Good morning, everyone, and welcome to Enhabit Home Health & Hospice's First Quarter 2023 Earnings Conference Call. Today's conference call is being recorded. I'll now turn the call over to Mark Brewer, Enhabit Home Health & Hospice Chief Investor Relations Officer.

Thank you, Julianne, and good morning, everyone. Thank you for joining Enhabit Home Health & Hospice for our First Quarter 2023 Earnings Conference Call. With me on the call today are Barb Jacobsmeyer, our President and Chief Executive Officer; and Crissy Carlisle, our Chief Financial Officer. Before we begin, if you do not already have a copy, the first quarter earnings release, supplemental information and related Form 8-K filed with the SEC are available on our website at investors.ehab.com. On Page 2 of the supplemental information, you will find the safe harbor statements, which are also set forth on the last page of the earnings release. During the call, we will make forward-looking statements, which are subject to risks and uncertainties, many of which are beyond our control. Certain risks and uncertainties that could cause actual results to differ materially from our projections, estimates and expectations are discussed in the company's SEC filings, including the Form 10-K and subsequent quarterly reports on Form 10-Q, each of which is available on the company's website once filed. We encourage you to read them. You are cautioned not to place undue reliance on the estimates, projections, guidance and other forward-looking information presented, which are based on current estimates of future events and speak only as of today. We do not undertake a duty to update these forward-looking statements. Our supplemental information and discussion on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information in the earnings release. I'd like to remind everyone that we will adhere to the one question and one follow-up question rule to allow everyone to ask a question. If you have an additional question, please feel free to rejoin the queue. With that, I'll turn the call over to Barb.

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

Thanks, Barb. Consolidated net revenue was $265.1 million for the first quarter, down $9.2 million or 3.4% year-over-year. We estimate the continued shift to more non-episodic payers in home health and the resumption of sequestration decreased revenue approximately $10 million year-over-year. While both of these items fall directly to the bottom line, adjusted EBITDA, which decreased $21.7 million year-over-year, also included increased general and administrative expenses, primarily due to increased employee group medical claims and incremental costs associated with being a stand-alone company. In our Home Health segment, total admissions increased 1.2% year-over-year as continued strong growth in non-episodic admissions offset a reduction in episodic admissions. While episodic admissions decreased year-over-year, they increased 1.3% sequentially from the fourth quarter of 2022, driven by our new Medicare Advantage contracts that pay episodically. This represents the first episodic growth we have experienced since the first quarter of 2022. In the first quarter of 2023, our non-episodic visits grew to approximately 29% of our total home health visits. This represents an approximate 700 basis point increase year-over-year and an approximate 300 basis point sequential increase over the fourth quarter of 2022. We estimate the impact of this payer mix shift was approximately $5 million on revenue and adjusted EBITDA during the first quarter. As Barb discussed, we are making significant progress demonstrating our value proposition to payers as we negotiate new agreements with improved rates. Our cost per visit increased 2.3% year-over-year as improved clinical productivity and optimization offset the impact of market increases, contract labor, and a rise in employee group medical claims. The year-over-year increase in employee group medical claims impacted cost per visit by approximately 120 basis points. In our Hospice segment, we achieved a 7.1% sequential increase in admissions, while our average daily census decreased 1.8% sequentially. This decline in average daily census was the result of an increase in the number of admissions with shorter lengths of stay. We had 137 more deaths in the 1 to 30 days length of stay range than in the fourth quarter of 2022. This is due in part to our intentional diversification of referral sources and the expansion of the number of our admissions coming from facilities as patients coming directly from a facility tend to be admitted to hospice care later in their journey. As Barb mentioned, the implementation of the case management model is the primary driver of the year-over-year increase in cost per day. Similar to the third and fourth quarters of 2022, our nurse recruitment success resulted in full-time nurses who were not at full productivity throughout the first quarter and increased use of contract labor to keep referral sources strong during that onboarding period. We now believe we have full-time nursing capacity that will allow us to reduce our use of contract labor and improve clinical productivity going forward. Our home office general and administrative expenses increased approximately $4 million year-over-year, primarily due to incremental costs incurred as a stand-alone company and increased employee group medical claims. For the first quarter of 2022, the net overhead allocation from Encompass Health was $3.1 million, as shown on Page 26 of the supplemental slides that accompanied our earnings release. For the first quarter of 2023, we recorded stand-alone company costs of $5.1 million. These costs include expenses associated with the transition services agreement we have in Encompass Health as well as costs we are incurring to ramp up our team and their resources. In regards to free cash flow, we generated over $28 million during the first quarter. Adjusted free cash flow during the quarter benefited from the timing of payroll and a $6 million income tax refund related to overpayments in 2022. We continue to expect to generate between $49 million and $88 million of adjusted free cash flow in 2023. Let's transition now to the balance sheet. Information on our debt and liquidity metrics is included on Page 15 of the supplemental slides. We exited the quarter with net leverage of 4.2x. Our credit agreement requires that our ratio not exceed 4.75x. Our leverage ratio is more sensitive to changes in adjusted EBITDA than it is to reductions in debt. As we've noted previously, the ramp from quarter to quarter in 2023 is expected to be steep. The strongest quarters of 2022 were in the first half of the year and will be replaced in the trailing 12-month calculation of adjusted EBITDA by what we expect to be the lowest quarters of 2023. While net debt decreased approximately $25 million from December 31 to March 31, our trailing 12-month adjusted EBITDA decreased approximately $22 million. This is putting pressure on our leverage. This pressure on our leverage also constrains our liquidity by effectively limiting the amount we can draw on our revolving credit facility. As of March 31, we had $107.6 million of available liquidity, including $37.6 million of cash on hand, which we believe is sufficient to support our operations and financial obligations. As a reminder, post our spin-off from Encompass Health, we've drawn on the revolver only once for $20 million during the fourth quarter of 2022 when we funded three acquisitions and made a $15 million deferred payroll tax payment related to CARES Act funds. Through today, we have repaid $10 million of that revolver borrowing and made $15 million in required payments on our term loan. Our current forecast indicates we will continue to be in compliance with our financial covenants. Given the leverage pressures mentioned earlier, we are continually and closely evaluating our expected compliance with the covenants under our credit agreement and will take all appropriate steps to proactively negotiate such covenants if needed and when appropriate. Let's turn now to guidance. As we stated previously, we knew the headwinds in 2023 were going to be stronger in the first half of the year, and we noted the ramp from quarter to quarter this year would be steep. Given the increase in employee group medical claims, our quarter 1 results were just shy of our internal expectations. With our expansion of Medicare Advantage contracts and improved rates combined with reduced staffing capacity constraints, we expect to see improvements in our bottom line throughout 2023. We maintain our 2023 guidance that includes adjusted EBITDA of $125 million to $140 million. Given the slightly weaker than expected first quarter results, the higher end of the range assumes sequential trends in episodic admissions in home health accelerate, the quick and smooth transition of non-episodic admissions to our new national and regional payer contracts, and improved clinical productivity in hospice. With that, we will open the line for questions.

Our first question comes from Brian Tanquilut from Jefferies.

Thank you, Crissy, for your insights on the year's progress and the improvement from the first quarter. Could you share where your confidence comes from in terms of sequential gains compared to Q1? I understand there is seasonality in your business, but what can you communicate to investors to help them feel as confident as you are about meeting the annual targets?

Yes. So I think it kind of gets back to the closing remarks of my script. The new national contract that Barb mentioned earlier and that was part of our earnings release as well as the two new convener contracts, they all became effective May 1. And so we are 10 days into looking at the performance of those contracts and working with our teams to shift those contracts into replacing former contracts or historic contracts. So it's a little too early to know how quickly and smoothly we can make that transition. As Barb mentioned, for every 5% of current non-episodic visits under one of our historic contracts that we can move to one of these new national or regional contracts, that's $2 million of adjusted EBITDA annually. Now again, it went into effect May 1 so you have to timeline adjust that. But it's a significant impact, and that's before we even focused on growing as a result of those contracts. So that's one of the bigger drivers of the rest of the year. In addition, episodic admissions, recall that historically, when we had a national contract, one of the other benefits or side benefits to a national contract is that our referral sources, we become more of a one-stop shop for them. And so when you go in and say that we can now take these patients, they also tend to provide more episodic patients to you again because you're meeting more of their direct need. So that's one of the things that we're focused on in regards to how can we accelerate and continue some of the episodic growth that we've seen thus far. And then the last factor is the clinical productivity in hospice. Again, as we noted, hospice has reached a point of staffing capacity that we're comfortable with and believe that we have the full-time nurses in place that we need. And so we can begin trending out, trending down the contract labor as we go through the rest of the year. And that's why you see that guidance consideration. We did take that guidance consideration up from 4% to 5% to 4% to 6% for hospice cost per day. But again, we stay comfortable with that knowing that the first quarter included contract labor usage but what we're seeing now is reduction in that and improved clinical productivity given the full-time nursing capacity we have.

That makes a lot of sense. Barb, in the past, you've mentioned that some of the challenges with volume or admissions may be related to the decoupling from Encompass. Considering that many are focused on the admissions number, could you discuss your perspective on the trend and how we should view the evolution of this situation throughout the year and where it is likely to stabilize?

Sure. I believe we are achieving more stability in the volume from Encompass Health. This relates to what Crissy mentioned. Our sales team has been concentrating on reaching out to our key referral sources, including Encompass Health, to identify other payers that could enhance our services and make us a more comprehensive provider. Some markets have significant local or regional payers that can significantly impact our business. Therefore, our goal is to engage with these regional payers as well as new national ones, which will help us earn a greater portion of the fee-for-service revenue, whether from Encompass Health or other facilities, allowing us to serve a wider range of patients effectively.

Our next question comes from A.J. Rice from Crédit Suisse.

Maybe first to ask about the MA trends. I know your revenue per visit was up 8.8% in the current quarter. That does not seem like it had much impact from the recontracting you're talking about today. What do you think the trend looks like for the rest of the year there given the recontracting? How quick do you sort of get to a normalized rate with this new national contract? And also, it's not clear to me, were you not in contract with this payer before and therefore, any volume you get from them is incremental? Or were you getting just less profitable volume from them previously?

So this is a new national contract. I will say that it is one of the top five payers. And we actually, they have lives in all of our markets, but one. So there were some out of network, very little that we were seeing in some of our markets, but this is a new national contract for us.

Okay. Any thoughts on the 8.8% revenue per visit and how that might trend over the rest of the year?

A.J., this contract has only been active for a total of 10 calendar days, and we are monitoring it closely. We have provided our branch leaders and regional presidents with the necessary tools to locate referral sources and patients, and to start converting historic referrals into these new contracts. We are making every effort to adjust quickly and efficiently, but it's still too early to draw any conclusions at this stage.

There are some branches that will move faster. We certainly have some that historically, were turning this volume away on a consistent basis. That will be quicker for those because they already have referral sources that have needed us to take these patients. And then in other markets, we're working with the teams to find the facilities and the physicians that take care of these patients so that they can go after the business.

I understand. I was trying to find out if there are any additional factors contributing to the revenue per visit in Massachusetts. The hospice costs increased by 13% per day. I know you slightly adjusted your cost per day assumption for the remainder of the year. It seems like a significant part of this is due to the transition to the case management model. However, I'm curious if there’s a way to determine how much of this is the case management change, and when we might expect that to stabilize so we can have more confidence in a return to a more modest growth rate. Additionally, how much of this increase is simply due to the natural growth trend in the business at this time?

So A.J., I'll try to provide some additional details on that. Nurse productivity, particularly during the onboarding phase, has been affected, causing a little over 500 basis points impact in the quarter. Additionally, contract labor added about 240 basis points during that time, while group medical accounted for another 130 basis points. Those are the main factors driving costs. The dedicated on-call and triage nurses represent a permanent part of our cost structure as they are essential for our case management model and for attracting and retaining nurses in our hospice sector. This component will remain, and as we enhance the clinical productivity of our nurses and increase our volumes, we expect the fixed cost structure to decrease, similar to trends observed in other areas.

Our next question comes from Jamie Perse from Goldman Sachs.

Just focusing on the national contract, again. Can you give any details just in terms of how the rate came in versus your expectations, the structure of that contract or anything to call out there? And then secondly, on a related note, how does this help you in terms of negotiating incremental contracts either with your existing partner and the renegotiation process there or just accelerating the process around incremental national payers?

Sure. Well, I think, first, we can't give specifics on a contract, but what I will say is kind of what we've been consistently saying on either new or renegotiated, we are not willing to enter a new contract unless we can get a discount at 25% to 30% or lower on a per visit. And on an episodic contract, we're seeing them come in at 0% to 10% of a discount on the episodic. So that's been pretty consistent on any of the new regional as well as the national and the convener contracts. And so then the goal is, as you mentioned, is going to be for us to move away from these lower paying historic payers, both national and regionals that have paid us with a much higher discount than what I just quoted and use that to say, we continue to want to serve those patients, but we're only going to be able to serve those patients if we can come back and renegotiate the fair rates.

Okay. And then just the home health cost per visit trends, they declined from $92 in the second half of last year to $88. Can you just help us bridge what the relief there was? And if that's a sustainable rate for the rest of the year? Just any color on what you're seeing in terms of cost trend there would be really helpful.

Yes. So much of what drove the Q1 cost was an improvement in productivity. So again, it is about clinical staff recruitment, retention and making them productive through volumes in the field. Productivity improved 200 basis points year-over-year. So that's able to offset the merit market and other factors. I'll also point out, I think I said in my script that the group medical increased 120 basis points, that was impacting the cost per visit as well. So if you take that out, then you're talking about a well-controlled cost per visit in home health.

Our next question comes from Jason Cassorla from Citigroup.

Maybe just a follow-up on that question. I guess, in context of the 4% to 5% home health cost per visit growth, I guess, are you assuming that accelerates in the back half of the year? Are you being kind of prudent around your expectations given the backdrop? Just given where you're at that 1% in the quarter, ex those medical claims versus the 4% to 5% guide. Just any more color around that front would be helpful.

Yes. Absolutely. We're definitely closely watching our group medical costs because recall that we also noted that in our fourth quarter earnings results as well as the Q1 results. I think the other thing that we've also talked about and that is included in that guidance consideration for cost per visit is we recognize that there will be markets where we have to make market adjustments in order to recruit and retain staff. In fact, we're in the process of doing some of that now again, just in high-growth areas where we believe that we need to make those adjustments. So that's one thing that's yet to come and why the guidance consideration is where it is.

Okay. As a follow-up regarding the commentary about the new national and regional strategies, I understand you mentioned a potential 5% movement leading to a $2 million benefit to EBITDA. Can you provide an idea of how feasible it would be to achieve such a 5% shift in volume over time? How significant could this be, and can you help us better understand the potential impact of that change?

Sure. I think we will have a clearer understanding of that by the end of the second quarter. Since we are only 10 days into it, it's a bit challenging to assess. What I can say is that we provided the field with a quick calculator tool. It allows branches to see the impact of shifting a certain percentage of their business from one payer to new options. Some branches can implement this change swiftly, as they have been turning away the previous payer. Therefore, while it's difficult to gauge this on a national scale, it truly depends on each branch. Additionally, there are varying opportunities in different markets. I expect we will have a better overall perspective as a company by the end of the second quarter. We've equipped the field with tools to understand how moving 25%, 30%, or 40% of their business to these new options can significantly impact their local branches.

Our next question comes from Joanna Gajuk from Bank of America.

So I guess, first is a follow-up on the MA book of business and the 5% you're talking about. So can you just remind us when we look at your MA book of business, what percent of that book is episodic versus non-episodic?

So I would say on a revenue basis, when you look at our payer mix, our total Medicare Advantage revenue, anywhere from 25% to 30% in a given quarter would be episodic and the remainder would be non-episodic.

Okay. And I guess my other question in terms of your expectations for the upcoming home health proposal, a Medicare rate proposal. So what do you expect to see in their proposal when it comes to behavior adjustment and also recruitment?

Sure, I don't think it would be unexpected to see the other half in the proposed rules. I believe we would be surprised if they decided to implement any of the temporary cuts in 2024 along with the other half of the permanent adjustments. It's possible they might outline a schedule for how this would be applied, but I think the industry would be taken aback if they were included in 2024. A request for a forecast error correction has been sent to CMS regarding the market basket rate from the past few years. This was communicated to CMS before the proposed rule went to OMB. Again, I expect we will see the other half, and what will be crucial is the nature of the market basket we receive with them.

Our next question comes from Andrew Mok from UBS Financial.

A couple of questions on hospice. Same-store hospice admissions were down 11% in the quarter, which I think is the seventh straight quarter of double-digit negative organic volume growth. When you take a step back and evaluate that business, what do you attribute the sustained admissions weakness to? And when do you think that will start to stabilize, especially with respect to the new case management system that you're implementing?

Sure. So I think there's a combination of things. Obviously, some of it's been the staffing that really had us not going to as many referral sources as the staffing began to really get in better place in the first quarter. We did increase the sales headcount in the field because that was something that we did not proactively replace when we had attrition in the past just because it was hard to hire a salesperson to go out there and sell something you didn't have. But we do have a good sales coverage now in each of the local markets. And again, on top of that, with the diversification of the referral sources, the case management model was critical to that. Because if we're going to increase the referrals coming from facilities, we need to be able to take those admissions within 24 hours of getting that referral, and the case management model is going to allow for a greater ability to accept those referrals timely.

Got it. And then on patient days in hospice, that was down 4% sequentially from the fourth quarter, even though admissions was up 7% and discharge length of stay was up 4 days. Can you help us understand what's going on here that would result in patient days down sequentially when the underlying components seem to indicate up?

Sure. Our sequential admissions increased while discharges only rose about half as much as admissions, so we would expect our average daily census to grow. However, this was influenced by having 137 additional deaths in the 1 to 30 days length of stay category. Although discharge length of stay increased, it was primarily due to long stays for patients who passed away during their service. Consequently, with such a high number of deaths occurring within the first 30 days, we weren't able to see the expected increase in average daily census despite the sequential changes in admissions and discharges.

Got it. Okay. And I'm just going to make the assumption that I'm last here and use that as an opportunity to squeeze in one more. Your corporate G&A increased $5 million quarter-over-quarter and $10 million year-over-year. With all the pressure in the business, you're investing in G&A at a time when most of your peers are pulling back. Can you help us understand why increasing G&A and back-office staff is the right investment decision here when there are additional reimbursement cuts on the horizon?

Sure. So I think that we need to clarify on the back-office staffing increase year-over-year, Andrew. That's not us adding headcount, that's us having the ability to fill branch director and other administrative members of our back office in the field, meaning we have more people in place and less open positions at this point in time year-over-year. So I think that's what we're talking about when we talk about the improved back-office staffing portion of that. Group medical is playing a significant role in the increase in those costs. And then, of course, to the incremental stand-alone cost of being a stand-alone company are also a factor.

And we have a question from A.J. Rice from Crédit Suisse.

With Andrew mentioning he might be the last one, I thought I would take another opportunity to ask a couple of questions. Regarding the convener contracts, could you explain how these will compare to the referrals from the discharge planner moving volume to you? Do you believe that discharge planners will depend more on the conveners, and will this provide additional volume? How should we view that aspect of your renegotiated contracts, and how significant and quickly do you expect it to impact your results?

It is indeed different to work with the convener, who some call benefit administrators and others refer to as conveners. It's important to remember that these are independent companies that offer post-acute services for health plans, and at times, they act as risk-bearing providers. Their main aim is to guide patients to high-quality, proven providers that can help reduce overall care costs. They collaborate closely with facilities to ensure that patients from their payer are directed to the right providers. Traditionally, payers have focused primarily on building a network, rather than ensuring it is a high-quality one. Given the fragmented nature of home health care, conveners have been instrumental in identifying which providers are best suited for patients. Therefore, our collaboration with these conveners is crucial for directing patients to our services.

I want to emphasize that these are new contracts, not renegotiations. We have focused on the significance of increasing contracts and improving rates. Both the convener contracts and the new national payer contract are new and include better rates.

Okay. My other follow-up question is regarding the competitive landscape. United has acquired LHC and seems poised to continue making acquisitions. Additionally, Kindred under Humana is active, and now Option Care and Amedisys are merging. Given that you are one of the last independent public companies, and considering what Crissy mentioned about monitoring your covenants, what are your thoughts on potentially needing a more financially robust partner in the future? Can you continue to pursue your goals independently? Have you noticed any shifts in the market due to these deals that might affect your ability to collaborate or the availability of opportunities?

Well, A.J., I think it's difficult to speculate on various announcements and transactions in the industry. We are focused on operating this company and executing on our payer innovation strategy as well as our recruitment and retention of staff strategy. That's really all we can say about those. We just don't speculate on those types of items.

More competition for deals or not really? Or about the same as it was six months ago in your mind?

Well, remember that even the investment communities received a lot of information recently on the fact that M&A deal was down significantly in the first quarter of this year. The trends have been down. A lot of that having to do with home health reimbursement uncertainty. I read reports recently that stated that the first quarter of 2023 was the lowest transaction quarter since 2018. And so I think that's important. Also, remember that the bid-ask spread between buyer and sellers are just too high right now.

We have no further questions. I would like to turn the call back over to Mark Brewer for closing remarks.

Thank you so much, operator, and we appreciate everybody joining the call today. As a reminder, there will be a replay of the call available on our website, and we look forward to talking to you in a couple of months when we recap our second quarter 2023 earnings. Have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.