LHC Group (LHCG)
Q1 2013 Earnings Call
May 09, 2013 11:00 am ET
Eric C. Elliott - Vice President of Investor Relations
Keith G. Myers - Co-Founder, Chairman and Chief Executive Officer
Peter J. Roman - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer
Donald D. Stelly - President and Chief Operating Officer
Darren Lehrich - Deutsche Bank AG, Research Division
Previous Statements by LHCG
» LHC Group Management Discusses Q4 2012 Results - Earnings Call Transcript
» LHC Group Management Discusses Q3 2012 Results - Earnings Call Transcript
» LHC Group, Inc. Q4 2008 Earnings Call Transcript
Eric C. Elliott
Thank you, Huey, and welcome, everyone, to LHC Group's earnings conference call for the first quarter ended March 31, 2013. Hopefully, everyone has received a copy of our earnings release. If not, you may obtain a copy along with other key information about LHC Group and the industry on our website at www.lhcgroup.com.
In a moment, we'll hear from Keith Myers, Chief Executive Officer; Don Stelly, President and Chief Operating Officer; and Pete Roman, Chief Financial Officer of LHC Group.
Before that, I would like to remind everyone that statements included in this conference call and in our press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act.
These statements include, but are not limited to, comments regarding our financial results for 2013 and beyond. Actual results could differ materially from those projected in forward-looking statements because of a number of risk factors and uncertainties, which are discussed in our annual and quarterly SEC filings. LHC Group shall have no obligation to update the information provided on this call to reflect subsequent events.
Now I'm pleased to introduce the CEO of LHC Group, Keith Myers.
Keith G. Myers
Thank you, Eric, and good morning, everyone. I'd like to begin by once again congratulating and thanking our 8,500 team members for their unwavering commitment to excellence and for consistently delivering high-quality care for the growing number of patients, families and communities we serve.
I've never been more proud of our team. Through their hard work, ingenuity and commitment to excellence, our team of dedicated professional caregivers have positioned our company to be successful not only in the current environment, but long into the future.
Since our last earnings call was just 2 months ago, we'll keep our prepared remarks short this morning and allow more time for Q&A.
So before turning it over to Pete, I wanted to talk a little bit about pipeline activity. As I mentioned on our last earnings call, the volume of inbound calls to our corporate development team related to potential acquisition or partnership opportunities continues to increase.
With the triggering of sequestration, we anticipate this volume to increase even more. Without question, hospitals and health systems around the country recognize that LHC Group is the industry leader in post-acute care partnerships.
Our 15 years of hospital partnership experience, as well as our proven clinical programs that are reducing ER visits and readmission rates continue to set us apart as the post-acute partner of choice for leading hospitals and health systems across the country.
And we can talk more about this in the Q&A and answer any other questions you'll have, but at this time, I'll turn the call over to Don and Pete. Pete?
Peter J. Roman
Thank you, Keith, and good morning, everyone.
For the first quarter of 2013, our consolidated net service revenue was $162 million and net income attributable to LHC Group was $6.3 million or $0.37 per diluted share.
Sequestration reduced revenue by approximately $1.2 million in the quarter. Home-based segment revenue in the quarter was $142 million with $137.8 million organic.
Compared to the same quarter last year, total Home-based segment revenue growth was 1.7% and Medicare revenue growth was 2.6%.
Facility-based segment revenue was $20 million in the first quarter, approximately $800,000 higher than the same quarter last year.
Our consolidated gross margin was 42.4% of revenue, down from 42.9% last quarter. Payroll taxes, which are higher in the early part of each year, primarily accounted for the increase in costs over the last quarter.
We also benefited from lower employee group health claim experience, which is also normal for the first quarter of that year.
And finally, we only transitioned 4 agencies to point of care in the first quarter and that began in March.
We expect to transition 75 agencies over the remainder of 2013.
Our G&A expense increased as a percent of revenue to 31.9% compared to 31.3% last quarter. The increase is due to the reduction of revenue from sequestration and the additional G&A related to the recently acquired Home Health and hospice service lines of Addus.
Over 2013, we expect gross margins in the range of 40.5% to 41.5%, and G&A in the range of 31.5% to 32.5%. These margins include the effect of sequestration, which we expect to be approximately $3.3 million each quarter for the rest of the year.
Our patient receivables from commercial payors continue to increase as a percent of total receivables and are 33.9% of total receivables at March 31.
As these receivables increase relative to our total, our bad debt reserves increased as a percent of receivables. This quarter, we also identified a few batches of commercial claims, which we consider to have a higher non-collection risk due to either problems with the change in the claim submission format or administrative processing issues.