AdaptHealth Q1 2023 Earnings Call Transcript

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May 9, 2023

There are 11 speakers on the call.

Operator

Good day, everyone, and welcome to today's AdaptHealth 1Q 'twenty three Earnings Release. Please note this call may be recorded. It is now my pleasure to turn the conference over to Chris Joyce, General Counsel.

Speaker 1

Thank you, operator. I'd like to welcome everyone to today's AdaptHealth Corp. Conference Call for the Q1 ended March 31, 2023. Everyone should have received a copy of our earnings release yesterday evening. If not, I'd like to highlight that the earnings release as well as a supplemental slide presentation regarding Q1 2023 results is posted on the Investor Relations section of our website.

Speaker 1

In a moment, we'll have some prepared comments from Richard Barish, Chair of Adaptel Steve Griggs, Chief Executive Officer of Adaptel Josh Parnos, President of Adaptel and Jason Clemens, Chief 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 2023 and beyond. Actual results could differ materially from those projected in forward looking statements because of a number of risk factors and uncertainties, call to reflect such subsequent events. Additionally, on this morning's call, we'll reference certain financial measures Such as EBITDA, adjusted EBITDA and free cash flow, all of which are non GAAP financial measures. This morning's call is being recorded and a replay of the call will be available later today.

Speaker 1

I'm now pleased to introduce The Chair of Adapt Health's Board of Directors, Richard Barish.

Speaker 2

Good morning, everyone. Thanks for joining us on our Q1 conference call. As you know, this morning, we announced that Steve Griggs will step down as CEO of Adapt Health as of June 30, 2023. He will be leaving the company in sound financial condition and much improved operational shape. Further, Adapt Health is blessed with a high quality senior leadership team that will continue to lead the company forward in the areas we will be discussing today.

Speaker 2

On behalf of the Board, I thank Steve for the critical leadership role he's played at AdaptHealth to help build a market leading provider of sleep, Diabetes, Respiratory and Other Healthcare Solutions. As CEO, he has led the company through the Successful integration of AdaptHealth and Aero Care overseen more than 2 dozen acquisitions and helped us navigate the challenges of COVID-nineteen And the CPAP shortage resulting from the Phillips recall. The Board has begun an extensive search process and so far has been quite pleased With the quality of the candidates to become CEO. We're optimistic that we can fill the role over the next several months, But if there's a gap, the Board has asked me to step in as Interim CEO until the role is officially filled. I will now turn the call over to Steve.

Speaker 3

Good morning and thank you for joining our call. AdaptHealth is a full service nationwide provider of products I want to start as I always do by expressing my appreciation to our 10,802 employees operating in 47 states for their tireless efforts Our changing environment, expand our reach and capitalize on emerging opportunities. We are the nation's leading provider of sleep equipment Related supplies. And we had another exceptional quarter in this business, delivering 18% growth in net revenues. We believe that the extraordinary efforts we undertook to maintain our supply and setup of PAP units during the Phillips recall and pandemic resulted in increased market share and accelerated setups.

Speaker 3

In March, our PAP setups were more than 50% higher than at any time during Prior to the commencement of the Phelps recall, our census of PAP rental patients is up 53% from our lowest point in February 2022. While our census in our much larger population of resupply patients is up 10% from the same period. Our Q1 also reflected the continuing evolution of our diabetes and CGM business, largely driven by the pharmacy channel shift. Despite these headwinds, the diabetes and CGM product lines remain attractive due to the continued growth in patients through expanded Medicare coverage. We expect improved profitability of this important product line through a number of ongoing operational and strategic initiatives, including lowering costs.

Speaker 3

It is important to note that our unit sales continue to grow and now we have a census of approximately 138,000 patients And the 8.3% increase in the past 12 months. As Josh will describe, we are now beginning to take the steps In our respiratory line of business, we are proud of the part we played during the pandemic going through extraordinary efforts to get oxygen to health systems and patients. Most of these patients have recovered and no longer need oxygen. Our respiratory business now turns to a steady state where we expect to see sequential quarterly growth. We remain confident that our purpose built national network supplying a full spectrum of sleep, respiratory, diabetes and HME products allows us to gain market share and drive sustained growth in these product lines.

Speaker 3

For example, as discussed in previous calls, we believe value based care is key piece of our long term strategy to evolve beyond the traditional home care distribution model and into what we now call Adapt Health 2.0. During 2022, we added value based agreements with 2 managed care providers to cover certain home care products and supplies for their beneficiaries on an exclusive basis. These agreements help drive better patient outcomes and a better overall experience for both patients will be a key contributor to our success moving forward. Shortly, we expect to announce more of these arrangements, including our largest to date that will showcase Revenue and EBITDA growth across a number of our operating regions and we'll improve our patient satisfaction by removing many of the administrative burdens And we have continued to invest in infrastructure and expertise to position the company to capitalize on these significant long term opportunities in the markets we serve. These are highlighted in our RCM improvements that have led to faster cash collections, Thus reducing our DSOs to 42.7 days, down 5 days from Q1 2022.

Speaker 3

Sales reps and leaders from territories all over the country recently gathered at our national sales meeting, We provide opportunities to learn about new enhancements and improvements we have made to the tools we provide them for servicing patients and referral sources. We also honor the most productive members of our sales teams, shared best practices and offered expanding training and performance incentives to help them further grow their businesses. Now I'll turn the call over to our President, Josh Parnas to discuss strategic developments in further detail.

Speaker 4

Thank you, Steve. As Steve mentioned, Adapt 2.0 continues to focus on an innovative care model, purpose built for payers and patients. The foundation of this care model is technology that connects payers, suppliers and patients. AdaptMyApp is our foundational patient facing app that provides logistics, Billing, chat and soon clinical data to help patients manage their chronic diseases. The initial launch of MyApp was focused on the diabetes product line And have seen strong adoption with 50,000 downloads and 7,500 actual orders transacted through the app.

Speaker 4

The download to date represent more than 1 third of our diabetes patient census in just a few months. We will continue to iterate we further refine and scale the app across other parts of our business. It is important to note that we have focused our efforts on our diabetes population, Which represents 96% of the MYAP participants. There is strong consensus now supported by Medicare That proper usage and monitoring of the data generated by CGMs leads to better outcomes. As we continue to scale and refine the app, We expect it to become a powerful resource for patients to access data on their connected medical devices and believe it will enable more clinical interactions For our chronic disease management programs leading to a transformative patient experience, further reduction in healthcare costs And bridging of the gaps in care that frequently incur in the populations we serve.

Speaker 4

The next phase of the development of MyAP will focus on our sleep populations where real time data will enable Adapt to continue in the evolution of its ultimate value proposition to be a low cost, Now I'll turn the call over to our CFO, Jason Clemens

Speaker 5

Thanks, Josh. Good morning and thank you for joining our call. For the quarter ended March 31, 2023, Adapt Health reported net revenue of $744,600,000 an increase of 5.4 percent 4.7%, again led by sleep, our largest product category. Sleep patient rental census continues to reach record levels and is now up 53% from the lows reached during the worst of the PAP shortage. This reflects continued strong patient demand for sleep products that we expect will continue in 2023.

Speaker 5

Additionally, our PAP resupply business continues to outperform, also reflecting strong demand and execution. The shortfall in non acquired net revenue growth reflects the acceleration of the headwinds affecting our diabetes product line that we have previously discussed. Specifically, while CGM patient census grew 8.3%, an increasing number of payers have shifted their diabetes patients

Speaker 6

Out of

Speaker 5

the DME channel and into dual benefit and pharmacy only, partially offsetting that volume growth. Additionally, Diabetes revenue for pumps and supplies was down $9,000,000 year over year. We very recently see negative impact share shift toward integrated pumps sold to patients through the pharmacy channel as well as the effect from manufacturers retaining some of their DME distribution in house. Adjusted EBITDA for the quarter was $134,000,000 which declined 2.7% from While we continue to experience inflationary headwinds, we were generally pleased with our ability to keep labor expense contained at 25.9 percent of net revenue, up from 25.4% in the prior year. Within cost of goods, in addition to the factors previously highlighted within our diabetes business, We continue to incur elevated distribution expense.

Speaker 5

However, this is trending in the right direction and should further normalize over the course of the year. Operating expense and G and A expense were both in line with our internal expectations. Cash flow from operations was $140,200,000 CapEx was $89,100,000 and free cash flow was $51,100,000 The quarter benefited from timing of key contract payment term negotiations as well as large one time purchases of patient equipment and supplies. We anticipate the first half of twenty twenty three to generate $15,000,000 to $20,000,000 in free cash flow, the 3rd quarter for free cash flow to come in the Q4. Turning to working capital.

Speaker 5

We had cash on hand of $101,400,000 With net leverage of 3.6 times as defined under our bank covenants, approximately 77% of our total debt is fixed including our swaps. Day sales outstanding for the Q1 was 42.7 days, a full 5 day compression from Q1 of 2022, Reflecting the benefits from refinements to the revenue cycle process and our technology and workflow investments, which have resulted in increased adoption of ePrescribe and faster, During the Q1, we completed $9,200,000 in share repurchases under our previously announced buyback program, leaving approximately $177,000,000 remaining under authorization. Even though our Q1 did not meet our expectations, We think we have the tools and programs in place for the balance of the year to get back closer to the midpoint, namely our cost management program and the new contracts that Steve mentioned earlier. Management is taking decisive actions to reduce our cost structure, specifically through organizational operating model changes, rationalization of footprint, $40,000,000 with $25,000,000 expected to be realized in calendar 20.3. The actions we have already taken to date Represent approximately $30,000,000 in annualized savings, of which $20,000,000 will be realized this year.

Speaker 5

Importantly, we do not anticipate any of these actions to negatively impact the high service levels we are committed to delivering for our patients, referral providers and payer partners, in Q1 2023 and we believe we will achieve improvement in adjusted EBITDA margin driven by cost of goods, labor and other operating expenses. It does not include benefit from the contracts that Steve outlined as they won't be effective until the Q3. I will now pass the call Back over to Steve for his concluding thoughts before we open it up for Q and A.

Speaker 3

Thanks, Jason. I'll wrap up by underscoring Our team's high level of confidence that Adapt Health is well positioned to capitalize on the opportunities ahead of it. We expect to drive significant shareholder value as we make further progress across a number of important strategic initiatives Within our core markets and through expanded opportunities under Adapt 2.0. To the 10,802 employees of AdaptHealth, It certainly has been my pleasure to work with each and every one of you, some for only a short period, all the way to some for 35 years.

Operator

And we'll take our first question from Brian Tanquilut with Jefferies.

Speaker 7

Hey, good morning. And Steve, thanks for working with you all the time that we work together. Good luck with the next move. I I guess my first question, as I think about the guidance and all the moving parts here, right, I appreciate like where you're coming from as you look at the cost cuts. But On the revenue side, maybe let's start there.

Speaker 7

What gives you confidence that we're close to seeing the end of it or any sort of visibility into The shift that's happening on the diabetes side of things and as it relates to the guidance, like What are you baking in, in terms of assumptions that will give us confidence in the validity of maintaining the guidance ranges for the year?

Speaker 3

Yes. Hey, Brian, Steve. Certainly on diabetes, let's start there, because I think that's the biggest Surprise to people. Without that reduction, the quarter would have looked much different. So there's significant Market change, mainly the shift to pharmacy as we indicated.

Speaker 3

And it happened much quicker with the advent of A few more products, particularly from manufacturers. So we went from an organization in diabetes as Posting double digit growth stood negative growth. That obviously has some cost concerns to us. But it also resulted in just a larger percentage going forward of government and more stable business for us And obviously a decrease in the pump business. So the cost structure for the government business differs.

Speaker 3

It differs in process, differs in products and difference in cost, Which are all net positives for us. So going forward, we should look at sequential improvement in the diabetes business. We're pretty very confident that Q2 will be over Q1, Q3 will be over Q2 and Q4 will be over Q3. And So the impact of pharmacy, the questions we ask ourselves, is it fully into the Q1 numbers? And we believe so, materially So we shouldn't see any more degradation from that pharmacy shift.

Speaker 3

The people that have shifted have already shifted. And so there's just not that many more that they can shift over there. Are the government products, the products that we need to be looking for? Certainly, they're very profitable the way we do it. So it will be a more government centric business.

Speaker 3

And then, so do we think we'll have sequential growth? Absolutely, we'll grow in the government products to be offset a little bit By some continued pharmacy shift, but again most of it's done and offset a little bit by some pump business. But again, the pump business is Now it's such a small part

Speaker 5

of the business, so it

Speaker 3

shouldn't have any material effect. So what we look for in the diabetes is increased revenue and improved margins.

Speaker 5

And I

Speaker 3

think That's the main issue with guidance going forward that if we solve that Should be handled nicely. Jason, you want to add to that? Yes.

Speaker 5

Thanks, Steve. Brian, to your question your second question on Guidance and assumptions. We're expecting Q2 to hold the same trends, frankly, across all product categories, But including diabetes for the Q2. So we do expect pumps to be down, pumps and mulling supplies To be down in that $9,000,000 ballpark that it was down in Q1. Based on what we're observing from the market, Insulet and their Omnipod is growing incredibly fast and their pharmacy component has moved from 80 in Q4 to 85% in Q1.

Speaker 5

We do expect those trends to continue because that's what management is saying. We expect Tandem, Medtronic, the other pump manufacturers to continue on their tread lines and their guidance. So we think the result will be continued compression in pumps and supplies, which today represents just a touch over 20% of our diabetes business. Turning to CGM and the discussion that Steve outlined, we do expect to anniversary some of The channel mix and payer pressures at the second half of the year, we believe that by the Q4 we'll start returning to single Mid single digit growth year over year and we do believe that that will continue to normalize as we bridge into early 2024.

Speaker 7

Got it. And then I guess in your prepared remarks, you talked about value based care and how you've got some contracts coming up. So just Curious what the setup is, what the revenue model is for you guys in value based care. And just any details that you can share with us in terms of How that works and how you see that driving growth for you guys going forward?

Speaker 3

Well, we can't mention too much about Specific contracts until they're finalized and they are announced, but that should become shortly. But the contracts that we're seeing will be much more on capitated and value based than ever before by AdaptHealth And it will give us some advantages in marketing the other products for those companies. So, yes, I mean it's very, very significant. It's by far the biggest contract that we have ever even come close to So we're very, very excited, but the team has done an incredible job and there will be more to follow as we're able to announce it shortly.

Operator

From Kevin Caliendo with UBS.

Speaker 8

Hi. Thanks for taking my question.

Speaker 3

I want to talk a little

Speaker 8

bit about the cash flows. Originally, I think Jason had said that mostly all of the cash flow is going to be used to fund M and A, I'm just wondering if that's still the plan. And while the cash flow was strong in the quarter, there It looks like a big benefit on the liabilities line that changed. If you can maybe explain a little bit of that

Speaker 5

to start with? Sure, Kevin. This is Jason. Just one maybe misinterpretation of use of cash. I think you had mentioned To predominantly be deployed to M and A, we would expect extremely modest M and A during this environment only for very small Incredibly accretive deals.

Speaker 5

The remaining of cash, I mean the bolus of free cash that we will generate this year, you can expect that to be returned to shareholders or debt holders as we deem appropriate at that time. I I would say in terms of the Q1 timing benefit I described in our prepared remarks, again DSO we're just incredibly proud of Now under 43 day sales outstanding, we do believe that we'll maintain that 5 day compression Through the next quarter or 2 until we lap many of the improvements that we deployed late last year across our rev cycle, our technology and our Our processes. Turning to the other elements of working capital, really the key factor are The updated payment terms that we've negotiated within some of our very key supplier agreements, and so we are getting a one time Benefit of essentially that cash holding on to that cash through the new extended payment terms As well as some strategic product acquisition we made in the Q1 that because of the extended payment terms, you're looking at a Q2 cash flow impact as opposed to Q1. So this is just timing. We still believe in our original Expectation of delivering between $15,000,000 $20,000,000 of free cash flow in the first half of this year.

Speaker 8

Okay. That's super helpful. If I can ask a quick follow-up. It seems like a long time ago, you put out this long range plan in 2022 and obviously things the world has changed a little bit and the results haven't been what you've wanted since then. But If we think through that long range plan, are there still parts of it that you're comfortable with or fully comfortable with or less comfortable with?

Speaker 8

If you can Maybe talk to that a little bit would be really helpful.

Speaker 5

Sure. I mean the short answer is yes. I would tell you that The growth of diabetes, we still believe, as we said back in late Last year at Capital Markets Day that it will land at a mid to high single digit growth business for us. As discussed, channel and payer mix shift came faster frankly than we anticipated. And so the compression we're taking on the commercial side of the business is happening faster than thought.

Speaker 5

Now the upside there is our government business It's growing very, very well. I mean upper double digits, upper teens, With what you might see out of some of the CGM manufacturers and that's great business for us, very strong margins. We're very pleased with that business and we still believe very strongly in those growth rates and the earnings power of the business. The contract that we just discussed with Steve, again, we don't have details to disclose. We will have details to disclose very soon.

Speaker 5

In terms of Adapt 2.0 and how our revenue profile is changing, how our ability to Land and secured large scale arrangements that I think are preferable for 1st and foremost the patient, the referring providers, Absolutely demonstrating our ability to execute there. So certainly some ins and outs, sleep performing, Frankly, above expectations and as the largest sleep provider in the country, we expect that growth to continue. So I think it's too early to really reapply on 2025, but we still feel very confident about achieving those financial goals. Timing could slide a quarter or 2 here or there, but as we get deeper into the year, we'll refresh that guide. And

Operator

we'll take our next question From Pito Chickering with Deutsche Bank.

Speaker 9

Hey, good morning, guys. It's Steve. It's a pleasure working with you here. I have a series of questions here on diabetes. And I know you're just setting the stage here.

Speaker 9

DexCom grew 17% in the U. S. In the first quarter, Libre 80% and Omnipod sort of 49% and your sort of diabetes declines were 6%. So I guess question number 1, Can you guys refresh us on the exposures that you have as a percent of revenues between pumps and CGM? Number 2, You talked about sort of the pharmacy channel pressure.

Speaker 9

Any color on how much you'll be decreasing pricing in order to make the patients channel diagnostic between the 2? And number 3, can you quantify what is your commercial mix for stethrinomic mix in diabetes? I have one follow-up question.

Speaker 5

Sure, Peter. This is Jason. I'll start maybe with question 13. So as you said, DexCom US is up 17% in the quarter. That is very consistent with our government CGM portfolio.

Speaker 5

We are also up high teens, exactly In line with what Dexcom is saying, I would tell you that The mix of pump first CGM of the $146,000,000 of diabetes revenue in Q1 2023, Pumps and pump supplies is just a touch over 20% of the portfolio. That's down obviously over prior year due to the $9,000,000 compression That we've experienced. I'm going to take a stab at your second question around Really the mix of pharmacy versus the other channels. We still maintain a pharmacy business. We are growing it.

Speaker 5

For us, It is 1, a growth engine, but 2, a bit of a mitigation strategy as plans shift to either a dual or a complete pharmacy benefit. That is an option that we leverage to keep the patient on census, to continue taking care of them And to flip them to their channel of choice to keep them on our census.

Speaker 9

So when someone shifts from a DME into pharmacy, What is the economic impact of both revenues and profitability?

Speaker 5

Well, at a patient level or a unit level, if a patient on our census, their plan changes design or policy and they 100% to a pharmacy channel. We will work to continue distributing to them On that pharmacy channel, it is at a lower reimbursement rate. I don't know that we'll get into too much detail on that, but it's a patient worth keeping In every sense.

Speaker 9

Okay. And then, so a follow-up question here. I guess, why are you convinced that the shift to pharmacy is done at this point. I think it was literally end of February on my question last quarter that you said you aren't seeing shift. Thanks so much.

Speaker 5

Yes. So Again, not to confuse against the pump and supplies market, which we're seeing a very, very large channel mix shift On payer shift, due to the dynamics we talked about with Insulet, Tandem and Medtronic. Now in the CGM Space. I'd tell you that it is very nuanced as you might expect as a plan moves a chance. There are different ways of doing that.

Speaker 5

Even a 100% move from a medical benefit to a pharmacy benefit, it most Boston doesn't come without grandfathering in of patients that are already on a medical benefit. So we'll maintain them on census and continue to take care of that patient As the quarters and years go on, some can switch entirely and deny all claims and essentially block Those patients from achieving their CGM through a medical benefit channel. So that's on a full shift. And as you look at the duals, It's even more nuanced. So what percent of patients on a dual benefit or referring providers on a dual benefit will Not elect the pharmacy channel and go to a medical benefit channel.

Speaker 5

That is we're still getting data on that. It's still early In the switch to dual benefits, and so to your question on the just the unknown and the challenge in predicting, Those are the reasons why. But as we sit here in May, a lot of planned policy or Design changes happen effectively January 1. So we're very comfortable we have our arms around it for the balance of 2023.

Operator

We'll take our next question from Joanna Gojek with Bank of America. Good morning. Thank you so much. So first, I guess, follow-up.

Speaker 10

So on diabetes, so did I hear you say the organic growth actually negative in the quarter? And then how does this impact the full year? So I guess previously you kind of lowered the guidance for the full year. So how do you expect this

Speaker 5

For the pump and supplies business, we said we were down $9,000,000 in the quarter. We are expecting that trend within the pump and pump supplies portfolio to continue. Related to CGM, We do believe we'll maintain about a flat growth profile, inching up in the second half of the year and exiting at mid single digits. For the end of the year, for the full year guidance, the total diabetes revenue year over year, we expect it just about flat.

Speaker 10

Okay. So, thanks for the year overall. Okay. And then on this value based contract that I guess we're going to hear The specifics, sounds like very soon, but I guess, sounds like you expect this to be actually agreed to EBITDA. So how does it work?

Speaker 10

Is it Can you continue your business or is it kind of changing some of the contracts you have with this particular payer in place? And can you explain Why do you expect this to be accretive in year 1? I guess when it comes to these bio based care contracts, there appears to be a ramp up time and some investments upfront. So just trying to understand the economics of that contract. Thank you.

Speaker 3

Joanna, any contract certainly there is ramp up, but when you have a significant one, Then you'll get some benefit during the year and then obviously next year we'll get the full benefit of So we expect some benefit in 2023 with the balance of with the Most of it coming towards the end of the year, but then the course of 2024 will be fully baked.

Speaker 10

So that is already included in the guidance, your commentary for the full year that you

Speaker 5

Yes. Good question, Joanna. So we have not Included the benefit from these wins in our description of Believing we will deliver near the lower point of the current range. Also, as we've said, we do believe we have the tools And programs in place to get us back to the midpoint that we are maintaining, those are 2 factors. It's the cost benefit that is already in and growing frankly.

Speaker 5

And that it's the benefit From these contract wins that again we have internal expectations on that. We want to be cautious until all the data Change is complete and everything is finally announced. But that's really the big tailwind that we believe will get us back to the mid.

Speaker 10

Okay. So the cost cutting and this new contract will or you would expect to help you get back to the midpoint?

Speaker 9

Yes.

Operator

Okay. Thank you. And it appears We'll take our next question from Richard Close with Adapt Health.

Speaker 6

Yes. Richard Close, Canaccord. Steve, good working with you as well. Jason, I was wondering if you can just go over the cost savings and provide a little bit more details I think you said $40,000,000 in cost savings, dollars 25,000,000 realized this year. And then you said something about a 20 1,000,000 realized from the stuff you already did.

Speaker 6

So if you can just go over the puts and takes on that, that would be helpful.

Speaker 5

Sure, Richard. So, yes, the $20,000,000 number of in year EBITDA has already been achieved. It's been validated whether that is a process or a real estate or a contract Or changes in organization, that has all tracked at a very detailed level and has been confirmed as flowing, So that's already been accomplished. We are still aiming at $10,000,000 annualized $5,000,000 in year The final phase of the program, we'll provide an update on that at the end of next quarter, but we're very Confident in achieving the balance.

Speaker 6

Okay. And then with CapEx, You talked about some, I guess, certain purchases. Yes. Can you just go over the CapEx, how you're thinking about it the rest of the year, please?

Speaker 5

Yes, absolutely. So maintaining guide at 11% of revenue for Q1 as expected. We were at 12% Of company revenue, I will tell you that the nuance of the capital equipment that We're acquiring there was about a $10,000,000 increase in Fixed assets that are not yet in service, but we do expect to have in service soon. Frankly, that was pulling levers to ensure that we're We're continuing to capture market share within the Sleep business. If you adjust for that, you're at a 10.6% of revenue.

Speaker 5

I'd expect that's going to be The ballpark for Q2 is that, call it, 10.5% to 11% of revenue and we do think it will dial Back to a more normalized 10% of revenue in the second half of the year. So we feel very comfortable at 11% of revenue for the full year. Does that make sense?

Speaker 6

Yes. Yes. And then final question, obviously, a smaller piece of your business, but on the HME, Can you talk a little bit about, I guess, the year over year decline there? I mean, obviously, not huge, but anything to call out?

Speaker 5

Yes. I mean, I'd say that Some of this is related to the new sales commissions and programs that we discussed last quarter Going effective on March 1, we are making changes and adding commission for e prescribe and electronic ordering On our DME, the complexity on paper or faxed orders, whether it's wheelchairs, walkers, beds, etcetera throughout the DME catalog. It's a substantial cost to work through Documentation and pre auth are everything that it takes to qualify that equipment on patients. And we've demonstrated incredible benefits For just efficiency and cost of obtaining electronic orders through where you prescribed for that equipment, we are Essentially, spiffing and adding commission for that type of order. So what you're seeing is a profile change at the revenue line.

Speaker 5

We are maintaining and starting to improve the bottom line from that category.

Operator

And it appears that we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

Speaker 3

Thanks to all. We appreciate everybody's time this morning on the call and we look forward to Accomplishing the tasks ahead of us for the remaining part of this year and thanks to all. Appreciate it.

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AdaptHealth Q1 2023
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