Good morning. Welcome to day two of Oppenheimer's Annual Healthcare Conference. My name is Michael Wiederhorn. I'm the healthcare services analyst. Today, we are hosting Amedisys. We have Chris Gerard, COO and incoming CEO, Scott Ginn, Chief Financial Officer, and Nick Muscato, Senior VP of Finance. We'll be doing this fireside. We also, for the audience, there should be a Q&A portal in the top right corner of your screen that you can submit questions into. Feel free to use that at any time. Welcome. Thanks, guys, for joining me virtually here. Hopefully next year we'll be back in person. I'll start right here with kind of a high level question. If you just give me an update or just discuss what you're seeing in terms of trends post the Omicron peak. G ive us an update there. Start with that. Sure. Yeah. Thanks, Mike. Also thanks for having us today. I echo your comments. It'll be nice to be doing this in person at some point again. You know, we've also gotten pretty efficient, I guess, with Teams and with Zoom over the last couple of years. S o for us, you know, obviously Omicron came on pretty strong at the end of December, accelerated through January, and then started to fall off pretty rapidly as we moved through February. T he biggest impact for us was really relative to our clinical capacity. W e were pretty transparent in our Q4 earnings call around getting up to almost 9% of our clinicians on quarantine at a peak. That's challenging us again on being able to actually convert referrals into admissions in certain markets. I think the silver lining is that the speed at which Omicron moved through the system. I think there could be some lingering actual more positive side effects is that I think that just the fear around the pandemic is starting and the anxiety is starting to lighten. I think people are starting to try to get back into more of a routine, lifestyle and in terms of just getting their health checkups and things like that. From a capacity perspective, I think it's also getting people that have taken a little bit of a break from healthcare back into the mode of maybe looking to get back into going back to work and things like that. T here could be some things starting to quieten down, there could be some loosening of the labor pressures over the next several months, and that's what we're expecting to see. For us, where we are today, we see the wage inflation pressures lightening from where they were in December, January. We see access to clinicians. Our hiring rates have been on par with what we've been expecting, and we're looking to accelerate those throughout the year. B ase wages is up a little bit, but we feel like, and we can talk about this a little bit later, where there's some internal offsets that we have to be able to keep our overall wage inflation in line with historical rates. Then now today the environment is that there's some very specific geographies, particularly in the north, northeast, where there still is a high demand for clinicians across all healthcare sectors. It's creating some, you know, pain points for us in terms of being able to fully take on all the business coming our way. you know, we say, just as we have always, we get focused on those markets, put creative solutions in place, and we feel like we'll be able to unlock the capacity of those markets as well. That's good color to start off with. You know, obviously we'll drill down here a little bit on the labor. Do you expect some return to normal to the extent that COVID becomes less of a factor in 2022? Also, how are you weighing the higher wages and use of contract labor? You mentioned, you obviously have levers, operational levers to offset. What other levers are you using to offset those higher costs? I t's kind of three-pronged question there. Yeah. I do think there will be a little return to normal. I don't think normal will ever be what it was pre-pandemic. I think there's still gonna be some things that come out of this that'll be permanent. I think that's what's gonna require creative agencies, companies like us to give even more creative around, you know, meeting the employees, you know, where they are. I'd say the overarching thing there is the, the concept or idea around flexibility and being able to have more control of their schedules. That's why we really are focused on how do we kind of help our clinicians have good, steady, full-time, you know, positions in the organization, but have more control of their own schedules so that they can have that work-life balance. I think that's not gonna go away. I think that demand came up during the pandemic and is going to stick for a while, if not, forever. For us, basically, we look at the inflation side. We have still more of the usual. We still have opportunities around our LPNs and PTA utilization. We talked about taking LPN from 48% to 50 this year, and PTA from 53% to 55 this year. We also have, you know, a pool of clinicians called PRN nurses that we are underutilizing today. These are clinicians that are credentialed into the system. They have a device, they've been oriented, and they really want full flexibility around their schedules. We're testing out new payment models with these clinicians to entice them on demand to be able to be more accessible for doing business. That's one of our key offsets to utilizing contract staffing is if we can use, you know, and turn on a couple of clinicians, PRN clinicians in a market while we have short-term needs versus committing to a thirteen-week, you know, kind of contract nurse that is a fixed cost over thirteen weeks. That's gonna be ideal for us. A lot of energy around that. We invested in a company called connectRN, which is a staffing, you know, company predominantly for our SNFs. We are co-developing alongside them a home health kind of staffing model, temp staffing model that'll allow, you know, kind of clinicians to be able from their device select a shift. That shift would be a number of visits for patients in a market where we have a need, and then be able to basically do that and, you know, get paid almost real time off of that as well. And we're excited about that. We think that can be, you know, a real kind of good alternative to higher cost, longer term commitments on the contract staffing side. Testing it right now in one market in Baltimore, very early stages, but the hope is that we're able to kind of come up with something that is another good solution for this. Then the last piece, Scott gave color on this during the earnings call, is that if you back away from cost per visit, and you look more at a cost per episode basis, and the fact that our visits per episode are still continuing to come down slightly. You know, one of the most impactful levers in terms of you know, controlling your costs and maintaining your margins is around the visits per episode. For like every 0.25 visits per episode we reduce, that offsets about 2% of wage inflation for our clinicians. You know, we think a combination of these things, and we have about 30 things we're looking at under our workforce optimization strategic plan. You know, these are some of the big ones out there that we think will help us, you know, continue to be able to take the business coming to us, grow our workforce, as well as, you know, kind of maintain our margins, if not expand them in some areas. That's great color. You kind of mentioned, you know, just the margins. If I remember, I think in the last conference call, you talked about a margin target of 13%-15%. You know, what will drive that? What are some of the underlying assumptions of that, those numbers? Yeah, I'll take that. I mean, a lot of it is, you know, continued good reimbursement. I mean, fortunately, this year, you know, while we, you know, we're having to deal with the offset of sequestration, we do see a good line of sight on some good reimbursement going forward. That'll certainly help us. You know, we have four hospice acquisitions that have been in play that we don't feel they're at their full ADC maturities yet. There's room to grow those. A lot of them are smaller ADC care centers, which we knew were there. You know, it's kind of why we feel we're at least two years behind to some extent, because you know, COVID impacted our ability to grow those care centers. We saw some high turnover in clinicians and BD staff as a result of some of those pressures. We think as those develop and move out, we're gonna increase that hospice ADC back, you know, more closer to where it was at kind of our legacy, which was you know in the high 20s. Really strong performance there. I mean, home health has been really I think a strong story throughout. They've done a terrific job, just levers around some of these cost issues. you know, we have to deal with this inflation level here, but from a wage perspective, we'll still see if we can get top line growth continue to move for us, you know, that we feel good about our ability to achieve those targets. You mentioned hospice earlier. You know, what are you seeing on the hospice side in terms of discharge rates, the timing of admissions, a verage length of stay? Do you think that business can recover during 2022? Do you think it's more of a 2023 year recovery? H ow are you guys thinking about this positioning going forward? Yeah, I would say the further in our rearview mirror Omicron is and, you know, knock on wood, hopefully not another variant that comes on, I think we will progress towards normal. It's still elevated discharge rates. It's still contracted median and average length of stay rates for our patients. You know, we feel confident that a lot of that has to do with just later diagnoses or misdiagnoses of patients because we just have, you know, a disrupted healthcare delivery system from the pandemic. You think about, you know, the patients that we get onto hospice, the journey to getting onto hospice starts, you know, sometimes years before, you know, definitely months before, you know, they actually end up on hospice. It starts with a diagnosis. Patients are, they're not in their normal routine of seeing their physician. There's still a good number of physician visits and checkups that are being done virtual that raises the risk of missing things from doing a full hands-on face-to-face, you know, head to toe assessment of a patient. We think that the gap between a diagnosis and somebody passing away with a terminal illness has contracted and will not get back to normal until people are actually getting their healthcare, you know, kind of routine checkups happening on a more normal basis. Again, with Omicron behind us, if there's not another variant, we do think it will progress positively. We are still, again, our discharge rate as a percentage of our average daily census in January was the highest that we had seen at 39.2%. It came down in February, and it's about kind of close to where it was in February, but still elevated. We have built into our model, you know, kind of our forecast and our guidance for this year, you know, some conservatism of discharge rates pretty much in line with 2021 rates, which is considerably higher than 2019 rates pre-pandemic. In the event that we do see a return to normal faster, you know, that could be a tailwind for us later in the year on an ADC perspective. We haven't really counted on that. We think 2023 will be probably the earliest that we see something that gets less, erratic and more predictable than what it's been over the last two years. Shifting, you know, back to the home health side. Obviously, you were impacted by the quarantines and admission trends across, you know, across that business. Also we, you know, we think there's pent-up demand. You talked about the trends in elective procedures. Is there a pent-up demand for care that can return in 2022 and beyond? How do you think that's gonna impact your business and how is that, you know, correlated to the labor? You know, one of the things obviously, demand in home health, but then there's the labor portion that's not able to meet that. Yeah. You're exactly right, Mike, and that's exactly, you know, how we're seeing it as well, is we think the demand is there. We're seeing the demand come through in terms of, you know, the incoming referrals for our business. We still have geographic pockets where we're incredibly strained from a labor capacity perspective, where the volume's coming at us so fast, it's tough to actually grow, you know, our clinical capacity to take that volume. Basically, balancing that is our key challenge. You know, we feel like, you know, for the next, you know, 3 years-5 years, there will be plenty of opportunities around just the organic, you know, growth and demand for our services. For us, unless you know anybody else in this industry, unless you really are, you know, kind of focused on, you know, full clinical efficiency and optimization, there's still gonna be challenges out there to be able to fully, you know, appreciate all that demand. You know, we feel that pain today in some markets. Other markets, you know, we're running with a good level of capacity that's showing up in some nice growth for the company. I think that demand just continues on. I think the pandemic absolutely made it apparent to the healthcare world out there what can be done in the home that we are a good alternative to SNFs for certain types of patients, and those are coming to the home today. I mean, continue to come to the home today, right out of the hospitals. We also see Medicare Advantage penetration and Medicare Advantage also really starting to feel the appreciation of care in home and, you know, and the demand on that side has become, you know, pretty enormous as well. You know, as we, you know, kind of think about, you know, you're talking about high acuity and the shift, you know, to on that side of the business. You know, could you kind of talk about the, you know, the shifts that you wanna move, you know, the SNF at home type of stuff that you were just mentioning? Also, how we should think about Contessa, you know, in this as well, in terms of of the business going forward. Yeah. I think it's clear that, you know, our investment and confidence in Contessa was, you know, definitely a strategic play on our part. I mean, it was really, you know, taking advantage of an emerging market, and a line of business that was even becoming more, you know, kind of more recognized during the pandemic with the Medicare waiver for hospital at home services. Also, you know, as hospital systems are becoming more and more savvy about how to optimize their beds, there's a better appreciation of, wow, we can actually participate in the economics of these lower acuity hospital-type patients and still keep our beds free for higher acuity, better margin patients. You know, it's a good win-win for the systems. It's a win for the patients because, you know, they're diverting from the ED straight to the home. They're not having to go into a hospital setting and getting hospital-type care. It's a win for the plans out there because they're getting some guaranteed savings on top. You know, the model itself makes total sense. For us, you know, the strategic play here is that, you know, you think about, you know, five, 10 years down the road as Medicare Advantage penetration continues to, you know, dominate, that's gonna be who we're predominantly working with as a payer for our services. Having those capabilities in the home that start from hospital at home, SNF at home, which is something that we also feel has just got as much potential as hospital at home and a good alternative to, you know, kind of being in a SNF setting. Home health, hospice, personal care, palliative care, and being able to then start to tether those together as a continuum of care. That's gonna put us in a position to where with plans that we're able to, you know, kind of negotiate and have more either a capitated or a full risk arrangements out there to where we're all aligned in what we're trying to accomplish. In the meantime, you know, the hospital at home, the SNF at home, and now, some opportunities around palliative care in a risk-based arrangement have arisen or are coming on pretty strong, you know, with potential systems out there and with some current existing partners as well, that, you know, we think that, you know, the business model is certainly going to, you know, to just do nothing but accelerate over the next couple of years, you know, get to where we have enough arrangements, JV arrangements in place and care delivery models in place that it's gonna be accretive to our bottom line, but also, you know, create broader value for the organization. Talking about accretion. You know, what is a realistic path for EBITDA in 2022 in terms of Contessa and beyond, given the increased investments? And how long do you expect for an average contract to turn profitable? Tell us, Scott or Nick. Nick, you can go ahead. Mike, from a Contessa perspective, I think what we said publicly is about 60% of that EBITDA loss will come in the first half of this year. 40% in the second half. You know, kind of opposite from a revenue perspective. I think close to 70% of the revenue generation will happen in the second half of this year. From a JV perspective, you know, average ramp to profitability, it's actually a pretty quick timeline once we get Medicare Advantage contracts in place. It only really takes, you know, 13 kind of full-risk patients, hospital-at-home patients to get 13 patients a month to get an individual JV to break even. You know, we typically look at those JVs on a three-year timeline to maturity. We currently have three joint ventures that are not at maturity yet that are all profitable. Feeling good about our ability to scale that asset and do so in a profitable way, kind of once we hit your revenue profile that the infrastructure is built to support. That's useful. Switching gears, you know, on home health reimbursement. Obviously we're getting closer to the rate season. You know, can you give me kind of your expectation around the CMS revisiting the behavioral adjustment? I mean, I think originally they were targeting, like, a 6% last year, but they said, you know, they pulled it back because all the COVID. Now I think MedPAC yesterday put out a 5% number out there. Kind of what's your thoughts around 2023 around that, and how should we be thinking about it in the industry as well? I mean, we still, you know, view through the market baskets. We still believe it's gonna be somewhere around just the normal 3% market basket, and maybe we'll get a little bit better. You know, the interesting thing out of MedPAC, which is, you know, unusual MedPAC, is they kinda pushed off looking at the behavioral adjustment, I think, till 2026 or something like that in their commentary. That's really the same 5% they've called for, I think, every year since MedPAC's probably ever existed. That's not surprising to us. C ertainly the industry has gotten together put, and hired folks to look at the data. We think that any data right now that's coming out is still impacted by COVID, so I don't think you get a full measure out there. I think that's an easy story to tell. We'll continue to get out in front of that issue. We know it's there but, you know, I think there's issues around case mix, there's issues around what's really case mix differentials from what was out there versus what's behavioral changes. I think there's a lot of discussion to be had, and we're certainly open to that. We're active on that, on that front right now and so is the rest of the industry. You know, we view it as a market basket update this year. We'll see what happens, but that's how we're viewing it. Okay. That's great. How about when we think about the upcoming 2022, the hospice rates? Do you see any changes on upcoming Medicare rates there? Any thoughts on rebasing, you know, needing further tweaking there? Also, I think there was, you know, people were t alking about potentially lowering the cap there. A ny thoughts o n all those issues? Yeah. We're still, you know, our view right now is still just the normal market basket increase at somewhere around 3%. Yeah, there is some talk around the cap issue. Our guys in Washington are out in front of that and taking a hard look at that and really getting involved. So that's something to keep an eye on. Don't see that near term, just with all the other stuff going on in Washington right now. But that's certainly something we're watching out. You've seen a lot around hospice and quality scores. You know, I think there's a lot of things that can be done around if you're really concerned about long length-of-stay patients. They have tools today to manage that. We're active in how we manage long length-of-stay patients. We'll certainly encourage them to use the tools available, versus just some cut across the cap level. Okay. Let's shift gears here to M&A. If you can give me, you know, kind of what your thoughts on the market right now in M&A in terms of your appetite for deals. Has that changed? Can you discuss whether you think the market has changed in light of the labor environment, the reimbursement environment, obviously COVID, from both the home health and the hospice side? You know, if you talk about the opportunities from there. Yeah. W e haven't seen any really dramatic shift in that from the labor issue. I think that is the. You know, we've been talking about with COVID, the pressures of PDGM and the RAP payment ultimately going away. All that's happened. You know, we talked about, look, there's some delay here because of COVID and COVID dollars, and you introduce sequestration, you're able to delay payroll taxes, all of the things we've talked about a ton here. I think that stuff does wane off. You see sequestration finally goes away here. You got another payroll tax in Q4 due, your second half of that deferral you were able to do. I think that pressure mounts in the second half. You know, we'll see. We've been talking about that for a while, but I do see that, you know, this labor being the final really tough issue that people are gonna have to get over at this point. Maybe right now they're not, you know, they're able to do some things, but you're still flushing some cash from the CARES Act dollars, and you're still sitting on some sequestration rate goodies. I think that's gonna mount, but I wouldn't say our pipeline's filled up with a lot of incoming around, "Oh, we're in trouble. We need to get out of here." You know, I think most of it has been us being very active in trying to seek out targets. which when you're doing that, the price is not always reflected because there's the strategic view in what we're looking at right now. You know, when I think about M&A and also obviously I think about you guys continually maintain a very strong balance sheet. How should we think about M&A opportunities versus share repurchases given some of the swings in the stock price? Yeah. I mean, W e've, I mean, this will be, I think, maybe the third year we've put out. We've got $100 million authorization available. Clearly that's always been around just, you know, as we issue stock and prevent some dilution there. I think, you know, where I view it is based on our balance sheet today, we're still able to do both. We can certainly move on the buyback as well as do acquisitions. We got a lot available out there from a revolving perspective. W e feel good about moving on both. I think there's if there's a larger deal out there that we go after, that's gonna really, you know, change how our structure looks like from a debt perspective anyway, so not really concerned about that. I think we historically run low levered. I think I've said in the past that, you know, I would not be uncomfortable at 3x-3.5x levered. We've never gotten close to that, but I mean, I think that kinda shows you our willingness to reach for deals and, you know. It's really sometimes easier to do one large deal versus a bunch of small ones. We really just have to weigh what's available, and really not big issues, we can get due diligence. Well, talk about the marketplace. I mean, yeah, your thoughts on the marketplace. Are you seeing any changes, obviously, with the entrance of HCA in many markets, Humana now fully operating Kindred, also the assets for sale there. W hat's kind of what are you hearing? Are you seeing kinda has that changed anything competitively or strategically? We really haven't seen a big shift. I mean, it's the same players that are kind of around there looking to do acquisitions and consolidations. I think you've heard a lot around the you know the big deal with all the SPAC dollars out there. Some of that has really been interesting to watch. What is that you know it was the hot topic of the day, and that's fallen off with what's happened with the feel of pressures along with the valuation. I feel you know the big private equity players that wanna make moves are gonna still try to do it. I think they've been a little quieter lately. I think they're trying to let some of this hospice ADC play out work through the system. I think that's probably the one when you're thinking about impacting the valuations. I think the multiples remain high, but with those lower and suppressed ADC levels, I think it's impacted some activity. Shifting gears, obviously, oil's been in the news a lot. W hat's your exposure there? What are you guys thinking? Can you update us in terms of, you know, the reimbursement rates for travel and what and when would you consider changing that? Yeah, we're looking pretty hard at that right now. I mean, what we do and from a spend perspective, we have both fleet vehicles, and we reimburse, you know, people per mileage. We're not at the full IRS reimbursement rate, which we're pretty comparable where the industry is. T he piece that's on our fleet, which is probably, from a spend perspective, is probably about 10% of it. About 90% of the cost is coming through reimbursement. We are looking at ways to deal with that, and we would look as a supplement type of a vehicle to help our clinicians get through this as these prices have risen. It's something we're gonna have to react to. Labor pressures are tough as it is, and it's hard out there when you got a home health aide and they're driving around, and these gas prices are what they are. We're gonna have to take a hard look at it and be reactive to that issue. We've got about a minute left here, so I'm gonna pass it over to Chris here to see. Is there anything you wanna talk about? Or, you know, obviously, we've got a macro. W e've got a very volatile macro environment. Is there anything that we haven't discussed that you wanna touch on or that you think is worth mentioning? Yeah, no. I think that, you know, again, you know, labor is probably what's discussed the most, and the environment around that. I think that in terms of, you know, kind of Medicare Advantage, you know, I think that, you know, over time, when we see the penetration rates as high as they are, and where it's going, you know, again, I feel like companies that are really trying to lean into that and finding ways to differentiate themselves and create a value proposition for the plans, as well as themselves so that, you know, you're able to actually have more of a partnership versus a vendor, you know, supplier relationship, which is a payer relationship, which is what it is today. I think that's gonna be key to k eep an eye on. We're working on some new things out there and some new payment models with some plans. We're hoping to have something announced this week that will actually help give us more desire to take more of that business and lean into it more with some sizable partners out there. I would just continue to watch that. The trends are absolutely there. You can't deny them. And the relationships is pretty strained right now between the plans and how they wanna pay us and our desire to take that business. I think that there's gonna have to be some corrective actions there, and it's gonna take both parties coming to the table. Well, that's great. We're out of time here. I really appreciate you guys participating in the conference. I wish you know, hopefully the rest of the day goes well. Hopefully next year we'll be back in person, and thanks again. Chris, I look forward to, you know, seeing you in your next position. Congratulations once again. Great. Thanks, guys. Thanks for having us. Take care. Bye. Yeah. Bye.