Hi, everyone. Thanks for dialing in for our next presentation. We're very happy to have Amedisys with us tonight, this afternoon. Representing Amedisys is Paul Kusserow, President and CEO, Chris Gerard, Chief Operating Officer, Scott Ginn, Chief Financial Officer, and Nick Muscato, Chief of Staff and VP of Strategic Finance. This is gonna be a fireside chat Q&A. If you want to email me a question that I can ask on your behalf, feel free to do that by emailing aj.rice@creditsuisse.com, and I will do that. I have plenty of questions, though. You know, I'm gonna just jump off of the third quarter. Some of this is pretty specific, but I think it's all stuff that we've been asking, helpful, hopefully, and paints the picture of where things stand. I think if we go back to the second quarter, Amedisys had identified about 54 hospice locations that were substantially below the company's norm for ADC and less than 45. Have you made progress in this area, or was the admit growth in the quarter that you saw in the third quarter more in the legacy locations? Thanks for participating, and maybe I'll throw that out as the first question. Great. Well, thanks for having us, A.J. I'm gonna punt to Chris for the next, five of these, and then, I'll jump in after that. Chris, you're on it for five. Sounds good. Yeah. Hey, A.J., thanks for having us again this afternoon. Yeah, the 54 locations, they actually did experience sequential growth, Q2 to Q3, 3.5% growth. You know, we were somewhat pleased with that. What we found was driving a lot of the lack of growth was significant, you know, turnover in almost every kind of key category in those locations. You know, we had to really get in, manage, you know, measure ourselves against, you know, the management team that we had in place and the people in the right seats. Invested in some positions there which, we think is paying off now. We're seeing real significant movement so far in Q4 of those locations, but 3.5% sequential growth in ADC Q3 over Q2 for those 54 locations. Okay, great. I think also, and maybe this is somewhat related, the company added 39 business development professionals in hospice, raising the total of BDs to 523. The company added 20 business development in home health, bringing the total to 844. Where is the company? I know that was a big priority coming into the year. Where are you at with respect to business development professionals now, and how's the productivity of those newer ones relative to expectations? Yeah. Where we are today, on the hospice side, we're at 536. We still plan on exiting the year beyond 550. Good progress even since the end of the quarter. We still expect to be, you know, kinda growing it from there. Home health side is 865 today, also continuing to incrementally add, as we have exited Q3 into Q4. The productivity has been incredibly consistent with history in terms of, you know, the first 6 months of our reps being on board on the hospice side have consistently performed right in line with our you know, with in the past. Same on the home health side. All that bodes pretty well for continued growth as we exit this quarter going into next year. Okay. I think the company mentioned that it believed it lost about 3,700 home health admits due to nurses being out on quarantine, challenges in getting staff and the COVID surge. Can you parse out the relative impact of those three items? Sounded like quarantine might have been the biggest headwind, which presumably would start to reverse as the COVID surge abates. Yeah, we agree. We think of the 3,700, about 1,500 or so, estimated to be related to clinicians that are our clinicians that were out on quarantine, and we were unable to take additional patients in those specific markets. I think the balance is roughly evenly distributed across the electives and in certain markets where we actually had very challenged labor environment, unable to get contractors or W2 nurses in those markets. That was identified and addressed quickly during the quarter, rectified relatively quickly in the quarter. Now we don't feel like we're missing out on patients because we don't have clinical capacity. Okay. The hospice side, admits were up 3%, ADC was off 4%, so the issue continues to be around length of stay, which I think you pegged at about a 5% decline. That's driven by COVID cases and people deferring non-COVID care until later and being diagnosed for hospice later. As COVID winds down, how quickly can we see the length of stay rebound and hospice ADC begin to grow again? Is there anything the company can do beyond just sort of waiting for the COVID effects to play out to accelerate that ADC growth? Yeah, there's not a lot we can do to control patient mortality rates or the discharge rate of our patients. You know, really kind of backs into when they come onto service. We do think it's gonna take a while for people to get back into the normal kind of routine of, you know, managing and, you know, their health and getting diagnostic testing and things like that. We think a lot of that was significantly disrupted, you know, during the pandemic. That caused delays in diagnoses, delays in seeking care, and patients coming onto service later. We feel like that'll probably hang over. It'll still, you know, persist a little bit into 2022. Then, you know, we see it getting more back to normal as we exit next year. I think a good sign for us is if you look at our country, we're split up into two specific regions. As the Delta variant was very impactful in Q3 in the South, we saw it kind of start to subside as we exited Q3 into Q4. What we saw happen right after that was a stabilization in our length of stay and a very distinct upward trend in our ADC. Even though our admission volumes are right on top of what we've been expecting, now we're starting to see the pull-through in ADC in half of our kind of markets that we're in. A lot of disruption still in the North. Still lower median length of stay up there. You know, we're assuming that as that stabilizes, then we'll start to see a significant rebound in our ADC. The company sort of called out something that was sort of interesting on the third quarter call. This concept that the excess deaths we've experienced due to COVID may have sort of shrunk the overall hospice market, and that may be impacting you a little bit this year, and there's a question whether it could impact you next year. Can you sort of expand on that a little bit? What do you think is the dynamic? I've heard others say that they think the pull forward is more multi-year, but what are you thinking? Yeah, we think it's multi-year, but we think most of it's behind us. The reason we think that is if you look at the early on deaths during the pandemic, that was pre-vaccination. It was also more kind of our demographic, you know, that was passing away versus what you're seeing today. You know, without a question, patients that would have been on service at this time this year or even next year or maybe 2023, might have passed away in late 2020 or early 2021. We feel like the actual market, although we rolled into this year expecting it to expand 2%-3%, we think it declined as much as 6%-10%, at the end of the day. Right now, with the prevalence of the vaccination, the vaccine rates of our kind of demographic population, and the fact that people that do get COVID that are vaccinated typically have a less severe reaction to it, you know, we feel like there will be a more normalization as we exit 2022 going into 2023. The biggest part of the impact we feel is behind us. Okay. All right. I wanna flip over and ask a little bit about the Contessa deal, which was a big deal, company announced in the summer. I know you're excited long term about the prospects there. Sounded like the drag on EBITDA in Q3 was a little less than expected. Expected to step up about $2 million in the fourth quarter, and then be a $10 million incremental headwind next year. First of all, I guess I should ask, do we have all that right? It sounds like the way to think about Contessa is almost if it's very successful in winning new business, then that becomes more of a short-term headwind, obviously a long-term opportunity. I guess if that's true, how does the company intend to manage the potential losses as it rolls this business out? I think I'll turn it over to Scott and Nick, but on the I think what we've discussed as a company is, as long as Contessa can grow top line and bring in new clients, prove it can scale and the capabilities that we have bet on actually come to fruition, that's something we'll always put first. We think that, you know, we're still sticking to our projections about coming in on the revenue side of $60 million and then, you know, about between 18 and 20 EBITDA loss next year. But the incremental growth in terms of new clients, a lot of it depends on what it may be. If it's SNF at home, if it's palliative at home, hospital at home. We're anticipating it'll be hospital at home. We should start to see some of the scale kick in. I don't know, Nick, any? No, no, I think that's right. I think, you know, the step-up that A.J. talked about, I think you had all those numbers right, A.J. We did a little bit better on, you know, the loss perspective, about $3 million in the quarter and stepping up to about $5 million in fourth quarter. Okay. How long a lead time is it? When you're talking about next year's impact, is that pretty locked in, or is there the chance that you would get a call that says, "Hey, we wanna roll out a new program with you," and that would impact 2022? As I think about it on the fly, it seems like to me there might be a fairly long lead time to a new you know relationship here. Is that true or not really so? Well, I'd answer your question by saying all the above. Okay. We can hit our numbers with the existing business that we have. Right. We're anticipating we're gonna bring in another 4-5 accounts. That is obviously gonna double that capacity. Again, we're getting a lot of requests to start to expand. We're in some large systems, as you know, with our clients. You know, we're in Mount Sinai, we're in Ascension, we're in some, you know, Henry Ford, just got that in. We think that Dignity Health, which is huge. We think that there's some real potential obviously if we just live within that environment, we do fine. Obviously we wanna win new business, particularly near our footprint. I think that's what we're looking for. Okay. What point do you think you'll have enough mature business on that side of the equation or in Contessa that even as you ramp new business, it'll be a positive profit contributor? Do you think that can be by 2023, or is it gonna take longer than that? We think 2023. Okay, can you talk more broadly then about the M&A pipeline? I know the Contessa deal was a huge deal relative to your target for acquisition spend this year. There haven't been as much on the home health and traditional hospice side. What do you attribute that to? We've seen some peers do deals. Do you think you're being more cautious on it with respect to price? Are there FTC issues in some markets for you? What would you say you're seeing out there in the M&A pipeline in the traditional home health and hospice businesses? Yeah, we've been. Go ahead. Yeah, got it. We've been pretty active all year, to your point, with Contessa. We've spent about $274 million year to date. We did, you know, one that had 3 locations, and we did some little where we bought the CON license. So not where we really wanted to be. I think we had some really good starts early in the year. Some of the deals we couldn't get across the finish line. On the home health side, I would say, you know, pricing is always an issue. Some of it's around just whether, you know, if we can get through the diligence phase of it. You know, we've looked at a lot of deals that have been closed on and just weren't right fits for us, for numerous reasons. We feel good about the pipeline. We do think it begins to fill up with some more incoming. I think, you know, we've been talking a lot about, you know, the impact of PDGM. That was the first noise around it. You know, you had COVID come through, so now you had the additional support around deferrals of payroll taxes, sequestration, and so forth. That's gonna go away. Now, you know, the PDGM, no wrap payments there, so you're getting nothing up front like you used to. Now you add this labor dynamic, we think it makes it even more ripe for us to have some opportunities into next year. We're gonna be smart about pricing. I think it's, you know, we're very excited that we did our hospice deals when we did them. We think we got ahead from a multiples perspective of some of the craziness around pricing. You know, we still think we can get some home health deals done. You know, and we'll be active, really have our regional approach, identify where we'd like to go and where we'll target. You know, we're working hard every day on it. Just timing doesn't always play out like you'd like, unfortunately. Okay, no problem. No problem. I think, A.J., just to add on to that, their valuations, particularly in hospice, surprisingly haven't come down. Although we've seen performance with some of our private and public competitors decline. We don't. Some of the recent prices in, let's say, the last 2 years have been, frankly, double what we paid when we did our big push of roughly $700 million in 4 companies. We feel very, very good about the pricing we got there. We anticipate at some point, due to some of the declines we've seen, that hopefully the hospice prices will come down. Home health, I think, is where we're spending a lot of our time. We're hopeful that we can fill out parts of the map on home health where we need to build a strong national presence. Okay. The CMS final rule came out right in the middle of earnings season there. It looks like it's better than expected, about 150 basis points, if you use the headline number there. The CMS is pointing to a 3.2%. How should we think about that relative to the puts and takes for next year? Yeah, I think that's certainly a great sign. I mean, 3.2, we think is roughly the number. There's some confusion because they didn't have the fixed-dollar loss ratio in one of their tables before. But roughly, we think from the preliminary rule, it's up about 80 basis points. We think from our internal modeling, that puts us somewhere around 3%. We're rerunning all of our numbers now for anything with acuity levels as well as wage index. But we think it'll be, you know. So basically, you know, we've been talking about early on thinking, look, we're gonna just sequestration, we're gonna get offset by roughly 2% wage, two percent increases on both sides. Now, I think we're at least +1%, you know, on the home health side, which is, you know, for our side, size of business, you know, that's a nice number differential. That's probably +10 over that number, if you think about 1% of roughly $1 billion of home health Medicare revenue. Right. In that final rule, they punted the issue of PDGM change for 2022. Do you guys have any update, either you or the industry trade association talking to CMS about where they're thinking and when there might be some adjustment coming down the path? I think it would be irresponsible for them to. You're talking about increased behavioral adjustments, and they need a clean read on that. We think that that's going to maybe if 2022 normalizes, they'll be able to get a clean read on that. There's been significant differences though in the way that there's been modeling, you know, the industry hired Dobson DaVanzo to do a model. Hopefully, they'll update it, but the implications were that budget neutrality had not been achieved, and therefore, there would be money coming back to the industry. As you can imagine, we're all gonna wait by the mailbox for CMS to send us a check. CMS came out indicating that they thought there might be a reason for more cuts, and those that have looked at the formula think it's pretty flawed. We'll have some debates back and forth on that one. If you follow Scott's logic, though, on the PDGM, and if the industry does start to consolidate and a good portion of the industry does go out of business, budget neutrality is very unlikely to be achieved. You know, if you've got 10, 20, 30% of the industry going out of business, when consolidation like that occurs, the spending tends to go down. Right. One thing that's often talked about on the home health side is the differential between Medicare Advantage payments for volume and Medicare fee-for-service. Where is that differential today? With all the labor pressure, have you seen any movement on the managed care side to reimburse better, so that you can get the clinicians you need to cover? Yeah, we've been having very good conversations. As you know, a lot of the managed care plans have delegated their home health, their contracts to conveners. We've been having a lot of conversations there. The issue is the discrepancy is so wide in terms of payments just overall payment on a per visit basis versus what equates to a visit basis from an episodic basis. I mean, you're talking about, you know, $125 versus $200 at least for us. That's a huge payment differential. Also, the plans is, you know, I'm an ex Humana guy, so I know what they do. They pay in about 90 days. The government pays in about 22-30 days. There's 10% bad debt generally with these folks through denied visits or whatever. There's generally none in fee for service. You know, we do about 70% of our book is fee for service and then 30% episodic and per visit on the MA side. You know, we're gonna, as long as we're paid like that, I think the big issue Medicare Advantage is gonna have is even though it's growing, and even though their members want more and more care in the home, it's gonna be hard to provide if they're gonna pay rates like that. We have some ideas. Chris has been working on some ideas to work with the conveners on us taking the risk, and hopefully we'll have some good conversations about that and come to some place where everyone, not just the plans. Right. Okay. When the company thinks about taking a referral, but it's Medicare fee-for-service versus an MA patient, does the home health provider have the chance to skew the mix of clients more to fee-for-service where the margins are higher, given the tight supply demand clinicians? How hard or easy is that to do at the, in practice? Chris, you wanna take that? Yeah. We're required, obligated to treat all patients the same, regardless of payer source. In markets where we have significant, you know, capacity constraints, obviously, we have to be very selective what we're doing with our existing resources. You know, plans or referral sources that may be, you know, heavy on the non-Medicare side, we may be spending less attention on those when we really know we have limited resources within our branch location. At the end of the day, you know, it's still a requirement that we're treating all the patients the same regardless of a payer source. Sure. Okay, interesting. Maybe to chat for a minute about de novos. Where are you at in terms of this year? How many you will bring on? What do you think it looks like for 2022? Has the target around return on those changed much? Maybe also talk about the dynamics between adding a totally new branch or a new de novo or a branch on an existing location. Right. Scott, you got that. Yeah. I'll kinda just start with the stats around there. We're, you know, certainly from a view of who we've got on tap. We've got 22 that kinda since this we started kinda mid to late 2019. We got another 10 that are pending licensing or some other type of Medicare tie-in. You know, that puts us, will put us in that 32-ish type of range. At that point, we still have some other ones that we've got on tap right now. We had originally targeted, you know, that 16 for this year, so we've got some more out there. We'll probably be kind of at low 10s-15 type of a number next year. I mean, ours, we kind of we'll load them up. We go into our market rankings, and we can be kind of nimble with how that we wanna run that. The big difference and what's helped us a ton is we've taken in, as we do acquisitions, this will be even more advantageous, is when we do a branch off of a parent, that's only taken us about 4 months to get the license. So that's gonna break in pretty quickly, probably, you know, probably in 6-ish months, we're probably gonna, on a branch, it's gonna earn somewhere around $158,000 before we get to a type of a break-even number. The economics work well for us. Pretty pleased with that. You just gotta be careful now, being in a world where we were loaded up with them. As you go down your list from return perspective, you know, the returns start to diminish. You just gotta be smart about it. But as we look to build out in Texas, we think there's great opportunities to build off of that. As we pay out, we've gotta really, you know, balance the acquisition front with de novos because I don't wanna get a de novo starter when I have potential to get a deal closed in that same area. Just gotta balance that, AJ, which will kind of impact how many we actually will do. We're always gonna have a running list of 20 to 25 that they're just, we know we'd like to do that at some point. It's just when's the right time. Okay, you didn't offer formal guidance for 2022 yet, but you did talk about a jumping off point of about $275 million, and you talked about some headwinds and headwinds, including mid-single-digit organic growth, elevated wage increases above the traditional 2%-3% range, an $8 million-$10 million incremental EBITDA drag from Contessa, $3 million headwind from the elimination of excess premium pay, contract labor and roughly $7 million net positive related to the home health increase offset by the Medicare sequestration. Sounds like that last number may be closer to $10 million now in your mind. Yeah. With that, when you put all that together, it gets us right around $297 million-$300 million for next year. Does that sound outside the ballpark? Any other adjustments, puts or takes you'd have us highlight as we think about that? What is the biggest open variable in your mind, thinking about- Yeah. I think that's a good ballpark right now. I'll know more and be able to give more color, A.J., depending on how we exit Q4 from an ADC perspective. I mean, the thing that makes this difficult and makes us kinda really peg a number right now is just the fluidity around the hospice discharge rates. That movement can be pretty minimal for us. We saw, you know, 1%-2% change means a lot. That'll. How we exit and feed into 2022 is gonna really impact how much more aggressive we can be there. I think that's a you know, from a starting point, not a bad place just with everything going on right now, and we'll tighten that up as we move forward. I mean, we've always got additional cost levers. That's where we have to balance. I've you know I've talked about it on the calls. We're probably carrying $12 million of excess costs on the hospice side. When the ADC drop, we're probably staffing pretty flat, and we're down about 700 ADC with what's happened with discharges. You know, I like having that capacity. If you think about it on a fixed cost model, as I get ADC growth, I'm gonna be able to very quickly get some nice returns on that and get some margin expansion. So you know, we like having that in our pocket. You know, if things happen with discharge rate, we might have to change our mind on that. You can see we have levers out there. We traditionally had levers that we'll pull if need be, and we'll continue to make sure we have that. We think we've always been a high quality, very efficient provider of care, and we'll continue to do that. Okay. Yeah. I think also, I'm very sanguine about what I think we'll do next year, largely because we're starting to see some good signs on ADC. We have to wait until the end of this quarter to really understand if this is sustainable and if we're gonna get a good head of steam going in. I also think our BD folks are gonna kick in. I think labor pressures will dissipate to a certain degree, and there's some pent-up demand. You know, I think we're being cautious, but again, if we don't get COVID 3.0, I think, and we go back to a norm, there's enough delayed business out there. Hopefully, it's longer like the stay business. I think this should be something we're gonna be looking for. Also, during COVID, we were good citizens, so we stole share in COVID. We now need to keep the share we stole. Then again, when you add M&A to that, if PDGM does kick in in a real way, obviously, we're gonna be out buying as much as we can. Right. Okay. We haven't talked in a while about the ClearCare partnership, but how that's progressing and any updated thoughts on the personal care segment, and how that might contribute to growth over time. Do you have any thoughts on that? Yeah. I mean, from my perspective, and then I'll have Chris comment on it. This is the right way to approach personal care. Personal care, you know, we own assets in three states. It's been very hard from a labor perspective, particularly in the state of Massachusetts, where we're in. We provide good care. It's been a really good experience from us learning how unskilled care can combine with skilled care. I think the way to approach this is to build strong partnerships, build a network. Chris has been working on juicing the network, and we've got two very good partners. I think in general, we feel good about it. I don't know, Chris? Yeah, I would say, you know, we lost a lot of, you know, kind of time and progress during the pandemic. I think we all, you know, spent most of our energy just focusing on our own business. The network kind of went sideways for a bit. I'm encouraged by the engagement level from, you know, the two partnerships or two parties that we're working with. We'll probably have about $2.5 million-$3 million in top-line contribution from, you know, cross-network referrals that we've received. I would suspect that basically those referrals we sent the other way were, you know, around the same area as well. We know it works. We know the patient experience is better. Now that we've got, you know, our heads out of the, you know, COVID fog, it's time for us to really, you know, kinda strengthen these relationships, increase the referral flow. It is a way to do it, you know, so that, you know, we're not owning and trying to manage these assets in a very difficult labor market. We're focusing on our core businesses as well as Contessa. You know, we anticipate seeing increased activity around that throughout next year and beyond. Okay. Maybe just to wrap up, when you think about the business, obviously we've been very focused on the give and take quarter to quarter around COVID, labor, et cetera. When you think about the long-term aspects of a post-COVID world, both the organic growth is that mid-single digit number that we're looking for for next year, the new normal, do you think that can accelerate to the high single digits? The inorganic growth, I know the company coming into the pandemic had a view as to how much in deal activity it could do year in, year out. Is that still the norm, do you think, or is that would you think that's changed coming out of the pandemic? I think if we lag the industry, yeah, we'll stay in the mid-single digits. We have no intention of lagging the industry. We're still shaking out some of the COVID stuff. That's why we came into the mid-single digits. If you look at the natural growth rates and what's driving those natural growth rates demographically and psychographically and regulatory-wise, I think, as well as, you know, consumer preferences, we should the quality we're putting up, the quality scores we're putting up, be easily in the high single digits post 2022. Assuming also the main thing for us is the demographic winds are gonna be at our back and the consumer winds are gonna be at our back. The question for us is building the labor force that's gonna be able to take what we see as a very strong business coming our way. I think that's where the next five years are gonna be in labor. Can you get it? Can you keep it? Can you make it most effective? Can you really drive that? That's what the game's gonna be about. You know, I think we feel good about it. Yeah. Well, I think on that, we'll wrap up. I appreciate Amedisys participating once again in our conference this year. Hopefully next year when we get together, we'll be in person. I really do appreciate you giving us the time this afternoon. I wish you a happy Thanksgiving, and we'll speak soon, I'm sure. Great. Thanks so much, A.J. Thank you for having us. We appreciate it. Yep. Thanks, A.J.