Greetings and welcome to the Amedisys Q2 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nick Muscato. Thank you, Nick. You may begin..

Thank you, operator and welcome to the Amedisys investor conference call to discuss the results of the second quarter ended June 30, 2021. A copy of our press release, supplemental slides and related Form 8-K filing with the SEC are available on our Investor Relations page on 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; and Scott Ginn, Executive Vice President and Chief Financial Officer. 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 Harbor 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 today to the most comparable GAAP measure will also 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 second quarter earnings call. We have a lot to discuss on today’s call.

But before we dive in, I want to express my sincerest appreciation to all 21,000 Amedisys employees that have helped navigate the company through an operating environment unlike any other in history over the course of the last 16 months. COVID has changed how we do business, impacted us all and continues to threaten us with the surging Delta variant.

It has been and still is all-hands-on-deck. And all along, our indefatigable and undaunted caregivers have been on the front lines, providing the industry’s highest-quality care to the nation’s most frail population. Financial results are important of course, but our first priority is always patient care.

I don’t want anyone to lose sight of just how heroic these efforts have been. And even though COVID is an obstacle we are dealing with daily, your unrelenting quest to care for your patients has always been truly awe-inspiring. Thank you for all that you do. I’m extremely proud of what this company does everyday.

With that, I will dive right into a few developments that have taken place over the course of the second quarter, and then I’ll turn it over to Chris Gerard to walk us through the second quarter operational update. Since our last call, there has been a flurry of activity, highlighted by the signing and closing of Contessa.

I am happy to announce that the deal closed August 1 and I want to take a moment to welcome all of the Contessa associates to the Amedisys family.

The leader in its space, Contessa is a risk-bearing, tech-enabled, hospital-at-home and SNF-at-home platform, one that Amedisys will continue to invest in for future growth in Contessa’s current lines of business but also for new growth into the new areas of care in the home, such as palliative care, primary care, and expanding their technology base to allow for even more and new cross-functional risk arrangements across the home health spectrum.

Contessa also adds significant capabilities to Amedisys, such as a new Medicare Advantage-focused claims payment and risk analytics platform.

Other strategic benefits from this acquisition include the addition of higher-acuity home-based care to our current service level offering, allowing Amedisys to create the premier home-based health system with the broadest reach in the industry.

It also brings significant expansion of Amedisys’ total addressable market, the TAM, of in-home care services from $44 billion to $73 billion. But more importantly, this allows us to deliver more care to a broader spectrum of people in their homes.

It also expands Amedisys home health and hospice’s MA pipeline to include new or enhanced joint ventures and acquisitions with partner health systems.

It accelerates admissions, expansions and growth opportunities for our core Amedisys home health and hospice businesses to seek care coordination and preferred provider arrangements with current and future hospital-at-home and SNF-at-home hospital partners.

We are thrilled to get this deal closed, and we’re already working hard to capitalize on the tremendous growth and new frontier opportunities for Amedisys and Contessa. On the legislative front, on June 28, 2021, CMS issued the 2022 proposed rule for Medicare home health providers.

CMS estimates that the proposed rule will result in a 1.7% increase in payments. Based on our preliminary analysis of the proposed rule, we expect our impact to be slightly higher than the industry average.

The proposed rule also provides for the expansion of the home health value-based purchasing model to all 50 states beginning January 1, 2022, with calendar year 2022 being the first performance year and calendar year 2024 the first payment year, with a proposed maximum payment adjustment or penalty of 5%.

We are pleased to see the nationwide expansion of VBP. Given our top-ranked composite STARS of 4.33 and that over 99% of our care centers have a STARS score of 4 or better and our advocacy of these – of efforts with CMMI for 2 years, we are excited that CMS announced this expansion of VBP.

Also, on July 29, CMS issued the final payment rule for Medicare hospice providers for the fiscal year 2022, effective for services provided beginning October 1, 2021. CMS estimates that the final rule will result in a 2% increase in payments to hospice providers. We expect the Amedisys-specific impact to be in line with the industry.

As you can see, a lot has transpired throughout the second quarter, and externally, within our business. I will now turn the call over to Chris Gerard to give us a rundown of our operational performance during the quarter and our projections for the year ahead.

Chris?.

hiring BD staff and retaining those we hire. If that sounds familiar, it should, as it is nearly the exact same strategy we put in place to grow our home health business in 2017 and had delivered the results we see today. The strategy is not overly complicated, but it works. We have proven that in the past. So here is what we are doing.

We are going back to our basic strategy that saw our hospice segment double its ADC organically from 2015 to 2019. We have added to our recruiting staff and have a team focused 100% on recruiting hospice BD team members. And though it has come later in the quarter, we made progress in ramping up our BD FTEs.

We have invested in the hospice BD leadership structure, adding VPs to BD, AVPs to BD and field trainers to help provide oversight and drive rep retention and productivity growth.

We are set to pilot new quality and growth tools in the field, including the Medalogix’s Bridge program, which identifies patients currently in home health that may be in need of hospice; and Medalogix’s Muse program, which will give our referral sources better insight into the quality of care we provide our patients.

And as we continue to move our BD leadership and BD staff back into the field, we will return to in-person trainings and ride-alongs. This in-person on-the-job training was lost during COVID as we moved to a virtual environment, and it will surely pay dividends as we have numerous VBD reps, many of whom have yet to meet their manager in-person.

It is time for us to rebuild our community and hospice heart philosophy, which were impacted during the pandemic. Again, there is nothing overly complicated here, but all of these activities will result in stronger growth through the remainder of the year.

We have a plan, have what we can control internally identified and we will execute and deliver on the levers you see today. Now with that, I will turn it over to Scott, who will take us through a more detailed review of our financial performance in the quarter and our projections for the remainder of the year.

Scott?.

adjusted revenue of $2.24 billion to $2.26 billion, adjusted EBITDA of $301 million to $308 million, adjusted EPS of $6.03 to $6.18. Our performance in the first half of 2021 produced strong EBITDA and expanded margins, and though hospice growth was behind our projections, we were confident in our outlook.

Given the recent surges in COVID-19, difficulties growing our BD staff in Q2 and uncertainty around how states, facilities and referral sources react, we feel it prudent to adjust our 2021 guidance ranges down.

The key drivers of the reduction in guidance are primarily reduction in our second half hospice admit and ADC growth, continued need for the utilization of contractors and higher health costs. Throughout 2020 and into 2021, we have been mindful of our need to deliver results and we have managed costs aggressively after facing top line pressures.

However, with our recent acquisition activity, we still believe that there is a significant opportunity to grow our hospice segment, which has required us to invest in leadership and continue to hire clinical employees to support this future growth.

Accordingly, and given that our hospice growth disruption has been isolated and turnover in hiring is not a systematic issue, we’re committed to staffing our hospice segment for this growth opportunity despite the impact in near-term margins.

COVID-19 has impacted the operating metrics typically used to forecast both growth and cost assumptions for both core Amedisys and Contessa. We are basing our guidance on our current operating environment. COVID-19 continues to evolve in both the disease itself as well as disruptions to the healthcare systems and the economy.

Any future regulations or government interventions, spiking clinicians and BD staff on quarantine, reduction in elective procedures, change in patient behavior and further decline in senior living occupancy could impact our ability to achieve this guidance. I’ll now turn the call back over to Paul to conclude.

Paul?.

BD turnover and hiring. We’ve developed action plans and assigned accountability to deliver these results. We are confident in our ability to deliver our second half 2021 numbers, and hopefully, beyond.

In parallel, we will use our new services via the Contessa acquisition to further propel us on our path to risk and solidify our very advantageous position. We have work to do. We have made promises upon which we will deliver. We are motivated, excited and committed to achieving our goals. We have a good strategy, and we’re sticking to it.

This ends our prepared remarks. Operator, please open the call for questions..

Thank you. [Operator Instructions] Thank you. Our first question comes from Brian Tanquilut with Jefferies. Please proceed with your question..

Hey, Brian..

Hi, good morning guys. I guess for Paul, as I think about your home health business, your home nursing business did pretty well during the quarter, 20% organic growth, but obviously, challenges in hospice.

Where do you sit today? How are you thinking about the long – getting past 2021, how are you thinking about the sustainable growth rate or kind of if we’re looking at an EBITDA growth outlook for, say, the next 2 to 3 years, how does that look today given everything that’s changed and all the moving parts in the business?.

one, hiring more people; two, retaining better people just in BD. I think we’re performing really well clinically and really well operationally. So I isolate our problem to just the area of BD growth, and that seems to be looking better. The other thing is we have, due to the acquisitions, some low ADC hospices. We have 54.

We’ve identified these 54 as places where we’re going to have to really dig in, get the ADC up so that we can get the economics in place. So in general, we’re still looking at hospice growth, in general, at between 6% and 7% CAGR for the next 5 to 7 years. So it’s a great business. We love the business. We provide extraordinarily good care.

We run the businesses well. The problem has been our growth has been obviously erratic in Q2, and that’s going to play throughout the year. 2022, I’d say, looks a lot better; and 2023, obviously, much, much better.

I don’t know, Scott, anything you want to correct me on?.

No. I think you’ve hit it. I mean I think our ability to continue to grow EBITDA we are very comfortable with that. I mean I think that, certainly, when you look at our acquisitions in CCH with – absent COVID, it’s probably a little behind where we wanted to be, but it’s really performing extremely well. So is AseraCare.

I mean we had great growth there, great growth in our, as we talked about, in our home health business, like 20% admit volumes. We hit 21 Medicare admits. So all of that’s exceedingly strong. We continue to push on that, and we will get some nice numbers into next year. We just got to rebuild in the back half here from an ADC perspective..

And we expect to do that by the end of this year..

Got it. And then I guess for Chris, you touched a little bit on the action plan.

But maybe just if you can give us your perspective on kind of like the cadence of some of these moves that you’re making in terms of when we will see some of the benefits as it relates to the ADC and kind of like what metrics you’re looking at to say, okay, we are hitting the goals to get back on track.

Just a little more detail on the action plan to turn the business around and also keep the growth healthy on the home nursing side?.

Sure. Yes. Hi, Brian, in terms of some of the metrics we look at, obviously, sales calls drive referrals, which drives admits. And sales calls is a function of the productivity of your sales reps.

So as we’ve been very clear, it takes a certain number of reps out making the right number of calls to the right accounts to generate the phone ringing that turns into admissions. We identified coming out of Q1 into Q2 that we were behind in our FTEs.

A little bit of that was because we had such a strong Q4, and actually, first part of Q1, we were seeing great productivity out of our reps, but most of that was kind of inflated due to the pandemic and COVID-related admits.

So our target and our goal was to really grow the BD force in Q2 going into Q3, and then to kind of getting on track for Q3 and Q4. We carried 476 into the year. We carried 480 into Q2, expecting to grow that significantly. But we only exited Q2 going into Q3 at 490, which was a disappointment for us.

So the driving factors there was a spike in our turnover – our BD turnover, and Paul kind of mentioned some of the things that was driving that, as well as us making sure that we’re getting enough new hires. I’m happy to say that now we’re making real strong progress, 505 today and growing. And turnover has ticked down since our peak in May.

So what I watch every day is kind of how we’re doing in terms of bringing our reps on and maintaining our reps and growing that force. And if you think about – right now, today, 25% of our reps have been here 6 months or less. 41% have been here less than 1 year. Those are the formative periods for reps and productivity.

So as we age those deeper into tenure, we should see additional pickup, and that should actually add to the overall productivity of our reps. So our goal is in this year, well over 530, maybe even up to 550. The pace we’re on, we can hit that.

And making sure we’re adding them in the right markets, and that should generate the referrals, and hence, the admits that we need to be on track. Sequentially, I just – I’d paid off back half of the year like this.

I think you’ll see sequential ADC improvement in Q3 over Q2, but flat to negative – slightly down if we hit our internal goals for Q3, but impressive admit and ADC growth in Q4 going into 2022.

And just keep in mind that, that admit growth that we should generate in Q4, which I think will be respectable, relatively speaking, is going to be against a heavily inflated Q4 comp from last year when we had 400 COVID-related admits that we don’t expect to get, but depending on the Delta variant, it could happen again.

But – so I’m encouraged by how we’re going to end this year, how we’re going to basically move through the second half. I’m confident in the plan. It’s just now a matter of just basically every day executing on it..

Awesome. Thank you..

Thanks, Brian..

Thank you. Our next question comes from Matt Larew with William Blair. Please proceed with your question..

Hi, Matt..

Hi, good morning. Scott, I was hoping maybe with the EBITDA guidance we set here for 2021, if you could just kind of remind us or help walk us through the moving parts for 2022.

Obviously, just with sequester coming back, the hospice dynamic you’ve discussed, Contessa in play, it might just be helpful, at least for me, to kind of hear what you’re seeing as the moving pieces for ‘22?.

Yes. I mean we can always – we will start with kind of top line reimbursement, which always drives everything there for 2022 as we move forward. I mean right now, we expect sequestration to go away, which – we will see what happens. We were surprised that it was extended during this year. So we will see.

Right now, on the surface, we’re looking to get a – somewhere around a 2% rate increase here in hospice effective October. So that’s going to be a positive. The home health rule that came out is not final, is around 1.7%. Our internal modeling kind of puts us close to around a 2% number. We will see once that gets finalized.

So I mean that’s certainly the big drivers for us. I think as we move into next year, the continued development around our hospice – this ADC issue will certainly help. I mean the comps should be favorable for us around there.

So it will give us some expansion because, as I’ve said in my prepared comments, we’ve added cost to that segment in order to really get the growth out of it. So you will be seeing some ability to expand some margins around that. Home health is in great shape. So I feel good about us. It’s going to be a growth story, and the growth looks strong there.

PDGM, we’ve done very well. So there is not a lot of expansion coming out of that. I think the opportunities in home health are going to be get our staffing right. We’ve made good hires.

I mean part of our pressure on cost per visit right now is new hire pay, which has added about $2, which you’re not seeing in those numbers because we’ve really done great within our LP and RN mix, which has offset some of that with – even given raises.

So the opportunity that we will get those new hires productive and pull down that contractor pay, which is running at – right now, at a year-over-year about a $4 million additional clip. So that’s going to help us there upfront. So I think those are the key drivers. I think our cost structure is built out.

So we will be mindful of G&A so that it’s going to come back down the top line growth. And we think that once we get this hospice right-sized, then we will continue to push on the home health side as well..

Okay. And then just on home health, obviously, the strong performance in the quarter. Just curious now as some of the CARES – stimulus support to smaller providers is starting to reverse.

Either from an organic perspective, curious what you’re seeing out there, share taking or the ability to hire folks? And then just from an M&A perspective, what the pipeline either you’re hearing about or seeing as?.

Yes. I’ll take the piece on the pipeline and let Chris kind of talk about the hiring if we’re seeing anything around that. From a pipeline perspective, we haven’t seen a lot really coming in.

We do agree with what you’re saying that, I think, as the stimulus dollars, that’s going to – you’ll have all money back here in Q4, sequestration going away, that’s going to put pressure on a lot. So we expect it to open up.

We’ve been active in our pipeline regardless of that and kind of just been more aggressive on pursuing targets, as I’ve said before. So I see that opening up, which will be a great opportunity for us to not only do some deals but also take share just from possibility of some folks having to step away from their business.

But Chris, I don’t know if you have some thoughts around the hiring and how that we feel around that?.

Yes. Hi, Matt, I don’t think we’re seeing yet the impact to the smaller providers out there related to PDGM. They are still propped up by a lot of subsidies out there. I do anticipate when that actually does start to impact, it only creates an opportunity for us to absorb care centers as well as staff.

The hiring environment out there right now, just – it’s very competitive, and it’s very difficult. And it’s not only competitive across our industry but, obviously, hospitals, other health systems are looking for staff as well.

So what we see right now is some regional pockets out there, where we are having to get very, very creative in terms of being able to build clinical capacity. But we’re having good success. I think that, that is not going to alleviate itself anytime soon. So we’ve got to continue to stay diligent in finding ways to bring on staff.

We still feel like the best thing we can do is retain our staff and grow our staff internally. I’m very pleased with what we’re doing in terms of our clinical retention and the capacity that we’re building out of that. So that keeps me optimistic on our ability to handle our growth that’s coming up..

Yes. Matt, I think one of the things that we’re going to see is if there is a shakeout, I think it’ll mitigate and alleviate, to a certain degree, the labor pressures. So we’re hoping that a big shakeout will create some free agents that potentially we can grab.

So right now, the CARES Act has really fundamentally kept a lot of these people in place that we expected to get. So in general, hopefully, it should buy us some new territories and get us some new staff. So we’re feeling we – it can’t happen soon enough from our perspective, but we’re expecting it to happen into Q4, into next year..

Thank you..

Thanks, Matt..

Thank you. Our next question comes from Justin Bowers with Deutsche Bank. Please proceed with your question..

Hi, Justin..

Hi, Paul and good morning everyone. Well, just keeping with the labor kind of market dynamics, there is just a lot of mixed messages this quarter, but, it’s, obviously, tough out there.

Some of the issues that you’re seeing in hospice is that – do you think it’s kind of isolated there or is – are you seeing some similar dynamics in the home health side of the business as well?.

I’d say a few – I’d say on the clinical side, we’re doing phenomenally well, which is what’s important. The big thing always is that we have clinicians. So I’d say on both sides, we’re doing well. We haven’t felt the pressure. We’re feeling it in pockets, but we haven’t felt it in a way that it’s showing up in our financials.

So we’re going to continue to drive that. The efficiency of our recruiting group has been extraordinary. We still are very aggressively, though, looking for new things to make sure that we can close the backdoor in terms of turnover, but that’s the key. Where we’ve seen a change, frankly, is in the people selling.

And we’ve just seen not so much in home health, but in hospice, we’ve seen some burnout. And we’ve seen some real difficulty transitioning from an at-home business where these folks were fundamentally dialing from their homes to actually getting out in the market.

And that’s where we saw the spike in turnover, where when we started to push these folks out, we – in March, April, May, we saw some turnover. And that was a surprise to us. So we thought they’d be anxious to get out in the market.

What we’re now seeing, though, is with schools starting, people making the decisions that they want to do it, do it in a way that is going to mean they are getting out there in the markets.

We’re seeing a lot more solidity, as Chris talked about with our sales force, a lot less in terms of people deciding how they want to work, where they want to work. COVID really changed a lot of people’s ideas about work, particularly in business development and sales roles.

I don’t know, Chris, if I missed anything?.

Yes. The only thing I’d add to that, Justin, is, I mean, the stark difference between home health and hospice right now is really the composition of our care centers, in my opinion.

If you think about our home health, it’s been basically on an organic growth trajectory for the last several years, no acquisitions, no integrations, some de novos, but pretty much very, very structurally just kind of positioned to move through the pandemic and coming out of the pandemic.

And then you look at the composition of our hospice business, 180 locations. More than half of those have been in our portfolio for less than 2.5 years, of which more than half of that time has been practically a virtual world. We actually acquired a sizable hospice in the middle of the pandemic.

So we had to build out a divisional, regional and area leadership team for the right span of control on the sales side that I think we’re a little delayed in doing, and probably, not as effective as we should have been. The team is in place now, but it’s relatively new in place. So we’ve got to kind of get to know each other and get our rhythm going.

It’s, essentially, the exact same structure we have on the home health side. It’s just basically we’re still just kind of getting familiar with one another coming out of a virtual world. And I think that, that has created a churn in our feet on the street that we didn’t see coming..

Got it. So just – I have a couple of follow-ups on mix then.

With the sales force, are they structured? So are they calling on various institutions/settings or do you have folks that are dedicated to institutions, others that are dedicated to community, just trying to get a better sense of that? And then can you just remind us whether it’s admissions or mix, how you’re – I’m sorry, admissions or days, like how that mix compares, let’s say, pre-COVID versus kind of where we are now, like institutional versus community, either admissions or days?.

I think the – go ahead, Chris..

Go ahead, Paul. Yes. I would say....

I think – go ahead..

I would say on the mix, starting with that, it’s really been – the only area that we’ve seen and still see kind of just a drag on us is on the senior living side. So with SNFs, ALs, ILs, which makes up about 25% of our actual volume on a normal day and still does today, it has been compressed. I mean their occupancies are down about 25%.

Our ADC year-to-date in those settings is down about 9% year-to-date. So we’re really heavily dependent on them coming back as well as us finding new opportunities and referral sources, which I think we’re doing a fine job here.

So in terms of days, if I look at median length of stay, which is kind of the most kind of a telling metric that we take a look at, really bottomed out in January as an organization. It has stabilized since April, and it’s been consistent since April, back to pre-pandemic levels of around 26 days, which is encouraging for us.

So now it’s just a function of the volume coming in. Back to the initial question – the first question is, is that – we do have specialists. We have hospital-dedicated liaisons that focus directly on transition planning and assistance in hospitals, which they may only have 1 or 2 hospitals that they actually work with.

And then we have hospice liaisons who are also kind of community-based, who are assigned a certain number of accounts that could be physicians’ offices; could be facilities, ALs, ILs, SNFs; could also be kind of other home health agencies, or well, our own home health agencies that they actually spend time educating on the benefit of hospice.

So we have a good mix of that. And I think that basically our segment mix has not changed much. The most encouraging kind of sign out there, again, is the stabilization of median length of stay and us building now our feet on the street and getting to the number we need, and we should start to see the volume come with that..

Got it. Thank you.

And then just one last one, just on the – what’s kind of like the productivity assumptions for the segment on the 4Q exit? And then in terms of margins, are we a little more compression in the back half of the year before rebounding in 2022 or are we at a good run rate at this point?.

I’ll take the productivity, and I’ll let Scott handle the margin. On the productivity side on our reps, what we expected to get to this year when we had our initial guide was about 10 admits per month. We – just for reference, we were doing about 10.5 admits per month in Q4 as we rolled into this year.

Obviously, with the mix of our reps now being newer, 25% less than 6 months, 41% less than a year, we’ve seen that come down to about 8.5. We have modest expectations for the rest of the year to hit this guided number of about 8.8. So – and we have a good line of sight that we should be able to do that.

And I’ll Scott – let Scott address the margin question..

Yes. I will take that. So, generally and historically, Q2 has been our best – our kind of all-in EBITDA margin here at 15%, the strongest one. So, we will see a step down in the Q2 and then a buildup from there. I mean with some of the key drivers that – and this is traditional to us.

So, as we move into the second of the year as we know health insurance always steps up, and that’s a seasonality issue as well as we give raises, so those two are about $28 million that we faced moving into the second half of the year. So, we will have to build back out of that and climb back.

But I expect for the year, this 15% to be the high watermark, which is kind of recovering a bit into – when we get to Q4..

Okay, got it. Thanks so much. I will jump back in the queue..

Yes. Thanks Justin..

Thank you. Our next question comes from Frank Morgan with RBC Capital Markets. Please proceed with your question..

Hi Frank..

Good morning. I think I will move on from the BD issue. I think we have got that one now. Just curious on – I guess one final question, though.

When you went through this issue back with home healthcare several years ago, would you remind me how long it really took to kind of get the BD issues resolved there? And certainly, understand it’s a different backdrop today with the effect of your referral sources changing, but just remind me kind of how long that process of retooling and getting back on track to the end, how long did that take?.

Chris, you got it?.

Yes. I got it. Hi Frank. So, we identified the feet-on-the-street issue in Q2 of 2017. We – it took some time. It was a bigger sales force than we were trying to rebuild. We have almost twice the number of sales reps in the home health than we do at hospice, but the same strategy.

And it took about two quarters to start getting some traction on that, and then starting to see the results come through. And again, then the key is that, as those reps grow in tenure, their productivity grows, and then that’s when you get – so you get that – the benefit.

So, as we went into 2018 and ‘19, we started to see more consistent growth that we were getting out of that staff. And so I think we definitely saw this. We identified this within the Q1, so our quarter end of this. Slow progress in Q2, but expected a stronger progress in Q3. And I expect to see results in Q4..

Got it. And then, I guess moving on now, just some of these other issues. Obviously, hospice was the biggest part of it. But you are also with Contessa and VNA.

Can you talk a little bit about the timing to breakeven on Contessa? It seems like maybe, at least from what I originally thought, looks like that EBITDA might be a little more negative, but maybe talk about trends there. And the path to recovery there would be my next question..

Want to talk about the split, Scott?.

Yes. Just real quick to make sure folks are clear on what’s in those numbers, and I have that on Page 22 of the slide deck with the impact of Contessa and VNA, that $12 million to $14 million range – negative $14 million to negative $12 million. About $2 million of that is the VNA piece, and we will start with that.

And I think we are happy about that deal. We like the geography. A lot of that, we expect to kind of get that to breakeven early into next year, so not really overly concerned about that. As we have talked about Contessa, it’s really a top line build story. We have got line of sight into that $60 million range of revenue, which we feel good about.

We have signaled before that we thought it was still going to be a negative $18 million drag into 2022. We believe in that. I think it’s going to be a first half heavy drag. And so I think 2023 is when we would be looking to start seeing some really pull-down in that EBITDA loss and kind of sort of heading in the right direction.

So, feel good about that, and we learned a lot here through the back half of the year. We had to take down revenue of Contessa as well. A lot of that was driven by the delay in a regulatory approval on an acquisition and some other pressures around hiring we got to get through.

A little conservatism, I think, in that Contessa guide with COVID when they experienced through the first round of COVID, felt that it had some pressure on their capture rates. So, that’s something we are being mindful of..

Yes. And I have been out in the market, Frank, with Contessa calling on people.

So, I am very encouraged about what I think – how I think we are going to do in terms of bringing in clients and the opportunities that that’s going to engender, particularly with the large hospital – large sophisticated hospital systems, and the plans are excited about it.

So, I think we will know a lot in the next six months as we go through and make all our calls and see which ones we can bring in..

Got it.

Last one here, just any early read on any kind of COVID surge impact from the variant so far that you are seeing out in the current quarter? And I guess with all this going on, should we expect any kind of slowdown in terms of appetite for MA? I mean are we in a phase now where we want to take our foot off the gas and kind of get these issues fixed and assimilated or are we full speed ahead? That’s it.

Thanks..

I think – in home health M&A, I think we are going to continue to look for deals, and we still have a good pipe. Scott, can talk specifically about the pipe, but it’s still very good. And again, I think prices are going to go down when there is a shakeout. I think there will be consolidation opportunities.

Hospice, I think we have to absorb and digest what we have. Although we are looking at deals, the pricing is crazy out there. Again, people are paying twice what we were paying 2 years ago for these assets. So, it would have to be very strategic. Scott and his team are doing a phenomenal job on de novos.

And so we are anticipating launching up to 15 de novos this year. So, we are continuing expansion. Home health should be the place, regional home health, very strategic to build out our map.

And so I don’t know, I missed anything?.

No. You hit it. I mean I think that we feel good about the pipeline. I mean to Paul’s point on hospice, it’s expensive. It would be something that we really like the geography. Certainly, if there was a CON opportunity that makes sense, there is territories, we are really wanting to get into.

I mean, as we said before, the operations of the hospice segment are terrific. We got great EBITDA margins, great quality. So, we feel good about all of that, and we understand where the issues are on the growth and feel good that we can isolate that. And certainly, home health, the appetite is strong there.

Our operators, as you can see the results have done tremendous. So, we think they are teed up and ready for some more..

Yes. I guess, Frank, just in general for the whole group, but we feel really good about our hospice strategy about how we build it up, about how it’s unfolding. Clearly, we need some work on the BD, but that was a new world. So, we are thinking this is bumps, not anything that we regret, not anything permanent, not anything we can box and execute on.

So, we feel very good about where we are in hospice, and we are going to prove it out in the second half of this year, get through it all..

Okay.

And then any color on COVID first quarter?.

COVID, yes, Chris can talk a bit about it. We are seeing obviously in low-vaccinated states, particularly in the Southeast, where we have some – where we see some things like in Louisiana, Alabama, Florida, in particular, we are starting to see some access shutdown for our reps. So, it hasn’t affected us to-date, but it is concerning.

And we are going to track that. But the one thing I can say is, please, anybody who is not vaccinated on the call, please consider it. It’s really important.

I don’t know, Chris, any further color on that?.

Yes. I mean other than, again, the Southeast, particularly like Florida, there is real – there are some restrictions out there for access.

But we are still going back to the same kind of playbook that worked for us last summer during the pandemic in terms of making sure that we are open for business, taking that – taking those patients where we possibly can.

The only other thing is we have noticed a tick-up over the last four straight weeks of our own employees that are on quarantine, still not a lot, were around 200 today. So, that’s something we are keeping a close eye on as the exposures are increasing a little bit..

Thank you..

Thanks Frank..

Thank you. Our next question comes from John Ransom with Raymond James. Please proceed with your question..

Hi, John..

Hi. Just go and trying to talk about something different. Your own – I mean we are reading more stories about just big-time burnout. I mean people have been fighting this fire for six quarters now.

And – so just curious about some of your stats on your labor force in terms of – what are you seeing in terms of like – how many of your own workers have yet to get vaccinated? What’s the turnover look like? How many temps are you having to use? And do you think you are going into this next – I mean assuming this thing burns out pretty quickly, how worried are you about just kind of going into the next battle with a bunch of troops that are, frankly, exhausted and burned out?.

Good question. I think, in general, our troops are feeling good, particularly our clinical troops. And where the retention has been very good, our predictive model that we have built has been working really good and we feel very strongly that we are doing the right things.

For example, in hospice, we know – and this is where we had some burnout, but we were able, again, to use the model. If there is over six deaths in a month, then you chance – that clinician doubles their chance of turning over. So, we feel good about understanding this – feeding this into the care centers.

So again, it’s been – the clinician retention has been extremely good, which is going to drive this. Our BD retention, in terms of people wanting to go back into the field, just in hospice has really been our issue. And again, it’s – they aren’t going to anybody else. So, it’s not like they are jumping into further hospice – into competitors.

They are just going into different parts of life, and sometimes, just not going back to work. It’s odd.

Chris, I missed anything?.

Thanks..

Just back on the vaccination rate, the one thing, John, is that we saw it get to 50% pretty quick and then kind of leveled off. And we had kind of geographic disparity. With the south, some of the southern states have lower vaccination rates.

What we are seeing now is as we are starting to pick back up, I think the Delta variant has got people’s attention, and we are hopeful that we are going to be able to really kind of push that number higher than it is today.

We will tell you that when we do a polling of our internal staff, we – it’s pretty stark to learn that around 20% that are pretty opposed to taking the vaccine for various reasons.

So, our goal is to make sure that we continue to educate and stress the importance of this, what it is for them, their families as well as our patients, and try to get as many of our employees vaccinated as possible..

And what we are also seeing, John, which I think is interesting is a lot of the clients now that we are calling on are basically saying we want only vaccinated workers. So, there is going to be a tension, particularly in home health, which is on a per visit basis, if they are not able to work. And so that’s going to be significant..

Right. I am – I was going to say an elderly clientele, I am surprised that they would – anybody would see someone who hadn’t been vaccinated. That’s surprising to me..

Yes. To me too frankly..

Okay. Thank you..

I appreciate it. Thanks John..

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

Hi, Scott..

Hi. Thanks. Hi everyone. First question, just wanted to just actually get a clarification just on the Contessa impact. Scott, I know you had mentioned that and touched the number. But I just want to make sure I was correct on the 2022.

Did you say that, that was an $18 million EBITDA drag you are expecting or – just want to clarify that?.

Yes. That’s what we originally said when we came out with the – right around the deal time, that was the number. We will certainly take a look at that again and – as we exit this year and reevaluate, but that’s what we put out to-date. So, I just – I am reiterating what we had originally put out..

Okay, understood.

And then just for a real question and maybe just a different topic as well, interested just in your views here on the enhanced Medicaid HCBS funding proposal that the dems are working on, the $400 billion over 10 years that they are looking to put into reconciliation? And if it does get included in the reconciliation and that bill actually gets passed, just interested in how you guys are thinking strategically about personal care? And whether that would influence your strategy there in terms of thinking about maybe sort of enhancing your focus on that relative to the current strategy?.

I think, in general – Scott, good question. In general, we clearly have a small personal care business and have elected to build it out through a network versus owning these due to a variety of things. We believe it’s better handled on a local basis and building networks are better.

So, through the network business and then with Contessa, as we take care of sicker people, we are building out the technology to include personal care. So particularly, in SNF-at-home and hospital-at-home, you will need these types of workers. So, we think it’s a good thing.

We think, in general, it’s going to be a good thing bringing people that might work elsewhere, particularly retail or in restaurants, things like that, that could come in. So, we think it’s a good – again, integrated – anything for integrated care, we love.

And I think this plays a lot towards integrated care, but it plays towards the lower end where we have very little exposure..

Okay, got it..

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

Thank you. Thanks for all the explanations around the higher turnover. Obviously, we talked about it a lot here. But just to clarify, because I guess you mentioned you recruited – or you have more staff that’s dedicated for recruiting, and I guess you have new leadership there.

But any particular actions you can take and you are taking to actually attract the right, I guess, salespeople because it sounds like you are hiring, and just that, I guess, they quickly leave.

So, how can you kind of change that dynamic?.

Well, actually, we have our head – our Chief People Officer sitting in the room with us who was not expected to speak today, but I think she ought to talk about what our recruiting efforts are, some of the numbers we are seeing. I am really happy with what we are doing from a recruiting perspective.

I am not so happy about our ability to control turnover on this, except July and June, we are getting a lot happier. So, we got to close that backdoor. Go ahead on the – this is Sharon Brunecz, by the way..

Yes. Good morning. Joanna, we have been really pleased. We have added additional resources both in people and like different sourcing tools to be able to attract people to the organization, both on the nursing side and the business development side.

So, I feel good about what we are doing on the top end of the funnel, and that our value proposition as a company is resonating in the market. And as we have talked about here, the trouble really has been in business development turnover.

Our predictive models have served us very well on the nursing side, and they have held firm, and we have been able to drive those turnover numbers down to great levels and have been sustained. And this business development anomaly that we are working through has been our challenge. But we have seen that starting to turn here.

And I like to believe that this is the beginning of the trend in driving those numbers back down to the levels that we need them to be at..

We are doing – I would say, Joanna, we – with full capabilities, we can recruit between 30 and 40 folks a month. And then we are reducing our turnover rates down to – if we can get from the high-teens, low-20s, that’s a very good day for us on a net basis.

And I think, as Chris was saying at the beginning of the year, we had about 478 reps, we now have about 505. Our target is 530. So, we are about midway. We have got some good amounts coming in, I think, 20 to 30 coming in. So, we are feeling very good. Backdoor’s closing. I would like to see it close better.

But once we get those folks in – their productivity levels are pretty good. Initially, when we were looking – the productivity levels initially, pre-COVID, were about 10.5 per month for our BD folks. They are now about high-8s, almost 9. So, productivity levels are pretty good.

The key is getting them in, getting them trained up, keeping them and finding people who want to come to work out in the field. So – but in general, we have our arms around this. And then I will repeat again. Where we really need to also focus is getting those 45 and below ADC. We have 54 of them, care centers, up.

So, the economics of that and the care ability really starts to kick in. So, we are putting a lot of extra attention on getting the BD folks in there and making sure they stay and making sure they are bringing in referrals, so we can get above that ADC level and start to have some real economies of scale kick in..

Right. So, it’s more about just finding the right people, I guess, that stay and then they, I guess, can deliver, I guess, these goals in terms of bringing in admissions? And if I can just....

We are seeing them in a lot of other – from a lot of other post-institutional sales forces. So, we are starting to see good results from there. SNFs, obviously, people are – and other places, and we are starting to see some firm infusion in some of these other places. So, people understand what’s going on and know how to kick in quickly..

Alright. Go ahead..

And I think part of what we saw in Q2, in particular, as we said, the people we hired last year had been at home, their whole career with us, if you will, right. And getting back out into the field is – was new, and some people have decided that wasn’t what they wanted to see. People that we are bringing in now, right, the world has opened up.

So, we have moved past that issue, right. We are hiring people that are out actively selling in the field, and they are coming in, in environments where they need to be doing that. So, I think people are more prepared for what they are going to need to do on a daily basis. So, that’s ramping up quickly..

No. That’s great. And if I may, just I was trying to squeeze in the last question, also a follow-up on the same topic, I guess, or related in terms of labor on the nursing side.

So, you said there are some pockets of turnover issues as well, right? So I guess kind of is it a similar situation or it’s more, I guess, related more so to burnout and the issue that people just want to maybe retire or move to other jobs faster?.

Yes. I wouldn’t say there is pockets of turnover that we are particularly concerned is – I think there is pockets of recruitment that are difficult. There is areas where finding nurses in this environment, particularly urban areas, places like Baltimore, Boston, some of these other places that are very difficult to find nurses.

It can take a long time with open racks. And we could grow much faster, particularly in home health, but also in hospice, if we were able to bring in some of these nurses. I think capacity – and that’s why, it’s so important we control turnover. That’s why, we are very happy with our turnover, which is the best it’s ever been.

So, we feel very strongly that, that’s good. The key is recruiting, just getting some of these folks. It’s a desert in some of these places just to find nurses..

Understood. Thank you so much..

Yes. Thanks, Joanna. I appreciate it..

Thank you. Our last question comes from Brian Tanquilut with Jefferies. Please proceed with your question..

Hi. Thanks for taking the follow-up. I guess, for Scott or Nick, just really quickly on the buyback.

If I recall, you had some left over from the last authorization, right? And then I guess a follow-up to that would be just, how soon are you allowed to be in the market to buy back stock, because if I remember correctly, in March, you bought most of it, like soon after the earnings call and within 10 days.

So, just curious how you are thinking about share buybacks here?.

Yes. Thanks, Brian. I will take that. So yes, we have spent roughly $74 million in that first half probably brought on average price slightly below $2.50. So certainly, we were buyers at that range. And certainly, we will use that additional $26 million plus that $100 million to be proactive as need be.

We would be able to do it as soon as kind of our window internally opens where we could put something in place to buy as an organization, which will be next week. So, we will kind of evaluate when things settle out a bit and kind of move forward as the need be. I mean we are certainly bullish on where we are heading.

Really nothing has changed from where we were before other than we got to fix this top line issue. Margins are phenomenal. So, I feel good about the future of Amedisys. I am certainly – I am a long-term Amedisys person, I have been here 14 years, so I am certainly long at Amedisys.

But I think that our opportunities are in front of us, and we will be opportunistic at this price..

Thank you..

Thanks, Brian. Alright. I want to thank everybody today who joined us on the call and would also like to again thank our employees who delivered a very good quarter. Thank you for doing this with all the trials and ambiguities of COVID. Please keep doing what you are doing. It’s great.

First things first, taking care of the people who need us the most, if we continue to take care of the people who need us, we will always thrive. And we hope everyone has a wonderful day, and look forward to updating you on our ever-evolving progress and purposeful work on our next quarterly earnings call in late October. Thank you again, until then..

This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation. Have a great day..