been specific world AL/IL to that's this second, have past, and -XX%

Pito Chickering

there ballpark be just But this exposure? something assisted – X% it a is like Okay. is living, of this helpful. is your Is XX%, would like

April Anthony

in think to XX% we volume saying patient resides communities. I of were AL/IL total XX% our

Pito Chickering

so quarter. right. All Thanks Nice much Great. guys.

Operator

question Frank Morgan next comes your Capital. of And of the from RBC line

Doug Coltharp

Good morning, Frank.

Mark Tarr

Frank. morning, Good

Frank Morgan

I morning. tail-end to to, Good want Hey, activity. question likely M&A AJ guess, go the about I an of back

COVID provider I lot surge You expected I'm about, on side. A have Healthcare of Hospice Healthcare your question ending I your side. just the them would you are in more versus secondly, But, a about remarks, again. to now certainly the talking you you you other thoughts side more curious opening calls it would think starting the And a ended for why that seeing pickup point curious, Hospice Home mentioned on sort see side? have the And the strong they a on by then the maybe about on are but thought color appreciate see Home on indicated Census. September Whit's are to lot of of our a note, that

appreciate So Thanks. would just I well. any color there, that as

Doug Coltharp

Thanks.

Hospice events the the We and impacted are has, to turn significantly speaking, XXXX Home Health. generally been over then part, first it by less April. on than of I'll

that And volumes got time and subject then, a the things one, to two any you've point we to is, in system, point for was run engage a Hospice PDGM. buyer So a to Hospice like discovery would a price form and impacted were better easier rate in less payment seller. it's not And at by COVID.

in those the regarding getting to that's an meaningful PDGM reflected And don't base there to which and regard it providers I play very awareness with think a establish both a runrate limitations everything difficult, the I to that's rate is layer same should on very with new under exist into in you there multiples. makes growth new EBITDA come having opportunities an and baseline, had top say, Hospice. just favorable is that when transaction, on so, before for discussions in a of that a on PDGM, – pandemic And and have opportunity going businesses, to COVID potential

and Hospice are thinking one out, if So, those an perspective. about a been pretty of time now, good owner it's do have to businesses so you right from transitioning of a

Mark Tarr

both COVID. seeing Frank, I to Barb relative on are want to just in what ask and the Jacobsmeyer April they marketplace current

April Anthony

would and think say really to Yes. year Well, the also Health we acquisitions. would and lot the loans, thought on that disruption advance create Fund, And opportunity and this spite not payments those the side, with Home I of the providers smaller see significant PPP did wave a that of level feel in I that in came so, of PDGM expecting into a of CARES to Home midsized then a Health disruption for agencies disrupt COVID. Act we

– kick secondary of the Hospice can continue the So, mentioned disruption. then as really road not me, just here complexity, Home kind the think we that it's all is long-term, for to some combination of that the down support going excuse of Doug this and Health

have to some those in in, we payments see kick as particularly start begin repaid pretty that to XXXX, we'll shortly. some here to expect that of still back So advanced of being

Barb Jacobsmeyer

to is side continuing. is say certainly those are challenges But similar would we've experienced that in the year-over-year been really we've the COVID on September. certainly say would looking side, and I I mean, seen IRF for I throughout the census market-by-market And what has October what

market. So another up we one pops see then in and market decrease a it in

changed. So, not that has

us are affect We on regular basis. to pretty continuing a that see

Frank Morgan

And could maybe April same question. Thanks. address that

April Anthony

Yes.

of part that overlooked I the question. Sorry,

we I of are and sort by market. like yes, so, seeing think Barb, And definitely ebbs flows

being pretty I and admission states, volume of with states Texas second wave. been two Florida, about both comes and hard that our hit first total our from biggest those think really XX% challenge has wave both

three are weeks in of the even seeing from October. third states really we so, the both And encouraged into progress are we first that quarter,

so, And learned referral think have we some we sources. create new to

for that experiencing as to As are the well from we impacts. lack of are electives, as I we mentioned mitigate looking from losses the ways earlier, AL/IL

feel a sources old to we've doing of would start I when and sustainable trend we that those think of with and sources. do suggest encouraged are we that maintain electives while adding two back AL/IL, to by see so, states particularly return And what that new our and got some a norm in

probably So, growth create trajectory for see the noise to feel positive pretty we I to about COVID avenues hard are think six we on. But months. continue are the for working going situation, next are new from to the that and we

Mark Tarr

set comments, it teams But COVID I my and, our Frank, staff, to, as routine. opening have efforts just done tremendous the a A, it in treat they never to with marketing our in our And service clinical setting or willingness patients that them. the I characterize learning But outcomes apart lines. have said how marketplace patients, and our to really in need whether certainly into a learning I our how want then ourselves also that it's have and take setting, we mitigating would sales with COVID the job achieved to from competitors to think take we

talked and chance even So, to MA I think referral sources really about us plans endure to earlier. a it's more given we ourselves

value show Home proposition that Health MA given have a through us IRF the our this has chance think plans, to I and we hospitals.

have just job a overall, mitigating So, the tremendous they impacts. done

Frank Morgan

Thank you.

Operator

And the Sandler. your Piper Sarah of from line next comes of James question

Mark Tarr

Good morning, Sarah.

Sarah James

you. of kind for morning. that I to am change of Thank going And M&A Good thought on follow-on here.

breakeven for degree are you us bit for the what remind leaning ROI versus you into understanding you things out do on can de the opportunity is, Home PDGM there are more available money a expect M&A? you novo to as novo, and of the as But to So, market as the disrupted normal or is M&A? little And far stimulus what's timeline what's back elongating differences get when maybe Health well. de that to just

April Anthony

get Health on we've to to see that - again. Home get Again, before repayment to advanced start probably those I through occurred. we would six another Home it's say, CARES if requirements burnt back On get going Health, the months really your got interesting start into Act again, Fund, payments,

however, into has been I on less. high of in the to marketplace. So, next mentioned, think very quiet and the been all would the nice little some the is Hospice, has Home There has way multiples big because that recently probably second Doug that year. bit the of a been Health quarter multiple going transactions far remain disruption announcements as

lot six the see a to over most frothiness will world efforts I in that hospice anticipate would that continue months, next of of think we'll from where be perspective acquisition and M&A pointed. our the an are

Doug Coltharp

ramp on months to our earliest questions historic Sarah, and probably, activity. and previously, out return the to or and regard point to in regard as the closer achieve typically have points to EBITDA based comparison a at With regard and the IRF, breakeven the XX then the months data between comparisons, of nine with with your six So, on on to we of then there. the positive that's to average, IRF four-wall couple mentioned returns, they side up XX

our probably you cost the view could average to how market depending at You ballpark it, of weighted capital X%. want current somewhere, on call conditions,

We de are record difficult returns Home track the acquisition good we becomes to make Health opportunities so use north land looking it make. you going And Hospice push seeing multiples returns. sure is that to a meeting What that or for acquisition we outsized to we are got certainly to that up. in creating growth with in as we that, of regard wealth. target. that XX% investments a up, and any IRR target So, estimating that we're of our are from to tend investments the We've multiples exceeding are receive novos push more very make

weighted or going your as to performance have organic isn't to be to growth XX XX%. paying where But So, we regard in that on cost get that outsized you very than between going terms XX of if they then disciplined capital opportunities, doesn't activity. a are times we significantly returns average you always being level are point kind of of to business that its closer are to current margin been impaired and that to have with be of are a

Sarah James

it. Got Thank helpful. That's you.

Operator

comes question from final Barclays. of your And the Mok Andrew line of

Doug Coltharp

Good morning, Andrew.

Andrew Mok

of centers. rehab Hi, a decreased, suggests discharge the remains your on and both revenue wanted on acuity. acuity good your I to in sequential which elevated stay per basis, morning. though acuity Even trends moderating length follow-up

get wanted those seeing acuity your to moving lower are on just clarity more in Thanks. centers? intensifying why numbers you So if are

Doug Coltharp

Yes.

think the I – here. believe I that my actually length numbers was own stay of the sequentially, the acuity increased. checking But and I

regard Acuity stay, in Our QX with of the acuity length was X.XX. we And also... I in to was were think X.XX. QX

Mark Tarr

half Almost believe. X.X a day. of day, I a

Doug Coltharp

up second. Julie are – were if And Can you number. Only believe, just here. QX We we I've even, putting had a the at here place. some fingers in I me just on got XX our We get we Duck to give QX. were

Andrew Mok

Okay.

Doug Coltharp

– in is about for not here The of But get sequential, oh, we XX.X was It for XX.X. a XXXX this just in QX go. for that was in you think I – it And moment. but QX We'll think QX acuity XXXX. XX.X was acuity – I

Mark Tarr

Length of stay

April Anthony

stay. of Length

Doug Coltharp

Length of stay, excuse me.

Andrew Mok

Got it.

Okay.

Doug Coltharp

you pricing. These be seeing the trend what consistent lines would with are in reflected

Mark Tarr

on what you give the questions? you needed that Did

Andrew Mok

down I XX.X of then, at see, QX length to XX stay and in in QX.

for you color looking hear are was lower. of color just trends, or love intensifying if why would was that I that. on more seeing acuity But, those more on to So, so moving any reversal

Doug Coltharp

are point. at this not we No,

Mark Tarr

our and terms the early to our COVID. just other on to their delayed ability patients discharge stay One post-acute in been QX of in of we that factors QX accept other length settings saw from went patients that to it's the of over it willingness relative had the to treated hospitals too, was in for

So, that in stay played extended our a role the of length hospitals. in

April Anthony

important – note is that, when and this patient I about to think talked I mix. about the think earlier what's also we

quarter of more length over and stay, acute. other basis does orthopedic in-house our quarter three XXX That of XXXX. patients as of because percentage down of patients went our conditions points, XXXX the a our impact three much our are So, actually CMI then

that hospital could So stay. start surgeries that of for that come seeing back do these that of our have and come to length the that a co-morbidities we see lot online if back CMI impact patients elective and

Doug Coltharp

QX to XX.X of your XXXX Andrew, XX and XX.X. right. in in so, at you to QX, And was we Sequentially, compared point, were QX year last are as

delta of XX.X. was was X.X it So - was a it XXXX QX X.X and up

delta a X.X. of was it So,

the the much levels of higher acuity both patient. at specific benefited the basis are pricing, the offsetting So of less of year-over-year against the length would margin had have stay higher But us pricing the the on reflective lift an how on of C&I impact perspective. a on of those of

Andrew Mok

you. Got helpful. That's it. Thank

Operator

to the And back I'll Ms. Carlisle. call turn over

Crissy Carlisle

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

Operator

for thank And you participating.

now this may You time. disconnect at