Morning. Welcome to Oppenheimer's 33rd Annual Healthcare Conference. I'm Mike Wiederhorn, a healthcare services analyst. It's my pleasure today to have the Amedisys team here. We have Chairman and CEO, Paul Kusserow, CFO and COO, Scott Ginn, Chief Strategy Officer, Nick Muscato, and incoming CEO, Richard Ashworth. Well, thank you for joining us, guys. Obviously a lot going on on your end. Timing is impeccable. Well, we did it just for you, Mike. As you know, we wanted to make sure that we gave you a little drama to lead in this morning. Well, we definitely appreciate it, yeah. Got it. Hopefully, we'll sell some tickets. Got it. This is fireside, so let me start, you know, obviously welcoming Richard here to the platform. Obviously, let's start, you know, with you, kind of why don't you go through your background, give some color on your, on why Amedisys, why is it a good fit for you, and what attracted you to this position at this point in time? Yeah. Thanks, Mike. A couple things. I think, you know, history-wise, I spent the majority of my career at Walgreens, kind of, starting at the ground level as a, kind of, stock boy and just worked my way up over almost 30 years to eventually being president of the company. I left Walgreens, went to Tivity Health to be the CEO there, right as the pandemic was beginning to, kind of, rage on. Did a lot of work there with a, with a fantastic team and eventually took that private here about five, six months ago. In terms of being attracted to Amedisys, why why I was, part of it is my background. You know, I spent a lot of time in, you know, decentralized clinical environments like retail pharmacy. We also had a lot of nursing, we had optometry, we had hearing care. We had a lot of different clinical venues that are, you know, decentralized out from kind of a central headquarters. So I spent a lot of my career on centralization, administrative tasks, reallocation, empowerment, engagement of teams and things like that. I think that it's not unique to Amedisys. It's an industrial opportunity for home health. I think there's a lot of opportunity to drive advancement there and to accelerate there. On the flip side, I spent a lot of my career with payers and, obviously, home health hospice and high acuity care has a lot to do with Medicare. It has a lot to do with Medicare Advantage now, and that's a big talk of the industry. I think I bring some unique perspectives and some relationships to the table there. Specific to Amedisys, it was around, I see a very strong foundation. I see independence, which I think is very important and a valuable asset right now. I see a relentless focus on quality, which the pharmacist side of me really appreciates and thinks that's also a differentiator. Also, Contessa was actually really interesting to me. I think diversifying the types of capabilities that we can do at home and to be more of a 360 provider for discharge planners and for plans is a unique opportunity for growth. You put all that together and plus the opportunity, and then, you know, Paul and I really hit it off. Just felt like a really strong board and a strong leadership team. I think from our perspective, Mike, we had a extraordinary pool of folks when I came back, and we got right to the search. Richard came to the top very quickly. I think if there's been any people that have expressed surprise, it's how quickly this happened. We found the right person, the right candidate early on, and we moved very quickly to secure him. I think from our perspective, the board's perspective, what we liked about some of the elements of Richard's experience, we believe are core and important for our future and to keep driving us as the leaders in this industry. One is he's, you know, at Walgreens, he managed close to and had very good results with close to 300,000 employees. I mean, 275,000 employees is extraordinary, and 9,500 locations. I mean, that's amazing. Our 22,550 locations is gonna be a piece of cake for him. The other thing is at Tivity, one of the things that I think is really important is they depend on payers. I think the relationships there, the understanding of how payers work, the understanding about, even though this is a different type of benefit, having those relationships, understanding how to deal with payers is increasingly important. Understanding how payers think, what they're looking for. Then operationally, Scott's been doing a wonderful job driving our clinical optimization, taking things out of the care center so that they can focus on really the right thing for patients and taking care of their employees, as well as maximizing their mix. I think, I think that we'll continue to see things going on there, that'll continue to extract value. The other thing I think that's quite important is the Contessa piece. We believe Contessa is transformative. It, it's, I've been spending a lot of time on Contessa. You know, as we move forward, I'll continue to spend some time on Contessa. I do think that, it's a very unique asset and, I think it's opened a lot of doors for us. There's, we just have to get deeper in the current client base, and then we have to bring on a couple more palliative contracts, and I think we'll be in really good shape. That's great. you know, just to continue a little bit, you know, Paul, you know, you came back, I guess, about four months ago. Yeah. You know, you kicked the tires again of the company and looking at an industry again. Obviously, you never really probably lost touch. What's your current perspective of the business? You know, you kind of touched on this, and how does Richard align with your thoughts about this going forward? Current perspective is, there's some good headwinds in the business. I think we have the solutions for them. I think that labor is something. That's a code we'll crack. I'm not concerned about labor. Labor is somewhat cyclical. I think considering all the activities that are going on out there in the world, people are gonna look for good employers, secure employers. As you've seen with clinicians, particularly nurses, they're countercyclical in terms of when they come back to work. The harder time that's out there in the economy, the faster they're gonna come back to work. Also, Nick has been doing some great work, and our HR people have been doing some great work, building out flexible scheduling, which only somebody of our size and complexity and sophistication can do. 'Cause I think more and more people want. One of the great things about care in the home is you can do it in a very flexible manner should you choose to. I think there's gonna be tremendous opportunities there. The labor crunch was definitely quite significant when I came back. I'd say the other thing is the acceleration of Medicare Advantage. Scott has been spending a lot of time working on that in his chief operating officer role and made quite a bit of progress. Of our two big payers, we've gotten an increase from one. We're working on another. We're also starting to, due to the fact that there's increased demand for home health, as you see it with long hospital lengths of stay and growing post-acute costs with the payers. As you see this sandwich, this crunch occur, there's more and more demand to put people in the home. We're the best option, highest quality, best coverage. We need to articulate that value better and get better mix of, of business in there. I do think with Contessa, we're seeing a lot of interest because we have six product lines fundamentally now. That allows us with Hospital at Home on Contessa, SNF- at- Home and palliative to continue to engage and drive more care in the home at higher acuity, which arguably I think no one else can do. There's some competitors out there, but they aren't built on the same model as we are. I'm very encouraged, I think, position-wise, and we're independent. Our two largest competitors are now part of the payer world. I think we have that independence out there, which is quite significant. All right. That's great. I'm gonna move, you know, just to, you know, kind of a question focusing on guidance for 2023. Your guidance issued last month appears, you know, and in my opinion, you know, seems conservative. It also appears, you know, like, to include strong underlying growth, which is being weighed down by a number of factors. Can you talk about how we should view the 2023 guidance as a base off which to grow going forward? How should we think about the conservatism in the outlook? What are some embedded themes to our growth metrics in your view? Sure. You know, if you think about it's really a reset, kind of, as we come off of Q4. You all saw us pull down guidance last year, and saw us kind of, I would say, somewhat flattening from a volume perspective. You saw a low ADC number, which was somewhat traditional on the hospice side. You really saw the full mix of kind of what was going on with the shift in the business from Medicare to more Medicare Advantage business. All of that came through, as we roll into the year with relatively flat pricing really for us versus the industry, all those pressures, plus on labor, it brought our numbers down. I think that it's a fair number. Certainly, you can see our growth numbers that we targeted from total admits on home health at 5%, you know, the hospice ADCs, 2%. I think those are certainly a lot more conservative than you saw in the past. Certainly, we learned some lessons there. Generally we leave room on the cost side to outperform, but it'd be nice to see us really, kind of, as we get to that second half of the year, really get some momentum on the growth. I think the opportunity is there for us. I think it's an achievable number for us. There's gonna be work that has to get done, the labor unknown, and the limits to capacity are really what's gotta show a lot from our success around there. A lot of work to be successful, but I think it's a good reset of where we are. I really pivot over to look at, you know, a good example of what we're doing is if you look at Q4 hospice, even with that decline in ADC year-over-year, we were up 220 basis points in EBITDA margin. The rate increase and some of our work around centralization, that's a great pivot point from a margin perspective. Look year-over-year as we get ADC moving forward, you're gonna really get some leverage off of that. I'm optimistic, but there's a lot of hard work out in front of us. I think one of the things that I just follow up on, Mike, is, you know, I was in Atlanta last week, meeting with our southern division of hospice, and we had our directors of operations. We had about 12, 15 of them stand up and tell us what was going on. It was a uniform chorus. It was all the same thing. It was all basically, "I got tremendous demand. I need supply. I need supply." The game is gonna be won or lost on labor, retention of labor. It also will be won or lost on, particularly when you look at the home health side, how can we get better contracts and take the right business to maximize, you know, the scarce labor? That's where we're gonna have to be creative and tough as well. That's great. You know, continuing here on, like, on top line trends, you mentioned. You know, can you know, talk about how you think about home health volumes? Can they be finally viewed as a new normal baseline in 2023? When you look at both the company industry growth performing, how do you see the, you know, for the industry and the company growth performing across the various payer buckets, such as fee-for-service, you know, episodic, non-episodic? Yeah. so, Mike, within, you know, the numbers that Scott called out, right? If we're guiding to a mid-single digit, 5% same store admissions growth in home health, you know, we think industry growth is kind of right around that number, call it 5%-6%. Within that, the majority of the growth is coming from the per visit payer bucket. You know, it's embedded in our guide, although we don't give this number, it's about a flattish Medicare fee-for-service admissions growth number. In order to achieve that still will require us to take some market share from the smaller mom-and-pops. If you look at the pressures around Medicare fee-for-service enrollment, being down call it 3% this year, you know, in order to get flat fee-for-service growth with no pricing update, right? That will require some share stealing. Most of that growth is coming from your Medicare Advantage per visit payers with home health. Right. We, you know, even if you roll back to last year where you saw the volumes down, we still were taking share. You look at the data we have around, from our Homecare Homebase peer data as well as what's going on in the market. You know, we're, you know, we're out there fighting for that every day. I, and I didn't mention, I think a key is just gonna be what we do around the Medicare Advantage negotiation tables around rate. I I mean, that can really differentiate. We've got a group of payers out there that really have paid us well, and they've done a great job for us, and we've talked about some of those some of our calls. There's another subset there that we really need to get something done in this year. You know, good news from that, I think as we, as we kind of reflect back to your question about the conservativism of guide, we haven't, you know, really put in anything from upside around any of those negotiations, which would be a straight drop to EBITDA. We gotta get it done this year. Okay. You mentioned, you know, contracting. I think that's a, you know, good area to jump off of here. Can you kinda, you know, update us as about how your blended home health rates compare on a per visit basis between Medicare fee-for-service, MA, episodic and non-episodic? Then speak about how your managed care contracting efforts are going. Yeah. Certainly there is a, you know, significant difference between, you know, you see our per visit rate on non-episodic type business is right in the $128 type of range right now. It's significantly different than our Medicare side of the business. We do have, as I said, a group of payers that kind of average close to $160-ish type of number. We just got to grow that book and really put some of our business there in the right way, which we're really focused from a referral source perspective and who we're calling on. There's a big diff there. If you look at it, though, that's a pretty significant opportunity for us if we drive up the differential in that average at a $128, and if we can get closer to that $160 type of number. That's a meaningful number to our operations. The contracts under discussion, can you give us kinda, you know, some size of them, you know, to some extent? What magnitude of the size of these type of contracts are we thinking about? I guess the second part, you know, what type of contract structures are you discussing with them? Anything unique or, you know, if you can kinda go into that as well? Large. I would say that if you kind of break down our. Think bigger, then double it. It's a big portion of it. Look, we're gonna make decisions around that contract. From a what types we're talking about, certainly we've been talking about case rate type models. Some of it just, you know, do we pilot some case rate in some areas, and then do we look to just really get a straight across the board per visit increase as we prove some of these models. We're at the table even on some that we've already got some increases on to look for more risk-based type approach. That's really where we, I think we're still in the early innings of what this will look like long term. We don't, you know, we think playing a game or trying to get just incremental per visit rate increases year-over-year is really not, you know, where we're gonna be successful. It's gonna be driving more risk-based contracts, that's where we wanna head, we'll do that all day long. We'll do anything based on quality. We think we win there all day long. That's, I would say, anything we can that we think will give us the opportunity to provide better care and give, from the payer side, them the ability to send more patients to us. That's really what they want at the end of the day. There's a lot of patients being not served that need to be served right now, and they're feeling it the most because naturally, it's not just us out there, but you're gonna send your capacity to where you're getting the best margin. That's something that I think a lot of them are starting to wake up to. Some of them need to move a little faster. It's also changing the dynamic in the case management and the discharge planning, Mike. What if you go to our hospital partners, you know, the big ones, and you say, "What's your biggest issue?" It's length of stay. These are DRG driven folks that are out there. The problem is, if your length of stay is increasing, which in some places, some of the bigger places I've talked to, it's increased already by 15% or so, a lot of it is they just can't discharge their patients. A lot of it is frankly, the low rates the payers are giving them. It's a pain for a lot of these folks when they have already low DRGs with some of the more aggressive payers and then they can't get them out. That's a significant issue. When they do get them out, they're now basically saying, "Okay, I can't get somebody to home health. You're going to a ALF, you're going to a SNF, even though you're appropriate at home health." That drives then the payer's post-acute costs up. While they're giving us low rates, the point is they're screwing themselves because what they're then doing is we're not as available for them to take their business, and they're sending it to a SNF, which is three times more expensive than home health. It's like, really? Those are the conversations we're starting to have now, relatively aggressive. Do you think the pendulum is moving more in your favor of the, of the large providers like yourself? Do you think that, you know, I mean, the insurers are pretty sophisticated companies. I mean, it seems to me this makes pretty common sense. You know, how fast are these negotiations moving, you know, with that knowledge of what the capacity? We're happy. We got another one that we need to get under control and we will or not, in which case then we'll start to shift volume. You know, the good thing is the wonderful thing, I mean, what I love about the world when I step back into it is demand is higher than it's ever been. The question is, are we good pickers of what's coming down or are we taking everything that's coming down the pipe? The key is we now need to be better pickers, but the market is more attuned to the fact that we do have to pick now. Therefore, that's gonna put pressure on those people that don't pay us well, because we'll be less inclined to be able to take that business if there's better paying business where we can produce better care. Mike, just to kind of back up to what you've asked as we put this back together is to think of where our opportunities are. We do almost two million per visit visits a year. If you think about what I said around the differential, we're all in at roughly $128 per visit. We've got target payers at $166. You quickly can see the math on a per visit basis of what that could look like to us if we're successful. you know, it could be meaningful. That's great color. Definitely. That's, I appreciate that. Continuing, I guess, you know, a little bit more on the home health side, you know, obviously reimbursement has been, you know, definitely an overhang on the industry. What are your thoughts about the Medicare reimbursement environment? Do you think CMS will follow through on the PDGM adjustment? Obviously that's kind of another, you know, kind of a potential is the temporary clawback. You know, kind of your thoughts on all those issues. The clawback, I think is very flawed logic, and we found some elements of it that hopefully the industry will show the world and CMS about some of the flaws that are there. I would be surprised to see it this year. What CMS tends to do is their methodology seems to be they throw out big things, see how it plays, pull back. We go to Congress, and we get everybody all upset, and we spend months of the year saying, "Take it back, take it back." They find a middle ground where they don't get beaten up anymore like they did last year, and they take things in halves or thirds or whatever and then keep at it. It wouldn't surprise me if they tried the other half of what they got last year. The question is, what's the market basket? It looks like if I looked at their market basket and you compared it to inflation, you compared it to what Social Security got, you compared it to what MA plans got last year, not this year, but you look at these cost increases, it was a really crappy market basket. Hopefully, my guess is they'll offset each other this year to flattish, hopefully slightly positive. If you look at the math now, it's gonna be tough. Yeah. If you go back and just look at their data, you know, they gave us a little extra benefit last year over Paul's exactly right. Their data is all around. It doesn't match what you see from a price perspective. If you take the base case right now, if they go take half of it, which would be 3.5% cut, the market basket that's out there right now would be 2.6%. You're walking into a negative 90 basis point just from what the data element's out there right now. They certainly can move that number up from a pressure perspective, but that's kind of as we think about planning forward, as we look at M&A deals, that's kind of what we're using as our base case just to be smart about it going forward. That's for 2024, but that certainly could change. It's a matter of time here. I'm gonna try to shift over to hospice and touch on that. What are you seeing on the hospice side? You know, what do you expect in terms of referral mix, length of stay? Kinda what are the trends there starting to, you know, to shape up going forward? Yeah. Thank you. As we signaled kinda in the end of Q4 last year, and certainly we saw some the ADC loss right at the end there, and I think a lot of people saw that. You're still seeing length of stay not return to normal. It's still probably on average across diagnosis, across referral sources, probably down about at least 10 days if you make that from an ADC perspective or length of stay perspective. We've done a decent job, you know, kind of watching where we're targeting and staying away from some of these shorter lengths of stays from a referral source perspective, 'cause that turn has been tough on operations, both from a clinician and a cost perspective. That's something we're being careful about and through referral source kind of direction. What you saw us give up some admit volumes late in the year as we serviced that. I think early on I would say that the trends are positive in that the length of stays are kind of closer to where they than what we've seen kind of as they flattened out last year. You're not at the where we saw kind of that 2021, early 2022 rate of stay. They're better, and I would say stabilized and more predictable, but still not to 2020, you know, pre-pandemic levels. If you got there, you'd really see a gap up in our ADC. We're, you know, we're pleased with where we are right now coming out as we approach the end of Q1. There's more work to do there. I think we've got a sales staff that we brought in a lot of heads, had some turnover there. Significant depth and maturity and across the board and hit kind of what they should be from a productivity perspective. Certainly, staffing is an area we have to serve, make sure that's under control in certain areas. Again, I also think it's a hospice is not something that's hugely doable, but a hospice mix is something that's important. Again, is what sort of developing the capabilities and expertise that draws in longer length of stays and better ADC. That's something we're also looking at. When you have expertise in certain areas, that'll drive your length of stay. Remember, it's a more of a fixed cost model there, so you're going to see leverage. As we can, you know, look at our kind of month-over-month, quarter-over-quarter progression at ADC, still get leverage off of that ADC, which really will drive better margins. That's something that can be really, I would say, from an opportunity perspective in 2023 is really something that we're pushing pretty hard on. Yeah. We've got time here for one more question. I'll just move to M&A market. You know, if you kind of give your thoughts around the M&A market, you know, What's your appetite? Have the deals changed? Obviously, reimbursement environments is different. The competitive you know, environment has changed, obviously, with larger shores getting potentially getting more active. kind of, you know, and obviously also with the labor environment, like the labor environment. if you kinda give us what your thoughts are, what's your appetite, kinda what you're thinking going forward. Yeah. We're still excited about what's in our pipeline right now. Really, you saw that pick up kind of as we exited Q4 into the beginning of Q1 here. Good pipeline. Contessa has been a great vehicle for us to get more in that pipeline from a JV perspective. It's a slower process, though, just because you get hospital systems in. We had conversations that started around Contessa asset and oh, by the way, we have home health or hospice. Everything together for us, that makes a lot of sense. We're still bullish on wanting to do acquisitions. I think, you know, where we're looking now, as you think about the labor pressures, where we always talk about 1+1 doesn't equal two, it equals 1.7. Look at in markets where we're labor constrained, if we can get better labor and get more concentration, I think that helps us set us up to win more. I think that's something we'll push on aggressively. I'm pretty optimistic about it. Also, as you think about an environment where, you know, rates aren't there for you right now, we historically look to get really strong deals and kinda, I would say, fixer uppers, something that we really wanna grow EBIT on. You know, I think we're gonna probably need to retune things a bit and look to really higher EBIT on driving operations. Maybe we'll pay up a little bit more for that, but I think that can really show some dividends early and help us as we come through this 2023 and 2024 as tougher years from a home health rate perspective. With the hospice too, and there's some good hospice assets out there as well that we're working on. Just one final question here, two minutes, for Paul. Kinda what makes you the most excited about this business as you look toward 2024? I think scarcity in terms of, I think one of the things that I've talked about before is two of our-- there's three large players here. Two of them are now part of a payer. I think there's, for, particularly for Amedisys, what I think is most interesting is we're independent, and those two folks will absorb between 10% and 11% of the capacity of the industry. I think it gives us, if we're aggressive and smart, I think it gives us a real opportunity to partner with other MA payers, other blues, really do some interesting things there. What really excites me, frankly, is the Contessa piece. I think the fact that we're high acuity care in the home and the amount of consumers that want it, the benefits we give to the payers as well as the benefits we give to the providers, I think is it's a really everybody wins in the Contessa model. I wanna keep being out there, and I know Richard will do this, but evangelizing and saying this is a wonderful model, and it makes us very distinctive. Well, I appreciate your time. We're out of time, unfortunately. It's a great conversation. Look forward to seeing, what you guys do over the next few quarters. Thanks again, and I hope the rest of the day goes very well. Thanks a lot. Thanks, Mike. Appreciate it. Take care. See ya.