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[00:00:02] Greetings and welcome to the Amedisys, Inc. third quarter Twenty earnings conference call. At this time, all participants only listen only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, you may press star one on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Nick Muscato, senior vice president of Finance. Thank you, sir. You may now begin.
[00:00:37] Thank you, operator, and welcome to the Amedisys investor conference call to discuss the results of the third quarter. And in September 30th, twenty a copy of our press release, supplemental slides and related Form 8-K filing with the SEC are available on the investor relations page of our website began. Today's call from a Matisses will be Paul Cruzeiro, Chairman, CEO and president and Schocken Chief Financial Officer. Also joining us is Christia, our Chief Operating Officer, and Dave, primarily Chief Legal and Governance 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 a Matisses 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 risk and uncertainties, which may cause the company's results or outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our filings, including our forms. 10K tend to indicate. In addition, as required by SEC regulation G, a reconciliation of any non gap measure mentioned during our call today to the most comparable gap measure will be available in our forms, 10k tend to indicate. Thank you. And I'll turn the call over to a medicine CEO, Paul Kusserow.
[00:02:08] Thanks, Nick. And welcome to the Medici's third quarter Twenty twenty earnings call. I'm extremely proud of our performance this quarter as we have once again generated prodigious clinical, operational and financial results, besting both our internal and external expectations in a tumultuous environment. With the ongoing covid pandemic still resurging and the once in 20 year payment system overhaul DGM. We delivered on our four strategic pillars, all while we and the country continue to deal with this crippling pandemic and our industry with the transition to DGM, our performance throughout this quarter once again shows the resiliency and persistence of our caregiving company, our clinical team, and all of the support from who will stop at nothing to provide the high quality care to our patients. Our performance is a direct result of all the incredible, acute and increasingly hard circumstances. And I want to send a heartfelt thank you to each and every one of you. This quarter, we will briefly spend time reviewing our progress against our four strategic pillars, digging into our underlying business performance, updating our outlook for Twenty twenty and diving into covid-19 varying impact on 3Q results, as well as exploring our even stronger outlook for 2021 and beyond. During this call, Scott and I will cover the following our performance in Q3, which tested our internal modeling and street expectations and highlights how important, essential and resilient home health, hospice and personal care are to the health care delivery system.
[00:04:11] We'll talk about covid-19, which has now sadly settled more into a business as usual. We are carefully monitoring these concerning surges and are learning how to execute successfully in this unusual environment and working to turn headwinds into tailwinds. The reimbursement outlook for both home health and hospice, which will set up Twenty twenty one to be our best Medicare reimbursement year in recent history. Post covid, including our updated view of Twenty twenty guidance, what we're doing to position ourselves for a strong twenty twenty one and beyond, and why the future value proposition of all our business segments looks even more promising. With that, let's dove right into our progress against the four strategic pillars, which are the drivers of our company and its success. Always starting with quality, we achieved a quality of patient care star to EPS score of four point three three and we had 95 percent of our care centers at four stars or above and 65 percent of our care centers at four point five stars are above our ship score is four point five stars, which is important as there will be no more to EPS updates until January twenty twenty to ship will be our interim standard. Our hospice business once again significantly outperform the hospice items set national average in all measurement categories and puts us at the top quality wise of the national players.
[00:06:01] Next is Rose. In home health, we grew total admits, by five percent and total volume by six percent, showing just how strong and quickly the business has recovered from the initial impact of covid-19. We expect these trends to strengthen throughout Q4, setting us up for strong growth in Twenty twenty one. In hospice, we delivered strong total admits that an impressive nine percent ABC and hospice was flat as facilities, especially sniffs experienced covid related occupancy declines. And we face some challenges related to access restrictions imposed by these facilities or covid is resurging from other interesting data points on hospice in the time of code that include our business mix has shifted during covid facility based census went from 43 percent in Q3 19 to 35 percent in Q3 20, with a corresponding average length of stay increase from 82 to one hundred and six days. Conversely, non facility business is up from about 57 percent in Q3 19 to 64 percent in Q3 20. Our average length of stay in our home base since dropped nearly 10 days as a result of patients on census. With covid-19 bringing down the average, these covid-19 patients were typically on census for an average of 14 days. In order to combat these trends, we have leverage our additional seventy three feet on the street towards two strategies. One, focus on continuing to steal market share in facilities and to expand our referral base to new non facility based accounts and in all cases, continue to educate all referral sources on identifying the need for hospice earlier.
[00:08:10] Finally, keep in mind that ADC growth lags admin growth by about a quarter, so nine percent admit growth in Q3 will be reflected in ADC growth in Q4 and we expect to see attractive ADC growth into Q4 and beyond into Twenty twenty one. Employer of choice, we drove total voluntary turnover to nineteen point three percent for the quarter and eighteen point five year to date, with an early exit rate of eleven point three percent, down from thirteen point two percent in Q3 2019. Early exits we define as employees that leave within their first 90 days has been a focus of ours this year. We know how valuable our employees are and how hard it can be to find and secure the best talent once we have them. There is no reason why they should leave us and this will continue to be a high priority going forward. We think we can and should do better on both fronts and expect to show improving results. Next, operational efficiency, we continue to make great progress in deploying DGM cost levers in the third quarter, we achieved an LPN Aaryn ratio of forty six point seven percent, up from forty point six percent into three nineteen and a PTA peaty ratio of forty nine point six percent, up from forty three point seven percent in Q3. Nineteen. As you can see, we are well on our way to our ratio goal of fifty fifty by the end of this year, which has will continue to provide significant positive impact for margin and will improve our care as well. We also continue to make progress on optimizing our planning and visits. Realizing a nearly two point four visits per episode reduction during the quarter while delivering equal or greater quality and learning to employ high frequency, low cost tools like telehealth into our care delivery models. Overall, our productivity has been improving at a quarter, over quarter and sequential rate of approximately five percent as we continue to refine our scheduling practices and documentation, becoming even more efficient in how we take care of our patients. Our performance this quarter has allowed us to increase our EBITDA our guidance range from two hundred and forty five to two hundred and fifty five dollars million to two hundred and sixty nine to two hundred and seventy two million, raising the midpoint of our EBITDA range by twenty point five million dollars. Scott will cover the details in his remarks. None of these results would be possible without our over twenty one thousand employees unwavering commitment to providing outstanding care to our patients in their homes. I want to thank every one of you for helping to deliver such a strong clinical, operational and financial results.
[00:11:37] It all begins with our culture of caregiving, which puts the patient first. As we said, great care equals great economics. Now onto the regulatory front. And as we reported last quarter, we are very pleased with how the rate environment for Twenty twenty one is shaping up. In July, CMS finalized the fiscal year 2021 hospice rule, which was comprised of a two point four percent payment rate update, this correlates directly to our specific hospice payment rate increase of about two point four percent, given our organic and inorganic growth. In hospice, positive rate updates are increasingly impactful and meaningful to our business and physician as well for top and bottom line growth in 2021. Similarly, in late June, CMS issued the calendar Twenty twenty one home health prospective payment system rate update, where CMS proposed to increase payments by two point six percent beginning in January. In addition to this positive payment update, CMS also proposed to make permanent the telehealth flexibilities that has been previously granted to home health agencies during the current public health emergency. Just last week, two bills were introduced into Congress, one in the House and one in the Senate, that similarly seeks to provide telehealth flexibility and importantly, payment for telehealth visits during the current and future public health emergencies. We applaud CMS and our congressional champions for their proposals to extend telehealth flexibilities and payment for those visits during this crisis and beyond.
[00:13:29] We look forward to working with them on this important policy initiative for the home health industry and our patients. We expect the home health rule to be finalized in the coming days and to be consistent with our comments here. The role traditionally comes out around 4:00 on Halloween. We don't expect to be scared this year a treat, not a threat. These two payment updates will be significant tailwinds for our company as we enter Twenty twenty one, producing an approximate incremental 40 million dollars in 2021. The Twenty twenty one rate updates were both home health and hospice are just a small piece of why we continue to be increasingly excited about what the next few years appear to have in store for our company. I want to spend a little time talking about the tremendous opportunity we see in front of us that could propel us to significant future growth and innovation for 2021 and beyond. Last week we completed our annual strategic planning process. Our market and regulatory analysis projects the next five years based on what we see demographically and regulatory, as well as the industry dynamics to be very strong tailwinds which should drive outsized growth for a metastasize and the industries we play in. For example, demographics are in our favor, thanks to the baby boomers now between 56 and 76, keeping in mind our average patient age is 78 to 80, meaning we will be experiencing a surge of potential patients in the coming years as baby boomers age into the home care sweet spot.
[00:15:21] More people are turning 65 years old and aging into Medicare faster than they have ever before. Over 10000 that the burgeoning 75 plus population, coupled with ever increasing unsustainable health care costs, puts us in a very advantageous position as an aging in place company delivering the highest quality care at the lowest cost to seniors. Also, besides demographics, psychographics are in our favor. Nine out of 10 of these baby boomers want to age and die at home. Add to that economics at home. Care is what people want. It's the cheapest type of care and it's the most suitable for the types of long length chronic illnesses that we will be treating in the future. Moving to regulatory systems, implemented massive and comprehensive home health payment reform in Twenty twenty, so the rate outlook over the next five years is projected to be stable and positive in both home health and hospice. When you put all the market forces together at what we have, quality, scale and capital. Things look very promising and that's why we're so excited. Besides demographics, psychographics, economics and regulatory, there is a new accelerator covid-19 it is not new news. The covid-19 severely impacted patients in institutional settings such as skilled nursing facilities and assisted living facilities.
[00:17:03] A significant portion of covid-19 deaths have occurred in institutional settings. It has accelerated the desire to be cared for in the home, which is now stronger and more urgent today than it ever has been. And we are innovating to meet this demand, working to be able to increase our capacity to care for more traditional patients, as well as moving up the acuity scale, focusing on new, sicker patients that had no other options but institutions. By developing a sniff at home product for those who want to avoid a sniff, say we are showing we can give patients a home alternative. We have made good progress in this product development, which focuses on a package of services in conjunction with traditional home health aimed at keeping higher acuity patients at home and out of institutions. This at home represents an interesting new growth avenue for the company and will be an opportunity for growth even beyond the pandemic, the time to work with referral sources on taking their higher acuity patients is now, and we're capitalizing on it. Finally, given our scale acquisition and integration capabilities, strong cash flows and balance sheet flexibility, when the current temporary covid subsidies holding the home health market together are lifted. The true impact of GM will finally be felt within our industry. We will be ready to continue our organic and inorganic expansion in home health and are well-positioned to capture more and more market share of a still highly fragmented market.
[00:18:47] As a result of our 20 19 planning and twenty twenty execution, we are thriving in GM and have worked incredibly hard and proactively to turn headwinds into tailwinds. We have navigated and our understanding how to operate during covid. We are active on building new territories via the no votes and innovating around our core, as mentioned. The growth algorithms we've developed for a metastasis in Twenty twenty, one and beyond are truly exciting, and I believe we have positioned ourselves optimally to fully capture any opportunities that come our way. Finally, as noted in our August 10th 8-K for tax and estate planning purposes, I exercised 500000 of my vested stock options and retained 100 percent of the underlying shares after tax and auction costs, as I just laid out. And as Scott will expand upon, we have many years of tailwinds ahead of us, and I am excited to retain approximately one point three percent ownership of the company. During my almost six years at a metastasize, I have not sold a share. This transaction resulted in a very positive tax benefit and subsequent EPS impact, which Scott will deal with in his prepared remarks. We believe this method was the best course of action for the company and our shareholders. With that, I'll turn the call over to Scott, who will run us through our Q3 performance and full year twenty twenty guidance. Scott.
[00:20:30] Thanks, Paul. I'm very pleased report another impressive quarter results, which was highlighted by a return to growth following covid-19 destruction in Q2 and meaningful expansion our margins. For the third quarter on a gap basis, we delivered net income of two dollars and 16 cents per diluted share, an increase of one dollar and 13 cents on five hundred and forty four million in revenue, an increase of forty nine million or 10 percent compared to twenty nineteen. AGAP results include our recognition of Kazaks funds, which is included as other operating income in our statement of operations, as a reminder, we have chosen to apply our care that funds only to direct costs associated with covid-19. The majority of these costs are included in cost of service and consists of the following p e of nearly two million testing costs of one point five million and quarantine payment plus one million.
[00:21:26] Our results were impacted by income or expense items, adjusting our gas results that we have characterized as nonpoor, temporary or one time in nature, five 15 of our supplemental slides provide details regarding these items in the income statement line items, each adjustment impacts.
[00:21:43] You'll note that our adjustments include the recognition of Kahrizak funds and direct costs associated with covid-19. For the quarter, on an adjusted basis, our results were as follows revenue increased forty nine million or 10 percent to five hundred forty four million EBITDA increase 19 million or thirty three percent to seventy six million EBITDA as a percentage of revenue increase, two hundred forty basis points and EPS increase one dollar nine cents to two dollars and twenty four cents per share during the quarter. EPS benefit is seventy two cents from a twenty four million dollars tax benefit as a result of executive stock option exercises. Once again, keep in mind, our adjusted results do not include any of the Karzai funds or Code 19 direct costs. Additional items impacting our two three Twenty twenty performance are as follows, the suspension of sequestration added Najmeh into our revenue and gross margin for the quarter. Continued improvements in clinical utilization and a shift in clinical staffing makes further substantial portion of our four hundred forty basis point improvement in gross margin. Don't catch selections, drove lower revenue adjustments, health and worker's compensation increased six point four million, driven by the shift of costs from Q2 to Q3, did a Code 19, as well as the inclusion of the sector which closed in June and wages which would effect August 1st. Sequentially, EBITDA increased nine million dollars, driven by fifty nine million dollars increase in revenue and gross margin expansion. Now, turning to our third quarter adjusted segment performance, keep in mind, segment level EBITDA is pretty corporate allocation. And home health revenue was three hundred twenty six million, fifteen million or five percent compared to prior year, driven by our strong recovery and total admissions and total volume on a same store basis.
[00:23:44] Total admissions were up five percent and total volume was up six percent. Revenue per episode was up fifty dollars, or one point eight percent, which was driven by the suspension of sequestration and reduction in loofahs, lost billing periods and an increase in Casement's. Visiting commission calls for visit increased five percent over prior years. The increase was driven by the planned wage increases effective August 1st, increased health insurance expense as a result of covid-19, which caused a more significant sequential increase than normal seasonality to contract utilization and the impact of lower visit volume on fixed costs. A gross margin improvement of 600 basis points was driven by a significant progress on clinical staffing mix and utilization. And 80 points, 80 basis point impact of sequestration, relief and the variable nature of our business model, which benefited from higher volumes. Segment. But I was 70 million. Twenty two million with an even higher margin of twenty one point three percent, representing a six hundred twenty basis point improvement. Other items impacting the third quarter results of our home health segment include an increased increase in gooney of approximately three million, mainly driven by planned wage increases. The addition of resources to support growth, higher health and worker's compensation, cost increases instead of accruals and investments related DGM partially offset by lower travel on trains and. EBITDA was up 16 million, sequentially driven by a 36 million dollar increase in revenue, highlighted by a 15 percent sequential increase in total emissions.
[00:25:25] I want to provide a little more color on our performance and observations.
[00:25:30] Because you're a minor and entering the year, the medicine right impact as a result of PDG, almost the negative two point eight percent. During the quarter, our revenue per episode was positively impacted by the sequestration suspension, excluding the impact of sequestration, our revenue per episode was down only point two percent from prior year, which is a material improvement as we were down to three point seven percent and two point three percent in Q1 and Q2 respectively. As a result of our continued focus on operationalizing PDG, we made significant progress on overcoming the right impact on clinical staffing, which is the quarter with a forty six point seven percent LCN utilization, up from forty point six percent in the third quarter of twenty nineteen and the forty nine point six percent utilization up from forty three point seven percent in the third quarter of twenty nineteen. This continued progress keeps us on track towards a 50 percent LPN and PTA utilization by the end of Twenty twenty. Keep in mind that every one percent shift in utilization equates to possibly four hundred fifty thousand dollars of cost savings. On utilization in the second quarter at fourteen point four visits per episode, which is down nearly two point five visits every year and one visits sequentially. As of the end of August, one hundred percent of our care centers are utilizing the metallurgic care for them as a reminder of the care products, uses analytics to create patient specific care plan to drive the most possible outcomes.
[00:27:02] Our business metrics only include in-person visits formed by commissions. We have deployed the use of telehealth visits in response to our patients needs during the covid-19 pandemic. During Q3, we averaged approximately point four telehealth visits per episode, which was down from point six in Q2. We have also rolled out the metallurgic touch product, which is an outcome which is an outbound calling product user identify and check on our patients at higher risk of readmission. So these additional virtual touch points are not counted in our business per episode. They are another key tool we use to provide the highest quality clinical care and help to ensure the best outcomes for our patients. I want to commend our entire home health leadership and operation, the speed at which you recovered volumes and the efficiency and what you did was a big driver of our performance this quarter. Congratulations on your performance and thank you for your efforts. Turning now to our hospital segment. Revenue was two hundred million dollars. Thirty seven million over prior year, an increase of twenty three percent, which includes the addition of two acquisition closed during Twenty twenty percent on January 1st and Americare on June 1st. Net revenue per day was up two percent to one hundred fifty five dollars and fifty seven cents driven by sequestrations suspension. Our ADC was up slightly over prior years. The segment continues its recovery from the impact of covid-19.
[00:28:30] Our facility based census has been most significantly impacted. However, we continue to see gains in our Norn facility volumes as evidenced by nine percent growth in same store admissions compared to a one percent decline in Q2. We anticipate Q4, ADC growth and census growth generally lies the mission. Office costs today increased forty seven cents, the increase was driven by raises and health insurance, offset by a significant decline of visits performed by variable costs, employees and lower transportation costs. As we've experienced limitations and access to our facility based patients, which has resulted in a 40 percent decline in visits for ATC. DNA is a percentage of revenues up to 100 basis points or 12 million over prior year. The increase is driven by acquisitions that are approximately nine million to the segment, excluding acquisition activity. DNA is up approximately three million due to the addition of resources to support census growth plan, wage increases and higher health insurance costs, partially offset by reductions in travel and training. Even out of forty nine million, up approximately seven million, an increase of 17 percent. Our personal care segment generated 18 million in revenue in the third quarter and maintained even that margin over prior year, covid-19 continued impact, billable hours and client services to three on a year over year basis. However, we have seen positive sequential trends in our personal care segment, including an increase in hiring of approximately forty six percent.
[00:30:06] Growth in clients of two percent and growth now is of five percent. Turning to our total general and administrative expenses.
[00:30:16] On adjusted basis, total Gené was one hundred seventy six million or thirty two point three percent of total revenue, which is up 200 basis points over the prior year, which includes 11 million in additional costs related to our acquisition, nine million in our hospital segment and two million in corporate. Additionally, instead of tropicals, taxes on stock option exercises, raises and health and health and worker's comp accounted for approximately 11 million. Sequentially total, Gené was up twenty four million dollars and 17 million, excluding the Cerqueira acquisition.
[00:30:52] The drivers of the sequential GNP growth were expected increases related to planned wage increases and higher health, as well as higher incentive tropicals driven by a strong Q3 performance. And to moderates, a more normalized percentage of revenue and twenty twenty one through growth in top line in both our legacy and acquisition businesses.
[00:31:15] Our impressive cash flow generation continued in the third quarter as we produce eighty three million dollars in cash flow from operations, the increase in cash flow was driven by a two day reduction in DSO to 40 days from the end of the second quarter. Eighteen million dollars in payroll tax deferral is under the care that ten million dollars relates to an increase in our estimated usage of Kahrizak funding, which will be used to offset increased costs. Lady covid-19 expects to be encouraged through June 30th twenty twenty one in accordance with the updated guidance issued by HHS in September. With our cash flow performance in the third quarter, we expect to generate approximately three hundred, three hundred, ten million in cash flow from operations for the full year of Twenty twenty systemized the third straight year of generating cash flow from operations in excess of two hundred million, which allows us to significantly pay down our outstanding revolver or fund additional acquisition activity. Finally, as Paul mentioned in his opening remarks, we are increasing our guidance ranges for twenty twenty our new guidance ranges to represent our best view of the business at this time. And as far as revenue of two point zero six seven to two point zero seven two dollars billion, adjusted EPS of two hundred sixty nine to two hundred seventy two million and adjusted EPS of six dollars and two cents to six thousand eight. I'm very pleased that our ability to increase our guidance ranges, given the challenges of implementing PDG, completing the Cerqueira acquisition. They continue to operationalize our other acquisitions, all while dealing with the covid-19 pandemic. As a reminder, our Twenty twenty performance has been impacted by covid-19 and we expect some of these items to normalize in twenty twenty one. These items include positive impact from the suspension of sequestration, which expires December 31st.
[00:33:15] Impact of this on utilization, which impacted revenue and business practices. The hospice margin benefit from lower home health aide visits to the facility, access limitations and a decreased travel and training costs.
[00:33:32] Based on our terrific Q3 performance, we are very pleased with our trajectory as we enter Q4 and we are very confident and excited about our growth prospects for twenty, twenty one. While we will see normalization, our run rates for the items mentioned, we head into twenty twenty one with some meaningful tailwinds. A two point four percent premium reimbursement increase in hospice and a proposed home health increase of two point six percent. Continued operational improvement in our four hospice acquisitions. Significant opportunity for mission growth aided by BD staff expansion and Twenty twenty covid-19 disruption.
[00:34:09] And significant improvements in our gross margin driven by changes to visit utilization and staff inmates in the second half of Twenty twenty. This will conclude our prepared remarks. Operator, please open the line for questions.
[00:34:22] Ladies and gentlemen, the floor is now open for questions, if you'd like to ask a question, please, press star one on your telephone keypad at this time may indicate your line is in the question who you may press star to. If you would like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up your handset before pressing the Saki's. We do as you please limit yourself to one question at a time, but you may Rikyu for any additional questions. Again, that is Star one to register questions at this time. Our first question is coming from Brian of Jefferies. Please go ahead.
[00:35:00] Hey, good morning, guys. Congrats on a very strong quarter. I guess we're limited to one question, Paul. I'll just ask as you think about growth. Right. So you clearly showed showed acceleration in the second in third quarter from Q2 despite it being in the background. So how should we think about the remaining growth acceleration opportunities? And what do you think will be driving that both from a macro and company specific perspective? I guess, to add to that, you know, where do you think volume growth could go from that six percent organic number that you. Thank you. Thank you.
[00:35:35] Thanks, Brian. Yeah, we feel good about where we are, obviously, in terms of growth. I think the key for us is on the hospice side are adamant growth is very good and strong. What we when you have a flat EPS, it's going to pass through. And so we should start to see a good ADC increase, which is what we've been focused on. So we can continue particularly good, particularly well for next year. So we feel good about it. And on health, the growth has just been fantastic. And Chris is with me to any any any comments on that?
[00:36:09] Yeah, yeah. I'd probably say, Bryan, I'll just kind of go through home health and hospice as well as on the home side. Yes. You know, we're real happy with how we came out of Q3. We also progressed nicely through the quarter. So that gives us some some encouraging signs for for the balance of the year. You know, we we see that, you know, really it's an opportunity for us to continue taking share, which we feel like we're doing both with facility business as well as with our physicians groups. We had 17 over 1700 unique new referral sources in Q3 that had not referred patients to us in the previous year. Our team is really, you know, gelling nicely. And we've got a bunch of reps that are really starting to get into that, you know, kind of that maturing stage, if you will, to where they're starting to see some some some additional growth on top of, you know, their ramp up from from being new hires. So feel really good about the home health side hospice. You know, what we like is, is that you see that we had the nine percent added growth in Q3, the flat on ADC. And so, you know, if you look at the previous three quarters, we had one percent, ADMET Growth one percent, and the growth in zero percent in our link to stay has been relatively flat. So there's it's not a surprise that we were flat and ADC in Q3, but a couple, you know, a few data points is, you know, one is we had the nine percent admin growth that we should see acceleration in EPS in Q4 and beyond.
[00:37:35] On top of that, we also had over 800 uniquely where our new referral source is referring to us in the quarter that had not in the previous previous year. And then also we had a really good progression throughout the quarter on ad growth on hospice. So that's encouraging for us, you know, for for, you know, future kind of ADC growth and continue admin growth. In the last piece, I'd say is we've really invested in new reps.
[00:38:02] On the hospital side, we have 73 new reps in Q3 this year versus last year, a twenty percent increase in our number of reps. So as they get really kind of productive and get on board, that's going to open up opportunities for additional growth.
[00:38:16] I think there's no excuse for.
[00:38:21] Thank you. Our next question is coming from Matt Larew of William Blair. Please go ahead. Hey, man.
[00:38:28] Hey, good morning. I wanted to talk a little bit more specifically about the fourth quarter, and it's got obviously a relatively tight range there. So does that maybe just reflect the visibility that you guys have and to the cost profile into PDM, perhaps even into the hospice census? Maybe just help us understand what it assumes about, you know, volume growth dynamics and just kind of where the upside downside stress test is around fourth quarter.
[00:38:59] Yeah, Matt, thanks. I mean, we you know, we feel good and kind of as Chris to talked about who we're seeing going in, I mean, it's certainly a nice progression for us. And I mean, in those rates, we're assuming kind of a similar growth type of movement that we see here.
[00:39:13] We do think admits around around half this will accelerate as we move forward. Just, you know, the timing growing ADC is a little slower as we talk about the lag, but we do see that accelerating. You're going to see the normal increases in cost as we move into that around. You know, what we see around health insurance going up. I mean, you have some of those movements. We do have a right good guy. But, yeah, we feel like the visibility there, especially on the cost side, really felt good with the revenue levers coming through this quarter on the right side that really offset that year over year impact of sequestration. I mean, of excuse me, a PDG. So, yeah, I mean, we feel that it's certainly in our sights, less fearful of kind of the ability to handle through handle covid. So, you know, most of the most of the costs are baked in. We're looking at a nice October from a volume perspective, so we feel good. That's why we tighten the range.
[00:40:09] And as I think know that, I mean, we increased it, you know, in the mid range, twenty point five million. So it's a it's a big jump, so we feel good about that.
[00:40:20] Yes, indeed, and Paul, just quickly on on sniff at home the product of developing a sense for what the payment mechanism might be, given that it might be an additional basket services associated with that, and would you be willing to pay for those sources? Would be interesting elements of that. And I'll jump off. Thank you.
[00:40:41] Yeah. Thanks, Matt. Yeah. The sniff at home, basically, we've always been anxious to show since we've been producing very good quality. And as you've shown in your research, quality equals growth. We believe that there is an opportunity, particularly as the market is demanding, unless people want to go into business, particularly people with less acuity, and it's become less attractive for the business to take these, that there's an opportunity to take the lower acuity patients and sniffs and take care of them at home. Fee for service really doesn't have the payment mechanisms to do this. So the people we're talking with now are largely risk based entities. So in risk taking and may also bundles also ACOs. So that's where we've been focusing on it. If there's not, what we're trying to do is to, you know, have traditional home health and then use some of our personal care networks around that. And and then we're working with some doc groups that would would refer to that. So we we have to piece it together. It's a different model. We want to show it works. We anticipate if we do it in a capitated environment, then then we can take it to systems and see if because the benefits would be much lower in cost, if we could then take it to CMS and see if we can get some some changes in the fee for service world. But starting without any proof is as a hiding to nothing seems. Thanks lot.
[00:42:14] Thank you. Our next question is coming from A.J. Rice of Credit Suisse. Please go ahead, Andrea.
[00:42:20] Hi, everybody. Maybe I'll just ask my one question about the acquisition landscape, what you see out there both in home health and hospice. How how is pricing changed? I know Kahrizak and some of that funding and pushed off some of the deals you thought you might see in the back half into the first half of next year. That's still you're thinking as to when we'll see some of that rollout.
[00:42:46] You know, the last deals we saw and then I'll have Scott talk about it, because it comes out of this comes under him, but we've seen in hospice pricing has been very high. So we've seen and frankly, we've done in the last 18 months, we've done four deals really happy with the deals and the pricing. We got post synergies as well as just the ability to incorporate them into our legacy system. So that's what we're focused on in hospice. We're always looking we have some regional hospice is that we're out there looking nice size regional hospices that we're out there looking at. We think now, obviously, with the how home health is performing, though, it's a real opportunity to go out and look for home health assets, home health, particularly in some of the areas where we think, you know, that we can start to fill in also. And I'll have Scott cover this. We've been doing an incredibly good job on the novos and are still putting out, you know, between 10 and 15 to novos a year. So I'll turn that over to Scott.
[00:43:53] Yeah, but he agree with your post comments around the pipeline, excited about it and certainly heavily on on the home health side. And, you know, if you look at our cash flow position, we've got tremendous opportunity in the Twenty twenty one to really take some. It takes them in organic growth into into the portfolio side about that of us. As Paul said, it's been a big win for us to continue to move forward on those. We did do a little bit of a pause this year, but when we hit covid, but those are right around. Well, we're doing branches. That's really a nice view for us. We're probably kind of getting those open anywhere from eight to 12 months by an average cost to license about 400000. But we built a nice rhythm there. And I would you would expect to see us as we talk about twenty, twenty one when we give guidance, want to invest some dollars and an increase in that pipeline to know those.
[00:44:46] And to answer your question specifically, A.J., we're seeing hospice decently run hospices with know that are relatively clean over 15 times. So it's gotten a little crazy, particularly when it is a p e platform with which they can use to lever. They can justify their pricing that way, or at least they tell us there hasn't been many home health deals that have been clean. So they've always had these other assets around them that what we expect is if sequestration, you know, is is added back on and when the loans become due for the receivables and and for payroll is that's when we expect to shakeout to occur. If the government pushes this out further, it's probably going to hold us back on on what we anticipate is a large consolidation opportunity with Pigman fall, particularly as the wraps are going to be eliminated in January. But, you know, we're what we've seen reference is trading, you know, maybe 12 times, 13 times, something like that. But post synergies, it's below ten for us. So that's why we're looking. And that's that's where we think the market's going to be. And a lot of our competitors now, frankly, have seen what we've been doing in hospice and are now deciding to go after after hospice. So I think that's going to push the hospice pricing up even more.
[00:46:09] Thank you. Our next question is coming from Joanna Kuchuk of Bank of America. Please go ahead.
[00:46:15] Good morning. Thank you for taking the question here. Hi, how are you? So one other topic here. Can you talk about your Medicare Advantage, a book of business on the home outside, so you can update us on the progress towards your goal of, you know, increasing that risk sharing percentage of your contracts? So and with that, you know, what are you seeing in terms of average pricing? And have you seen improvement? Know, just looking on the average book of business for me, thinking I'm going to punch of on that.
[00:46:47] But in general, we're really happy with where we're at. We've got a great team doing this.
[00:46:53] Just have made a lot of progress. So we feel, you know, we know this is the future. And so we're very aggressive in terms of our ability to go out and learn as much as we can risk bearing environments. But, Chris, when you talk about where we go.
[00:47:07] Yes. How are you? And so, you know, it's still it's it's a it's a kind of a slow and grueling progressor process that we're going through in terms of just getting plans to give us an opportunity to earn additional rate based on, you know, quality metrics. You know, the plans are very open to that. They're doing that. We have now over 20, 20 percent of our actual contracts out there have some sort of upside based on quality metrics. We did some recent analysis is over 30 percent of our actual erm admins have some upside opportunity. Many of those are still new enough arrangements that we're not able to really report out the actual gains from that, but we should be able to do that in upcoming quarters. Again, you know, the make up is typically still, you know, a per visit rate that may be a little bit better than what we've experienced in the past with upside, you know, in a in 10 percent range based on those quality metrics. Ideally, you know, we want to really kind of close the gap between our Medicare fee for service and our Medicare Advantage. You know, the challenges that we run into is it's still a very fragmented industry out there, even though the plans are interested in quality. A lot of times they're also just as interested in who's going to take the lowest rate. And until there's some consolidation in the industry and some of those, you know, those willing to take, you know, unfavorable rates are off the table, it's probably still going to be an uphill battle for us. But, you know, we're still you know, we're moving it forward. Our rates are inching up, but we still got quite a ways to go.
[00:48:37] And we're also seeing Joanna, we're seeing some opportunities with with bundles in hospitals. So we're getting having more conversations. They are large, large areas where they do have specific regional concentration, which plays well when we have that coverage. Also, Chris and his team have done a fantastic job on driving down our readmissions rate. So what's our rate is like eleven or something. So our 30 day rate is eleven and or interest rates. Fourteen and a half. Yeah. So it's really good. So we're continuing to drive that down, continuing to show differentials there. And that's what a lot of the payers are interested in. And an uncertain marketplace, whether it was marketplaces, we're able with the co-operation particularly of hospitals, to drive that into single digits. So we feel very good about it. And that's what a lot of the payers are very interested in.
[00:49:34] Thank you, our next question is coming from Matthew Gilmore up there. Please go ahead.
[00:49:41] Hey, thanks, everyone.
[00:49:43] You, though, back at you, I heard you didn't like the music.
[00:49:47] You know, Paul, I just I think it's I think it's fortunate that that you're good at your job. You don't have to that song.
[00:49:56] A.j. Futura. Come on and I'll let you check next time. I love.
[00:50:02] Hey, let me try to follow up on some of the 20, 21 comments. I know you're not in a position to give guidance, but just hoping you could help us sort of think through a framework if if we did the math right. I think you're sort of at a seventy five dollars million quarterly run rate for the back half of this year. Is that kind of a good jumping off point as we're then thinking about organic growth into 2021 and sort of one of the puts and takes? And obviously the sequester is just one of those things. You just, you know, how would you frame it up versus the right sizing of it? Yeah, yeah.
[00:50:38] I got the math. Yeah, I think you're right. That's a good starting point. I mean, there's some noise in there, but, you know, 75 I would I would say is good. And if you look at our guidance in the guidance, you kind of put forth, you know, fourth quarter in a similar range of that. Seventy five. No, I think there's probably four things off the bat I'd consider moving into there. One is raised. We've talked to that before. And you think of what we expect and rate increases for next year is sequestration. That's probably about a 20 million dollar good guy I would talk to. The other would be CCH in a staircase as they expand. You know, we had said before, just alone of CCH, we get a 14 to 16 million dollar expansion and expect it to close somewhere around thirty four to thirty six million for this year. Obviously, with Tilba 19, that'll be impacted for us, you know, so that number, you know, I think still sequentially, you're probably between those two, somewhere around that 20 million dollar range. And then the other items to think to or I do think some hospice visits are going to come back for, as I talked about that in the prepared comments, we're seeing a reduction in visits in facilities specifically, which is probably about one hundred and ten basis point good guy in the hospice margin.
[00:51:47] So I see that coming back and then travel and training will come back around. We've seen that over the quarter, down around four million dollars year over year. So some of that will normalize for us. And then we think our growth, our growth prospects are very strong. You see us moving into, you know, what was there in Q3. We think that continues to move forward. And certainly with some low marks in Q2, we're going to have an ability to grow that pretty significantly. The other thing that that we'll be looking at and Paul mentioned earlier was the no, we're going to want to continue to expand that. That certainly is going to be a tiny bit of drag. But we think those our data we're seeing on the net of those make us pretty bullish on doing that. And then we're going to make some investments in the organization at this high rate of growth. We continue to look at that, but those are the big items to look at. But just off the battle between rate and CCH, you giving you roughly 40 million dollars as you move forward. And then the other items will work to finalize as we get closer to close out the year and can look at our plans for next year.
[00:52:49] Yeah, thanks. And also, Matt, my radio station, we're going to put that into.
[00:52:55] Thank you. Our next question is coming from Andrew Mack of Barclays. Please go ahead, Andrew.
[00:53:01] Hi. Good morning. I wanted to follow up on your knife at home service and your desire to expand capacity to take market share. How far along are you in that process? And has capacity been a constraint to volume growth from Smith diversions so far into the pandemic? Thank you.
[00:53:17] Let's talk about Jump Ball and then Scott, why don't you talk about 7-Eleven either way?
[00:53:22] Yeah, I'll start. This is Chris on the sniff diversion, which, you know, we kind of distinguish that from kind of the futuristic sniff at home, which is more kind of down the road. You know, it is you know, it is real. It's happening right now. There are some pockets of areas out there. You know, our growth rates were even a little bit ahead of our internal expectations in Q3 and accelerating into Q4. So we have run into some, you know, areas to where we do have some staffing constraints. But you know what we've, you know, shown that we can do in the past and we continue to do today is, you know, when we see those areas, we react pretty quickly and we've been able to utilize contract. You know, clinicians were necessary as well as kind of triaging visits if necessary as well, so that we can make sure we take care of the patients. We're not turning away any business related to capacity. The one the one thing I'll put out there, though, is about two percent of our clinical staff at any given point in time over the last, you know, a few months has been on quarantine leave related to covid-19. So, you know, if we run into any kind of spike there, then that would also kind of create some additional constraints. But our staffing, our clinical capacity right now is not, you know, inhibiting our growth.
[00:54:37] And they don't know the. Yeah, yeah.
[00:54:40] Sit down, please. I tell you that we're getting pretty close. We got to finalize a contract, which we're working pretty hard to get that done. Over the next few weeks, it'll be a pilot. So what that may look like in the first iteration of it could ultimately change if we push it out much further. Excited about it?
[00:54:57] I think it gives us the ability to move up the up the scale here from a from acuity level, which is what we want to do as far as our strategy in the home. And I think we're going to build it in a way that gives us some certain upside if we do the great job that we think we will. So excited about it need to get across the finish line, but we'll be talking more about it. That pilot kind of begins the rollout. And ultimately, when we see we're able to measure our success, you know, so we feel good about it.
[00:55:26] Jump ball business. We're winning more than we used to and then getting quarterly some interesting, again, respiring payers deciding that they want to push more from the lower acuity levels in the sniff into the home. So we're feeling good about it.
[00:55:43] Thank you. Our next question is coming from Matthew us at BMO Capital Markets. Please go ahead.
[00:55:49] And I know you got your third Matthew on the call. So I wanted to ask about what you're seeing in terms of competition or potential competition in home health from, you know, a large hospital systems, large physician groups, possibly, you know, integrated plans like Optum. You know, how much of that is on your radar screen now? And and, you know, should it be?
[00:56:21] Yeah, I think obviously we look at competition. Home health is still very much a local and a regional play. And so it varies sometimes. We see some of the folks you talk to in the you know, some of the bigger national players. In general, though, it's a mom and pop business. So we see a lot of players there. Again, we we believe with our quality scores and the correlations that that come out of that for a growth perspective, if as long as we focus on quality, good service, good transition, we're tending to win pretty disproportionately. We're we're gaining share out there. So we feel very good about that. We don't see much disruptors out there outside of the traditional space. There's a lot of news and noise on it in the venture and P worlds, but we haven't seen a lot of or virtually any disruption from some of these new models that are out there. I know, Chris.
[00:57:17] No, I agree. I think that, you know, for these large systems, if they want to enter into the space, it's not a simple thing to do. And, you know, and it's enough for them to be able to do it in a way that actually is, you know, either kind of, you know, kind of harms us anyway, or it takes to take share away from us. We're just not seeing it navigating, you know, kind of their own existing kind of, you know, payam world and systems a lot of times doesn't line up well with with home health, which is more of a, you know, traditional Medicare fee for service business. So, you know, we we see in pockets, but it really is, you know, an area that a lot of times our flexibility, our service reach, geographic service, reach and things like that actually, you know, helps us gain business from these hospitals that have their own systems.
[00:58:05] You know, what we are seeing, though, due to covid is we're seeing hospitals start to put together preferred provider relationships, which means instead of 15 home health agencies that are calling in, what they'll do is they'll generally go buy quality and then they'll limit it. And so we you know, it's a it's a it's the same five fewer players. So we find that attractive. And then also, frankly, what we're also seeing is a lot of people, if they can have procedures done outside of hospitals and ambulatory environments, we've seen some good growth there. So we're out there looking at some of the ambulatory world as well. You know, again, institutions in this environment, we've just seen a lot of real consumer reluctance to to want to to walk into an institution. So we're trying to be good partners on one side. And yet we're also trying to follow the business on the other side.
[00:59:06] Thank you. Our next question is coming from Justin Bauers of Deutsche Bank. Please go ahead. Hey, just people.
[00:59:14] I'm actually surprised it took as long as it did for someone to comment on the three, although I have thought it would have been one of the elder statesmen. So just on just taking a step back, Paul, it sounds like you guys have gone under a bit of a strategic process. And if I think about some of the comments you made about the Calloway's earlier, how are you guys thinking about kind of the long term growth algorithm of the enterprise? Is there any way that we can, you know, at a high level, like maybe put some numbers around there?
[00:59:52] Yeah, I mean, we just superstar Nick here did a wonderful job, but we just finished up with it on the board.
[01:00:00] And what we do after we do strategic planning is we take it out to our leaders, about 100 of them. And we we make sure they buy into it. And then we then we turn it into a work plan and deliver against the work plan. I mean, I think that if you just apply that and we'll we'll start to push this out. But if you look at if you look at the natural growth rates in home health and hospice and personal care, they're the best in anything in health care if you look at the margins. Home health and hospice, tremendous margins. If you look at. So just with a regular wind at our back from an industry perspective, you also look ahead at regulatory. You're looking at very good updates, you know, good consistent updates, which we haven't seen in home health in the past 10 years. Now, the GMs, you know, settling in, we have we can start to implement against that. So we feel very good if we just sit in place and stay in our core businesses. I think we have the best business mix of anybody out there with, you know, very good waiting in home health and hospice and then moving on personal care largely into networking. So I think we you know, we're I think we feel very good about it. If we go above the industry, which is what we expect, that's going to clearly accelerate even more. So we expect to be two or three points above the industry from a growth perspective, if we do to our cash flow, if you add, you know, 300 million, 250, 300 million a year in M&A and you add that which we can easily do, stay still very low leveraged, you add that in and then you're going to accelerate even more growth. And then you add in some of our innovative products that's going to see even more growth. So we'll be bringing this out. But it's you add all this together again. If we just sit and float down the river, it's still pretty nice. It's a nice it's a nice ride for the next four or five years. So you want to add anything? I don't know if I covered it
[01:02:02] Not to get a lot of high points, but I think certainly we're bullish about where we are as a company. The opportunity in front of us is tremendous. And I think the fact that we've come through covid-19 as strong as we have continued to accelerate margins, which was really, if you think about our ability to do acquisitions and as we start looking at pricing on on home health assets, looking at our own internal market is going to help us be very competitive there. So prospects are great, you know, always have some work to do, but really feel wonderful moving into Twenty twenty one.
[01:02:41] Thank you. Our next question is coming from the families of the benchmark company. Please go ahead.
[01:02:46] Hey, Bill.
[01:02:48] Hey, guys. So I've been hearing that the actual DGM codings apparently running behind what seeing this estimated originally. So given it's supposed to be budget neutral, is there potential down the road for some positive offsets? This if this really is I mean, are you seeing.
[01:03:10] I first of all, thank you. I love that question. Yes. And after Twenty twenty, too. And so if you look at the Dobson DiFonzo report, which came out from the partnership, it showed that there was a gap in spending or an anticipated gap in spending of about twenty one and a half percent. If this continues, then I think as of Twenty twenty to I'll turn to Dave Kimberle here.
[01:03:39] Yeah, Bill, good question. It's important to note and remember that the Bipartisan Budget Act of 2018 mandated that the transition to a new payment model in this case be DGM in Twenty twenty be budget neutral and even provide a mechanism for a true up, if you will, in 2022. So does have the data from the early part of Twenty twenty holds throughout the year, the remainder of this year and then into 2021, there will be a rate give back or increase in the payment rate update for 2022. So when you see that final rule in November of 2021, there should be a rate update for 2022. Yes, the behavioral sanctions, you know, are playing out like they are now. And it was flawed. We said it was flawed. Going in is playing out even prior to covid. That data that Paul referenced from Dobson given to that study, which looked at data from January, February, March, maybe in early April, clearly showed that it wasn't budget neutral.
[01:04:39] So while we aren't going to wait by the mailbox for checks from CMW, what we will anticipate is we will go to Congress and we will push this if if there is continued underspending because of the mandate. And we have some good friends there. So we anticipate the industry will do this. And then my guess is they'll try to make it up on rates. So I view this as a very positive. I also if you look at the fragmented nature of the industry, what you see is a lot of people are still paper-based. A lot of people are still having a problem with the rules that it's just as we said, it increased the amount of administrative that everyone has to deal with. So and we think they guessed wrong on the on the cuts. So we think, you know, we think at some point they're going to have to make it up.
[01:05:29] So it's a good sign, in my opinion. Thanks, Bill.
[01:05:33] Thank you. Our next question is coming from John Ransom of Raymond James. Please go ahead.
[01:05:38] John Ransom.
[01:05:41] Just for the record, Paul, what kind of music do you like? I'm just I need to get going.
[01:05:47] I like Steve Earle here in town. So any time he's playing or Neil Young, which shows my I'm outdated. So but I can't no one wants to play that here. So
[01:05:55] At least you didn't say smooth jazz or bro country elevator music.
[01:06:02] Yeah, there we go. I'm like New York.
[01:06:08] I guess it just strikes me that all of us in the chattering community, you know, killed a lot of trees over the past 12 months obsessing over the DGM. And for you guys, it just ended up kind of being basically that flat. So. It just maybe help us understand a little bit all the doom and gloom versus the reality, what levers you pulled, and maybe this Lupa maybe with coding, but just a little more behind the covers of how you turn what everybody thought was dogs living with cats and the giant Pillsbury Doughboy walking around.
[01:06:41] It just it just kind of turned into a net threat. Wasn't that a lot of data processing that just ended up not being a big deal?
[01:06:47] Yeah, I think I think for us and I got to give credit, not that I like to do this, but I got to give Chris Gerrard a lot of credit. He he had he had us drilling on this. He and he he Antione, who run runs home health, had literally set up trial and pilots that were acting like PDM was there last fall. So the amount of prep work that was done, the amount and our coding folks did a fantastic job. They were prepping Melissa Boller there has just done a fantastic job. So we were really working hard on this and we were working scared too. But we were very planful. And so I think the result has been, you know, extraordinary. I don't know, Chris. Maybe he's he's swooning. And I know it was it was really it was preparation.
[01:07:36] It was really disaggregating all the components. I didn't find the the revenue levers and the cost levers in picking apart, you know, to those I mean, we we utilized metallurgists care, which has helped us tremendously in our episode management side. We really drilled down into our 2013 data to see, you know, how those would play out in 2020 under G.M. And we really quickly identified opportunities around lost billing periods and coding opportunities as well. And then, you know, just really, you know, just kind of the spreading that through the organization and creating kind of our own our own kind of scorecards that we managed off of, you know, allowed us to really identify quickly. You know, we were we were seizing the opportunity where we had where we had more opportunities to seize and just execute it on it. So, you know, it sounds like it was easy. It was not easy at all. And it still is a challenge for us. And we still have work to do. But, you know, I think it's just a good old, you know, preparation, breaking it down, communicating well, you know, all the way upstream and downstream. And then, you know, again, execution.
[01:08:48] Yes, just like we don't you know, what's behind all this duty, John? There's a lot of work, just so you know that.
[01:08:57] Thank you. Our next thousand joke of UBS. Please go ahead.
[01:09:04] Hey, guys. Thanks. I got pulled off for a little bit. So if I if you guys covered this, just tell me to come back in the queue. But can I get an update on Asthana to say here and really just how they're tracking versus plan? Any modifications to the integration plan given to the pandemic? You know, changes, you know, anything changing your your view on the slope of the integration plan and maybe just some comments on the team turnover would be helpful things.
[01:09:31] Turnover on the on the newly acquired company.
[01:09:35] Yeah. Yeah. Anything anything in a turnover that's beyond normal that you would sure to call our positively or negatively.
[01:09:43] Yeah, I'd say in general the integration has gone extremely well. We've learned a lot from our from our early days, you know, when we acquired infinity and then tennants assets. So we have a really strong team, Mike North, as has we, who we brought in from Humana a long time ago, who was in charge of integrations there, worked with me there has been doing that. And then Chris Novavax has done a great job. I think the idea is that the technical integrations have gone extraordinarily well, largely because we've been doing that. The also the synergy pullouts have gone on track and on time. And so we've been tracking that. We have pretty strong discipline and execution on that. The cultural pieces are always what you try to figure out when you get in. So we've been really good about retaining folks. There has been more cultural changes with CCH, which was more decentralized than with a care, for example, and Azana, but in general we feel really strong about it. Scott, Scott, this comes under Scott again and Chris. So I don't know if I missed anything. Guys, you.
[01:10:59] No, I think we're pleased with, you know, certainly you can't ignore the covid-19 impact from a planned perspective where we thought we would be. So we'll be we'll be handling the schedule in case. But we're seeing some nice improvement, some some good growth numbers from emissions that are really getting us back in line with where we need to be. So we're pleased with that. But, you know, you've got to go with this distraction. As I said, I don't know if you're on and talked about you know, we talked about a 14 to 16 million dollar recommendable improvement coming out of a cage. We know we're going to be a little low, a little below where we thought we would exit, but still think the incremental build will be strong going into next year. Sharecare the great asset. That one's really performing probably slightly ahead of expectations financially. And, you know, as this cloud of covid kind of becomes the norm to us and we continue to operate more, we're comfortable where we're heading from a plant perspective. I mean, just kudos to the team that did that integration. Basically, when we were in Lockdown's Downs had to try and remotely couldn't get get to see some of these folks. So it's it's a tribute to our team, as well as the Sayako team on that asset, as well as all of our other operations folks through this time. But feel good about it. It's a nice it's a nice group of assets. Now, you pull all four of these together and blend in with our legacy. You know, we feel great about where this process that has been 20, 21.
[01:12:29] Thanks.
[01:12:31] Thank you. Our next question is coming from Frank Morgan of RBC Capital Markets. Please go ahead.
[01:12:37] Good morning. Most of my questions been answered, but I guess, you know, given your view of the industry backdrop over the next several years and the opportunities around potential acquisitions, I guess what is your comfort with with leverage when you think about doing deals the size of deals and what type of leverage, Strich, would you be willing to assume given given the backdrop? And then the second question was just just about loofahs in the quarter. I'm guessing that wasn't a big issue. But any any specific data on that? That'd be great. Thanks.
[01:13:12] Yeah, yeah. I'll start by Scott doesn't let us love her up, so let him take this one.
[01:13:18] Scott will let us up. And I mean, it's just seen as a great sign. I mean, so, you know, we're going to do, you know, the start with the obvious cash flow from Ops is going to be greater. And three hundred million this year had some really good some things that helped us out.
[01:13:31] But just to be, you know, be over 200 million, I think at least three straight years is strong for us. You can see through Sharecare will continue to pay down our revolver pretty aggressively. I mean, that's pretty close to paid off by the end of the year. We'll leave that term loan out there. But from a pure leverage perspective, you know, it's the right deal, the right assets. You know, we would go up to 3x, you know, anything above that. We would probably maybe potentially use our stock if it was rising, something transformative. But we would we would let this thing leverage the lever up and consider what's available under our under our revolver.
[01:14:03] Right now, with availability in the cash generation, you're looking at really close to five hundred million right there from ability to fund deals. So a lot of great opportunities out in front of us. And, you know, are our base operations continue to get better? It makes us more bullish and our belief that we can integrate well, operate well and pay down the debt.
[01:14:27] And Frank, this is Chris. From a looper perspective, our two three number was eight point six percent. That was down from nine point two percent in Q2. So I feel really good about our ability to manage.
[01:14:43] Thank you at this time, I'd like to turn the call back over to management for any additional or closing comments.
[01:14:49] Great. Thank you very much, Donna, and thank you for the suggestion of Johnny Cash next time. As intro music Well, we'll take a look at it. I do love Johnny Cash as well, but I want to thank everyone who joined us on our call today. I'd also like to thank again all of our employees in the field and those who support them and for helping to deliver such a strong quarter. Please keep doing what you're doing, taking care of the people who need us the most. We hope everyone has a wonderful day. We hope you stay safe and we hope you vote on Tuesday. And we look forward to updating you on our ever evolving progress and purposeful work on our next quarterly earnings call. Until then, take care.
[01:15:33] Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time and have a wonderful day.