Amedisys Inc (AMED) 2014 Q4 法說會逐字稿

Good morning. My name is Kurt and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 earnings call. (Operator Instructions)

Mr. David Castille, you may begin your conference.

Thank you, Kurt. Good morning and welcome to the Amedisys investor conference call to discuss the results of the fourth quarter ended December 31, 2014. A copy of our press release is accessible on the Investor Relations page on our website.

Speaking on today's call from Amedisys will be Paul Kusserow, President and CEO; Ronnie LaBorde, Vice Chairman; and Dale Redman, interim CFO. Also with us is Scott Ginn, Senior Vice President and Controller.

Before we get started with our call, I would like to remind everyone that any statements made on this conference call today or in our press releases that express a belief, estimation, projection, expectation, anticipation, intent, or similar expression, as well as those that are not limited to historical facts, are considered 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 Amedisys today and the Company assumes no obligation to update these statements as circumstances change.

These forward-looking statements may involve a number of risks and uncertainties, which may cause the Company's results or actual outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our Forms 10-K, 10-Q, and 8-K. The Company disclaims any obligation to update information provided during this call, other than as required under applicable securities laws.

Our company website address is Amedisys.com. We use our website as a channel of distribution for important information including press releases, analyst presentations, and financial information regarding the Company. We may use our website to expedite public access for time-critical information regarding the Company in advance or in lieu of distributing a press release or a filing with the SEC disclosing the same information.

In addition, as required by SEC Regulation G, a reconciliation of any non-GAAP measures mentioned during our call today to the most comparable GAAP at measures will be available on our website on the Investor Relations page under the tab Financial Reports, non-GAAP. Thank you and now I will turn the call over to Paul Kusserow.

Thank you, David. Welcome to the Amedisys fourth-quarter conference call.

This morning I am pleased to announce we reported fourth-quarter revenue of $301 million, adjusted EBITDA of $23 million, and earnings per share of $0.27. For the full year we reported revenue of $1.2 billion, EBITDA of $74 million, and earnings of $0.73 per share.

As many of you know, this is my first conference call as CEO of Amedisys. Most recently, I served as Vice Chairman of Alignment Healthcare and also as Chief Strategy, Innovations, and Corporate Development Officer at Humana, with prior stops at Tenet Healthcare, the advisory board, and McKinsey.

Throughout my career I have spent quite a bit of time focused on how to provide efficient and effective clinical care to the Medicare and Medicare Advantage population. It has become clear to me over the years that home health and hospice are essential to serve our most complex and fragile patients. Not only in terms of providing effective quality care at lower cost, but also because of the patients' overwhelming preference to remain at home. That's why I am here.

In the early part of 2014, I was asked by the Amedisys Board to lead a consulting effort to perform a strategic review of the Company. I can definitely say that Amedisys was in a much different place at the time. The Company was losing money and had recently announced a large settlement with the Department of Justice, putting a strain on the balance sheet. My main concern, though, was that these events would result in real deterioration and damage in employee morale.

What a difference a year makes. 2014 has seen a remarkable turnaround for Amedisys. Operations have stabilized thanks to the great work of Ronnie LaBorde, Dale Redman, our field and corporate leadership, and the entire Amedisys team. Difficult decisions were made to close or consolidate underperforming care centers, cut costs, and refocus internally on core operations. Looking back, these decisions have paid off tremendously.

Since being named CEO a little over two months ago, I have taken the opportunity to visit extensively with Amedisys team members, both in the field and here at corporate. I spent most of the last month on the road visiting and listening to all of our regional leaders and their teams. I visited 12 states, 21 care centers, and have met with over 700 employees.

To date, what I have seen is an increasingly confident group of people, passionate and committed to delivering superior home health and hospice care. My job, along with the rest of the management team, is to provide our people with the tools and support to deliver care effectively and distinctively. Our team members are excited and looking forward to our next steps, a stark contrast to what I saw only a year before.

It also appears that healthcare payors and providers, including CMS, are increasingly recognizing the value of providing care in the home. With the recent goal announced by CMS to transition towards outcome-based payment versus the traditional fee-for-service model, I truly believe that Amedisys is uniquely positioned to capitalize on these big longer-term opportunities. All while maintaining very healthy operation under today's reimbursement models.

Much of the hard work and the low-hanging fruit of our turnaround has been harvested. We will generate future incremental value by focusing on more efficient care delivery, new business line growth, margin preservation, and return on human capital.

The last two months have been very educational. We are still in early stages of forming our strategic vision, but my travels around the Company have been very encouraging. Team members from all over the country have identified large pockets of untapped value.

Over the next few months, we will be refining our plan and stress-testing these ideas to extract that value. We will provide updates as our thinking solidifies.

In the near term, we will be focusing on top-line growth and continuing to improve the efficiencies of core operations. We will also be looking to capitalize on tuck-in M&A opportunities that help us to capture and solidify market share and are accretive to earnings. I am confident at this time next year our conversation will be about continuing to streamline and grow our core operational performance past the industry standard, as well as reviewing our various strategies for new growth.

Finally, I would like to thank all of the Amedisys team for the great work you are doing on a daily basis, delivering care at home to those who need it most. Also, thank you for welcoming me as your new CEO. I am truly excited about all of the opportunities that lie in front of us.

With that, I will turn the call over to Ronnie LaBorde for an operational update.

Thank you, Paul. I would like to take this opportunity, as we report 2014 results, to reflect on the tremendous progress made during this last year.

Beginning in the second quarter, the combination of closing financially underperforming care centers, reducing G&A expenses, and an entire organization that engaged and committed to the turnaround all resulted in improved quarterly results. These results have been sustained throughout the year and we remained focused on the commitments we made to investors early in 2014.

First of all, we continue to focus on clinical excellence as we believe the ability to achieve consistent, superior clinical quality will ultimately drive referral volume from physicians, hospitals, and payors. CMS has recently taken an important step in this direction by introducing a five-star quality rating system for home health that will be available publicly on Home Health Compare beginning in July.

We are closely monitoring these developments and have done some preliminary work to identify the rating for each of our care centers. While some of the specifics of the rating will be tweaked, we have no doubt that these star ratings will be an important metric that can drive future volumes.

Second, our goal to achieve consistent and sustainable organic growth; we have seen some progress. In home health we saw positive same-store Medicare growth for the second straight quarter, with a 2% same-store increase in admissions and re-certifications. In addition, non-Medicare revenue continued strong growth with a 26% same-store increase in the fourth quarter. In particular, we are seeing large contracted payors driving this increase in non-Medicare revenue.

Same-store hospice admissions were up 2% and ADC was down 3% in the quarter. As you may recall, Jim Robinson assumed operational leadership of hospice effective October 1, so the fourth quarter was the first one under our new structure. We are confident we will see a return to sustained admission and ADC growth. While it is early, core metrics are improving.

Third, we will focus on efficiencies in our operations. Our home health gross margin was 42.1% in the quarter, representing a year-over-year improvement of 270 basis points from 39.4%. Hospice gross margin was 46.4%, a slight decrease of 10 basis points from 46.5% last year.

G&A expenses are also a continued focus. For the quarter, we reduced consolidated G&A expenses by $13 million from the same period last year. Finally, Dale will comment on capital expenditures, both in 2014 and expected during 2015.

We currently have 15 home health care centers using our AMS3 system. We are continuing to make improvements to the system and will evaluate the results of these changes over the next few months. The results of this evaluation, in combination with the training and preparation required for the implementation of ICD-10 effective October 1, will influence the pace of our implementation going forward.

We have not been immune to the impact of severe winter weather around the country in the first two months of 2015. During this quarter we have had 210 home health and hospice care centers experience total or partial closure due to the weather. Prior to the last two weeks in February, we were seeing strong organic admission growth trends in the upper single digits in home health and mid-single digits in hospice.

In closing, to all of our dedicated employees, I want to take this opportunity again to also thank you for a job well done. Because of your efforts, Amedisys is in a great position as we begin 2015.

Now I will turn the call over to Dale Redman for a financial update.

Thank you, Ronnie. For the quarter, revenue was $301 million and earnings were $0.28 per share on a GAAP basis and $0.27 on an adjusted basis. For the year, we generated $1.2 billion in revenue and earned $0.40 per share on a GAAP basis from continuing operations.

There were numerous adjustments detailed in our press release, the majority of which related to our restructuring efforts in the first half of the year. Adjusting for these items, we earned $0.73 per share. EBITDA for the quarter was $23 million with a margin of 7.6%, compared to $7 million, or 2.2%, for the fourth quarter of 2013.

In our segment results, we will be focusing on year-over-year comparisons. In home health, revenue was $240 million. Same-store Medicare admissions and re-certifications were 2%, and revenue per episode was up $10. Same-store non-Medicare revenue was up 26%, while admissions were up 22%.

Home health gross margin of 42.1%, an improvement from 39.4%. Cost per visit was $86, down $4. Most of this decrease was due to a shift in clinicians from salaried to pay per visit at the beginning of the year.

And hospice revenue was $61 million, same-store ADC fell 3%, and admissions were up 2%. Revenue per day was up 1%, roughly in line with the rate increase for Medicare effective in the fourth quarter. Hospice gross margin was 46.4% and flat relative to last year. We saw an increase in cost of service per day, driven mainly by increased pharmacy costs.

Consolidated G&A expenses decreased $13 million year-over-year on an adjusted basis. A majority of these savings were achieved through restructuring of our portfolio and other G&A efficiency initiatives announced earlier in the year. Total capital expenditures came in at $12 million for 2014, significantly below our expectations at the beginning of the year.

We ended the quarter with $8 million in cash on the balance sheet. Cash flow from operations for the quarter was $41 million, excluding the second DOJ payment of $36 million. This compares to $8 million at the same period last year.

For the year, cash flow from operations, excluding the DOJ settlement and related fees, was $90 million, compared to $102 million in 2013. It is important to note that 2014 cash flow includes negative cash flow from operations in the first quarter followed by three strong quarters of cash generation. Additionally, 2013 benefited from a $42 million reduction in accounts receivable, causing DSO to fall 10 days.

At the end of 2014, DSO was down again to 29.4 days. This is an all-time low for our company and down three days since the beginning of the year.

Outstandings under our revolving credit facility at the end of the quarter were $15 million. While we drew on the revolver in order to make our second DOJ payment, we were able to reduce our debt balance by $33 million during the quarter and $79 million during the course of 2014.

Our total leverage ratio is 1.5 times, down from a high of 3.2 times at the end of the first quarter. Our operational and working capital improvements have driven significant free cash flow, resulting in a stronger balance sheet and additional flexibility to operate our business.

While we are not providing guidance at this time, we are optimistic about the core operations run rate in 2015. However, the first-quarter run rate will be impacted by a number of factors. As Ronnie mentioned, there are going to be some turbulence from the weather impacts across the country. We have an estimated $2 million increase in payroll taxes that will hit the first quarter.

Merit raises that we gave in December of 2014 will impact the first quarter by about $1.6 million, and two less hospice days of revenue in the first quarter will have an impact of $1 million; and some typical seasonality. With all that being said, we are optimistic about the rest of the year.

This concludes our prepared remarks. Operator, please open the call for questions.

(Operator Instructions) Kevin Ellich, Piper Jaffray.

This is Cairn Clark on for Kevin. I'm wondering if you can give us any details regarding any involvement in Medicare's BPCI initiative. So which model you are participating in the convener; using it, if you can quantify potential or how much you could add this year or next, thanks.

Good morning, thanks for the question. It's two things. I would say on the Model 3, throughout 2014 we were a convener under a Model 3 program. We basically had two sites where we had activity; worked with that throughout the year and terminated that as of 12/31. So going into 2015, we are not participating in the Model 3 program going forward.

There will be -- there's some financial impact that we have seen into 2014, but it will really be relatively small we think, just from administrative costs, and then the ultimate reconciliation of those claims costs. So, again, that has terminated at 12/31 of 2014 and we will not go forward in the Model 3 bundles.

We are participating in a Model 2 bundle. We have one relationship where we are not the convener. Obviously, it's Model 2, but we are a participant. That is a good relationship going forward and that one works very well for us.

Great, thanks.

Brian Tanquilut, Jefferies.

Good morning, guys. Ronnie, just to follow-up to that first question. Do you mind sharing with us just your experiences or conclusions from participating in Model 3 and why you exited the program?

Sure, Brian. Good morning, thanks for the question. Obviously it was -- it's very early stage and, from a CMS perspective and certainly from a provider perspective, of how do you dip your toe in the water and begin to take on risk and participate in different reimbursement alternatives.

After we got into this and really made some good progress, I think, operationally, it allowed us to have better visibility into the risk profile. If we looked at a bundled payment, which we had operated under a 90-day period of care and had responsibility there, we just -- going forward, we thought that the risk profile was not well-suited for continued involvement.

Inside of the bundle I would say, basically, one-third of the cost was home health and two-thirds of the cost was other providers. And what we worked to do was intervene and try to reduce the occurrence of the additional chain of costs when patients were readmitted.

And while we have made some progress, we just weren't moving that needle far enough. We had some positive clinical care redesign. We worked hard, but it was more of a financial risk profile that we decided not to go forward with.

Got it, thank you. Then, Dale, I know you are not providing guidance, but if you don't mind just maybe helping us through how you think about your ability to sustain organic growth.

You talked about Q1, early Q1 was strong. But as you think about the rest of the year, how do we think about your ability to drive organic growth in hospice and home health? And also how much more can we lop off on the expense side? Sort of just help us model and figure out the different moving parts.

Well, there's several parts of that question. Let me take the first part. What we are really telling you is that while we are optimistic about the core operations run rate in 2015, there is some things that are essentially nonrecurring or they are unique to the first quarter that is going to impact the run rate as you look at it coming into 2015. And we mentioned those.

It is weather; it is payroll taxes; it is merit raises. It is hospice having two less days in the quarter and the typical seasonality that comes out of the fourth quarter into the first quarter related to [lupus] and things like that. So that is one part of the equation and that is we are optimistic about 2015, but the first quarter probably not going to be the run rate for the rest of the year.

Now from an organic growth standpoint, maybe, Ronnie, you want to address that issue, or Paul.

Sure. I think we are feeling quite good about the year in terms of what we have seen initially in the first couple months minus the weather. We feel that the core operations are performing very well. It's just we are seeing some traditional lumpiness that we normally see in the first quarter when we back in --.

When we went back and looked at this, we said okay, we think things are going to trend very well, but I think we were a little concerned about the straight division that was being done out there by the analyst community.

Got it. And then last question for me; hospice was still obviously negative. I know you've put in some new leadership in there; how do you think the improvement in that segment will progress over the course of the year, over the next 18 months?

This is Paul. I think what we are seeing, we are -- anxiously every week we look at the numbers and what we have been seeing, I think, is some very positive trends in terms of admissions. Starting to see more positive trends in terms of ADC, but -- so we are cautiously very positive about this.

We like -- Jim Robinson has taken control of this. He has built a new team; the team is performing. There has been some trimming and consolidating that is just being finished up, so we feel very good about it. They've got a clear vision; it's a very focused team. And so we are monitoring it very, very closely, but we like what we are seeing thus far.

Got it. Thanks, guys.

[Toby Wong, City N Research Group].

Good morning, guys. A couple of quick things. On the non-Medicare same-store growth, what is really the driver behind that?

This is Ronnie. We have -- what we are seeing this year in the run rate is reflected in some pretty robust growth rates that you mentioned there. And that is from some large payors and contracted relationships that were -- we saw that change early in the year, so that has given us some nice comps as we have gone through the second, third now, and fourth quarter.

All other things being equal, obviously those rates of change won't continue if we continue at this same run rate. Obviously year-over-year in the first quarter that will drop to probably somewhere low double digits and it would be flatfish in the second -- all other things being equal. It is still an area of focus for us, but to this point it has been a few large relationships under contract that have moved that needle.

Although I think what is important is, when we get updates from our managed care folks, we are asking them to aggressively still move forward and to get as many contracts as possible. And I think they have been getting positive contracts in terms of our contracting ability, so we have a good team there.

There still is more to do there, but I think a lot of the big stuff has come in. And it's an area we like, so we want to be the choice for managed care. I came out of that background and we have good relationships there. And we want to be the solution there, particularly as Medicare Advantage outpaces traditional Medicare growth we want to be there.

Okay, thanks. That's helpful. And then is there a component of managed Medicaid it is also a part of that from Medicaid expansion as a result of the Affordable Care Act as well?

No.

Okay. And then just moving on one other thing quickly, you guys mentioned that you are evaluating AMS3 and making some changes. Maybe if you could expand on a little bit.

What we are doing is we have actually been working quite hard. We've implemented AMS3 at 15 care sites and the schedule -- when I first came in and looked at the schedule, it was very, very aggressive in terms of getting it rolled out in a two-year timeframe. We started to look at the difficulty with implementing AMS3 plus preparing for ICD-10. We can control our implementation on AMS3 and we can't control when ICD-10 is going to go. So our feeling is we want to make sure we get that right.

We also want to see -- we have some fixes to do in terms of AMS3 and we also want to see what the impact has been in the 15 centers we rolled out.

Okay, that's helpful. Thanks a lot.

Darren Lehrich, Deutsche Bank.

Thanks. Good morning, everybody; a few things here. Just coming back to the hospice question, I wanted to just flesh out a little bit more what you are saying about gross margins in Q4.

It sounded like pharma costs were the bigger part of the issue. I guess sequentially you did a rate increase in Q4, so I guess I'd like to just understand a little bit more about what other factors you think might be playing into the margin performance in Q4.

This is Dale. A couple things I can mention. If you look at Q3 and Q4, we had an adjustment to the cap in Q3 of about $1.5 million and that had an impact on the gross margin. That is probably not recurring, so we are sitting at $2.8 million in cap liability at this point.

Second initiative that I think you mentioned was pharma costs and that's primarily related to the change that CMS made almost a year ago in Part D, partly to adjust for those kinds of issues and working toward national contracts, etc., that will probably help with that issue. So those are the two pieces that you were thinking about from that standpoint.

Okay. And then your cap position for accrual in Q4, what was that?

I think it was minimal because the cap liability didn't change from Q3 to Q4. It was $2.8 million in Q3 and $2.8 million in Q4, and the accrual between -- the accrual for the quarter is simply the change in that cap liability.

The only real significant change that has occurred over the last year or so was the two care centers that we had that dramatically improved their operations through additional admissions and, therefore, reduced their cap liability in Q3. And that benefited us from about $4.3 million down to about $2.8 million and it stayed there in the fourth quarter. So long-winded way of saying no accrual in the fourth quarter.

Got it. Okay, that's helpful. Then obviously the non-Medicare business is something, Paul, given your background that we would expect you to spend a little more time on.

Can you maybe just talk to the margin outlook that you have for that business and how you think you are set up to serve those patients and the structure of the arrangements? Just so we can think about, to the extent you grow that business at a differential pace going forward, what the margin profile might be.

Sure. That's a great question and I am going to give you a strategic answer versus a specific answer.

We have been studying that. Obviously, when you see a new segment of business coming in that is growing at the rate this is -- and we look at the traditional margins compared to traditional Medicare -- we have been spending quite a bit of time understanding what the drivers would be so that we could get the margins equal to traditional Medicare.

Now, we are working through a lot of this strategy. Currently, as you know, that is not the case, but we have been working on a strategy -- on a managed care strategy that fundamentally looks at the needs of managed care in terms of utilization, in terms of staffing mix that we think can get us competitive from a margin perspective.

So it will mean some changes to operations in a certain way. We're going to have to do things a little differently in managed care, but we know they are driven largely by outcomes and costs, so we think we can participate there largely being very aggressive on utilization and then staffing mix. So that's what our thinking is and we also are going to be looking at other lines that way. We think there's a big play potentially in the senior living space and then we've got to go take another look at Medicaid, considering the growth, particularly managed Medicaid.

That's helpful. Then last thing from me. When you talk about I guess your plan to review the strategy and some of the goals you have going forward in M&A as part of the discussion, I think we all think about some of the acquisitions that have been done in the past.

So, Paul, can you maybe just speak to your business development team and how you as the CEO are going to approach M&A, perhaps, differently than the Company has in the past?

Sure. So I came out of an M&A background, obviously Humana, running corporate development, so we did a tremendous amount deals there. We've got a very good core team here in the finance area and we've got a great guy in Kris Novak, who is running this process right now.

I think the key thing is we are back looking at deals and we are looking at really interesting deals. What we are going to try to do is be very conservative, I think, initially. So what we want to do is we want to make sure that there's tuck-ins that are accretive, that are in the market, that are additive, that come under good management teams, and are in home health or in hospice, so that we can get these under our belt, understand how these things are working. I think that is where we are going to focus.

As we get better at this, we will start to look more expansively and look at some of these other deals that are out there that can take us into new geographies where we feel we need to be playing.

And then the other thing is we need to start -- the third bucket we are looking at is capabilities. I am quite convinced there is going to be a post-acute world where we are going to have to have more tools as we want to take on risk in bundling, which I think will come back. There will be a 2.0 version of this. So I think we will want to think about that as well.

But initially we have got our folks digging in, knocking on doors, being as proactive as possible within our own geographic market structure.

And obviously, looking at our balance sheet, it is in the right kind of shape to be back in the acquisition game. We have a leverage ratio, as we mentioned, of 1.5 times and that will probably come down with cash flow this year. So we're going to be prudent about how we spend that capital, but we are in a great position to be a player back in that arena again as we go forward.

(multiple speakers) Just let me add, we will have to bulk up our team and Kris knows that. He is working too hard already.

(Operator Instructions) Ralph Giacobbe, Credit Suisse.

Thanks, good morning. I hopped on a little bit late, so apologies if you already went through it, but did you go through why you haven't given guidance for 2015?

Yes, this is Paul. We haven't because we talked a little bit about the first quarter and also I just arrived. So I have been here for about 2.5 months and I am, frankly, not comfortable at this point; gotten my hands around what's going on with 2015.

I feel very, very good about the core operations and the wind we have at our back in terms of the core operations. There is a little bit of lumpiness in this first quarter, as we alluded to, and so -- I do want to get a plan put together. Clearly, we will articulate this plan to you all, but I do want to make sure that we get the plan right, get our employees' heads around it, get buy in, start to do the math in terms of where we think we are going to need to go from the plan, particularly for the new businesses we are starting to look at.

So I want to make sure we have an ability to do that and structure the organization properly to implement the plan well. So that is where we are and that is why we aren't issuing guidance.

All right, fair enough. Then do you have any timeline -- would you expect to do it in the next couple quarters, or this is just suspended for some period of time without a real timeline around it?

I think as we work through 2015 and we get comfortable with the circumstances, we will take another look at that issue, but no prognostication at this point as to when we may or may not do that.

All right, fair enough. At this point, are the bulk of the cost savings essentially done and the story really now all predicated on driving revenue growth? Is that the way to think about it?

I think that's not. I think we -- as I said in my statement, I think we took advantage of a lot of the low-hanging fruit from a G&A perspective. I think there's more there, so we are going to go back in and we see some pockets where we can potentially create some more efficiencies.

But we do have to grow and we are putting a lot of effort into that. There are new business lines that are very exciting, so we want to make sure we participate there. And there's some things that I think we need to do on the people side, which I mentioned to my comments, in terms of strengthening our people and our clinicians. And then our processes, which we are dealing with; I think we can take some things out of our processes that are currently a little wasteful.

Okay. Then just wanted to understand a little bit more on the managed care side. You had sort of mentioned in the prepared remarks something about sort of going after contracts.

I just wanted to understand is that -- is there a sense -- is there willingness and are you interested in more narrow networks or preferred arrangements I guess going forward? And just the argument of trading off -- I guess greater trade-off of price for volume and where we stand with that.

At this point we're looking at everything, so I think there is -- if the plans, which obviously on capitated plans, managed care plans, and Medicare Advantage, some of our partners out there do like to work in narrow networks. And for those folks that do, we will obviously work with their designated provider, so that is quite clear. We understand how to do that.

I think the key for us is to be as flexible as possible. Some of them aren't there yet in terms of ultra-narrow networks, but this is an area that -- once again I was at Humana for five years so I understand how that's done. And I think we want to be prepared. Also, I think ACOs are going to start to emerge in a serious way where we are going to want to have much more conversations with ACOs who will be very narrow networks.

We have got some plans around it, so we understand the importance of it.

Just last one. What is your current relationship with Humana? I think there has been sort of preferred provider status in the past I think I recall, and I think at some point there was actually exclusivity to some degree this kind of got toned down a little bit too preferred provider. So if you could just help us understand where we are at in terms of your Humana relationship.

This is Ronnie, Ralph. We continue with Humana and have contracted a relationship that has been in place. We are a provider for them. I don't think there's -- the way that is structured there is local market discretion of providers, so we work under that umbrella and that structure. It's been pretty stable I think the last -- the restructuring of our relationship was October 1 of 2012 and been relatively stable since then.

Okay. But there are no preferred -- there is no steering right now, other than on a regional basis I guess you have sort of the relationship and there's a referral channel there?

Yes.

Right. I think the one thing we have to do, as we look towards building a managed care strategy, is what can we do that differentiates ourself from the rest of the industry. Right now I think it's relatively undifferentiated, so I think there is a big opportunity here for us.

Okay, thank you very much.

We have no further questions at this time. I will turn the call back over to the presenters.

Great. Thank you, operator, and I want to thank everyone who joined us on our call today. We appreciate your interest in our company.

I want to thank our employees for what has been an incredible year and we look forward to updating you on our next quarterly earnings call. Thanks, again. Take care.

This concludes today's conference call. You may now disconnect.