Amedisys - Q4 2021

Transcript

Speaker 0

Greetings. Welcome to the Amedisys Q4 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

I will now turn the conference over to your host, Nick Muscato, SVP of Finance. Thank you. You may begin.

Speaker 1

Thank you, operator, and welcome to the Amedisys investor conference call to discuss the results of the Q4 year ended December 31, 2021. A copy of our press release, supplemental slides and related Form 8 ks filing with the SEC are available on the Investor Relations page of our website. Speaking on today's call from Amedisys will be Paul Kucera, Chairman and Chief Executive Officer Chris Gerard, President and Chief Operating Officer and Scott Ginn, Executive Vice President and Chief Financial Officer. Also joining us is Dave Kimberley, Chief Legal and Government Affairs Officer. Before we get started with our call, I would like to remind everyone that statements made on this conference call today may constitute forward looking statements and are protected under the Safe Harbor of the Private Securities Litigation Reform Act.

These forward looking statements are based on information available to Amedisys today. The company assumes no obligations to update information provided on this call to reflect subsequent events other than as required under applicable securities laws. These forward looking statements may involve a number of risks and uncertainties, which may cause the company's results or actual outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our Forms 10 ks, 10 Q and 8 ks. In addition, as required by SEC Regulation G, a reconciliation of any non GAAP measure mentioned during our call today to the most comparable GAAP measure will also be available in our forms 10 ks, 10 Q and 8 ks.

Thank you. And now I'll turn the call over to Amedisys Chairman and CEO, Paul Kusserow.

Speaker 2

Thanks, Nick, and welcome to the Amedisys 4th quarter year end 2021 earnings call. We have a lot to discuss on today's call, but as this will be my last earnings call, before we dive in, I first want to thank and acknowledge Nick Muscato for all of his fine work on these calls over the years. He has taken us to a new level and I'm very appreciative of what he has done for me and Amedisys. I would also like to express my sincere appreciation for all of the 21, 000 Amedisys employees, whether you are at a patient's bedside or support those providing the industry's best in class care. At Amedisys, we put quality before everything and the unwavering dedication of all of our employees has been delivering great patient care and this dedication to quality continues to be my greatest point of pride and largest source of inspiration.

I humbly thank you for all that you do. 2021 was a topsy-turvy year unlike any other. And before I turn it over to Chris and Scott, I'd like to highlight a few of the many successes we've had during the year. Though CMS has frozen the publicly reported home health STARS metrics, we never let our foot off the gas on quality. We never will.

It's simply in our DNA. In 2021, we continued to make strides. Using industry data and internal benchmarks, we proved that once again. Amedisys is second to none in home health quality. You can't deliver great care without great caregivers.

And we have made human capital a passion, recruitment and turnover a science and focused hard and creatively on building and retaining our incredibly important clinical staff. I want to thank and acknowledge Sharon Burnez and her team for putting us at the vanguard by constantly reminding us it's all about our people. As healthcare labor markets become more challenged nationwide, Amedisys was able to drive our clinical turnover down an additional 9% from 2020 to 2021. Additionally, to fuel our present and future growth, we increased our recruitment numbers by driving a 20 7% increase in recruited headcount. Recruitment, retention and turnover are continuously our biggest initiatives as having enough clinical capacity to serve our patients in our fast growing industries has never been more paramount.

Demand is not going to be the issue, supply is, and we are improving our capabilities here every day. While still facing many challenges brought upon by COVID in both home health and hospice, in 2021, we still grew our EBITDA 10% and we grew our EBITDA margin 40 basis points while delivering $189, 000, 000 in cash flow from operations and we beat Q4 during the peak of Omicron. We took our cash flow and we invested in the inorganic growth of our business resulting in the acquisition of 4 CONs, VNA, Evolution and changed the game with our acquisition of Contessa. By acquiring Contessa, we took a meaningful step in differentiating ourselves as more than just a home health and hospice company. The leader in its space Contessa builds risk bearing tech enable hospital at home, sniff at home and capitated palliative platforms.

It has become our platform for future innovation and new models for care delivered in the home. We further continued to think outside the box and challenge our thinking by investing in Connect RN, an innovative solution for recruiting nurses and for engaging with our current clinical workforce differently. In the coming weeks, you'll hear of other investments that continue to push us to innovate and differentiate in this constantly evolving market. Finally, and yet most importantly, we delivered the highest quality care performing more than 11, 500, 000 visits for more than 445, 000 patients in 2021. Amongst the backdrop of COVID-nineteen disruption and its impact on all of healthcare, 2021 is a year I'm exceptionally proud of.

The leading quote to our 2022 strategic plan was a quote from the ancient Greek philosopher Heraclitus. You can't step into the same river twice. Amedisys enters 2022 as a new, expanded and complete organization well poised for continued growth and even further differentiation in our expanding solutions for the home. With that, I'll turn it over to President and COO and incoming CEO, Chris Gerard, to run us through the operational updates. Chris?

Thanks, Paul. Now let's dive into our Q4 and full year Home Health segment performance. For the quarter, Home Health grew a total admissions and total volume by 2%. For the year, Home Health grew same store total admissions by 6% and total volume by 5%. Elected procedures as a percentage of our total episodes increased from 7% in Q3 to nearly 8% in Q4.

Much of the increase quarter over quarter was in the first half of Q4, where we actually saw electives reach pre pandemic levels of greater than 8.5% to 9%. However, as the Omicron variant set in, we exited the year back in the 6.5% range. We are beginning to see improvements in this percentage, but we're not yet back to the pre Omicron levels. For the quarter, we performed 13.7 visits per episode, down 0.1 visits sequentially and down 0.3 visits year over year. On clinical mix, in Q4, we achieved 49% LPN utilization and 53% PTA utilization.

We have made tremendous progress in our clinical mix throughout 2021 and believe that there is still additional room for optimization of our LPN utilization percentage as well as some additional improvement in our PTA utilization. Lastly, the final 2022 home health payment rule has been released and I'm pleased to say that we will be receiving slightly over a 3% rate update. Now moving on to hospice. For the quarter, Hospice same store admits were down 1% over a 15% Q4 2020 comp and ADC was down 4%. For the year, same store admits grew 2% and ADC was down 4%.

We again made good progress on hiring hospice BDFTs, ending the quarter with 533. We had previously stated a desire to exit 2021 with 550 Hospice BDFTs. However, we had some planned consolidations and closures during Q4, which impacted our hiring trajectory. Nonetheless, we ended 2021 with 48 additional BD FTEs versus our 2020 exit rate. And we look for increased productivity from these new reps as well as our tenured staff to drive continued admit growth as we move forward.

Hospice ADC remained pressured in Q4 as we continue to see a trend of patients coming on to service much later in the dying process and not realizing the full value of the benefit. Our hospice discharge average length of stay fell to 90.3 days in Q4 from 94.5 days in Q3. The median length of stay dropped to 22.7 days from 24.3 days. These decreases were driven by an increased percentage of deaths on census. The increase of deaths on census is materially impactful to the Hostess segment performance as a 1% change in discharge rate is equivalent to approximately 130 ADC, which over the quarter would have added approximately $2, 000, 000 to the bottom line.

As we look back at 2021 as a whole, our deaths as a percent of current monthly pre COVID timeframes, again having a material impact on the ability to consistently grow ADC in the near term. Though predicting behavior is more art than science, we do think that the increased death rate is a short term issue and over time will return to normal. Whenever behavior returns to pre COVID normal and patients access healthcare like they did pre pandemic, we will see an ADC increase and as we continue to hire and retain our BD staff and grow admissions, ADC growth will follow. In summary, 2021 was a year that saw both home health and hospice continue to be impacted by COVID-nineteen issues and their subsequent shakeout. Many of the challenges presented in our current operating environment are out of our control, but they have forced us to think differently, become more efficient, innovative and set us up to be even more successful organizations as those challenges dissipate.

I am tremendously proud of what we've accomplished and the care we have delivered during these very challenging and unpredictable times. Now, I'd like to discuss Contessa's performance for the quarter. Our high acuity segment Contessa, which offers home based recovery solutions for patients in need of acute level care, continued positive momentum in Q4. Total admissions were 520 since the closing of the acquisition last August. Clinical management of patients admitted onto Contessa's program continues to be a strength evidenced by favorable MLR performance relative to expectations as well as strong quality and satisfaction metrics.

From a financial perspective, during Q4, 3 JVs reached profitability, which proves that this model continues to be efficient and scalable in different types of markets. We are also excited to announce that through Contessa, we closed another joint venture partnership with a multi hospital health system in Penn State Health. This Penn State Health joint venture, which is an extension of our existing partnership with Highmark Health, is another example of the demand and appeal that high value health systems have for Contessa's home based acute services. Program operations for this market are expected to go live in Q2 2022. Additionally, Contessa continues to add payer sources for its high acuity clinical models.

And in the coming months, we expect a number of new health plan contracts for the hospital at home and sniff at home models, increasing total addressable patients. We continue to remain encouraged by Contessa's robust pipeline of additional health system opportunities. Furthermore, this year we expect strong performance through scaling of existing markets, increased penetration of our newer clinical models, additional value based contracts and an increasing number of partnerships that reach market level profitability. Amedisys continues to focus on integration efforts with Contessa related to nurse staffing strategies for the high acuity programs. Contessa has historically relied on 3rd party home nursing providers in select markets where Contessa's hospital partners do not have capabilities to provide home nursing.

Nurse capacity constraints in those markets have resulted in Contessa not being able to admit all patients referred to the program. Amedisys and Contessa have begun implementation of a strategy to in source nursing requirements instead of continuing reliance on third party providers the majority of the markets in which Contessa operates. While meaningful progress has been made in several markets to increase ADC capacity, I. E. Tennessee and Arizona, the integration efforts are taking longer in select existing markets such as New York and pending markets in Hershey, Pennsylvania and Tacoma, Washington.

We are very pleased with the High Acuity segment's performance and are excited by the new opportunities and capabilities Contessa has brought to our organization. The combination of Amedisys and Contessa has created a truly differentiated in home care platform. And I'm very excited by all the opportunities ahead of us in 2022. With that, I'll turn it over to Scott, who will take us through a more detailed review of our financial performance for the quarter and our projections for 2022.

Speaker 3

Scott? Thanks, Chris. For the Q4 of 2021, on a GAAP basis, we delivered net income of $1.04 per diluted share on $559, 000, 000 in revenue, a revenue increase of $9, 000, 000 or 2% compared to 2020. For the quarter, our results were impacted by income or expense items adjusting our GAAP results that we have characterized as non core, temporary or 1 time in nature. Slide 15 of our supplemental slides provides detail regarding these items and income statement line items, each adjustment impacts.

For the full year of 2022, on an adjusted basis, revenue grew $136, 000, 000 or 7 percent to $2, 200, 000, 000 EBITDA increased $26, 000, 000 or 10 percent to 300, 000, 000 dollars EBITDA as a percentage of revenue increased 40 basis points to 13.6 percent and EPS decreased $0.16 to $5.95 Keep in mind that prior year includes the Q3 EPS benefit of $0.72 resulting from executive stock option exercises. The suspension of sequestration added $36, 000, 000 to our revenue and gross margin for the year, which is up $13, 000, 000 over prior year. For the Q4 on an adjusted basis, our results are as follows. Revenue grew $9, 000, 000 or 2 percent to 559, 000, 000 dollars EBITDA decreased $13, 000, 000 or 17 percent to $65, 000, 000 Excluding the acquisition of Contessa, the EBITDA decline was 8, 000, 000 dollars EBITDA as a percentage of revenue decreased 2 60 basis points to 11.6%. Excluding Contessa, EBITDA as a percentage of revenue declined 160 basis points to 12.6%.

EPS decreased $0.31 or 21 percent to $1.18 per share. Contessa drove $0.13 of the decline. Now turning to our 4th quarter adjusted segment performance. Keep in mind, segment level EBITDA is pre corporate allocation. In Home Health, revenue was $337, 000, 000 up $8, 000, 000 or 2% compared to prior year.

Revenue preference sold was up $45 or 1.5 percent. The increase in revenue preference sold is the result of 1.9% increase in reimbursement, partially offset by a change in our case mix. Our visits are down 0.3 visits per episode. Our implementation of Metalogist Care has led to a reduction of 2 visits since Q1 2020. Improvement in our revenue per episode and lower visits added 130 basis points to gross margin, but was offset by an increase in cost per visit resulting in a gross margin decrease of 40 basis points.

The increase in cost per visit was driven by planned wage increases, an increase in new hire pay, clinician bonuses, wage inflation and health insurance. G and A increased approximately $4, 000, 000 mainly driven by raises, increases in care center administrative staff, travel and training, partially offset by lower incentive comp. Segment EBITDA was $63, 000, 000 with an EBITDA margin of 19%, which is down from 20% in 2020. Our 1.5% increase in revenue per episode and the decrease in business per episode were not enough to overcome labor pressures. Sequentially, segment EBITDA was down $5, 000, 000 on a seasonality driven increase in health insurance of $3, 000, 000 and an increase in cost per visit, which was driven by a full quarter of raises, new hire pay and clinician training.

Now turning to our Hospice segment results. For the 4th quarter, revenue was $205, 000, 000 up $1, 000, 000 over prior year. Net revenue per day was up 5% driven by a 2% hospice rate increase that went into effect October 1, 2021 and reductions in our capital liabilities. Hospice cost per day increased $8.78 primarily due to fixed costs associated with salaried employees on a lower incentive, plan raises, wage inflation, health insurance costs, higher utilization of contractors and higher visits performed by hourly employees as prior year was impacted by access restrictions due to COVID. As we've detailed in previous quarters, we have maintained our clinical staffing levels similar to prior year despite a year over year decline in census.

EBITDA was $41, 000, 000 down approximately $12, 000, 000 G and A increased $6, 000, 000 due to planned wage increases, additional business development resources, higher recruiting fees and higher travel costs. Sequentially, admissions increased 4% with ADC remaining relatively flat due to higher discharge rates, which is typical as Q4 historically has the highest discharge rates of the year. Segment EBITDA decreased $625, 000 as the rate increase effective tenone and positive cap adjustments were offset by a full quarter of annual raises as well as additional bonuses and raises to increase employee retention. Higher contract utilization and higher health insurance costs. Turning to our total general and administrative expenses.

On an adjusted basis, total G and A was $183, 000, 000 or 32.8 percent of total revenue, up 120 basis points, mainly due to the Contessa acquisition, which added $6, 000, 000 in additional G and A. The remaining $3, 000, 000 of the year over year increase is due to raises, additional resources for growth, higher travel and training spend and higher health insurance costs, partially offset by lower incentive compensation costs. Excluding Contessa, our G and A as a percentage of revenue increased 20 basis points over prior year. Sequentially, G and A is up 7, 000, 000 dollars of which $2, 000, 000 is due to the addition of Contessa. The rest of the sequential increase is due to higher health insurance costs and increase in staffing, primarily BD Resources and severance.

For the quarter, we generated $5, 000, 000 in cash flow from operations, which includes $27, 000, 000 in repayment to deferred payroll taxes. For the year, we generated $189, 000, 000 in cash flow from operations. Our net leverage ratio at the end of the quarter was 1.3 times, inclusive of the funding of the Contessa acquisition. Turning to M and A. In November, we announced a new hospital at home JV partnerships with Penn State Health.

As Chris noted, we've been very pleased with the accelerated pace of incoming partnership requests at Contessa since we closed the deal. We also recently announced the signing of the Evolution Health deal, which will add 15 care centers to our Texas, Oklahoma and Ohio footprint. Though evolution is very much a turnaround, we're excited about the opportunity to increase our density and believe the longer term growth and profitability outlook for the asset is compelling. Finally, just yesterday, we announced the signing of Assisted Care Home Health, adding 2 locations in the CON state of North Carolina. I'm very pleased with our M and A effort to be excited about the opportunities within our pipeline.

As you can see on Page 6 of our supplemental slide deck, we're initiating guidance ranges for 2022. As we've said, 2022 is very much a setup year for 2023. Our guidance ranges are as follows: adjusted revenue of $2, 330, 000, 000 to $2, 365, 000, 000 adjusted EBITDA of $275, 000, 000 to 285, 000, 000 dollars and adjusted EPS of $5.23 to $5.45 on an estimated 33, 200, 000 shares outstanding. There are several key factors impacting our 2022 guidance outlined on Slide 18 of our supplemental slides. These items include rate updates of 3.2% in the home health and 2% in hospice, which are partially offset by the expiration of sequestration suspension.

As a reminder, sequestration suspension remains at the full 2% for the Q1 and 1% for the Q2. The net impact of reimbursement is expected to be approximately a positive $25, 000, 000 Higher than normal wage increases as a result of increased labor cost pressures, Keep in mind, our first half of 20 22 results are impacted by raises given in August of 2021. And incentive comp headwind of $16, 000, 000 over 2021 as incentive compensation expense reflected our performing below plan targets. Continued incremental investments in the business of approximately $8, 000, 000 which includes $5, 000, 000 in additional de novo spend, dollars 3, 000, 000 in investments focused on workforce optimization, automation and the rollout of metallurgic community product in our hospice business. Our investments in Intesa will reduce EBITDA of $17, 000, 000 over prior year, which is $6, 000, 000 higher than originally anticipated due to a significant ramp in business development opportunities and our desire to enter the palliative care and home business.

The impact of COVID-nineteen on our volumes in January February of 2022 was approximately 7, 000, 000 Due to an increase of clinicians on quarantine during the 1st part of the year, we had volume misses of 2, 300 admits in research and home health and misses of 200 admits in hospice. Though the number of clinicians on quarantine spiked with the rapid spread of Omicron, we have seen a significant decline in the number of clinicians on quarantine at this point. At our peak in mid January, we had the highest percentage of clinicians on quarantine since the beginning of the pandemic at approximately 7%, whereas today the percentage is closer to 2%. Further, we continue to see some Medicare Advantage plans moving away from PDGM reimbursement to per visit arrangements through utilization of benefit managers. When this happens, there is a short term reimbursement impact.

That said, our M and A partners continue to recognize the value of home health for their members and that is materializing itself in the openness to tie quality to outcomes. Though the 2022 impact will be between $10, 000, 000 to $14, 000, 000 we will continue to mitigate this impact via our workforce optimization initiatives by delivering the best outcomes and utilizing the Metalogix suite of products. The combination of these initiatives and improvements in per visit reimbursement rates will result in better margin in this business than in recent past. Our effective tax rate assumption 2021 is approximately 27% with an estimated cash tax rate of approximately 19%. Though M and A is not contemplated in our 2022 guidance, we do expect to continue to acquire both home health and hospice assets this year, and we expect cash flow from operations to be between $180, 000, 000 to $200, 000, 000 Some additional items to keep in mind relate to our performance in Q4 2021 compared to Q1 of 2022.

The first of these items are seasonality in nature. The impact of the ADC hospital decline combined with 2 lesser calendar days is estimated to impact revenues by approximately 4, 000, 000 dollars The benefit of lower health costs related to seasonality of claims of approximately $10, 000, 000 and an increase in payroll taxes of approximately 3, 000, 000 dollars Some new items for 2022 are a $2, 000, 000 sequential decrease in EBITDA due to Contessa, an increase of $5, 000, 000 due 2022 incentive compensation. Keep in mind, 2021 was impacted by performance coming in below plan metrics. This ends our prepared remarks. Operator, please open the line for questions.

Speaker 0

Thank you. At this time, we will be conducting a question and answer session. Our first question comes from the line of Brian Tanquilut with Jefferies. Please proceed with your question.

Speaker 4

Hey, good morning, guys. Good morning. Hey, Scott, really appreciate all the color you gave on the guidance. But just wanted to ask maybe for you and Chris, how should we be thinking about your confidence in that guidance range? And maybe Chris more directly to you, as you take over the CEO spot coming up here, what's your thinking on guidance philosophy and how are you thinking about your approach to the business being the new CEO?

Any strategic things that we need to be thinking about as you step into the role?

Speaker 3

Yes, I'll start and turn that over to Chris. But Brian, I'm very confident in what we laid out there. Certainly, we wouldn't have, from a clarity perspective, not having January, which is our 1st full month view impacted by Omicron that would have made our lives a little easier and everyone's lives a little easier. But from a vision into the future, we feel good about it. We feel strong.

We think we've left our rooms within our some room within our performance numbers that we laid out to outperform, which is what we always want to do. We've got the same pressure moving in. I think the biggest things to keep an eye on are hospice length of stay, which is the 1 item that's somewhat out of our control and we'll be keeping an eye on. But we've got a lot plans out there. We've proven that when we laid out plans before and we can get in front of some things, we'll get great results.

But I'm still very confident in it, Brian.

Speaker 2

Hey, Brian, it's Chris. Yes, I appreciate the question. And I've been part of doing giving guidance since we resumed guidance a few years back. And so a lot of the same inputs are happening today that's happened over time. I think that given what we've experienced over the last 2 years with the pandemic, particularly and just how you can't predict everything.

We just spent a lot of time looking at all the inputs and handicapping those as we come up with kind of what we put out there as a number. Obviously, I wouldn't put anything out that I didn't feel confident that we were going to be able to achieve and hopefully overachieve. And I feel like that's what we're putting out for 2022. Again, handicapping some things like labor pressures, wage inflation, length of stay, as Scott mentioned, on the hospice side. And in terms of philosophies, I think 1 thing around innovation that you're going to see and that is actually more of the same, but what we've been doing quietly over time is investing and partnering alongside other companies out there.

Speaker 3

Here in the back half of the year, a sequestration suspension goes to 0. So the opportunities are strong, the pipeline is strong. Our M and A team is excellent. They've done a great job, and they'll continue to deliver. So I think those things open up.

From a valuation perspective, we're still kind of looking at and focusing on home health right now, kind of a 12 to 14 times of evaluation. We think through synergies and get them through our operations, we're going to get those closer to a 10 times at the year 3 marker. So I feel great about it. I felt beginning last year, I felt great too. Things kind of slowed up a bit for us, but a lot of line of sight and in what's out there.

It's a healthy pipeline. And I would think we're going to get some more incomings in the back half of the year.

Speaker 4

Awesome. And Paul, congrats on the upcoming retirement. Thanks.

Speaker 2

Appreciate it, Brian. Thanks.

Speaker 0

Our next question comes from the line of Matt Larew with William Blair. Please proceed with your question.

Speaker 2

Hey, Matt.

Speaker 5

Wanted to first ask about Contessa. And just wanted to sort of bridge the gap between, I think, just the revenue profile that's maybe a bit light of what you've been expecting versus some of the partnership activity and your commentary that is as bullish as you were anticipating. So maybe just help us understand that. And you mentioned that staffing has been somewhat of a limited issue. I'm curious sort of what the true demand has been in terms of We've

Speaker 3

got some of those issues. I think it was probably over 300 admits that we probably missed opportunity. I think that's 1 issue. The second issue on the revenue difference is that, this completing hospital to home through the Medicare waiver program, we've got a lot of that business, and that's really at a lower revenue, kind of per episode, if you want to use that label on it than a typical risk base. So that's some of the differential.

And yes, our commentary is certainly more bullish than the top line number. We see a lot of certainly have a lot of line of sight with we think this thing can do and feel bullish about 2022. But I'd say most of that is what I described as while revenue is a little off at this point.

Speaker 2

And Matt, just as the team wanted to get me out of the office, they sent me on the road with Contessa and I've been out with Travis Messina, the CEO, calling on a bunch of clients. And just to reemphasize Scott's point, the appetite and the pipe there is quite extraordinary. And I think we're very excited. And I think the other exciting thing is the types of discussions have changed from pure hospital and home to other types of risk based palliative, SNF and home. So this is as well as potential partnerships, potential JVs.

So I couldn't be more excited about the choice we made with Contessa.

Speaker 6

Got it. And then a quick follow-up on

Speaker 5

that 1. Just Scott, you laid out sort of the EBITDA impact for the year, but could you maybe give us a sense for what the exit EBITDA drag might be relative to early on in the year?

Speaker 3

Yes. I mean, that's what I can do for you. I think somewhat around probably from a revenue perspective, I'd say that drops at about 25% in the first half, about 75% in the second half. And we think the second half EBITDA is probably about 40% of the drag for the year. And I think we're optimistic maybe we've got some things that could potentially change that right now.

That's our view we want to go with.

Speaker 5

Okay, got it. And then just a question about hospice guidance at 13% same store. Clearly, last year had issues in terms of BD turnover and clearly have a bigger sales force now. But what's just the level of confidence in terms of building up to that 13% number? And maybe what has the trend been like year to date?

It's probably helped you start to build towards that?

Speaker 2

Yes. Hey, Matt. So I feel very confident in the number that we put out. We brought 46 additional BD FTEs into this year versus last year. Turnover is trending in a good direction as well, which is suggesting that our reps are kind of growing into longer tenured buckets where productivity also increases as well.

The productivity of our reps today is as expected, so no surprises there. I will say Q1 the 1 impact in Q1 was really around the quarantines and Omicron really peaking in mid January. And we call out that we lost about maybe 200 hospice admissions in the quarter, which is kind of having an early impact. Since the quarantines have come down and Omicron has subsided, we've seen volumes come back up very nicely. So I'm encouraged by kind of what we're going to be able to produce from a hospice organic growth perspective this year.

The 1 caveat is that there's still a lot of unpredictability and inconsistency in the discharge, median length of stay as well as discharge rates. And so as that moves around and that's having a little bit of a drag on the ADC growth.

Speaker 3

Hey, Matt, real just a quick follow-up on contestant that Mist and revenue does not leave anything out. There was also an anticipated in 2021 a signed deal that would get closed. It's a home health asset that was within that and it's kind of just looking to use that differential differently within the Contessa asset, was supposed to close, got held up in regulatory issues. So that was part of the delay as well. We expect to get that closed this year.

Speaker 5

Okay. Thanks everyone.

Speaker 2

Thanks Matt.

Speaker 0

Our next question comes from the line of Justin Bowers with Deutsche Bank. Please proceed with your question.

Speaker 2

Hey, Justin.

Speaker 7

Hey, Paul, and good morning, everyone. Very apt Choice of Music and congrats on the transition. It's been quite a run. But just a quick follow-up on Matt's question with Contessa. Is there what's kind of the visibility in the revenue that you have, kind of, I guess, in backlog or in the guidance for 2022?

And then just on hospice, I know that a lot of the discharge rate is out of your control, but do you have any has there been any shift or the way that you guys are attacking different referral sources? And then have you seen any changes this quarter in terms of accessibility to some of the senior living and SNF referral sources?

Speaker 3

Yes, I'll grab Contessa. I mean, we feel good about what's out there. I think there is some back end loaded pieces. You can see we're on track, probably ahead of track, I would say, on the signing of JV deals. So feel great about that.

You can see, as I mentioned, we're front loading some G and A costs to do that. I think the development that's changed is always when we looked at this asset, we wanted to and had the opportunity to build off on a palliative asset as well, palliative program. That's probably moving along faster than we thought. So I think there's potential upside in those numbers. We're working on some deals and hope to get those across the finish line, which could certainly help that number as well.

So that's something to look forward to, on Contessa.

Speaker 2

Yeah. And hey, Justin, on the hospice question. So I'd say no, there's not really any notable shift in referral source or segment where patients are coming from with the 1 exception is there is a direct correlation of a spike in the pandemic. So even when we saw Delta last fall as well as we saw Omicron early this year and hospitals beds were full, we also saw a 1 or 2 percentage point tick up in our actual hospital referral volume or mix of our admissions. And then that would also drive down length of stay a little bit.

But we've seen even as Omicron has kind of settled out, it's not it's back down to normal. In terms of what we can do is, we always are doing account optimization. We're looking through utilizing claims data to identify where we're getting business from, where we're not getting business from and where there's opportunities. We assign that to our reps to be able to go out and establish relationships and build upon that. There's probably going to be more science around that related to just kind of the length of stay opportunities that are out there in terms of kind of our targeted accounts.

And then the last question around facility access, it's pretty open for us now. We do have again, I think that that comes and goes with the pandemic kind of waves. Right now, we're seeing that we're not having access issues in our markets today.

Speaker 7

Got it. Appreciate the questions and and congrats, Chris.

Speaker 2

Thanks, guys.

Speaker 0

Our next question comes from the line of A. J. Rice with Credit Suisse. Please proceed with your question.

Speaker 2

Hey, A. J.

Speaker 8

Rice. Hi. Best wishes, Paul, in the future. Maybe just to ask on the labor and benefit assumptions around 2022. I know in your slide deck, I think it's Page 18, you have a 2% to 3% assumption around salaries and then it says 11% growth in benefits and it looks like 8% of that is attributable to headcount.

Is that headcount is there any reason to think that that's not also something we should think about on the wages, even if the apples to apples increases 2% to 3%, there's as much as an 8% increase in headcount that you're anticipating. And then also on that 2% to 3%, if you break that down, I'm assuming that's the consolidated number. Is it materially different in hospice versus home health?

Speaker 3

Yes. I'd say not really the way we built that, A. J. That's kind of what we said we're going to give for our normal raise pipeline. There's other inflation embedded in there just from an exit rate perspective that's really not called out.

There's also probably another $14, 000, 000 $15, 000, 000 ish that we've got in there for bonus type retention payments that you're not really seeing that's reflective in that number. So I'd say it's across both lines. I'd say the hospice is a little different because you're seeing material increases in cost per day lines because of our lower ADC. We're down roughly 5.60 ADC year over year. And that's we have only 37 less commissions.

So as we said before, we've kept those staffing levels at a higher level. So you'll see that cost per day as that ADC expands kind of correct itself, but still be up because of other inflation pressures. I think the easiest way to think about and there's a couple of ways, of course, to look at it. But on the cost per visit line, as we've got it modeled we've got our model in our cost revisit from 2021 to 2022 being up almost about 5%. So that's going to be reflective of everything going on.

So it's health insurance, what's happening around labor pressures, also has contractors within that number, which we expect them to pull that down. So the overall inflation number as you could see would be much bigger, but that's only a half the story. The other half is our plans around what we're going to do with VPE. We believe we can take those down. We think for every kind of a shift in a quarter of a point in visits, you're going to offset about 2% inflation.

So as I've laid out those numbers and what's built in our expectations is a cost per episode increase of roughly 3%. So you can see there's some offset planning and pull that back down and that's on top of we're getting roughly a 3% rate increase year over year. So that's kind of how I slice that up, A. J, if that's helpful. J.

Rice:]

Speaker 8

Yes, that's great. And then maybe just as a follow-up, ask about any latest thoughts on the discussions with CMS and Washington generally about PDGM, about what you're expecting for the rate proposal that will come out in the summer for next year or any other initiatives that you're tracking closely?

Speaker 2

Yes. We've got Dave Kimmerle, our resident Washington expert here.

Speaker 9

Yes, A. J, thanks for the question. As you know, last year in the proposed and final rule, CMS shared a methodology that if employed would have resulted in additional cut for behavior changes under the new PDGM payment system. However, to credit CMS, they realized that COVID and the continuation of the PHE had an impact on the data and that continued claims analysis was needed. So I think since that time, we've seen multiple waves of COVID come and go.

We've seen the continuation of the PHE, significant workforce issues, continued growing demand and lack of capacity for home health that 1 would think would necessitate further analysis without instituting additional cuts. CMS also stated, it was open to receiving input on additional methodologies and approaches to determining budget neutrality. So with that being said, our team and the industry are fully prepared and are preparing to respond to whatever CMS may put in the proposed rule this summer. But I would say this, I'd remind you historically proposed cuts are typically blinded to some appreciable degree in the final rules. And also a reminder that as we sit here today, we expect about 3.35 percent market basket update in that rule.

And that could increase because that market basket update is calculated on also has Q3 and Q4 projected wage inflation in it. By the time the rule comes out, we should be some Q3 and Q4 2021 actual wage inflation in there. So expect a nice market basket update. We expect CMS to be very reasonable and reasoned in their approach to any particular any additional behavior cuts, if at all. And lastly, I'd say this, I mean, we will urge CMS and our friends in Congress that any PAG or COVID impacted year is not a good baseline year to determine anything.

So they should probably delay any changes until we have a clean year.

Speaker 3

So I

Speaker 9

think we'll spend a lot of effort on this. The industry collectively will spend a lot on it. Our peers are spending a lot on it. So I think there'll be a lot of attention, a lot of very deep analysis. So I feel confident on it, A.

J, there'll be a good outcome here. So you heard

Speaker 2

it right here, A. J, CMS is going to be reasonable. We're excited.

Speaker 10

Okay. All right. Thanks a lot.

Speaker 0

Our next question comes from the line of Sarah James with Barclays. Please proceed with your question.

Speaker 2

Hi, Sarah.

Speaker 0

Hi, and congratulations on your retirement. So churn went up to 21.5%. The 1st 3 quarters of the year was 18.3%. So I'm wondering if this level is sustained so far in 2022. And then on the nurse churn, you guys broke that out for the full year at 26.8%.

But I would like to get a sense of how it looked exiting the year or early in 2022? Thanks.

Speaker 2

Hey, Sarah, this is Chris. So for turnover for us, throughout the 2021, we stated that we improved our nursing turnover 9%. We also discussed after our Q3 earnings call kind of the impact Delta was having on staffing as well as this migration to travel nurses and the rates that were being paid. So we were a little bit of a victim of that as well. We had our nursing turnover in Q4 was in line with our expectations, but ticked up slightly in Q4 over Q3.

Coming out of the gates this year is looking really strong for us, with just a couple of pockets, in very specific geographies that we still are having challenges being able to stabilize around. A lot of that also is correlated to kind of the wave, that the Omicron and the stress associated with us getting up to almost 7% of our clinicians on quarantine at 1 point in time in January. And there was a lot of volume coming into those same markets and I think that created a little bit of churn. But right now, I feel good that we will continue to drive down our nursing turnover. That's a big focus for us around clinical capacity and keeping our own is our best and most impactful lever for us to pull and we're strong on culture and making sure that this is a good place to work.

So we have a lot of initiatives around that, a lot of focus around that and I feel good that will drive down turnover even further this year. Just a qualitative comment, Sarah, is that we find when there is high quality, which we are the highest quality out there, there it correlates to lower turnover. And so the more we become a really good place for people to work and deliver excellent care, the more people want to stay with us. And it's also helped, as I mentioned in my comments on recruitment. Our recruitment has been fantastic and a lot of that is because we stand so strongly for quality.

Speaker 0

And follow-up question on this is, as you think about the staffing constraint that you guys have talked about and the growth for Contessa expansion into palliative and SNF alternatives. How do you think about the areas of shortage compared to each other? So is this more of a limiting factor from personal caregivers? Or is it still mainly the nurses and clinicians that are putting you in a position to turn away admits?

Speaker 2

Yes. It's nursing it's nursing nurses and clinicians on both the Contessa side as well as on the home health and hospice side, registered nurses are typically the ones that are initiating the care that we're providing. And that's the gating factor of whether or not we can admit the patient as well, whether or not we have the clinical staff to be able to take care of them, but it starts with having the nurse to be able to do the admission. So for us, that is why workforce optimization is critical. We need to also continue to focus on using lower licensed skilled caregivers where appropriate, so that we can continue to expand the capacity of our nurses.

And on the Contessa side, we find that the nurses are out there and the shortage that we're looking at is not huge, but it's really kind of educating the local market about this type of a job. It is acute care in the home, which is not very well known out there. And I think that as hospital at home continues to grow in recognition out there, then I think we will find more critical care nurses wanting to migrate from the hospital setting where they're burned out to something that's still high acute care services, but in the home. So I'm optimistic that we'll be able to catch up to the demand there. Let me just emphasize what Chris said.

I think it is exactly right and that's what we've seen in the marketplace. We've actually are looking for people who are getting quite burned out in hospitals, who have hospital skills to transfer and do that in a less intensive difficult place in the home. So that once people hear that message, it's a very attractive message for the hospital type of nurses that we need to recruit to do hospital in the home and palliative in the home and SNF in the home.

Speaker 3

Thank you.

Speaker 2

Thanks. Appreciate it.

Speaker 0

Our next question comes from the line of Ben Hendricks with RBC Capital. Please proceed with your question.

Speaker 11

Hey, thanks everybody. Hey, how's it going and congrats to Paul and Chris.

Speaker 9

All right. Thank you,

Speaker 11

Just turning back to Justin's question with regard to Hospice ADC. Given that your admission volume, referral mix and diagnosis mix are essentially in line with normal patterns, can you help us understand what's driving these late admissions to Hospice care and the medium length of stay headwinds? I guess I'm trying to get my head around how that volatility normalizes and how that might play out in terms of timing? Thanks.

Speaker 2

Yes. Thanks, Ben. I'll take that. This is Chris. We think that the key driver here is just basically disruption in the normal kind of accessing healthcare.

If you think about during the pandemic over the last 2 and a half years, number 1, lockdowns happening throughout the country at multiple stages, waves of the pandemic coming on, access to doctors' offices going to virtual environment versus in office environment. And people also having a fear of even getting out and going to the doctor. So what we feel like really is happening is people that are somewhat or potentially hospice appropriate are delaying getting just their typical checkups or diagnostic testing and diseases are being kind of identified later in the process, which means they've had more impact on the patients. And if you think about just the journey to hospice, it starts with kind of a diagnosis that would suggest life expectancy of 6 months or less. But people when they first get that news will typically aggressively try to fight that, whatever means they can.

And then at some point when they accept end of life care as their treatment, then they move on to hospice. So we think that they're getting diagnosed later. We think that they're then trying to kind of fight whatever it is. And then at the time that they're coming on to hospice, they're just closer to passing than they have been in a normal kind of a normal environment. Prior to 2020, when the pandemic first began, it was relatively predictable.

Your discharge rate and your median length of stay is pretty consistent based on your segment mix. And what we've seen is it's just been based it's been pretty erratic, consistently erratic, if that's a phrase, since then and it continues so far in 'twenty 2.

Speaker 6

Thank

Speaker 0

you. Thank you. Our next question comes from the line of Joanna Gajuk with Bank of America. Please proceed with your question.

Speaker 6

Hi, Joanna. Hi, how are you? Yes, so I guess 1 question. On the front of the question on labor, so you mentioned that pretty good hiring momentum is 27% increase in recruit headcount. Do you have I don't know maybe I missed it, but a net hiring number in a sense just trying to assess how much you increase your clinical staff pool last year?

Speaker 2

Yes, we don't I don't have a net hiring account right in front of me, but Joanna would be happy to kind of follow-up with you and kind of get that out there. We do know from our clinical capacity, we have expanded our clinical workforce throughout last year and rolling into this year, have seen positive momentum as well. But we don't have it quantified to the number of actual clinicians, net new nurses new clinicians less turnover. But it's net positive. I just don't have the number.

Yes. I think in my comments, we talked about gross hiring of increase of 27%. But on the net side, we're clearly in the positive area, but we don't have that number. And I think also remember that there's what we've seen in certain cases is some of those folks that we've hired moving into PRN and we're working very hard to particularly with the connect RN tools and these other things to really start to increase our efficiencies with the PRN pool and utilizing new technologies and new techniques and new incentives. So we keep at that top line level and we keep driving our turnover down.

Obviously, we're going to keep more and more people.

Speaker 6

All right. Thank you so much. I guess I'll leave yield to the person who wants to ask the question because we only have few minutes left. Thanks so much.

Speaker 2

Thank you, Joanna. Appreciate it.

Speaker 0

Our next question comes from the line of Matt Borsch with BMO Capital Markets. Please proceed with your question.

Speaker 2

Hey, Matt.

Speaker 12

Hey, how are you?

Speaker 3

I'll start

Speaker 12

off by thanking Joanna too. Let me just ask a question. I know you've gotten a lot of versions of this. But looking at the constraints on clinical labor, if you project forward to a year or a year and a half from now, and let's assume we're really well past any variance further variance of COVID. How do you think the labor force is going to compare in a year and a half versus a year, year and a half to what you had in 20 18, 2019?

How many residual headwinds do you think you'll still be dealing with? And what things will you have done by then to offset them?

Speaker 2

Yes. I think that's a great way to state the question, Matt. So for us, I mean, this is all we're about and this is what we're focused on day in and day out. We do feel like if you think out a year or 2 away and assuming there's no really kind of new variants and things that are going to be driving different types of demand, We feel like this migration of the nurse to the traveling nurse role and the wages that they're able to get for doing that, I think that settles out. I think it's new and it's a new scene for these nurses and I think they kind of like it and they're getting paid very well.

Obviously, that's related to the demand from the hospitals and that settles out to where there is less of that and less competition and nurses want to get back to where they have a stable job and they know what they're going to be expected to do and know where they're going to be staying and living. I think that's going to create better kind of stability for us. For us, increasing our clinical capacity is on several fronts. It's 1, making sure we're using our clinicians at the right level of their license. We have opportunities in hospice and still further opportunities in home health, where we're using registered nurses and we can be appropriately using LPNs and LVNs that will create additional capacity for us.

We're also seeing tools that are helping us get smarter with how we're using our clinicians. Metalogics Care was a great 1 to point to and how it's helped us optimize our business per episode so that we're not providing unnecessary visits for the patients that are not at any value add to the patients. We're now utilizing Muse for Metalogix on the hospice side to get smarter with our clinical capacity there. So what I think you'll see is you're going to see better efficiencies within how you're utilizing your existing staff. I still think that it will be challenging to hire enough and net enough new staff to fully meet the demand.

When you think about the demand that's going moving into the home and what was accelerated with the pandemic. So I think technology will also be utilized more in terms of providing virtual visits and telehealth visits and things like that to offset the lack of kind of access to nurses if that's appropriate. But and then I think that there's going to be consolidation within the industry also that's going to allow those that are high quality, very stable solvent providers out there to really start to amass clinicians to be able to be able to take more market share as well. So I think it will be a shakeout within the industry. I think the ones that are really prepared for that and taking it serious, we've been working on this for 2 years.

This is all we focus on right now in terms of when we think about our headwinds for the next 5 years. So those are solved for it. I think we'll be in a good shape. I still think there will be more demand than supply. But those that don't, I think are going to be very challenged.

And a quick coda to Chris' very good response. We talked yesterday, Matt, about the McKinsey report, which again, if it's a quarter, right, we'll take it, where 25 percent of healthcare can be shifted into the home, meaning it will turn into a 2 $70, 000, 000, 000 industry or something like that. So I think we believe that the demand is definitely going to be there to drive care into the home that it's going to be increasing and that the game is going to be, do we how do we attract and retain and make as productive the people that can do these types of things in the home. So we get it. We've seen it.

We've been prepping for it for 2, 3 years. And I'd say we're way ahead of everyone else in terms of how we think about it.

Speaker 12

That's all. That's great. That's great. I'm good for now. Thank you.

Speaker 2

Thanks, Matt. Thanks, Matt.

Speaker 0

Our next question comes from the line of Andrew Molk with UBS. Please proceed with your question.

Speaker 10

Hi. Congrats again to Paul. Best wishes. You will be missed. Wanted to clarify a few comments in response to A.

J. Question on the salaries increasing only 2% to 3%. For the $16, 000, 000 of incentive comp in 2022, can you confirm that that's related to clinician bonuses? And it was unclear to me whether that's included in the cost of service line or whether that's going to be included in SWB in the G and A line?

Speaker 3

Yes. The $16, 000, 000 is not the clinician line. That's so that's just on the G and A line. So that's incentive comp plan reset for 2022. It's I think there's been some thoughts that maybe that's some catch up in 2021.

It's not. It's just our new plans we start accruing as if we're going to achieve plan, which is at 100%. So that's all G and A line. I think and we could have laid this out better as I look at it now and understand some of the confusion. But we've laid out in our guidance thoughts are the 2%, 3% is just general what we think in our as we would in our raise pool.

There's also numbers we put in for additional bonus retention that's just locked into our numbers that we're using to guide to the year. So that's why I kind of went back to the example. If you look at our cost per visit, it's up roughly in our modeling about 5% over prior year, which is going to include all the noise in cost per visit. And that certainly would include the health going up. It will include contractor, which is going to be roughly a plus 10% type, 10% to 14% type of additional spend we're estimating this year, additional rate, I'm sorry.

But that's being reduced by the fact we believe we're going to bring contractor utilization down. So a lot of things going on in their episode, we can offset at least 2% of that for every 0.25 reduction in a visit.

Speaker 10

Got it. So the retention bonuses are flowing through the cost of service line?

Speaker 3

Yes, they are. Yes, they're just not in what we laid out on

Speaker 10

that 2% Right.

Speaker 3

Got it. How we

Speaker 10

Just a quick follow-up on the investment in Connect RN. It's only a $5, 000, 000 investment so far. Is that an area of focus that you'd like to invest further? And what kind of impact or return are you expecting from that investment? Thanks.

Speaker 1

Yes, Andrew, this is Nick. Doubt will make any more equity investments into that asset. But where we are going to invest is kind of our time and attention to help partner them to develop a home health specific solution and hospice specific solution. Historically, that company was born on servicing staffing needs of the SNF industry. As they look to expand verticals, I think it was a very timely and very nice partnership.

They've been wonderful partners as far as helping us think through how to gigify our home health and hospice workforce. So we're spending a lot of time developing that asset for kind of home health and hospice specific operations. Probably won't be any further equity investment in there. But from a return perspective, if you think about our PRN workforce, that's relatively from a visits perspective relatively unproductive. If we're able to incentivize them and engage with our clinicians in a different way to give them kind of shift based work or gig based work, that really takes off a lot of pressure from the hiring and retention side of the house.

And these people are already trained on Homecare Homebase, already onboarded, already credentialed. And so it can really be a nice lever to pull from a productivity perspective. So on a $5, 000, 000 investment, the ROI on getting an additional visit out of that PRM workforce is substantial.

Speaker 2

Yes. And just 1 last point, I know we're over, but this is and Nick's been leading this, so I give him lots of credit and as well as the team. The fact that we're making investments in people that are forging way out in front, forging new territory in areas that we know strategically are very important is really important for us as an organization culturally to always look ahead and partner with those change people out there so that we don't get surprised by it. So we're part of the change, not acting and reacting to the change. And I think that's something unique here.

And my guess is you're going to see more of these.

Speaker 0

Thank you. Our next question comes from the line of Scott Fidel with Stephens. Please proceed with your question.

Speaker 3

Hey, Scott.

Speaker 13

Hey, everyone. Thanks and echo the congrats to Paul and Chris. My question, just trying to package it into 1 is, first, just any guidance or thoughts just on the EBITDA split when thinking about the first half versus the second half in 2022? And then the follow-up part would just be on Contessa and I know it's early here in 2022, but just given the importance of modeling this in the out years, any initial guidepost that you'd want to give us just on how you're thinking about that revenue trending out into 2023 from that $56, 000, 000 outlook that you've provided for us in 2022? Thanks.

Speaker 3

Thanks, Scott. I'd say from a revenue perspective, you can certainly go back and look at our historical patterns and unfortunately they've been a little bit disrupted here in 2020 2021. But we're looking, I would say, somewhere in that 47% to 48% load in the first half of the year. From an EBITDA perspective, I think you're going to see, as I had in my prepared comments, we got some pressure coming from Q4 to Q1 normal seasonality earlier than anticipated. But we're just talking right now.

We think and that's really around that pallet of asset and that's we believe that's going to expand earlier than we thought. So Monica?

Speaker 14

All right. We're at the end.

Speaker 2

You saved the best for a lot. There you go. Thanks for holding on. Flat.

Speaker 14

No, I got to figure out that. I got to get better at the star 1 thing. Can we just go back for a second to the comments that you were making about MA? And I think, Scott, you said that this year, we're going to see some of our plans transition from something that resembles PDGM to a per visit. And then you referenced this maybe being a short term headwind.

And I'm just trying to understand really what's going on here. And then it sounded like you referenced something around maybe home health benefit managers. So can you sort of just unpack this a little bit and help us sort of understand it?

Speaker 3

Sure. So I mean, I think there's a couple of things going on. 1 is, we've seen this. If you go back probably a couple of years ago, we had a major player go from home CMS reimbursement down to a purpose in that. So I think just systematically, I don't think a lot of them are big fans of it.

We do still have some out there and some that are still going to stay on that. But I think as those historically move forward, you'll probably see a greater move to to just pay us per visit. And that's my commentary around that. The good news is the early indications of if you go convert our PDGM type revenue per visit from a PDGM revenue per episode to a revenue per visit number, we feel like some of the contracts we're negotiating are in a good ballpark going down to that. But they're still not going to be at 100% of the Medicare rate.

So that's a little differential there. And then the comment just around benefit managers, as we see that, we talk about the different players out there as they use that. That puts really just more pressure on the utilization side of our services. So if you think about from the per visit, we're just selling per visit as we go out there and send a clinician in. That's not really anything new for us.

We do that on the CMS side from reimbursement perspective on our Medicare business. So that's not necessarily a bad thing as long as we like the rate because that just means it frees up capacity to send somewhere else if we see that and can use that from a rate perspective to really manage that business a bit. So just something we have that we know has been out in front of us, but feel good about where our managed care team is from negotiating rates and are going to continue to push that. We think they see the quality aspects of our business. I think some of this labor tightness will help us from a leverage perspective.

We'll continue to use that. And I think that will bridge us up to a nice 2023 as we get through the haircut from moving to a PDGM reimbursement to a per visit.

Speaker 2

Yes. And last comment, it's hard to drive utilization management when there's increasing scarcity of the asset you're trying to negotiate with. So, and again, when you have our quality and you have our ability to recruit and retain, we think that increasingly that's going to move more into leverage to the providers versus the conveners and the clientele.

Speaker 14

Got it. And just 1 last follow-up on this is, as you look at your MA book today, if that's what we want to call it, how much is still PDGM like reimbursement? How much is per visit? Maybe where was it a year ago? And maybe you don't want to guess as to where it's going to go.

But I guess I'm just trying to think about how that book has transitioned over time.

Speaker 2

So today, our PDGM like book is 12.7% of our home health revenue and per visit is 19 point 1%. I don't have a year ago, but I would say it was probably closer to maybe probably closer to half split fifty-fifty between the 2 and just moving more to the per visit side. I think that over time, actually, I think you're going to see new types of models come out of payment that may not get squarely into either 1 of these buckets, things like case rate and things like that, that could be actually an opportunity for us to want to take more of that business and actually do it at a better margin than we're getting today. So, and again, I think the catalyst is going to be the labor pressure that the industry is facing. That's not going to go away any time soon.

It's going to make it more and more challenging for these plans to get their members access to care in the home, which is going to drive up their total cost of care. So I think we're running into a spot here now where there's going to be some leverage and some genuine desire from both sides of the table to come to something that makes more sense. As we're thinking about this strategically, this is very interesting to us because we have Contessa, which takes risk. We are driving utilization management to a science with the Metalogix piece. We have high quality, so we know what sort of product we're delivering with incredible accuracy.

So we're clearly moving to a place where we can bet on ourselves. And by doing that, we can go to the plans and say you don't need utilization management when we can do all that for you.

Speaker 3

Yes. And 1 in our just to be clear, so I don't confuse anybody because I use a different terminology. But if you look at Page 6 on our slide, we got our revenue sources. You can see what we're referring to that PDGM like reimbursement, we refer to as private episodic. So private payers that pay us episodic and you can see the split on Page 6 for those who want to go back and take a look at it.

Speaker 0

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to Chairman and CEO, Paul Kusserow, for closing remarks.

Speaker 2

All right. Thank you very much, Alex, and thanks to everyone who joined us on our call today. I would also like to again thank all our caregivers who delivered yet another great quarter and year of results. I'd finally like to thank all of you on the phone and the webcast for your interest in Amedisys. As this is my last earnings call as CEO, as I am moving to the role of Chairman, I'd just like to say how proud, honored and humbled I am to have served and led this organization for the past 7.5 years.

It's been a life changing journey to serve our patients and employees. I believe the best time to transition leadership is when an organization has a clear idea of where it's going and a great strategy to get there when it's at its peak strength hitting on all cylinders, looking at problems and executing hard to make them opportunities. The team we have built is second to none and knows how to move our strategy to completion. I'm leaving you all in the very capable hands of Chris Gerard, who is 1 of the best operators I've ever seen. It is an exciting time to be at Amedisys.

Care in the home is the right space. We're the highest quality asset and I truly believe that the company we have built will lead, innovate and change how healthcare is delivered in the future. As you can tell, I'm beyond excited to continue to watch this story play out, albeit I'll be cheering on everyone from the stands. Please take care. Thanks for taking this journey with us and buckle up.

The best is yet to come. Godspeed to Amedisys.

Speaker 0

Thank you. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.