Greetings, ladies and gentlemen, and welcome to the Amedisys Q1 2021 Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Mr. Nick Muscato. Thank you. You may begin..

Thank you, operator, and welcome to the Amedisys investor conference call to discuss the results of the first quarter ended March 31, 2021. A copy of our press release, supplemental slides and related Form 8-K filing with the SEC are available on the Investor Relations page of our website.

Speaking on today's call from Amedisys will be Paul Kusserow, Chairman and Chief Executive Officer; Chris Gerard, President and Chief Operating Officer; Scott Ginn, Executive Vice President and Chief Financial Officer. And also joining us is Dave Kemmerly, 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 harbors of the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Amedisys today.

The company assumes no obligation 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-K, 10-Q and 8-K. In addition, as required by SEC Regulation G, a reconciliation of any non-GAAP measure mentioned during our call to the most comparable GAAP measure will be available in our Forms 10-K, 10-Q and 8-K. Thank you.

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

Thanks, Nick, and welcome to the Amedisys 2021 First Quarter Earnings Call. 2021 is off to a good start for Amedisys. And none of our performance this quarter would be possible without our 21,000-plus employees, whose unwavering commitment to providing the best care to our patients in their homes is nothing short of inspirational.

I want to thank every one of you for helping to deliver such strong results. Before I turn the call over to Chris and Scott to walk us through our performance this quarter, I want to review a few developments that have recently occurred. The poet who you heard instead of our usual music, T.S. Eliot, was wrong when he said April is the cruelest month.

April for Amedisys has turned out to be a very fortuitous month. First, on April 8, CMS issued its proposed rule to update hospice payment rates and the wage index for fiscal year 2022 effective for services provided beginning October 1, 2021. CMS estimates hospices serving Medicare beneficiaries will see a 2.3% increase in payments.

Based on our analysis of the proposed rule, we expect the impact on Amedisys to be in line with the 2.3% increase. We view the proposed rule very favorably as positive rate updates in our hospice line of business have provided a meaningful impact given our substantial top line growth and increase in size over the past few years.

We don't and we will not count our chickens before they're hatched. But when the proposed rule is finalized this summer, it will represent an incremental $6 million. Next, on April 13, Congress passed H.R.1868, which, among other provisions, extends the temporary suspension of Medicare sequestration through December 31, 2021.

We are updating guidance by $27 million to reflect the further suspension of sequestration. Also, on April 14, we announced that we signed a definitive agreement to acquire licenses that will allow us to conduct home health care operations in Randolph County, North Carolina.

This Certificate of Need purchase allows us to provide home health services within a 50-mile radius surrounding Randolph County, including the populist Montgomery County. The service area provides access to 31,000 Medicare and Medicare Advantage enrollees. We expect the transaction to close on April 30, 2021.

As we have said in the past, M&A is an important tool for us to continue to expand our geographies and market share, and we are continuing to look for more significant ways to deploy capital to grow inorganically throughout 2021.

While these are small deals, they increase our presence in strong markets, are geographically strategic and represent we are active and successful in the M&A market and expect to do more and bigger deals as the year progresses.

Finally, on Tuesday evening, we announced what we have previously referred to as an innovative SNF-at-home pilot with our partners at Sound Physicians, a leading physician partner to hospitals, health plans, physician groups and post-acute providers, seeking to transform outcomes for acute and post-acute episodes of care.

We are delighted to be working with such a high-quality partner and industry leader on this initiative. Our pilot is set to launch in May.

We will be focused on caring for higher-acuity patients, allowing them the option of being cared for in the home but with a more robust home-based care offering, including home health, telemedicine, personal care and other services focused on ADLs, activities of daily living; and SDOHs, social determinants of health.

We have two sites identified and ready and are working to locate 2 more. We are excited to test, learn, iterate and grow this important program, and we'll keep you updated on our progress in moving up the acuity scale. That's the main news for April.

So I'll turn the call over to our resident poet laureate, President and COO, Chris Gerard, for a run-through of our first quarter performance.

Chris, could you do this in iambic pentameter, please?.

quality, people, operational excellence and growth. Always first, quality. Even though CMS has frozen its Home Health Compare data until its January 2022 release, delivering the highest quality care is always at the top of our priority list. If we deliver the best quality, all good things will follow.

While this data is frozen, we have been using internal data sets from SHP to benchmark our performance. And I'm extremely proud of the progress we continue to make. In fact, as of our last internal benchmark, 316 of our 320 home health care centers are at or above 4 stars, which puts us at 99% of our care centers with 4 stars and above.

For perspective, in 2015, we averaged 3.2 stars. This performance is nothing short of amazing. This is a great proxy for how we -- our continued focus on quality is paying off. Congrats to the home health and clinical teams for such tremendous progress.

Much like home health, CMS has frozen the hospice compare reporting metrics and will resume reporting in 2022. We have historically outperformed the industry average on all hospice item set measures and continually strive to improve our performance. Next spring, CMS will publicly report hospice star scores.

They are currently collecting data for the initial release. Seeing this coming, we have been replicating our home health structure, analytics and reporting that has propelled our home health segment to best in class.

Our focus in preparation should set us up to perform well, and we look forward by having true public benchmarks and being at the top as we are in home health. Next, you can't have a great quality without having great people.

Keeping our people and helping them develop and grow is our next great challenge, and one that I'm personally energized by and committed to driving. As Paul has stated time and time again, we are a company of people. It takes time and effort to recruit our clinical staff who are in higher demand than ever.

When we do bring in top talent, it is our job to keep them fulfilled and productive. Further, RNs initiate nearly 90% of our revenue. So turnover within the RN clinical staff has a significant trickle-down effect throughout the organization.

I'm very proud of all the effort the entire organization has put behind this initiative and how quickly the results have come. I'm pleased to report that at the end of Q1, our total voluntary turnover was down to 15.9%, which is down from 19.5% in Q1 of 2020. Keep in mind, Q1 2020 was a pre-pandemic comp.

Making this kind of turnover improvement during the pandemic is really an amazing story. We saw reductions in clinical turnover nearly across the board in both home health and hospice and saw reductions in care center leadership turnover in both lines of business.

This is a phenomenal performance for the quarter, and we look forward to continue to improve our turnover statistics throughout this year. It's all about our people. Next is operational excellence. For the quarter, we performed 13.9 visits per episode, down 0.1 visits sequentially and 1.9 visits year-over-year.

We remain very comfortable with our VPE levels as we've seen strong increases in our quality scores. As a reminder, we consistently stated that we will never do anything to impact quality scores. And given our continued improvement in home health quality, along with our decreased visits per episode, we're delivering on that promise.

On clinical mix, in Q1, we achieved 47.6% LPN utilization and 52.5% PTA utilization. As visits per episode have come down, our ability to increase LPN utilization has become more challenging. However, there's still room for some improvement.

We also saw year-over-year productivity improvements in our home health clinical staff as our visits per FTE increased nearly 4%. Increased productivity, combined with decreased visits per episode, will increase our capacity, which will be key to our future growth opportunities. And finally, growth.

For the quarter in home health, we grew same-store total volume and admissions an impressive 6% and 5%, respectively. Our home health line of business has done a tremendous job growing through the pandemic and continued that strong momentum in the first quarter.

We did see significant weather disruption in our operations in February, which impacted our Medicare admit growth by about 1%. As a reminder, Q2 of 2020 was the most significantly impacted by COVID-19.

So we're expecting a large year-over-year growth number in Q2 '21 that will put us in line for our full year guided home health growth target of 9% total admissions. Moving to hospice. We saw increasingly strong same-store admit growth throughout 2020, reaching 15% in Q4.

Though our growth rate in Q1 '21 was 5%, our admissions increased sequentially, with 1 less working day and a significant weather event in mid-February. The severe weather caused unprecedented office closures, resulting in a lost opportunity of approximately 1% of admissions growth.

Additionally, COVID-19 impacted our admit volume in Q4 '20 and Q1 '21. Excluding the initial peak of the pandemic, we saw the highest volume of COVID admits in Q4 '20 at nearly 400 on a same-store basis. This number declined to less than 300 in Q1 '21, with 70% of those COVID admits occurring during January.

Keep in mind that these COVID admits, which were helping our net growth in the back half of 2020, were also negatively impacting our ADC, with length of stay in single digits in many cases.

As COVID admits decline, we continue to see improvements in median length of stay after reaching a low point in January of '21; and in our discharge rates, especially in our shorter length-of-stay patients, which will be beneficial to reaching our ADC target throughout the remainder of the year.

COVID-19 has also had an impact on our ability to hire and train hospice BD FTEs. However, as more and more of the population are vaccinated and COVID-19 restrictions are lifted, the pace at which we're able to increase our BD staff, roll out our training programs and get our reps in front of people is increasing.

And we're seeing more consistency in access to our referral sources. The increase in the head count, combined with the improvements in productivity and conversion rates, should both be catalysts for increase in admits in ADC as we move throughout the year.

Page 18 of our supplemental slide deck shows graphically how we're performing versus the forecasted plan. We normally are skeptical of hockey stick forecast, but the second half of 2021 should be just that.

In Personal Care, our network drove approximately $1.2 million in revenue to our home health and hospice segments, which is up 107% year-over-year. Small, but we still have plans in place, and we're working to drive more volume through the network.

We have also expanded our dialysis partnership in Massachusetts to include several Aging Services Access Point organizations, ASAPs for short. ASAPs are responsible for the reimbursing and overseeing of providers of Medicaid waiver services for Massachusetts Medicaid.

This reimbursement is a 3-way partnership between the ASAPs, Fresenius Medical Care and Amedisys to coordinate and execute dialysis-focused personal care services in the home for dialysis patients. Through this partnership, we have further refined our dialysis programming and services requirements.

The dialysis-focused personal care services will be performed by a supportive home health aide who has received specialized training to service the needs of a dialysis patient. This shows how we are progressing to prove that personal care is an essential element in care for the very sick patients in their homes.

And finally, as Paul mentioned, we signed an innovative pilot with Sound Physicians to provide a bundle of home-based care focused on higher-acuity patients that can be cared for in the home.

A key piece of this program will be utilizing personal care services to support activities of daily living and for economically providing more routine and consistent patient interventions. We will be utilizing our owned Personal Care assets for our initial pilot markets. And as we expand, our Personal Care network will be engaged.

While these pilots are initially small, they're a great representation of the new and innovative ways we're trying to use Personal Care. We view our Personal Care line of business as a service delivery incubator, and we'll continue to deploy Personal Care services in new and differentiating ways.

As you can see, we carry much of our core business positive momentum from 2020 into the first quarter. Our focus on clinical distinction, employer of choice, operational efficiency and growth continues to pay off financially, but more importantly, for our patients.

And 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.

Scott?.

revenue of $2.3 billion to $2.34 billion; adjusted EBITDA of $342 million to $352 million; and adjusted EPS of $6.85 to $7.07. The items to keep in mind as we move into Q2. We're still climbing out of our ADC decline from Q4. We're seeing an increase in access to patients in both facilities and their homes for our hospices aides and LPNs.

The impact is approximately $3 million quarterly as we return to our pre-COVID visit levels. We anticipate a sequential increase in health insurance and workers' compensation of $7 million to $8 million. I'll now turn the call back over to Paul to conclude.

Paul?.

Thanks, Scott. I love financial poetry in April. As you can see, we have delivered another strong quarter of performance in an ever-changing market. We vested our expectations and increased our guidance ranges.

We remain in a very advantageous position as demographic, psychographic, regulatory and operational tailwinds all point to a very exciting future. This ends our prepared remarks. Operator, please open the call for questions..

[Operator Instructions]. Our first question comes from the line of Brian Tanquilut with Jefferies..

Congrats. I guess my first question is for Scott.

Scott, as I think about the guidance adjustment, right, so you're only -- just to clarify, you're only adjusting for the sequester, but nothing has changed in terms of the assumptions in your Q2 to Q4 guidance despite the buyback or what seems to be an earlier-than-expected acceleration in kind of like the recovery pace at hospitals? Is that the right way to think about that?.

That's right, Brian. So yes, so we -- I'm only adjusting for the impact of sequestration, kind of sticking to our plan around waiting to get to Q2 to reassess guidance. So we're sticking with that. And I would say from the buyback, you're not seeing anything from an EPS impact perspective. I think a full year impact of that is somewhere around $0.02.

So it's minimal..

Got it. Okay. And then, Paul, I guess for you and Chris, so hospice turnaround, if you don't mind just walking us through what the action plan is. I know you have the guidance chart in your slide deck. But how are you thinking about operationalizing the turnaround there? And I guess I'll throw a second question.

Since from your Humana days, just thoughts on what they're doing there? How does it impact you now that they've brought Kindred at Home in-house?.

Sure. Chris, why don't you take on the seesawing we're seeing in hospice. I think it's beneficial seesawing. But we've been -- where we're focused most, just to preview a little bit about what Chris is saying, we're focused on ADC. That's very important for us.

And our length of stay, which bottomed out in January, this March is equal to last March pre-COVID. So we're feeling very good about that. But I'll let Chris describe the seesaw..

Yes. Brian, yes, you can only imagine what I go through every day. On hospice, what we saw is really kind of a big -- while this came through at the end of December, end of January related to the pandemic that we have a 15% admission growth in the ADC growth in Q4.

It came out of gates really strong with strong admission growth in January and saw some declines after that. And as we saw that most of that was either hospitals discharging or COVID-related patients as that moved off.

So the metrics we're watching very closely are really our median length of stay and our percent of patients that are on service for 14 days or less. The good news is, as you move through Q1, both of those numbers moved in a positive direction at a pace a little quicker than what we had in our internal model.

So -- and we hit the low point on median length of stay of 18 in January of this year, and that's compared to 27 in January of last year. So the signs there around kind of stabilization of length of stay are really positive and looking good.

Unfortunately, we just had a really disappointing admission month by our standards, and we have some work to do around that, mainly around making sure that we have the right number of feet on the street. We saw a little bit of a tick-up in turnover in Q1 from our sales team on hospice particularly that we got our arms around.

And now we have an aggressive kind of hard deploy plan that we're in the middle of right now that we should have done by the end of next month that makes me feel good that we'll be on track to be able to generate our committed numbers for 2021..

And Brian, in terms of the Humana acquisition of Kindred, it's great. I mean as an ex-Humana person, and I'm sitting with 3 Humana people in the room -- ex-Humana folks.

I think it's a validation of the idea that the payers, if they're going to be payviders are going to move into the home that managed care, particularly Medicare Advantage, which is growing at 4x the rate of fee for service is going to -- wants to be in the home.

That's where the demographics are going for the baby boomers that are signing up for Medicare Advantage 4:1. And so I think it's a very smart move for them. I think they're renaming it to Care Center or something like that. Anyway, but it's smart to be in home health.

As we saw when we were all there, when we got involved and started Humana at Home, we found that using home health for your sickest of your sick members works very, very well in terms of cost savings.

I think the interesting thing will be -- on that is whether -- it seems like they have good overlap with Kindred, whether all that Humana business will go to the Kindred folks, and then they'll think of cost savings versus generating revenues, if so, where we compete against Kindred, will that provide an opportunity for us if that capacity of Kindred has used up by Humana business if that means more fee-for-service business for us.

And I think one of the things we talked about is how high our quality scores are. So I think where we will compete -- I think it's a good sign for us. And we're good partners with them. We -- where Kindred isn't, we work with them.

It will be interesting to see what happens if they -- I guess they did announce they're spinning off hospice and personal care. So I think that commitment to home health is very good for a plan to do. And I think hospice should be not part of a payer. So it's all happy news for me..

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

With lower visits per episode right now partly because of Medalogix and your record low turnover, you do have increased capacity. And with the record referral source adds you've had over the last 12 months, we think we'd have even more demand.

So how do you make sure that, that increased capacity that you have is really being fully utilized and capturing all these new referral source opportunities?.

Well, first, Chris, do you want to take Matt through the incremental referrals we have and how -- and then the natural growth rates, I think that we described in our JPMorgan deck in January talks about the demographic growth.

So yes, capacity is going to be a significant issue for the entire industry, and that's one we're trying to get in front of by making sure we have very low turnover.

So yes, Chris, do you want to walk him through that?.

Yes. Yes. Thanks, Matt. So from a kind of growth in referral accounts, we added another 3,200 home health referring accounts in Q1. Those are accounts that did not refer business to us in the previous 12 months.

We have a strategy around that is, we're growing our BD sales force pretty aggressively on the home health side to be able to maintain those accounts and go deeper into those accounts. So we feel good about our strategy. It's one that we've been with for a while now, and it's definitely paid off.

I think another thing to look at is segmentation of our business on home health. And even with the growth that we're looking at right now, 5% in Q1, our senior living business, which I'm going to include skilled nursing and rehab in there as well as you know those, it's still down 20% year-over-year, but it's up 4% sequentially from Q4.

So we're starting to see that come back, and that's an opportunity for us that we should see as upside to utilize that capacity that you mentioned a while ago. So we still have room to grow there as those communities come back, that business comes back as well as the electives.

And we still have not seen those really get above 80% of pre-pandemic level. We're around 75% now. So we see those as 2 -- we see those as a couple of good signs, things to come as we continue on the strategy..

On Sound Physicians, it's kind of an interesting partnership there.

Is there anything that you can give us in terms of what does that kind of build tests iterate? What metrics are you tracking? And what ultimately do you want to provide versus eventually convene? And then is there sort of a time line in terms of an endpoint here for the pilot stage where you might make a call to expand more broadly and potentially with even other partners?.

personal care combined with home health, combined with telemedicine, transportation, diet, all these other things that we can provide. So I think the idea is as we move up the acuity scale, this is very important for us because it increases our addressable market tremendously, I mean, to start to work in higher acuity environments.

I think it's going to be more of the traditional things.

What can we do in terms of making sure readmissions are taken care of; med adherence, which often drives admissions; so the traditional things, quality outcomes, customer satisfaction; and then the cost per patient compared to what they would normally do if they referred it into an institutional setting.

So those are the pretty much the benchmarks that we put in front of us. I don't know, Scott's running innovation.

So Scott, did I miss any of the benchmarks?.

No. Paul, you've got them. I mean, Matt, it's going to be mostly around readmission. That's where all the cost is. So it's better for the patient. How many days can we keep them in the home, keep that number of days up. And then patient satisfaction will be huge at the end of the day.

So I think some of the normal items we talk about, and then we'll be able to measure that from a financial perspective..

Yes. I mean, Matt, a lot of this is -- we're jumping in with Sound, a great partner. We set up some benchmarks. Again, our job is to deliver them the value that they need in the process of doing this, but then to iterate, iterate, iterate until we build a methodology that we're really successful with. We overlap in 30-plus areas with Sound.

Obviously, Sound's associated with United. So there's some really good opportunities to expand beyond this, particularly with our friends at United..

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

Just first -- and I appreciate the comments about the elective business and where that stands.

But if you think broadly about what the business looked like pre-pandemic and where you're at now -- I know you've picked up COVID patients, and I know there's been some shifting in the referrals that may have come from SNFs that are coming direct -- or may have come from hospitals to SNFs to you, that are now coming directly to you.

But do you have a sense of where the rebound in your professional business is, how much below baseline or par or whatever you want to call it, you're still running? So how much is there to still potentially catch up?.

Yes. Chris should address that. But it's a good question, A.J. I mean we still won't share where we've been. Clearly, in the SNF area, we've stolen share to -- because it's not equal to the decline.

So -- but Chris, do you want to talk about where we see things in terms of percentage of growth pre-pandemic versus post?.

Yes. A.J., I would say the physician business is back ahead of pre-pandemic levels and growing, partly because the market is back and partly because we're also growing our base of physician referrals pretty significantly. Hospitals are fully back as well.

So what we do think will happen with hospitals is, as electives are starting to move more to ambulatory surgery centers, they're going to fill those beds with other kind of medsurg patients and other types of patients that could create some incremental upside opportunity where we have very strong hospital relationships. So excited about that.

When I talk about the skilled nursing and rehab and senior living community, again, that is down almost 20% year-over-year, 19.6% to be exact for Q1. And that business makes up about 18% of our admission mix. So where we see the opportunities is that -- and we don't feel like we've lost share in those, we actually feel like we've taken share in those.

So getting back to pre-pandemic levels and beyond in those markets is where I would expect to see significant growth opportunity..

Okay. Great. And maybe just quickly on the M&A front. I know that remains a priority for you. And I think coming into the year, you talked about potentially $300 million to $350 million spent on acquisitions, so was the target. We've got sequestration that may stretch things out a little bit.

We've seen a couple of deals, small regional deals done by other players that were north of 2x revenue.

Can you tell us what you're seeing in terms of pricing, and whether you think things like the sequestration move will delay a little bit the rebuilding of the acquisition activity?.

Yes. A.J., I think the -- on the M&A front -- and I'll have Scott talk about the pipeline because we're feeling very good about the pipeline. And I think a CON in North Carolina is not where we are going to end the year. So we have a pretty good pipeline, largely proactive.

The pricing on the deals that we've seen out there from some of our competitors has been perplexing for particularly the assets that they're acquiring. So we're going to continue along being highly proactive going after high-quality assets at reasonable prices.

Have we seen the prices move up in home health? A little but not crazy; hospice, crazy in some of the last deals that have been done. But I think there's a move for a lot of people to try to get home health and hospice, if they're going public or if they're doing a SPAC or something like that, to get that on their books.

And so we feel that that's causing some inflation out there, particularly with some of the assets that -- we've seen a lot of these assets before.

I don't know, Scott, do you want to talk a bit about how we're doing on the pipe and using up some of the capital we're generating?.

Yes. A.J., so we feel good about the pipe that's out there. As we've talked about, our focus has been home health. So we've got a lot of those out there. And I think you're right on. I think the sequestration has made it. You're not seeing the incoming, and I do think that delays that.

But really from our assessment, we'll still be active in pushing for those areas we identify from a geography perspective we want to be in and the targets that we've laid out. So we certainly go different routes, while wait for processes to start and try to head some of these off.

So feel good about where we are, and we'll continue to push and looking to be successful as we move through the rest of the year from an M&A perspective..

Yes. A.J., I don't think I answered your question specifically. But I do think the delay of sequestration will delay roll-up opportunities with mom-and-pop industries, not the midsized to larger deals that are out there. So I do think the roll-up opportunities will be delayed until sequestration gets reimplemented..

[Operator Instructions]. Our next question comes from the line of Joanna Gajuk with Bank of America..

So can I still have a follow-up, a short one? First on the visits per episode. You talked about the reductions there. I want to say that previously, you talked about the first thing this reduction in visits per episode.

And I guess, when do you expect this to happen? And what is kind of the target foot for the year in terms of visits per episode?.

Sure. Before Chris jumps in with the specific numbers, the one thing I'll say is, while the visits per episode did go down out of our home health, in home health, 320 care centers, 316, 99% of them were 4 stars and above. So what we always -- the first thing we always look is to make sure that our quality is sustained.

Actually, our quality, in concert with reducing some of these visits per episode, were actually increased. So that, to me, is something that I'm really proud of what we've done as a company. I'll let Chris talk about the specifics..

Yes. So from 13.9 for Q1, a little bit less than what we had kind of modeled out. We modeled out that we'd be about 14.5 for the full year. We did expect a ramp as the year went on to get to that 14.5.

I do feel like Q1 was a little impacted by the pandemic, particularly around nurses on quarantine as well as access to facilities, both of which are much better shaped today than they were earlier in Q1. Where I think we'll land for the year will be around -- in the low 14s, around 14.25, could get up to 14.5.

I think we'll exit the year closer to 14.5 than where we are right now as we get into more of a normalized environment. Medalogix data suggest that's where we should be. So I wouldn't anticipate it going down any further. And I'd look at it as around 14.25 range..

Okay. That's helpful. And my question was on topic, which we didn't get to yet in terms of the Medicare Advantage plans and I guess the pricing or the rates in the home health business.

Can you kind of talk about any updates there in terms of closing the gap on the rates, the increasing penetration, I guess, of this more at-risk or value-based-type structures with MA plans?.

Chris, that's you all what you do there..

Yes. Yes. It's still more the same story. Nothing kind of we're breaking -- groundbreaking in the last quarter. We had a couple of contracts continue to renew. And we're able to typically get a reasonable kind of rate update, but still a significant gap from a Medicare fee for service basis.

The name of the game still remains pay us a more fair per-visit rate, but also give us some upside that we have to go earn based on quality metrics. The appetite in the plans for doing that is very strong. So we're able to be -- pretty much any renewal or new contracts we're bringing in has that component.

But unfortunately, still significant gap from the actual blended net revenue per visit and what we would get in an episodic world, particularly since we're seeing our visits per episode come down. That's driving up the revenue per visit by pure math, with our revenues per episode being up as well.

So the gap is not getting any more -- any narrow, but we are getting more rate -- better rate from the plans, but nothing -- it's nominal, it's not significant..

And I think that's going to change, Joanna, over the years as the higher quality folks -- as the plans desire to work with the higher quality folks and some of the conveners are pressured that have been acquired. Some of the conveners are pressured to contract with higher quality folks to get better outcomes. There will be a capacity limitation.

So with capacity limitations, there's going to be price increases. So I think we're in good shape. Again, if we just focus on the quality, on delivering what the plans really like, which is high-quality readmissions reductions; other metrics which show that we can deliver very good outcomes for them.

We're going to continue to try to go at risk and continue to try to make sure that we get paid extra. Right now, it's about $125 average rate on a Medicare Advantage versus about $165 on fee-for-service. But the risk portion is increasing. Yes, we're looking at about 25% risk based on our MA book of business..

Our next question comes from the line of John Ransom with Raymond James..

So my question is just kind of on the market share gains. Just trying to -- if we think about the totality of volumes versus the disconnect with your volume growth, I mean, that's at least 10 points of share gain. But kind of -- maybe, Scott, you can sort of help me with that math.

I mean how do we triangulate between electives down 25%, some offset other sources, but then your 5% organic growth? How should we think about market share gains in 1Q using that math?.

Yes. John, I mean, I haven't really -- I think, Chris, you kind of backed through some of those in your thought process. But I mean I think as electives move, we're always going to fall behind that a little bit, I think from what's going to come to us perspective. But Chris, I don't know if you have some specific perspective on where you see that..

adding the reps, adding the referral sources, making sure that we're selling on quality. Really haven't paid attention to what's happening around us with our competitors, but we think that there's going to be significant upside as we move through this year..

Yes. And I think what you're trying to smoke us out on, John, which is smart, is the -- is where the bounce is bigger than what we're saying. And yes, I think it is. I think we've stolen a lot more share than we really have tried to calculate. And also, I think we're following the business better than most.

There's a lot going with ASCs, for example, a lot of these places. So that's getting involved with the bundlers. That's being as facile as we can to try to figure out where the business is. It's like whack-a-mole -- COVID has been like whack-a-mole. And I think we've been fairly adept at moving around figuring out where the business is.

We still have some work to do in terms of our value proposition on some of these places, but I think we're learning..

I mean my editorial comment is I never really understood 28 days in a nursing home for a total joint rehab versus a couple of home health episodes at 1/3 the cost or more. So -- but that -- I guess I take the pandemic to sort of make that more obvious to people.

My second question is as we look at '22, there's some comparison difficulties with respect to the sequester perhaps going away and the fact you'll be lapping these big Medalogix staffing gains.

So how are you guys thinking about -- I mean there's the obvious answer of M&A, but is there any other -- how else is the team thinking about trying to not have a big air pocket as we look forward?.

Scott, do you want to take that one?.

Yes. I'll just kind of -- you're right about that. Sequestration right now, John, a full year, that's roughly $36 million. So you got to think, as we walk into next year, we've got to deal with that issue.

I mean, I think for us, from a good -- and then the PDGM gains, you saw us really -- first, we'll see good year-over-year comps in the first half of the year, but then we'll get to a normal pattern. So some of those levers will have run its course at that point in time.

I think then you look for -- I think how we built this model, you'll see continued accelerated growth on our acquisitions. I think that's what will help give us juice into 2022. And then we'll continue to try to pour into some more M&A. I think that's kind of -- we'll follow rates closely.

I think productivity around our clinicians, as we get that right, I think that certainly will be helpful for us. I think we have some few levers there as we get more our staffing versus contractors. But yes, I think that's some of the difficulties in moving into next year..

Our next question comes from the line of Frank Morgan with RBC Capital Markets..

I wanted to go back, you had talked about business development turnover and not being able to reach your targets for growth there.

I'm just curious, is that -- what side of the business is that more prevalent? Is it on the home health care side or the hospice side? Or is it both? And then do you see a -- when I think about turnover, I always think more on the clinical side, but just maybe an update there.

And then finally, just on the -- some of the things that are slowing down the pace of the roll-up in home health care. I would have thought with the RAP kicking in this year, the elimination, maybe that would be a bigger influence. But do you think that's more than offset by the effect of this pushout of the sequestration? That's it..

Yes. The no-pay RAC, I think, is quite severe. I think, again, Scott showed how we've come through that. We were anticipating it would be a 5-day increase in DSOs, but it turned out to be, I think, 3.7. So I think we performed very well against that. I think the industry is working very -- we're seeing mixed results out in the industry.

I don't know, Scott, anything on that?.

No. I think that's right. I mean, I think we've done well on it, but I still think that prop up in sequestration, depending how funded, you still have some CARES Act dollars. You got those funds in your pocket right now. So I feel that makes it more challenging, and it gives them the ability to kind of withstand that RAP hit early in this year.

So we think it still shakes out, but I think it makes it a little bit more difficult..

Yes. And I'd say on the BD side, I'll let Chris talk a bit about it. But on the BD side, it's hospice. We lost some people in hospice due to the transition in COVID, and we're going to make that up. I think Chris mentioned, we'll make that up by May -- end of May. And turnover with BD is generally pretty good.

We've -- but we've reduced our turnover so much that we're going to take it to BD.

So Chris, any comments in terms of how fast the buildup and then what that's going to do for an admits and then ADC growth get us back on track?.

Yes. Yes. So Frank, we got up to about a 10% vacancy rate on the hospice side. This is clearly a hospice issue. Home health is about 2.2%. So we're in good shape there. And it was a combination of the turnover kind of spiked on us in Q1.

And we had a couple of fairly sizable regions that had some leadership vacancies that have since been addressed and filled and onboarded. So I'm really comfortable there. Focus on driving down that turnover has been a little bit of a shift for us over the last couple of months.

And we've increased our resources around hiring and bringing in new BD reps. So I think we'll be getting us back on track relatively soon, just as we get the hires and get them out in the field and deployed. Back to your clinical question.

We're proud of how this organization has responded to the clinical turnover, and we've driven that down significantly. And again, our nursing turnover was in the high 20% range, 29%, I believe, for last year. And we drove that down in Q1 to around 20%, which was a great feat for this organization, and we're continuing to drive it down even further.

And as I mentioned in my prepared remarks, our total turnover for Q1, 15.9%, which is a real good sign that we're focusing on the right things, and we're retaining our good people..

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

So just quickly, with -- can you talk a little bit about your thoughts on the competitive landscape with some of the strategic activity going on? And then in terms of ability to grow in home health, it sounds like it's more of a demand issue than a supply issue, just in terms of like the electives and the institutional stuff coming back versus being able to staff up.

Is that kind of a fair characterization?.

Yes. I'd say -- on your latter part of your question, I'd say it's going to be a supply issue. It's getting to be a supply issue in certain of our regions.

So again, I think our -- we saw what's well ahead on the road, which is if we don't have the excellent clinical staff and productive clinical staff, we are seeing -- we don't think we'll be able to keep up or certainly post the growth that we're anticipating to post this year and next year and actually for the next 5 years.

So it's largely going to be a supply issue, and that's why we're so focused on turnover. From a competitive landscape perspective, my guess is you're referring to probably HCA's acquisition of Brookdale and then Humana's buying out of the Kindred asset.

Yes, I think, in a lot of ways, it's a validation of the fact that things are moving into the home that, particularly with the demographics that are out there with the baby boomers, we're seeing very, very strong demand for -- and the plans are telling us there's very, very strong demand to provide home-based care.

So I think you've got 2 of the most respected players out there basically validating what we all know that things are moving into the home. So I don't -- I'm not particularly worried about any of the competitive issues there. There's -- as you know, it's a highly fragmented industry in both home health, hospice, personal care, palliative care.

And I think quality is going to win. And I think also being able to execute and have capacity to supply services is going to be the winner there. So I'm not particularly concerned about what these 2 folks might come up with.

And I think integration and figuring out how these folks integrate with their core companies will be something that will probably take a little while to occur. And we'll keep doing what we do every day and getting better and better and better..

Okay. Yes, supply issue. And then just on kind of the labor dynamics.

Is that -- has that pressure eased at all more recently versus kind of what you saw early in the quarter? And then lastly, just any notable kind of swing factors as we move from 1Q to 2Q?.

I'd say from a labor perspective, we don't see -- we see it in urban pockets, but we don't see labor inflation, except for contractor, which is again a capacity issue. That's where we -- when we had COVID -- heavy COVID admissions going through that, we had to go to contractors.

But in general, that's why we're focused so much on our -- fundamentally, we're a human capital management organization, and we have to make sure that we have enough people to supply the market with what the market is demanding.

And we can't get caught in -- but we don't see the market being inflated like you're seeing in the hospital side of the business. Again, when you have high quality, it's -- sorry, I'm sounding like a broken record. You have high quality, 99% 4 stars and above, people want to come and work for you.

All things being equal, they want to go to an employer that delivers high quality, that will not compromise on quality, that will do the right things for the patient and do the right things for the employee.

And therefore, we don't seem to have big problems with recruiting, as I said, except there's some urban pockets that -- where it's just tough for everybody. I have actually my head of HR here, who's in charge of it.

So did I get that right?.

Yes. You did..

Okay. Good. Sharon gave me the thumbs up.

Chris, I missed anything on labor?.

No. You got it all..

Okay. We're good..

Our next question comes from the line of Steven Valiquette with Barclays..

So you touched on this a little bit, but maybe just tying a lot of talking points together.

Yes, when we do think about the 9% home health same-store admissions growth guidance for '21 that's unchanged, you mentioned the last quarter around the seasonal trend that 1Q could be a little bit softer; 2Q, the strongest with the easiest comp; and then 3Q and 4Q, I guess, relatively in line with that full year guidance.

And staged result coming in at 5% to 6% growth of 1Q seems to correlate with that, but I just want to confirm whether you're viewing it that same way.

And are you feeling just better or slightly more cautious around that 9% in either direction based on everything we talked about on this call? Maybe the same sort of summary question just on hospice and Personal Care, too, just on the key metrics.

So for hospice, the 18% number there, are you feeling better or worse or about the same? And the same thing on the 10% billable hours on Personal Care, just to summarize all that..

Yes. We balance hospice with ADC. ADC is our most important number. And since Chris is responsible for the numbers and runs the businesses, I'll let him answer. But we feel comfortable in general, unless Chris can say otherwise.

Chris?.

Yes. So going in line with your questions on home health, I would say, we feel slightly better than going into the year based on the first quarter, just kind of how things are shaping up.

And a lot of this is going to be dependent upon some of the senior living coming back and us taking our share in that area as well and just continuing to action on our plan. So I feel strong about the 9%, it could come in better than that, but I feel good about that.

On the hospice side, I'll say I feel better about the 8% of ADC growth than I do 18% admission growth just given the soft Q1 and a little bit of a lap that I've got to build -- we've got to build up here in Q2. But I think we will get it on track, the 8%. We're getting the tailwinds of the -- length of stay coming back faster than we had modeled.

But I feel like we're going to have a really strong exit second half of the year and going into 2022. And we should be able to deliver kind of our financial commitments on the hospice side. I feel pretty good about that. On the Personal Care side, that one, we really continue to struggle to grow that business.

And it has been -- it has the most lingering effects of the pandemic because even when the pandemic is gone, you still have labor issues at that wage level. So a good example is that stimulus checks went out last month, our turnover spiked and our number of new applications dropped significantly.

So as you have a difficult labor market -- and most of our business is in Massachusetts, which is also little bit of a difficult labor state. We still got some headwinds. We got to work through to be able to get to where we're growing our caregivers. As soon as we can grow our caregiver base, we will be on a growth trajectory for the business.

So I still look at the second half kind of momentum there, still working through some challenges today, which is kind of access to caregivers..

Yes. And I guess just -- I'll add a comment, Steve, to that on Personal Care. I'm so happy to be in personal care. We're in a tough state, Massachusetts. We do mainly Medicaid.

But the fact that we're able to use personal care and show that we can drive home-based dialysis, the fact that we're using Personal Care -- our Personal Care assets with our partnership with Sound Physicians in the SNF-at-home project is something that's fantastic.

The fact that we're building a network of Personal Care assets is something, again, that provides national coverage. And that's growing nicely, although we want to grow it faster. That's something I'm real proud of. And we're learning every day in the business. So -- and it's a very small business. As you know, it's about an $80 million business.

But I think doing all that, we're learning just about the combination of all these services and how, when you put them together, they can be really beneficial to patients and provide tremendous value along the care continuum. So I think that we're very committed to the Personal Care business, particularly in an innovative way.

So that's what I'd say on that..

Jen, do we have anyone else in queue?.

Should I start reading T.S.

Eliot, Jen? Are we off?.

No.

Operator, are you there?.

I think we have two more questions in the queue..

So guys in queue, we apologize for the technical difficulties. We're going to call it..

Yes. I think we're going to -- I think we'll call it, and we've got 2 folks. I think John had a circle around and then Bill was in the queue. So we'll call you right up afterwards. We apologize for this. We shouldn't have this happen. But I want to -- thanks to everyone who joined us on this call today.

Like to thank again our incredible employees who delivered all this great value and wonderful results. Please keep doing what you're doing, take care of the great people, our patients who need us the most.

We hope that everyone has a wonderful day, and we look forward to updating you on our ever-evolving progress and purposeful work on our next quarterly earnings call in July. Until then, have a wonderful day, and we look forward to talking to you as we progress. Take care. Bye..