AMED
#We are very excited about the deal, first of all.
We think it is a wonderful opportunity for us.
Obviously, they have some assets that we have acquired.
The issue with Tenet is that they didn't want to disclose the price on this or some of the revenues.
I think I'll have <UNK> weigh in, in terms of how you can kind of come to at least some range on this.
Certainly.
Good morning, <UNK>, and thanks for the question.
We are excited about the opportunity we have with the Tenet transaction.
This is a step in the right direction for us but as you are thinking about this, this is six care centers for us in key markets that opens the door for us for future discussions; so as you think about the size of the purchase price on this, just keep in mind that we are talking about six care centers in these geographies.
Equally divided between home health and hospice.
I think the key thing that is important is, yes, we did this acquisition, yes, I think it is a good deal.
Most importantly, though, when you look at the composition of Tenet in the ambulatory space as well as the hospital space, when you look at the overlap that we have with Tenet facilities and our facilities, I think what we are most encouraged by, when we've had discussions with their management, has been places to partner with them so that their patients are well taken care of and that we can coordinate and deliver really outstanding outcomes for them.
I think we are really excited by this.
I know there was other deals done before, but we've been holding out for this and it we are glad we're able to bring it to a close actually yesterday.
One thing that I would add, <UNK>, as you take about that, we think we can fund this acquisition purchase price with cash on our balance sheet and really would not need to tap into our revolver [a lot] to do that.
Sure.
Thanks, <UNK>.
Good question.
I think the most important thing to take away from the fact that we have Homecare Homebase transition kind of in our rear-view mirror is the fact that it really does create some additional capacity with your existing staff that you have at your care center.
As we are able to really be very proficient with the system, we had the ability to take on more business as our field team, our sales team in the field, are having more and more success out there.
Capacity is oftentimes a limiter in this business and it makes it difficult for you to grow your centers based on either disruption or the system that you are using.
But Homecare Homebase really unlocks that capacity, so as we have more and more of these care centers that have been on the system for some time, we expect to see a corresponding ramp in volume and our ability to take that volume as we move in 2017.
Just add, <UNK>, on this.
We are hoping to banish the words post-implementation, chopped, disruption and all of this from our vocabulary, hopefully in the next couple of months, so we are excited by that.
The other thing I think that we did mention, we talked about is that we have developed a proprietary tool that we been using that fundamentally is a capacity estimator.
And we've been working, we've been rolling it out.
We're almost complete in our rollout and it is been incredibly successful [along] and concurrently with Homecare Homebase.
What it is basically able to do is we can go out and figure out levels of productivity in care centers with the various clinicians that are out there and then we are able to ---+ it is really cut down on what we thought were some of our staffing needs.
Also, when have reduced turnover, you reduce turnover at the level we have reduced turnover, we find that we're in very good shape.
We've have been getting some question on labor, if we have seen issues there.
We haven't, but largely we've been pushing turnover down we will really working on the productivity of our people and making sure that we can maximize the capacity in a way that is good for everybody.
We've been very encouraged by this.
I think the way we are looking at it is, is there's tremendous capacity.
We obviously have tremendous capacity.
We have got some big deals the we are looking at.
We found that over the past two years we have done nine deals, spent a little over $100 million for about $150 million in revenue.
We are thinking at this point is that we would like to do something bigger.
We think in personal care we are still going to play by the ones and play ---+ move very judiciously to build up presence where we think we can combine all three businesses.
We like the hospice business a lot and we find we are really good at it, so I think we'll be aggressive in that space.
We like the bigger deals that are out in hospice.
We are seeing a lot of hospice deals come out.
We're seeing less in home health that we haven't seen before and the pricing is still ---+ we are getting more competition from sponsors.
We haven't seen much strategic competition, but the sponsors are now looking to try to do this.
We are seeing less sophistication in the marketplace in terms of home health.
But we want to do bigger deals and we have been focused on bigger deals.
The deal we announced today is a little bigger deal than obviously what we normally do, so we are going to try to move up that food chain.
I would love to deploy a lot more capital because we clearly have the capacity and with the free cash that we anticipate will start to build up once we get our AR issues under control in the next couple of quarters, we're going to be generating a lot of free cash and so we need to start to deploy that.
Sure.
Great question, <UNK>.
Part of the AR issues is at the care center level.
We're just making sure that the documentation is all in place, that we are working with our referral sources to ensure that documentation is complete and accurate and timely.
We deployed extra internal resources that are really a focus swat team to help us attack that and catch up on any documentation that we need in order to get bills processed appropriately.
The other side of that is with our revenue cycle team and just making sure that we are working through the edits and being able to drop clean claims and then the opportunity to really have the lack of distraction of a new system and the ability to focus in on working with our payers to make sure that we are moving those forward.
We have a very concerted effort now on our AR days and we would hope it will be in the low- to mid-30s on DSO over the next couple of quarters.
It is not a lay up.
It takes some heavy lifting, but we are focused on getting that done.
Thanks, <UNK>.
Appreciate it.
The opportunity, this was an acquisition of their ---+ as you know Tenet had announced last year that they were going to get out of the health plan business and they were going to divest their home health and hospice assets.
We've been in conversations with them for a while.
What we saw there and what we see and what we have been having conversations around is, yes, they have some assets and these are good assets and we are going to take these assets and the people with them.
We are very excited.
These are well-run assets.
They are producing good results.
The star ratings are good.
We need to get them on a common technology platform, which we need to do, but they have good basics.
They are profitable and so we want to do a very good job where there's facilities associated with them and we think there's a lot of opportunity there.
There's a lot of Medicare folks within the geographic footprint of these hospitals.
We are excited by that.
But obviously, what we are most excited by is working with Tenet in the acute side and the ambulatory side.
We believe that as ambulatory becomes more important and sicker folks go into ambulatory that there is a real opportunity for us in the home health business to partner with some of these folks.
Then also, we like the focus in terms of hospitals.
With 79 hospitals there is a large overlap with where we are, so we want to go in and we get a seat at the table and we want to figure out what we can do to help these folks and help ourselves in the process, as well.
So we are quite excited about this.
We believe this is a toehold.
This gets us in there.
This gives us an opportunity to show what we can do and then we move forward and we build a bigger partnership.
Let me talk to it a little and then I will turn over to <UNK> <UNK>, who is really focusing on this.
I guess the way I look at our performance is I think that we got all As and we got a B minus on growth.
I think the idea is we understand that what we need to do is to reinvigorate the growth.
We have brought in a very good experienced team that understands how to do that.
We have taken initiatives as we've talked about before, Project Redwood, which has restructured our business development group so that we can more efficiently deliver and incentivize our folks to bring business in.
We have changed our mix.
We have been very focused on growing Medicare, because, as you all know, that is where the profits are and that is where we can deliver the best care.
I think we have the right strategy in place.
I think we have ---+ I think what we've done is we're going to start to recover from our ---+ as I said, I don't want to use the word chop and self-induced pain and all that sort of thing, but I think you will see descent growth in the next two quarters on a year-over-year basis and then we expect to really start to outperform the industry and expectations in the second half of the year.
I will turn over to <UNK> and he can tell me I am full of it or continue this process.
Cheryl, I'm going to pitch to <UNK> on that one.
Then I will come back in it.
Good morning, Cheryl.
It's <UNK>.
As we mentioned in the previous response, we are talking about six care centers that we are starting this transaction with Tenet.
We believe that we'll be able to evenly fund the transaction when it closes in a few months with cash on our balance sheet.
As a reminder, we had $30 million of cash on our balance sheet at the end of the year.
We don't expect this would require us to tap into our revolver.
We really ---+ this isn't transformative type transaction that we are talking about doing as the year progresses, but this is a step in the right direction.
This is a beginning point for us to show that we're being able to execute on some of our inorganic growth strategies.
We would love able to continue to partner with Tenet in the future as they look to do different things with home health and hospice assets.
This is simply a starting point.
I think one of the things I recall when we were out seeing you, <UNK>, in New York is we talked a lot about the potential of the ambulatory world and we think that as the world ---+ as more and more seems to be fitting into that, we like the opportunities we saw when you combine the hospital world with the ambulatory world in overlap areas.
We saw that as a real potential to start to build up on our skill set in not only the hospital world and gain from what Tenet has there and there is very good overlap there, but also in the ambulatory world where we believe we can partner with folks because a lot of the things that used to go to hospitals, the procedures are now going into ambulatory; and we believe we can start work to with them on protocols to really start to drive some volume into the ambulatory world.
So we are optimistic about that and we're also excited about ---+ our conversations with Tenet have been very good about where they need some help, particularly where their facilities are full.
We are very excited to possibly bring in some of our (inaudible) home ideas, hospital at home ideas, and start to help alleviate some of their pressure on their capacity.
Very good point.
That sounds good, yes.
We have thought about and we ---+ we're obviously, as we started to understand these issues, the last thing that we want to do is generate a lot of LUPAs.
There's places to play, that for us are particularly interesting.
One is at the front door of the hospital to divert people from coming in as we have these protocols for taking sicker patients that we have developed through clinically home.
So our belief is that if we can start to drive some folks, particularly in facilities that are full, into home health and partner with a large hospital system like Tenet to do that, that's one thing.
The other piece is when people are going for more severe type and more acute type procedures in an ambulatory setting, home health makes a lot of sense because if you look at some of the discharge patterns that come out of ambulatory, most of those, in my opinion, should be going to the home whereas some of them are going into SNFs and ERFs and some of these other places.
So that is where we really hope to sit down and understand that.
The last thing that we are going to do, though, is get into LUPA situations.
That's just ---+ we won't go there.
Based on what we are doing now, frankly, this has been a real area of focus.
We meet ---+ the Management Team meets and does a round pound every Thursday on two things, the $46 million, and we have our trackers here ---+ the guys who are teeing this up, Scott Ginn and <UNK> <UNK>, here, so they can answer this as well.
We focus on the $46 million and obviously generating growth.
Thus far, we track it every single week.
We go over it.
We watch the numbers.
The only place that I think that we always have to be watching is on contact labor utilization.
You always have to make sure that, that's staying down and mix, and making sure that we are always aware that skill mix is something that is a big driver.
<UNK>, you have any additions.
Certainly, <UNK>.
This is <UNK>.
We have received a notification from the ZPIC, as we talked about in our 10-K disclosure, around four care centers in Florida that were acquired by Amedisys as part of the Infinity transaction at the end of 2015.
We continue to have those conversations.
The inquiries have escalated somewhat in the last couple of months and that is why we felt it appropriate that at any point that we have a regulatory development and that we share that in a very transparent way with our investors and that is why we chose to talk it on today's call.
But those four care centers, to just give that some frame of reference, represents only about 20% of our Florida market, which is 7% of our home health revenues, so while it is concerning and we are going to continue to aggressively work with the ZPIC auditor because we believe that there are some errors in the way that they are approaching some of this, we don't know the outcome of that.
They have found some things that we have developed an internal team to focus on.
We are reviewing all their claims in those four care centers.
We take these things very seriously.
We are focused on this.
We will continue to move this forward and expect that we'll continue to discuss it with our investors as we progress.
Thanks, <UNK>.
Appreciate it.
Hey, <UNK>.
That is a great question, <UNK>.
I think that our methodology is pretty simple here.
We've taken our managed care business, about $0.25 billion of it.
We put into a separate business unit and what we are doing is we are doing two things.
On the same game ---+ we call it same game, new game.
On same game, what we are doing is we are cleaning up our contracts to make sure that we have good contracts, that we are being paid appropriately, that the contract terms are good.
We are developing a lot of initiatives that we believe will drive out the cost, particularly the back office cost.
We should be talking about that the next couple of months.
We have some very specific initiatives that we are looking to really drive those costs out and get clean, good contracts, drive better adjudications, better authorizations, better reauthorizations, so that we can drive cleaner business.
We're looking at utilization management, trying to make sure that we can generate good profits on what we are getting paid and in some of the situations we aren't.
We are doing a cleanup job there and we believe that is important.
The next thing we are trying to do is, as you saw on our slide deck on the state of Massachusetts, is we want to start to take risk.
We believe that managed care is going to only increase.
Managed care penetration will increase and for us to get out of the commoditization game with the large payers that we have to start to, one, start to cut into other elements of the post-acute continuum, which we are doing, which is to basically take business out of SNFs and ERFs and [LPACs] and so we believe we can do that.
The other things is how do we start to take more risk and get paid more for taking risks, particularly on rehospitalizations, and then how do we get paid for quality and why is it worth it for the plans to pay us for quality.
So we have been having very good conversations with all of the large players out there and starting to say, let's find a place where we can understand what you are looking for, cut some elements out of what are the normal protocols, and then have just home health do the majority of it, start to take some risk on aging in place, start to take some risk on rehospitalization rates, and then we can do that.
The other thing we have been doing, which we are very excited about, is we have a project here called ACE.
ACE is our database.
As you know, a lot of people here are from the payer world and one of the things we learned is you need two things to take risk.
You need to provide great care and then you need to have data.
We've been building our own proprietary database and are starting to experiment now building algorithms so that we can judge based on certain elements of the Oasis, which is a start-of-care plan, starting to basically say, what is the risk of hospitalization of this person.
How do we minimize that.
What is the risk of rehospitalization.
What's it going to cost to age in place.
So we are starting to build these databases and starting to try to use these so that when we do take risks, we can bring data into this and some comparative data so that we actually can say with a straight face, we think we can keep this person out of the hospital or whatever else sort of metrics the payers would want to deal with.
So we are very aggressive in this space.
We understand the payer world.
We understand that it is going to continue to grow.
But right now, same game is not really of interest to us.
We will play because we have to in a lot of places, but what we want to do is transform the dialogue with the payers.
No, you got me worked up on it so I'm just taking a breath.
Yes.
We've been spending a lot of time, and I'll let <UNK> <UNK> address this as well, but we've been spending a lot of time in Washington.
We've been fairly forthright in believing that pre-claims review doesn't accomplish what it's supposed to.
We believe it is an incredibly burdensome from an administrative perspective.
It doesn't add to ---+ it basically assumes you're guilty right at the start, versus is innocent until proven guilty which was the prior methodology, so it means that we have to go through a lot of administrative work to move past this.
We've figured out how to do it.
We get it, but it is not helping anybody, and so what we have offered to CMS, we've gone in with our friends at the partnership level, at the Partnership for Quality Home Health, with other big players and we have gone in and said, if you want a fraud detection tool, we will build one for you.
This is ridiculous.
Thus far CMS hasn't taken us up on it because we believe we can do it very efficiently.
We don't like fraud.
We don't want it.
We know where it occurs.
We know where the hot spots are.
We think it is relatively easy to detect, so you don't need these nuclear weapons in there just destroying everything to look out for fraud when it is easily recognizable and can be detected in a much more effective way.
So that is the conversation we are trying to have on PCR.
The other thing is, we are optimistic because Secretary Price was one of the folks introduced the bill to put PCR off for a year; and also what we have also seen is the two senators from Florida, Nelson and Rubio, have sent a letter in to Secretary Price asking him to reconsider PCR as well as delay it or kill it.
We are hopeful that given Price's orientation and dislike of this initially, that we can move forward and get this thing either sidelined or killed.
But thus far, we are preparing for it to we believe we are adequately prepared for it.
We believe since we've been through it before we can get through it okay.
Not happily, but that we believe it will be very difficult for, particularly people that don't have the system in place to do this.
<UNK>, I don't know if you have anything.
Not much to add on that.
Very well done, <UNK>.
I guess I would just recap and say that we are working closely through the Partnership for Quality Home Health, our trade association, or really, I'd call it more of a coalition then a trade association.
We're working very closely with LHC and with Kindred and Encompass as we go to CMS and do two things, propose alternatives to this to really root out fraud and abuse rather than PCR, and also we are continuing to push for a delay [very much] which <UNK> talked about.
We think there's a much more hospitable environment now for potentially delaying this and a more hospitable environment or open environment to listening to our other ideas.
With the change in administration we think there's potentially some opportunities there.
Again, we are pushing for a delay, as are Senators Nelson and Rubio from Florida, which we think is key.
We will continue to push for a delay, but we also are going to continue to push for an alternative method to root out fraud and abuse that we think we can propose as an industry.
Lastly, but most importantly, we are continuing for payer to be ready on April 1, for a pre-claim review in Florida and we think we are well positioned to do that.
We had experience in Illinois.
We learned there, albeit we only had a couple of care centers there, but throughout the process we were able to perform well by the end of it.
So we feel like we are in a position to perform well in Florida as well, if need be.
Thanks, <UNK>.
I think the key thing what we did ---+ I have to think <UNK> Laborde, who is here with us and I'll let <UNK> talk a bit about it, but I think that what we did initially is, we just separated out hospice and home health.
We really fantastic team with it's [will to break] culture that just doesn't say no to anything and they just move forward.
They have done this thing organically and it has been really inspiring to watch this group come together and then move forward in the way that they have.
I think the benefit is also something that is incredibly valuable.
I think it is a nice business, it's a clean business.
We understand the rules.
They're pretty upfront.
There is a demographic interest in this.
We see a natural very strong wind at our back and as well, the government seems to very much like it.
If you look, obviously we got some gains in terms of we have offset $17 million of headwinds in home health and what we've got is we were able to bring it down to $12 million because we got a positive on hospice.
So we see that opportunity there.
Obviously, to grow it at the levels we have, at some point we are predicting it will come into the low-double digits, the high-single digits, but thus far folks keep outperforming, so more power to them.
We will take it all day.
I'm just going to say, <UNK> do you have any questions.
Sorry, <UNK>.
Comments, sorry.
Thanks, <UNK>.
No, it's about ---+ I'm looking at <UNK>.
This is <UNK>.
I think they are decent sized agencies.
We're not talking about small agencies.
I don't think they would be much larger than our average.
<UNK>, it's <UNK>.
We know those rules have been in development for some time.
They have been discussed at length.
We're the process of working through those.
We believe that the timetable that we were provided was pretty short, so there are some things we have to cover relatively quickly in order to be prepared.
We don't see that as a heavy lift.
We think our team is on target there and that we don't encounter seeing any disruption from that.
Sure.
I would be happy to walk you through that and take those off-line with you.
Basically, it's nonrecurring charges, so the items that we have detailed as the add-backs to EBITDA, we try to detail which line item those impact for you and many of those will show up in that corporate segment.
When you bridge those two together then I think you'll see where the differences are.
Thanks, <UNK>.
Great, great question and your calculator works like ours does, so we would not say that you are off base there.
As it relates to timing, we are going to be focused on getting these deals over the finish line.
We would think in a couple of months we will have these done and a part of our portfolio.
Thanks, <UNK>.
Thank you, Tim.
I appreciate it.
Before we close, I'd like to thank, congratulate and wish the very best to our Vice Chairman, former CFO, COO, Interim CEO, Board Member, <UNK> Laborde.
This is his last Amedisys earnings call.
On April 2, he is slated to retire.
We wouldn't be here today and be where we are today without him.
His sage counsel and calm presence have made a huge difference to me and our teams as we've partnered together to turn Amedisys around.
<UNK> will be sorely missed, so on behalf of our 16,000-member Amedisys family want to think <UNK> for his credible service to our Company.
Thank you very much, <UNK>.
Thanks to everyone who joined us on our call today.
We sincerely appreciate your interest in Amedisys and we look forward to updating you on our next quarterly earnings call.
Take care, everybody.
