Enhabit, Inc.

Good morning, everyone, and welcome to Inhabit Home Health and Hospice's fourth quarter 2022 earnings conference call. At this time, I'd like to inform all participants that their lines will be in a listen-only mode. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, please press star 1 on your telephone keypad. You will be limited to one question and one follow-up. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'll now turn the call over to Mark Brewer, Inhabit Home Health and Hospice Chief Investor Relations Officer.

Thank you, Chris, and good morning, everyone. I want to thank you all for joining Inhabit Home Health and Hospice for our 2022 fourth quarter earnings call. With me on the call today are Barb Jacobsmeyer, President and Chief Executive Officer, and Chrissy Carlisle, our Chief Financial Officer. Before we begin, if you do not already have a copy of the fourth quarter earnings release, Supplemental information and related form 8K, followed with the SEC, are available on our website at investors.ehab.com. On page two of the supplemental information, you will find the safe harbor statements, which are also set forth on the last page of the earnings release. During the call, we will make forward-looking statements, which are subject to certain risks and uncertainties, many of which are beyond our control. Certain risks and uncertainties that could cause actual results to differ materially from our projections, estimates, and expectations are discussed in the company's SEC filings included in the Form 10-K and subsequent quarterly reports on Form 10-Q, each of which will be available on the company's website once filed. We encourage you to read them. Your caution not to place undue reliance on the estimates, projections, guidance, or other forward-looking information presented today, which are based on current estimates of future events and speak only as of today. Do not undertake a duty to update these forward-looking statements. Our supplemental information and discussion on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information and the earnings release. I'd like to remind everyone that we will adhere to the one question and one follow-up question rule to allow everyone to participate. If you have additional questions, please feel to re-enter the queue. I'd like to turn the call over to Mark.

Thank you, Mark. Good morning, everyone. Thanks for joining us. We appreciate the commitment and diligent work of our Inhabit Home Health and Hospice leaders and our staff as we focus on delivering our care where patients prefer it, in their homes. It is the quality of the care our team provides that is the catalyst to our future growth. Starting with a recap of our financial results, on a consolidated basis for fiscal year 2022, our financial results were revenue of $1,083.1 million and EBITDA of $159.3 million. Significant changes were required in 2022 to lead important strategies for our future success. We added the company's first Chief Human Resource Officer in January of 2022. We established our payer innovation team in May of 2022. We added an executive with extensive hospice experience to lead our hospice team in June of 2022. All of this while preparing and executing the plans necessary to spin into our own company on July 1 last year. Let's start with the progress we've made in these notable 2022 changes. Our chief human resources officer has worked with our data and analytics team to develop a robust human capital data set. This is allowing us to drill down much further than we could historically on understanding what's happening with our workforce and what we need to do to recruit and retain our staff so that we can meet the demands for our care. We are pleased to report that our full-time nursing candidate pool increased 19% in quarter four over last year. This drove 101 net new full-time nurses in the fourth quarter, 60 in home health and 41 in hospice. Our full-time vacancy rate ended 2022 at approximately 24%, which accounts for some of the recalibrating of needs based on staff that have shifted from full-time status to part-time or PRN. In 2021, approximately 35% of our nursing staff were PRN. As of December 2022, we now have approximately 39% in a PRN status. This means we need more people or full-time equivalents to meet demand. With the progress in clinical staffing, it is now imperative that we ensure sufficient business development resources in the field. We had 83 less direct sales headcount in December 2022 versus 2021, 59 less in home health and 24 less in hospice. As I will discuss later, we made some organizational changes in this last month that resulted in 60 additional frontline sales individuals now back in the field to drive growth without the need for additional total sales headcount increase. Let's move now to our payer innovation team. We are pleased with continued progress of our payer innovation team. 2022 was a strong year for non-episodic home health admission growth at 26.7% for the full year and 19.9% for quarter four year over year. With the continued shift of Medicare beneficiaries moving to a Medicare Advantage payer, our payer innovation team has been critical to setting us up for volume growth in 2023. While we continue to meet and negotiate with the national payers, we have established a strong regional contracting strategy. In the second half of 2022, we have been successful negotiating 18 new regional agreements. Nine of these are now in effect, and seven of those are at episodic rates. One particular agreement, which we mentioned in the quarter three call, became effective on October 1. This agreement covers 13 of our branches in six states. These 13 branches experience 4.2% growth year over year in quarter four, primarily due to this new agreement. As evidenced by this one multi-state agreement, the local and regional agreements provide avenues for growth. Each successful agreement creates an opportunity for us to be a stronger resource to our referral sources. It creates access for patients to inhabit home health care, and in turn, the outcome data we need to continue to reinforce our value proposition with the payers. Turning to our hospice segment. Our strategic decision to add an experienced hospice executive to our team has led to specific opportunities for improvement in our staffing and in our diversification of referral sources. We experienced a 0.7% same store and 2.9% total store ADC growth sequentially. We were pleased with the stability considering our ADC in quarter four last year dropped 200 from the prior quarter as fewer patients tend to initiate hospice services over the holidays. The strategic sales and operational changes previously made in this service line are starting to gain traction. The strategy to move away from our home health staffing model to a case management model has supported our hiring efforts, and in some markets we have successfully rehired previous staff that enjoyed our culture but not our previous staffing model. As I mentioned, we had 41 net new nursing hires in quarter four in hospice. Currently, 30 are in orientation. We used above average contract labor in quarter four as we staffed to rebuild referral relationships while new hires were in orientation. We peaked at 26 contract RNs in 20 branches. By the end of January, we already have this managed down to 12 contracts in seven branches. We are making great progress on the strategic initiatives we initiated in 2022. With labor challenges, referral source needs, diversified payers, and a focus on efficient acceptance of referrals, our operational and sales teams need to be aligned. With this in mind, our regional leadership worked diligently over the past four months on a new organizational structure. We announced phase one at the end of the year and the final phase mid-January. Historically, our sales and operations team had a very different reporting matrix with little to no alignment. With the new structure now in place, complete alignment now exists. We are confident this sales and operational alignment will drive success clinically and operationally. In addition to our focus on growth at our existing locations, we remain focused on our de novo strategy and our due diligence of potential acquisitions. In the fourth quarter, we made three acquisitions that added five hospice locations and one home health location. We evaluate the opportunities in our pipeline carefully with a priority for adding hospice where we have home health and home health acquisitions that provide tuck-in opportunities for improved scale and density. We opened four de novos in 2022 with two to four anticipated in quarter one. The pipeline of Donobos remains strong for 2023. For 2023, we remain confident in the need for our home-based services. Our guidance for 2023 includes consolidated net operating revenues $1,110,000,000 to $1,140,000,000. Consolidated adjusted EBITDA of $125 to $140,000,000. adjusted earnings per share of 50 to 89 cents per share. Chrissy will cover the key considerations underlying this guidance. And with that, I'll turn it over to Chrissy. Thanks, Barb.