LHC Group (LHCG)

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LHC Group (LHCG)

Q2 2013 Earnings Call

August 08, 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

Jeffrey M. Kreger - Senior Vice President of Finance


Kevin K. Ellich - Piper Jaffray Companies, Research Division

Whit Mayo - Robert W. Baird & Co. Incorporated, Research Division



Good day, ladies and gentlemen, and welcome to the LHC Group Q2 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host today, Eric Elliott, with the LHC Group. Please proceed.

Eric C. Elliott

Thank you, gentleman, and welcome, everyone, to LHC Group's earnings conference call for the second quarter ended June 30, 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 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. Let me begin by congratulating and thanking our entire team for yet another outstanding quarter and first half of 2013. Once again, the collective talent work ethic and experience of the more than 8,500 health care professionals who make up our LHC Group family today have proven to be our greatest competitive advantage. Our people truly are our greatest asset. Job well done.

Even as we continue to drive efficiencies throughout the organization, our quality scores and total patient admissions are at all-time highs, and our employee turnover rate has reached an all-time low. This confirms our continued belief in our successful operating model, growth strategy, and employee -- employer of choice culture. Our company's proven ability to grow admissions while simultaneously improving quality, retaining high-caliber employees and becoming more efficient in our operations is the key to long-term success in today's health care environment.

Now I'd like to give you an update on our activities in Washington, D.C. As you know, CMS released its proposed rule for calendar year 2014 Medicare home health reimbursement in late June. Last Friday, CMS also released it's final rules for Medicare long-term acute care hospital and hospice reimbursement for federal fiscal year 2014. As expected, the final rule increased LTAC payments by approximately 1.3%. The final rule also stated that the administrative moratorium for the 25% referral rule would expire for cost report period beginning on or after October 1, 2013. All but 2 of our long-term acute care hospital facilities cost reporting years that are affected by this rule began on September 1, 2014. Two of our LTAC facilities have cost reporting years that begin June 1, 2014.

Also, as expected, CMS increased hospice payments by 1% in the hospice final rule. The final rule also provided additional clarification of CMS policy regarding coding, quality reporting and hospice experience of care surveys. Our hospices do not participate -- sorry, do not anticipate any issues in complying with these revised policies.

With regards to the Home Health proposed rule, CMS has proposed rebased home health payments beginning in 2014 by reducing reimbursement 3.5% per year for 4 years, or a total of 14%. This 3.5% annual cut is the ceiling imposed by the Affordable Care Act. CMS is also proposing to drop 170 ICD-9 codes from the Home Health group for which we'll have a negative impact of approximately 0.5 of 1%. CMS estimated the overall impact of its policies in the proposed rule is a negative 1.5% for 2014.

LHC Group is a founder and an active participant in the Partnership for Quality Home Healthcare, which is also joined forces with the National Association of Home Care & Hospice and the Visiting Nurses Association of America in advocating against these significant cuts and the effects of the seniors we serve. These organizations are actively engaged in an all-out effort to change CMS proposal before it is finalized in October or early November. In particular, the partnership has already implemented a strategic plan for addressing the rebasing cuts, which include: active lobbying of Congress to oppose the cuts; data analysis and research to address deficiencies in CMS's approach to rebasing; extensive grassroot efforts in support of our lobbying efforts; and media and public relation activities.

The partnership's members, including LHC Group, have devoted substantial funding and resources to aid in these efforts. In addition, LHC Group will be posting partnership advocacy materials on our website as they are finalized.

Read the rest of this transcript for free on seekingalpha.com