Enhabit, Inc.

Good morning, everyone, and welcome to Inhabit Home Health and Hospice's first quarter 2023 earnings conference call. At this time, I would 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, Julianne, and good morning, everyone. Thank you for joining Inhabit Home Health and Hospice for our first quarter 2023 earnings conference call. With me on the call today are Barb Jacobsmeyer, our President and Chief Executive Officer, and Chrissy Carlisle, our Chief Financial Officer. Before we begin, if you do not already have a copy, the first quarter earnings release, supplemental information, and related form 8K, or filed 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 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, including the Form 10-K and subsequent quarterly reports on Form 10-Q, each of which is 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, and other forward-looking information presented, which are based on current estimates of future events and speak only as of today. We 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 ask a question. If you have an additional question, please feel free to rejoin the queue. With that, I'll turn the call over to Mark.

Thank you, Mark. Good morning, everyone. Thanks for joining us. I'd like to take a quick moment during this Nurses Week to acknowledge all our nursing professionals who provide a better way to care each and every day for our patients, families, referral sources, and payers. It is our nurses alongside our other clinicians, caregivers, and support staff who deserve the credit for our consistently strong quality outcomes. We firmly believe care will continue to move to the home, and the long-range growth potential is significant, particularly for the providers that can deliver the high-quality care required to help patients remain wherever they call home in a cost-effective manner. Let's talk now about our Quarter 1 results as we continue to make progress in two of our critical success factors for 2023. payer innovation, and the recruitment and retention of clinical staff. We are pleased with the progress we've made in both areas. The start of the year has been a busy and productive time for our payer innovation team. The most significant update is our executed agreement with a national payer that became effective May 1. Our branches are excited and ready to accept these patients they historically had to decline. In addition to this national payer, We executed agreements with two conveners that have national reach, both of which went effective May 1. We look forward to working alongside these conveners to solve challenges and deliver accessibility for patients for home-based care. The primary role of a convener is to create high-quality networks of post-acute providers who can lower the overall total cost of care. They understand the need to pay competitively for timely access to high-quality care. Our data analytics and strategic finance teams have collaborated to produce information for the field to direct our local teams where to go to drive change in referral and admission patterns towards these new agreements. I have been traveling with members of our executive team visiting our local leaders. To date, we have visited branch operations and sales teams covering 159 branches. We believe it's important to take time to sit down and be transparent as we present not only how but why we must deselect certain payers and replace them with the new regional and national agreements. We spend time walking our operations and sales leaders through the impact of not making these tough decisions and how this affects our ability to reinvest in our people and our technologies. We sincerely acknowledge there is a patient on the other side of these tough decisions, but we remind them we did not create the need for this difficult decision the payers have. We thank our employees for remaining focused on the quality of care they provide and remind them to rely on us at the home office to negotiate these better contracts. We are confident the strong quality outcomes our clinicians drive, particularly our low readmission rates which are 360 basis points below the national average, will continue to reinforce our value to the payers and the conveners. To put the financial impact of driving this change in perspective for you, every 5% move of non-episodic admissions under our current average rate per visit to one of our new national or regional agreements improves adjusted EBITDA by approximately $2 million annually. This is outside any additional volume growth. In addition to our success with payer innovation, we have continued success with our recruitment and retention of clinical staff. A continued increase in our full-time nursing candidate pool drove 101 net new full-time nurses in the first quarter, 91 in home health and 10 in hospice. Our full-time vacancy rate improved 50 basis points sequentially decreasing from 24.3% to 23.8%. We are beginning to see the impact of our staff completing orientation and ramping up their patient caseloads. We ended the quarter with only four hospice locations at capacity constraints and 71 in home health. 17 of these home health capacity constraint locations occurred as a result of growth to new census levels. New positions have been posted in these locations to increase core staffing. With improved staffing and increasing volumes, the team's efforts around productivity and optimization resulted in a 2.3% year-over-year increase in home health cost per visit and a 4% sequential decline in cost per visit from Quarter 4, 2022. For hospice, the implementation of the case management model has created an increase in our cost per day year over year. The use of contract labor, while less than quarter four, and additional triage and dedicated on-call resources drove 1,000 basis points of the 13.2% increase year over year. Sequentially, cost per day increased 4%, primarily due to the impact of the case management model's fixed cost that were added in quarter four with lower patient days in quarter one. We continue to believe these are critical resources needed to drive our recruitment and retention and our ability to accept patients from a more diverse referral source. I'm also excited to share with you a little about our first inhabit employee engagement survey that was recently completed. 76% of our full-time and part-time staff completed the survey. And their response to the question, how likely is it you would recommend Inhabit Home Health and Hospice as a place to work, was above national healthcare benchmarks and places us in the top quartile of healthcare. The two top drivers of engagement were the meaningful work that we do and the organizational fit our employees feel, specifically when it comes to diversity and inclusion. We scored in the top 5% of healthcare on each of these drivers. With the continued progress in staffing, payer innovation, and our hospice case management model, we are making additional strides towards our growth strategy. In March, we acquired a home health agency in Evansville, Indiana, and we continue to have success with our de novo strategy. In quarter one, we opened two hospice de novos and have increased survey activity at other sites in quarter two, which is a prerequisite to obtaining our provider number. We believe we are on track to open 10 de novo locations this year. With that, I'll turn it over to Chrissy to discuss our quarter one results and guidance.