Jefferies Global Healthcare Conference. Brian Tanquilut, I'm the Healthcare Services analyst here at Jefferies. Our next presenter is Amedisys, one of the largest providers of home health services in the country. With us today are the company's CEO, Chris Gerard; the company's CFO, Scott Ginn; and the company's Chief Strategy Officer, Nick Muscato. Chris, let's get to it right away. Maybe, you know, obviously, you're new to the seat, you know, maybe just a little bit of discussion on where Amedisys is today, you know, what you guys went through with the pandemic and where do you see the company going forward as we exit COVID. Yeah, sure. Thanks, Brian, and thanks for having us today. Yeah, so just a few months into the seat, but obviously not new to Amedisys. I've been here for five years as the chief operating officer, and I was the president for the last year. Moved into the CEO seat in April of this year. You know, obviously, the last few years have been anything but normal for us, or the industry in and of itself. Navigating through the pandemic, being able to actually, you know, expand our services during the pandemic was one of our key strategic moves that we made by adding a Hospital-at-Home business, Contessa, to our portfolio last August. You know, I feel like we're well-positioned to capitalize on this movement to the home with our service offerings that we have today with a, you know, nation's second largest home health company, nation's third-largest hospice company, and now we have Hospital-at-Home and SNF-at-Home capabilities. I would say near term, Brian, is really, you know, navigating through some of the immediate, you know, challenges related to labor pressure and labor supply and meeting the demand that's out there. Q1 was really challenging for the industry, but 2Q is looking much better in almost every respect and we're feeling good about that. Longer term, it's really, you know, kind of scaling Contessa, continuing to have inorganic and organic growth on our home health and hospice space to create, you know, more of a broader footprint out there. To also lean into Medicare Advantage penetration of the senior population, which is not slowing down. To, you know, kinda create a model out there that makes us attractive for these plans to do business with, to help us serve these patients in home, which is the lowest cost setting. Chris, lots of stuff to digest there, but maybe, you know, let's focus on the near term first. Labor, obviously a big concern for a lot of folks across healthcare. As I think about, you know, nursing is probably where it's most acute, right? As I think about the challenges in labor, and we hear the hospitals talk about this a lot, but you guys seem to have navigated this a little better, as I look at your turnover rates and recruitment. Where does that stand today, and how are you thinking about your ability to drive capacity growth over the next 12 months- 18 months? Yeah. You're looking at it right on the nursing side because, you know, you think about our line of business, every dollar of revenue that we generate includes a clinician taking care of a patient in their home. Having clinical capacity is the number one catalyst for us to be successful or not be successful out there. We've been focused on this, you know, for several years, even when Paul got here to the organization, who was the former CEO, about 7.5 years ago, and just really made commitment to quality and our people number one, and we haven't wavered on that. You know, we started on the quality side by just really driving, you know, our Star Ratings up to the top of the mountain. We're also focused on our quality on the hospice side. That led us to really have better retention around our employees. We found that clinicians wanna work for a company that wants to put patients ahead of profits and to make sure that we're committed to providing that level of quality. I'm really proud to say that we just got notified that for the second year in a row, we've received Modern Healthcare's distinction of being one of the best places to work in healthcare. You know, building around that clinical capacity is something that we stay focused on day in and day out. We have some tools that we use that are unique to us. You know, a predictive tool that tells us when people are gonna be leaving the organization. We also do very routine touch points of our employees. Actually, every quarter, we do surveys of our employees, and we have about an 80% participation rate so that we can see movement from one quarter to the next on what's important in our employees', you know, kinda minds so that we can adapt to that. Scott, just kinda staying on the labor side, right? There, I guess, what? Two or three sides to labor, right? There is the use of temp labor, there's the rate increases that you're putting through, and then the impact of labor shortage on capacity and eventually the top line. Maybe if you can just walk us through how you're thinking about those three factors. Yeah. If you think about the impact of our whole, kind of our cost per visit metric on the home health side, which is the biggest, and as you alluded to, what's in there. Contract utilization is certainly a big factor. And then how do we manage through that? I mean, we, you know, historically ran about 2.5%. That peaked kind of at about a 4.8%-4.9%. Continues to come back down, probably about a 3.5% or something like that. You know, we'll never get back to 2.5%, but that's something we continue to manage aggressively. I think we've gotten a lot smarter with that. You saw in Q1 and kind of in that back half of prior year that when quarantines would spike, we would, I think, get a little nervous about managing through that and look to, you know, really bring on a lot of contracts. I think we've learned a lot through that. I think our folks are better about managing it. Kind of how we structure a quarantine period is a little different. You can manage that a little differently, and I think we're better at it now, so I feel good about the trajectory of that. On just the pure clinician labor, you know, what I point out on the home health side is that we've been pretty disciplined from our standard rates. We pay our clinicians on a per visit rate. Those normal standard visit rates, which everything's based off on, there's a multiplier on that's still only up about 3%. The noise has been more around sign-on bonus utilizations, bringing on new hires who are paid a salary till they get more efficient. Those items are heading back in a better direction for us. We feel good about that. Much smarter around sign-on bonuses. I think similar to what I alluded to around the use of contractors, a lot of nervousness, and I've gotta get people in the door, kind of spread the use of sign-on bonuses across the company when maybe it needed to be just in more specific areas, markets. I think we feel good about what we've learned there, and I expect those numbers we'll need to deploy those, but not at the rate we had in some of the numbers you've seen. These are from the impacts around capacity. You know, I think we feel good about what we have right now and able to deliver our services. I think that certain markets, if you go look, there's a handful of markets probably that still, if we had the capacity, we would be seeing better growth rates, but that's certainly not across the company. Do you feel like you're getting close to normalization on that front? Is it still heavily a supply-driven growth story at this point? Yeah, I don't think anything's normal quite yet. I think we just have learned to adapt. I think that, you know, this thing's still got to evolve a bit. There's still even before the pandemic, you know, we knew from a nursing perspective with the high growth within the Medicare-eligible population as people age, that you were gonna need. There wasn't enough nurses. This just kinda exacerbated that problem. We're not, you know, we know there's a lot more work to do and we're really focused on, is, you know, with employer of choice, what can we do differently to our clinicians, for our clinicians to make us more of an attractive employer. Not just at the wage line. I mean, that's always something you're gonna have to manage through. How do we, you know, continue to focus on quality, which we know is attractive, to nurses that come to work for us. How do we structure PTO and how do we alleviate some of the other pressures from what they do day-to-day. Shifting gears a little bit here. Hospice obviously has been a drag in your business, and it's probably the area that has been impacted by COVID the most, of your business lines. Anything you can share with us in terms of improvement in trend on, you know, ADC, length of stay, admission trends that you can share with us there? Sure. Yeah. First, you know, stepping back a little bit and thinking about the trajectory of our hospice and how we've grown it over the last several years. Prior to 2019, we had about 85 hospice programs. We were the country's 13th largest hospice at the time. Starting in February of 2019 and finishing in June of 2020, we deployed about $700 million in acquisitions and pretty much doubled the size of our hospice with the last deal happening in the middle of the pandemic in June of 2020. You know, we had some stunted integration work and, you know, we had a pretty good, you know, model in terms of doing the acquisitions, taking the smaller care centers, growing them into higher profitability and kinda bringing them into our way of doing business. I think some of that progress was stunted, you know, during the time that we're trying to integrate in a 100% virtual world. With that aside, you know, some other things that happened, too, you know, within the industry, that's been a bit impactful. One is, you know, COVID has definitely brought forward a good number of deaths. We feel like the actual hospice market has shrunk significantly, you know, through these pull-forwards of deaths. We think that most of that is behind us, and we're starting to see some normalization there. Also it has created an environment where patients were actually electing hospice later in the dying process. There are delays in diagnosis, delays in treatment plans, and then at the time when families decide, "Hey, I want to move on to hospice," they are closer to passing away than they have been in the past. What we saw happen over the last couple of years is an increased discharge rate and a lower median length of stay. Even though our admission volumes were growing year-over-year, we were actually declining to flat on our ADC basis. The good news is that, you know, even though Q1 and we reported on Q1 and talked about how challenging Omicron was, we had our highest discharge rate in January. We had an elevated discharge rate in February and in March, and so it kinda created a little bit of an ADC hole for us. The good news is since then, we've seen some good stabilization and growth. The discharge rate has come down. It's actually below what we have built into our plan for this year for April, May, and so far in June. Our ADC growth has been consistent in April, May, and June. That's actually taken us into year-over-year ADC growth range. We're excited to see this trajectory. The key is for us to continue this trajectory and see continued stabilization around that length of stay. If that happens, then we should, you know, kind of exit this year in a really good place. We should see also, you know, Q3 and Q4, nice growth in ADC relative to last year that was flat for most of the year. You know, the indicators are pretty good right now, the best we've seen in some time. Even at today's rate, though, the last thing I'll point out is even though we're better than we expected to be in discharge rates today, it's still significantly elevated over 2019. There still is more normalization that needs to happen. When that does happen, that will be accretive to our ADC, and we should see actual additional growth from that. Got it. Chris, have you quantified where median length of stay is right now and where that was before the pandemic? For 2019, our median length of stay was roughly 26 days. In the pandemic, it got as low as January of this year was 18 days, and January of last year was 19 days. So half our patients die in 19 days or less. The percentage of our patients dying in 14 days or less got into the mid-40% range. Right now we are at 23 days median length of stay, and it looks like this quarter will be in that 23-24 day range, which is, you know, a positive sign. Trending the right way, for sure. Right. Shifting gears a little bit. We're coming up on a year on the announcement of the Contessa acquisition. Has anything changed with the strategy there with that asset, and what have you seen in terms of Contessa delivering on its strategic and financial goals? Yeah. I would say some things have changed. You know, one thing that was on the radar but was not at the magnitude that we feel like it is and should be today was around value-based, you know risk-based, kind of palliative care programs. We're close to bringing home, you know, kind of a statewide, you know, risk-based palliative program that will be not a JV, but also will be significant upside and also cross, you know, kind of synergistic revenue opportunity for our hospice business as we implement this. You know, the speed of which that has actually taken on is a little bit quicker than we expected. I'd say another thing that really kinda has changed in a good way for us through this acquisition is, you know, prior to us acquiring Contessa, they had a good pipeline of JVs that were just Hospital-at-Home and SNF-at-Home based. Decent sized systems they were working with, but, you know, a little bit on the rural or more regional kinda basis. With the addition of home health and hospice in our scale that we have, we've had a lot of incoming and inbounds from larger health systems that have their own home health and hospice that wanna do broader-based joint ventures that include home health, hospice, Hospital-at-Home, SNF-at-Home, and palliative care, to where even they're contributing their assets into the joint venture. That is a new, you know, kind of move for us to get more aggressive into the joint venture world. Prior to Contessa, we had about eight joint ventures in home health and hospice. Now with Contessa, we have 26 joint ventures, and we have, I think it was 46 locations that we're actually, you know, kinda operating in a joint venture world. I would expect our actual strategy around joint ventures to get a little bit more, kinda comprehensive with home health and hospice as well. We're excited about that. Scott, just to follow up on the Contessa comments, right? At the time of the acquisition, I mean, SNF at home was not as big of a focus there, and then palliative care was kinda like on the periphery. Right. -for Contessa. It sounds like it's a much bigger portion of the story today. How do we think about that in terms of what was contemplated in your kinda like long-term Contessa guidance versus what Contessa as an asset looks like today? Right. You know, that's a good question. You know, originally, we put that out from a five-year perspective. We talked about getting to a $500 million type of number. Both SNF-at-Home and palliative were always in that number. I would say that it's more the speed at which we're getting there. We'll see what it means for that $500 million number. It certainly you'll be able to more quickly, I think, see where this is headed for us as a company. Got it. Chris, a lot has been written in Home Health Care News and other trade rags about how AMED wants to be more acquisitive this year. I think Chris Gerard has done a lot of interviews. You know, you've been more disciplined and judicious about deals over the last couple of years. Is that the right way to think about it, where we should expect AMED to be more aggressive this year and next year? How are you thinking about the impact of, you know, your key competitor becoming part of United, another competitor in the middle of a spinoff, you know, just market dynamics, anything you can share with us there? Yeah. I mean, I think we've always been very active in the M&A side. I think the challenges that you run into in a fragmented industry like this is getting and finding assets that are clean enough to acquire, because when you do a Medicare acquisition, you're acquiring their history, and you're on the hook for their history. We take a lot of deals close to the finish line, but they don't get through clinical diligence, and we're gonna, you know, we have to take a pass 'cause we can't take on that risk. I don't think appetite, you know, I think the appetite's always been there. I think some of the things that are a little bit different for us today, you know, we've done and focused more on the smaller, more regional plays, and that still is part of our strategy today. Also, you know, with our balance sheet unlevered the way it is, we've always had the capacity to do larger deals. In the past, doing larger deals also meant us dealing with the fact that you have overlap, a considerable overlap with the larger scaled companies out there. That's typically been a negative kinda, you know, factor in deciding whether or not to do a deal, because typically you lose and you have attrition of business when you bring two together in a market where you both exist. Given today's labor environment and the importance on clinical staff and capacity, actually that's turned. You know, where it's been a negative mark on us, you know, making a decision, actually something we'll consider more of. I think we are more open to leaning into larger deals if they make sense, really kinda sharpening our pencils and making sure that it does make sense. It's not that there's a lot out there available today. We haven't seen really a softening in multiples, even though kind of the public markets are softer and, you know, and some of the deals that transacted, you know, that were large in size were a little bit, you know, lower on the multiple side, but we haven't seen the ask price come, you know, down quite yet. At the same time, you know, we obviously are very, you know, active out there, you know, typically having conversations with companies today that we may not acquire for three years. If you look at the deals we've done in the past and you go back from our first introduction to the time we got it closed, it was a two or three-year kinda, you know, courting process before we got it done. Not a lot out in process today, but everything that does come out, we take a look at, and we make some quick decisions on whether or not we want to pursue it. Given kinda, you know, our two of our biggest competitors out there are either now owned by a payer or going to be owned by a payer, you know, we see that as an organic just kinda market share taking opportunity today. You know, whereas, you know, any kind of tension goes off of fee-for-service and turns more focus to taking care of the owner's membership, I think that creates an opportunity for us because capacity is a challenge for our competitors just as much as it is for us. Also having, you know, another comp out there and competitor out there that's spinning out, you know, it's not very crowded for us today. We're, you know, we're losing one and gaining one in the public markets out there, but, you know, we still feel like we're very well positioned as the largest independent kinda, you know, high functioning, you know, high quality care, you know, care provider out there. Staying with the discussion of the competitors, right? One of the questions we're getting is, why is your largest competitor, you know, why have they decided to sell at this point? There have been a lot of questions surrounding Medicare Advantage and if, you know, what kind of pressures the industry is seeing, whether it's from conveners, whether it's rate compression. I know, Chris, you and I have discussed this quite a bit, so maybe if you can share with the audience, you know, how you're thinking about your own experience with Medicare Advantage and your outlook there. Yeah, you know, first of all, you can't ignore the fact that, you know, Medicare Advantage penetration is accelerating. 43% of the senior population today is Medicare Advantage, and that's not gonna slow down. You can't argue with the fact that Medicare Advantage understands and respects the value of care in the home being the lowest cost setting and quality care that can be delivered there. I think that was exploited quite a bit during the pandemic, you know, when patients could not land in SNFs, and they went straight to the home and were able to be cared for safely. You know, we have some things that line up in terms of, you know, the demand for services as well as the respect for the quality of services. There's still a big disconnect in how we get reimbursed, particularly on, you know, if it's on a per visit kind of basis with Medicare Advantage. Still today, 19.1% of our home health revenue is paid on a per visit basis, and 14% is paid by Medicare Advantage on an episodic basis, which is pretty much on par with Medicare fee-for-service. For us, what we've seen happen this year is kinda more of a push for Medicare Advantage to utilize conveners to do utilization management and really kinda be the gatekeeper of visits for the patients. We saw that coming into this year, and we actually kind of penciled it out for our organization. That's why we built in about $10 million-$14 million headwind, and we called it out in our guidance from this year because we knew what was converting over to either per visit or going to a convener world. You know, that's not sustainable if basically the only play of a convener is to drive down visits per episode and length of stay. At the same time, making it more difficult for us to take care of patients and putting in a lot of roadblocks or speed bumps, you know, that require us to have clinicians talking to their clinicians to get approval of visits. You know, we feel like there's alternative plans out there, and we've been talking a lot about, you know, kinda bringing home a new payment model with some plans. We feel like we're very close with a couple of sizable plans out there today. That is a good chunk of our 19% that would change kinda the game quite a bit. It actually could, it would, you know, it may, it'd bring forward a program to where actually we want to lean into that business. Because what we as an industry have today that we haven't had in the past is the fact that we have, you know, this clinical capacity issue, and we have to decide what we're gonna do with that clinical capacity. As plans want to use more and more of our services, you know, there's gonna be some tough decisions around, you know, whether or not we take bad contracts or we stay in contracts that don't make economic sense for us. For us, we leaned into it with, you know, kind of proposing a new plan out there that's more of a case rate versus a episodic or per visit rate that allows us to do our own UM, allows us to manage our patients the right way. It opens up capacity by doing so and allows us to dedicate that capacity to the plan so that the plan is achieving the same thing that they would under a convener in terms of savings. They get guarantees around quality, but on top of that, they're gonna get guarantees around additional access to care. At the same time, if we manage that appropriately, we're gonna see margin expansion on that business, and then we can actually use that extra capacity just to take business that we're already having to turn away today. You know, we're close to the finish line on a couple of these. We hope to have them announced, at least one announced this year. We wanna show that, you know, kinda that that's gonna be a way to turn the tide and create more of a partnership between us and a plan versus kind of a vendor-provider relationship with this intermediary that's also very agitating in the middle that creates an environment where we don't really wanna do more of that business. You know, we're excited about that. The last thing I'll say is longer term, again, adding Contessa, adding Hospital-at-Home, adding SNF-at-Home, having a broader scaled capability in the home. At some point, we will be having a conversation around total risk of, you know, taking for patients in the home. You know, I think we'll have the tools to be able to leverage that. I've got two more questions, but just really quickly since we're out of time. Does that mean that vertical integration or closer partnership with payers and home health makes more sense in the same vein that UnitedHealth is doing their deal and Humana is doing their thing? I guess just Scott, really quickly on reimbursement, I mean, what are your expectations coming out of the rule scheduled to be released, you know, by July fourth? Yeah. I'll start out, you know, on the two deals we talked about. I think that there's a lot of logic behind it. I do think it can work. I think it's gonna be harder than one would normally think in terms of going from a profit center to a cost center. I think to the extent that either one or both of those are successful in really extracting the value of those acquisitions, I think that just makes us more attractive out there. Then when you compound that with our additional capabilities around hospital to home, I think that even just, you know, puts a better spotlight on us. From reimbursement, our expectations are to get a market basket increase this year. A lot of noise came out of the SNF rule with a cut there. I think there's a lot of differences between SNF ruling, the original one that came out for them versus us. They did not have behavioral adjustments in the beginning as we did. The 4.36% cut was certainly impacted us back in 2020 when it came into effect. You know, their spend 2019 versus 2020 is up probably about $1.7 billion. Ours is actually down about $700 million. I think it's hard to draw those correlations. Regardless of what comes out in this preliminary rule, we'll be teed up to battle that through data and through our contacts in Washington. As always, we, you know, this is something we live with every year and we're prepared to manage through it and really get the best outcome. Awesome. All right, guys. Well, really appreciate it, and, thanks for joining us today. Thanks, Brian.