StrangeTony,
In case you miss the language of business being used to describe hospice, here's what Kindred executives said in last week's
earnings call with Wall Street analysts:
Moving now to Kindred at Home, which comprises our Home Health,
Hospice, Community Care and Home-Based Primary Care businesses, we've
had a terrific quarter. The leadership team in this division has really
come together over the last six months, led by David Causby, the
Division President. Revenue increased to $606 million this quarter and
core EBITDAR contribution increased to $101 million. The integration of
Gentiva and Kindred continues to proceed faster than our initial
expectations and we remain on track to achieve our goal of $35 million
of realized synergies in 2015.
For our Home Health operations,
total episodic admissions grew 6.5% and revenue increased 7.6%, both
over prior-year quarter on a pro forma basis. For the Hospice segment,
ADC improved 2.3% sequentially over the first quarter of 2015. We
believe we have successfully stabilized our census over the past several
months and are returning this Hospice segment to growth in light of
recent policy changes by CMS, providing more clarity on the importance
of the hospice benefit to Medicare beneficiaries, our continued focus on
highly-effective palliative care programs and a deep belief that
hospice save the Medicare system money while aiding greatly with
end-of-life care, we are bullish on the growth potential of this segment
over the next few years.
Several analysts asked questions about Kindred's hospice segment.
Frank Morgan -
RBC Capital Markets
Okay.
And then you called out certainly how the hospice business is improving
and we're certainly seeing a lot of other companies talk about that as
well. But any high level thoughts on really what's driving this recovery
that most people seem to be experiencing today?
Benjamin Breier - President and Chief Executive OfficerI
think if you listen, Frank, to what's coming out of policy makers in
Washington, as I said in prepared remarks, I think that there is this
growing parallel path that started to come together on two specific
ideas. On the one hand, I think that – and for anybody on the call and
lots of Americans out there who have gone through the path of having a
loved one who's had to deal with and received some form of palliative
care hospice card – as a qualitative benefit at end of life, it really
is, I think, one of the most powerful things societally that we can give
to our loved ones around caring for them at end of life. So on the one
hand there's this undebatable qualitative nature to it.
And on the
other hand, Frank, I think what policy makers are seeing on the
reimbursement side of the world is that what is clear is that if you can
have discussions earlier with family members and loved ones about end
of life care and if you can make some decisions on where those loved
ones are around end of life treatment, there is the potential, if I may,
to talk about significant savings to the Medicare system if you use
these services appropriately.
And so here you have a qualitative
issue with a financial issue coming together and I think policy makers
at CMS and others have looked at this and finally said, you know, this
is a benefit that we probably ought to think about expanding, not
contracting, and if you see some of the recent comments that came out of
CMS around Medicare beneficiaries who are going to have the opportunity
to participate in hospice at an earlier stage than what they might
otherwise have been able to do, if you see what came out in the new
payment policy around this U-shaped curve of – in terms of the way we
manage hospice patients, and if we just watch ourselves what's happening
from a patient day admission ADC trend, I think you have to be nothing
but pretty bullish on what the future of the hospice delivery is and for
us, we have almost a $700 million, $800 million Hospice business here
at Kindred. It was, I think, one of the hidden jewels if you will, as
part of the Gentiva integration and acquisition.
We're running the business very well and we're, as I said earlier, we're pretty bullish about our growth prospects in line.
Frank Morgan - RBC Capital MarketsOkay,
and just one final one on the Hospice business, you mentioned the
U-shaped curve, what's your assessment right now in terms of if you look
at your length of stays, median length of stays, how do you think the
U-shaped curve will impact that business in and ad hoc? Thank you.
Benjamin Breier - President and Chief Executive OfficerOur
length of stay has historically been a little bit higher than others
mostly because we're like 98%, 99% into the Routine Care business. We
don't do much inpatient or continuous hospice care in our Hospice
branches. I would say we're starting to see our lengths of stay come
down slightly, irrespective of any payment changes that are happening
and my general comment to the U-shaped curve is it will be net-neutral
to slightly positive for us, although I would not be surprised if, Frank
to your question specifically, lengths of stay come down a bit.
Frank Morgan - RBC Capital MarketsOkay. Thanks.
Josh Rashkin -
Barclays
Hey.
Thanks. First question just on the hospice segment; it sounds like,
Ben; you're obviously excited about that. I'm curious what your
perspectives are if and when the hospice benefit actually moves into
Medicare Advantage. Clearly, currently not part of that. Do you think
that's a risk in the sense that the health plans manage those patients
to a lower length of stay, or do you think potentially there's an
opportunity because MA's been avoiding hospice costs because obviously
they don't manage it right now. So I'm just curious what your
perspectives are, if that actually occurs?
Benjamin Breier - President and Chief Executive OfficerWell,
I'll go back to my thesis, and or my hypothesis I guess, back to what I
was talking about a few minutes ago. I understand your question and I
think you're right to be – and all of us are right to be a little bit
curious and concerned as patient benefits move from Medicare
fee-for-service to Medicare Advantage, primarily because the MA plans
have different thoughts in terms of how they manage utilizations. But
Josh, if you go back to my hypothesis, which I think is right, that the
hospice benefit is actually a net saver to the Medicare beneficiary and
to the payer. I actually think that smart companies like Medicare
Advantage that are looking to both be qualitative to their patients and
their customers and managed costs, I think they're going to run to the
hospice benefit, not away from it. I think.
Josh Rashkin - BarclaysYeah.
No. I mean, you've seen a lot of this movement towards slower side of
care and clearly hospice is cheaper than any of the inpatient options.
So I get that. I'm just – it's just you always worry about the way they
manage the patient I guess. Second question around these duals moving
into Managed Care on the hospital division, is there a way to contract? I
mean have you guys reached out to some of these Medicaid health plans,
particularly in California that are getting all of these duals assigned
and try and be sort of proactive around the contracting and seeing how
you can help and maybe get a case rate to your point as opposed to
length of stay mattering, et cetera?
Benjamin Breier - President and Chief Executive OfficerOh,
absolutely, Josh. You should know. I mean, for the last 18 months as we
were heading towards these demonstrations in California, as the state
of California was picking who their Medicaid providers were going to be,
our Managed Care folks, Franke Elliott, whose our Chief Managed Care
Officer and his team of provider relations and contracting folks, I
think we have something like 65 full time Managed Care folks now in our
organization. They've worked collectively very hard to garner contract
participation with; I think virtually all of the Medicaid managed
providers out there, including negotiated rates, including a very good
relationship with those payers in the state of California. And I think
one of the reasons why we've been able to achieve so much of the
movement into the Medicaid managed population is because of the work and
the foundation we laid.
Provider relations and contract relations
is always sort of an ongoing effort. You have to continually go back
and talk about your value proposition, why rates should be what they
should be. I think having the diverse market offering that we have in
Southern California helps us in that regard. So we're on it. We're on it
in a very meaningful way and we'll continue to pursue every path
towards having good relationships with those payers as we can.
Josh Rashkin - BarclaysOkay.
And then just last question on M&A and I know you guys have had a
particularly busy year. But I'm curious what the appetite is today to
continue to roll up sort of tuck ins in your markets and then maybe
which segments are most attractive. And maybe lastly, how do you weigh
that against debt repayment?
Benjamin Breier - President and Chief Executive OfficerWell,
I think we're always trying to be opportunistic as we manage our
investor's capital and as we think about our balance sheet. De-levering
this company and paying down debt remains our number one priority. We
have said that and focused on the idea that we want to integrate
Gentiva. We want to gain all of the synergies that we think are
available in that integration and acquisition. As Stephen mentioned,
we're off to a great start this year, and we think that we'll meet and,
we hope, exceed the expectations of what $70 million-plus that we laid
out. Nothing helps de-lever our company more than getting those
synergies and driving EBITDAR higher. So that's our first focus.
But
I think, Josh, to your question more broadly, there are a lot of
markets, particularly our integrated markets, where there are tuck-in
opportunities and we have to continue to remain nimble and
opportunistic. We have markets for instance where we might have a very
significant home health presence and there may be a hospice branch that
may be for sale. We'll certainly be on top of that.
Unidentified Analyst
Hi,
this is Frank on for Chris. Thanks for taking my question. I see you
touched on this a bit earlier, but it looks like there was some
lumpiness in the Hospice segment in the quarter. Can you just provide a
little more color about how we should think about stabilization in that
business going forward? Thanks a lot.
Benjamin Breier - President and Chief Executive OfficerWell,
I think – as I've commented a couple times, I think we've seen now five
– I think it's five consecutive months or five out of the last six
months, we've seen patient day and admission growth in this business.
The trend after sort of stabilizing and flattening, I think, towards the
back half of 2014, has really been the arrow I think pointing up.
Our
operations are well intact, our sales teams are well intact, I think we
have a really good sense of how we're managing the hospice patients. I
think having some stability now in what the reimbursement environment
looks like is going to be very helpful, and there is a little bit of
seasonality in the Hospice business. I mean, certainly you'll see
Hospice trends probably continue to go up, then flatten and probably a
little bit down in Q4 before they return back to growth in Q1 of next
year. But I would just generally say, the arrow, as I've said now a
couple of times, is clearly pointed up in this business, and we remain
very confident that we'll continue to show incremental performance
there. Thank you.
Valued hospice employee, are you still there?
Nope. I hung up long ago.
Anonymous (from Gentiva: a Kindred at Home company)
