Hanger Inc (HNGR) 2014 Q1 法說會逐字稿

Good morning. My name is Kristin and I will be your conference operator today. At this time, I would like to welcome everyone to the Hanger, Inc. first-quarter 2014 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Russell Allen, Treasurer, you may begin your conference.

Good morning and welcome to Hanger's discussion of our 2014 first-quarter results. Before we start our discussion, I will review with you our declaration of forward-looking statements. During the call management will make forward-looking statements relating to the Company's results of operations. United States Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for certain forward-looking statements. Statements related to future results of operations during this call reflect the views of management. However, various risks, uncertainties and contingencies could cause actual results or performance to differ materially from those expressed or implied by these statements. These include, but are not limited to, the Company's ability to enter into and derive benefits from managed care contracts, demand for the Company's products and services, the impact of reviews, audits and investigations conducted from time to time by the government agencies and other factors identified in the Company's periodic reports on Form 10-K and 10-Q which are filed with the Securities and Exchange Commission under the Securities and Exchange Act of 1934. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.

Now I will turn the call over to our Chief Executive Officer, Vinit Asar.

Thank you, Russell. Good morning and thank you for joining our Q1 earnings call.

As we reported in our press release, weather impacted Q1 results in our Patient Care business segment. Total Company revenues for the quarter came in at $235.6 million, an increase of $6.2 million from the first quarter of 2013. Adjusted diluted earnings per share were $0.19 for the quarter.

These results reflect, among other things, the impact of adverse weather patterns across the country in Q1. Although it is not unusual in our business to see a negative weather impact in Q1, the severity and the duration of the severe winter weather was much worse than we have seen in quite a while.

This year we saw approximately 1,000 closed clinic days across our network in Q1, primarily in the East and Central part of the country. This number of days was approximately five times greater than the number of days that we were affected by weather in Q1 of last year. Our Products & Services segment formed largely in line with our expectations for the quarter despite a slight weather impact on our distribution business and the continuation of the O&P industry headwinds affecting the independent providers.

Separately, during the quarter, we found ourselves in a difficult situation in connection with the filing of our Form 10-K this year. The 10-K filing was delayed due to the identification of material weaknesses in our inventory control process.

Although the issues did not impact our reported results, we are not satisfied with either the delay or the material weaknesses and have begun to work to remediate the associated issues and prevent them from recurring.

During the quarter, we also announced that George McHenry, our CFO, will retire from Hanger at the end of this year. Even though George will be with us for the remainder of the year I want to take this opportunity to thank him for his dedication and service to the Company as our CFO for the last 12 years. We have initiated a national search for his successor.

I want to provide a quick update also on the regulatory front. We recently received a letter regarding the WalkAide from the interim head of the CMS Coverage Analysis Group indicating that there was not enough evidence to warrant a reopening of the existing noncoverage decision for Medicare reimbursement for WalkAide in stroke patients.

In other words, they would want more data to reopen the existing noncoverage position.

Now, while this is disappointing to us, we are gathering additional evidence to bring to CMS for a meeting that they have already agreed to have with us. As I have always maintained, we have been and remain guarded about the opportunity with WalkAide. While we plan to continue the dialogue with CMS, the letter has only increased the hurdle that has been set in an already tough reimbursement environment.

In other regulatory news, on a positive note we recently received notice from the staff of the Division of Enforcement at the SEC regarding the investigation that they had opened in May of last year. The notice informed us that they had concluded their investigation and they do not intend to recommend an enforcement action.

We are obviously very pleased with this outcome. I will provide more color on all of this and the rest of our operations in Q1 results shortly. But at this time, let me turn the call over to George to take you through our financials.

Good morning, everyone. As Vinit mentioned, Q1 was a difficult quarter, given the weather conditions that impacted much of the country, resulting in a significant number of lost days compared to 2013.

My specific comments on the quarter are as follows. Adjusted diluted EPS was $0.19 compared to $0.27 in the prior year. The shortfall was driven by the impact of severe weather, as Vinit mentioned earlier, and the cost associated the delayed filing of our 10-K.

The combination of lower-than-expected sales and increased cost negatively impacted our adjusted operating margins, which were down from 10.1% in 2013 to 7.1% this year.

At Patient Care, total sales increased $6.5 million or 3.5% while comparable-store sales declined 1.8%, due principally to the adverse weather in the Central and Eastern part of the Company. In our Western zone, where the weather was not a significant factor, comp sales increased by 2.4%.

Our Products & Services segment reported a $300,000 decrease in sales, reflecting the impact of the weather on our distribution customers, partially offset by a mid single-digit increase in sales of ACP. Our materials rate of 28.6% was 90 basis points lower than last year, due principally to a favorable mix of orthotics sales, which have a lower [economy], a slight increase in reimbursement rates and the impact of our materials management initiative, which includes a purchasing portal that is now live in all of our practices. This effort is helping us further concentrate our purchasing power.

Our effective tax rate for the quarter was 39.6%, which included a $240,000 out of period adjustment. Our core rate excluding that adjustment was 37.2%, which is slightly better than our expectations.

Moving on to the balance sheet and the cash flow, our Accounts Receivable balance was $183.5 million at March 31. DSOs were 64 days, which is one day better than Q4 but eight days higher than a year ago. CMS [audit]-related receivables increased to $17.1 million compared to $15.2 million at the end of the year and our success rate on appeal remained just under 90%.

Bad debt expense was 1.5% compared to 2.1% in the prior year. AR over 120 days has increased to $65 million compared to $51.6 million at the end of 2013.

The CMS audits have been a contributing factor but we have also seen a general slowdown in payments which have not yet significantly influenced our reserve calculations, but we are watching this very closely. Inventory was $154 million at 3/31/13. Inventory turns were 4.1 times, which are unchanged from a year ago.

Our CapEx for the quarter was $8.9 million compared to $5.4 million a year ago, which is $3.5 million higher than 2013. The increase was related principally to the expenditures related to the rollout of our billing and scheduling system in our clinics.

Cash flow provided by operating activities -- the Company reported a $10 million outflow of cash from operations for the three months ended March 31, 2014, compared to a $2.2 million cash inflow for the same period in the prior year. The $12.2 million swing in operating cash flow was driven by lower operating income and increased working capital requirements.

Moving on to liquidity, as of the end of the quarter the Company had $140 million in total liquidity including $56.6 million in cash, $84.4 million available under the revolving credit facility, net of approximately $112 million and borrowings of $3.6 million in letters of credit. The Company's leverage ratio is defined by its bank credit facilities with 2.99 times at the end of the quarter.

Now moving on to guidance, the Company has lowered its 2014 full-year adjusted diluted EPS guidance to a range of $2.01 to $2.11, which represents growth of between 3.1% and 8.2% over the prior year.

First, let me explain at a high level the reasons for the $0.09 change in the range of our guidance. There's really three components that we are looking at. In Q1, weather had a $0.04 impact on earnings that we do not expect to be able to recover over the balance of the year, given the length of the bad weather that we saw during the quarter. The late filing costs were approximately a $0.01 hit to EPS, and that was due to increased legal, printing and labor costs. And given the outcome of the delayed filing, we will be adding additional resources to its system in remediation of our control weaknesses in the bulk of our internal controls. That investment will cost us approximately $0.04 per share. Those three components make up a $0.09 change in our guidance range.

The Company expects to grow same center sales between 3% and 5% for the remainder of 2014. When we take into account the impact of the first-quarter results, that will give us growth for the full year of between 2% and 4%.

The Company also lowered 2014 full-year net sales guidance to a range of between $1.1 billion and $1.120 billion. That reflects -- moving on to cash flow, reflecting the lower earnings outlook and increased working capital requirements, the Company lowered its expectations on cash flow from operations to a range of between $80 million and $90 million.

The Company continues to anticipate acquiring O&P operations in 2014 with annualized sales of between $35 million and $45 million and we intend to invest between $40 million and $50 million in capital additions for the year.

That concludes my comments. I'm now going to turn the call back over to Vinit, our CEO.

Let me take the opportunity at this time to provide some color on our results. As mentioned earlier, our Patient Care segment was impacted by weather throughout the quarter. The effect on us was exacerbated by a couple of factors.

Almost 75% of our revenue is generated in the East and Central parts of the country in our business. Unfortunately, not only were the weather issues concentrated in this area but they persisted throughout the entire quarter.

In addition to the weather causing clinic closures, our referral sources were also affected. This in turn affected our ability to build up the patient pipeline or the WIP, as we refer to it, during the period. As we look at the WIP now, we are beginning to see it return to normal levels. If we isolate the Western part of the country, which was not affected by weather, our results came in right on what we anticipated.

Overall, despite the Q1 weather-related results, we remain confident in the fundamental patient flow of our core O&P business for the rest of the year. Turning our attention to the reimbursement environment that we referenced in our press release last night, we continued to see Medicare audit activity increase. While the volume of RAC audits has slowed down for the time being, we have experienced an increase in the number of Medicare prepayment audits across all Medicare regions. With the increased prepayment audit activity, the time from claims submission to the initial payment is often significantly increased.

I should also mention that prepayment audits target high dollar claims, which affect our AR more than we have seen the past.

Most significantly, the time to final adjudication of all Medicare audits has increased with the recent moratorium on ALJ case assignment. With the appeals process for RAC claims being stretched to several years in some cases, time of payment averages continue to draw out our accounts receivable.

Lastly, on reimbursement, just a reminder that this Q1 did not have sequestration in its prior-year comp and that this is the last quarter without any prior-year comp and sequestration, as it now begins to lap starting in Q2.

Switching gears to our O&P acquisition activity, it remains right on track as we see a continued healthy pipeline of independent O&P providers that are interested in selling their businesses to us.

As in the past, we are carefully scrutinizing these opportunities to ensure we acquire businesses that are healthy, have a good record of regulatory and reimbursement compliance and are a good cultural fit. We expect to close approximately $35 million to $45 million of annual revenues in acquisitions is year. With regards to our Dosteon business, we continue to improve work on improving business practices and have implemented organizational and process changes to bring this business back to a healthy state by the end of Q2. As mentioned before, if we are not satisfied with the results and outlook at that time we will take additional actions.

Our Janus Clinic Management System implementation continues to go as planned. We are pleased with the continued rollout and associated training events that our teams are going through as part of these implementation. We also remain on track to be live in approximately 300 sites by the end of this year.

Our efforts on the materials management and purchasing initiative continue to progress very well and we are beginning to see the positive signs of its impact on our cost of materials line.

As George mentioned, during Q1 we reported a year-over-year improvement in our materials rate of 90 basis points, which in part came from our efforts in this area.

With regards to our network management business, Linkia, we continue to be pleased with their progress. Our relationship with United Healthcare continues to develop as we had announced last quarter. While still very early in the partnership, we are seeing progress on three (technical difficulty) UHC controller out of network spend; second, rightsizing local O&P networks; and, third, collaborating with our clinical staff on O&P education and policy.

Separately I should mention that we have been getting increased inquiries from several Blues organizations about constructing narrow networks in the O&P space. While we have anticipated the need for narrow networks and created our network management team for this eventuality, we are pleased to see these additional inbound inquiries coming in.

Switching gears to our Products & Services segment, we were pleased to see the segment meet our expectations for the quarter. Both our SBS distribution and rehab solutions businesses performed well. While there was weather-related impact on our distribution business due to warehouse closures and destruction, our ACP rehab solutions results offset some of the impact.

Our distribution business continues to feel the pressure of the independent O&P community and how they are dealing with the reimbursement environment I have talked about earlier. It is are not easy being an independent O&P provider, especially if they don't have access to or they have not invested in regulatory or reimbursement experts these days.

Now let me switch gears and talk about the accounting and financial reporting issues we have had over the last year or so. As I mentioned earlier, we are glad to have finally filed our 2013 10-K and also glad to have received the already mentioned communications with the SEC enforcement staff that its investigation is concluded. Nevertheless, we are taking issues underlying these matters extremely seriously.

Since the filing of the 10-K we have taken the time to reflect and be brief on our internal controls processes and, as result, made the decision to make additional investments in this area. Our investments will include permanent additions to our staff in a number of areas and we have engaged external accounting control experts to help us remediate our material weaknesses.

In addition, to ensure continuity on the finance leadership front we have engaged an executive search firm to assist us in identifying experienced a CFO successor for George as well as an experienced Chief Accounting Officer.

In summary, 2014 will be a year of significant investments in Janus, revenue cycle management, purchasing initiative and our control environments. While these investments will impact our earnings in the short term, they will make us stronger in the future as we continue to grow our business. Despite these investments and the impact of the severe weather in the first quarter, we anticipate growth in revenue and earnings for the full year.

The fundamentals of our O&P business also remain strong when we look at our patient flow combined with our acquisition results and pipeline. We continue to monitor and adapt to the changing reimbursement environment driven by the volume of Medicare audits and delayed appeals processes.

Despite these challenges our cash flow remains fundamentally strong at $80 million to $90 million of expected annual operating cash again this year, reflecting the strength of our fundamentals.

This cash flow will more than cover our needs to fund O&P acquisitions, capital expenditures and debt reduction.

That concludes my prepared remarks. Operator, please, can you open the call for questions?

(Operator Instructions) Dave MacDonald.

Just a couple of questions -- one, Vinit, I was wondering if you could just give a little more detail on the WalkAide in terms of what this follow-up meeting means. And then if you assume that it does not move forward, I would assume that there is a potential commercial strategy here where may be you cut the price and you go direct to patients. What are some of the thoughts around that?

Sure. Let me start in the first part of your question with regards to the letter we received.

Over the last year or so, we have been in communication with the team under the head of the CMS Coverage Analysis Group. And we made our submission based on that.

Now we are dealing with an interim head or acting head of CMS Coverage Analysis Group so we want to make sure we go back to this person and the team and taken through all the data that we submitted after discussions with them. But what this clearly reflects is the journey we been on for the last eight years or so or nine years of the WalkAide.

The rules do change and we just have to adapt to the changing environment. In terms of the additional data we had submitted as part of our official submission back in December, the six-month follow-up for the INSTRIDE trial in the patients.

Now clearly, time is of the essence then and we now also have 12 months data. So depending on what they mean by insufficient data, we're going to go in and talk to them about our 12-month data that we already have and see where the discussion goes.

So that's, in a sense, the summary of the discussions we are planning on having with CMS -- again, with the acting head of the Coverage Analysis Group.

With regards to the commercial strategy, there's different options we can choose, depending on what happens. One is, we continue to sell the way we are and we get about $8 million or $9 million of revenue today for all the other indications of such as incomplete spinal cord injury and also through private pay. So one approach is to continue down that path. The other approach is certainly we would look at is maybe a price play, but we are not sure how successful that will be. But we want to take it one step at a time at this moment.

Okay, and can you guys just spend a quick moment on ACP? I didn't hear what the growth was in the quarter. And then also in that business, are you guys starting to see any traction success in terms of cross-selling it into other areas of postacute?

Yes. I am not sure if George mentioned it but we did see about a mid single-digit increase in ACP for the first quarter this year. It's pretty much right on track, maybe even slightly better than we had thought with the business. What's encouraging about the results is we are seeing a continued -- a stabilization within the customer base and also the increase is all in the least revenue piece of it, which is the more sustaining part of the business.

With regards to the cross-selling in other postacute areas, we're looking at ALS and other pieces. But right now there's still, we believe, more opportunity within the [SNF] area now that the SNF area seems to be stabilizing. We have not seen a lot of traction in the ALS because we haven't put a lot of focus on it. Our focus has been to stabilize the SNF piece over the last 12 months or so.

And just a last question on collections and deposit activity -- I assume there hasn't been any change to the win rate that you guys are seeing when you appeal to these clients?

That's correct. We are still seeing a win rate of just a shade under 90%. And there has been a build in the receivables, simply because there aren't very many claims that are getting settled at the other end of the equation.

Okay, thanks very much, guys.

Brian Tanquilut.

Back to the blockade, do you guys have any feedback on how [Vitas] did with their trial in terms of how CMS is reacting to that?

We don't have any information on how CMS is reacting to their trial. As you know, they are not public, so we don't get much information in the public domain. We believe their trial results cannot really be compared to our trial results because they are slightly different in terms of the design of the trial. So not much information there, Brian, unfortunately.

Okay, got it. And as relates to your comments on reimbursement, so it seems to me like the reimbursement issues you are facing right now are all delay and AR, but it's not like you are seeing incremental rate cuts when you talk about reimbursement headwinds.

That's correct, Brian. That's why I wanted to provide more color in the commentary about exactly that. We are not seeing any rate cuts, on the reimbursement front.

In fact, in Q1 our rates were up slightly. So we saw a -- and when you consider the fact that we still had one quarter left of sequestration to absorb, that's a good result.

And also just to be a little more transparent about reimbursement, overall we are not seeing or sensing rate cuts. But individually every once in a while we will get a [cut] in a certain product category or something in off-the-shelf orthotics, which doesn't really affect the overall rate when we look at our rates on the macro level. I just want to be clear on that.

And that's a good point and to that last point, are you seeing any scrutiny on the higher-tech items at this point, meaning the microprocessor needs? Is there more pressure in that? Or the flipside of the question is, are we seeing more share shift to you guys because the smaller guys are not doing much of the high dollar items?

To the first part of it, we are not seeing rate cuts or rate cuts on the higher priced items. We are certainly seeing more scrutiny in the sense it takes longer to get authorizations from payers for the higher ticket items. We have to provide a little more documentation or answer more questions. We are certainly seeing that piece but we are not seeing rate cuts in the higher ticket items for the most part.

And then in terms of share I imagine we are, but right now it's difficult to really measure how much or what amount of share is coming over because we really -- our mantra to our clinicians is you got to make sure you fit the right device for the right patient. And if we do get audited, whether it's a prepay or a RAC, we are going to appeal it because we have the confidence in our own paperwork.

So that's our position but it's hard to see if we are actually getting a lot of share, especially with the noise in the first quarter with weather. The data gets all garbled.

Last question for me -- so, as we think about O&P services, it is a necessary service. If people did not go to your clinics in Q1 because of the weather aren't we supposed to expect that at some point they're going to show back up in your clinics?

A great question, Brian. Obviously, we had this discussion with our teams here over the last few months. You got to look at it a couple of ways.

First off, throughout the first quarter we had weather. And typically what would happen is, if we had weather in January we would build up the WIP or the patient flow in February or March so we could start treating those patients in the second or the third quarter. Because it does take a while to build a device, et cetera.

But in this case we just lost a lot of time in the first quarter because the weather persisted literally all the way to the last day of the quarter. So we are in the process now of building up the WIP around the business in the product portfolio. So that pushes everything out by almost a full quarter in terms of building up the patient flow.

The second piece I think we should be cognizant of is half our revenues is prosthetics and half our revenues are orthotics. Now, in orthotics you have a certain segment of patients that may be sports injuries or need a splint or a crutch, et cetera. Those patients probably just either got over the injury because they didn't get in to see us in time, or they may have gone elsewhere online or to CVS to pick up some of the products and tried to self-treat themselves, in a way.

So those are the two issues why we wouldn't see a lot of the revenues come back.

Got it. Thanks, guys.

Larry Solow.

Just to clarify a couple things. The $0.04 impact from weather -- I'm assuming that's the additional impact from, I guess, mid-February or from when you gave guidance? Or is that a year-over-year impact?

You are correct. It is the additional impact over and above what we expected when we were talking to you in the middle of February.

So can you quantify like the 800 missed days? I would imagine that's more than $0.04 and maybe even more than -- is that fair to say?

Some of the missed days happen in the first half. But we certainly had many more days where we were closed than we expected in the second half. And we figured that added up to about $6 million in sales, which was the $0.04 impact.

You also have to think about the month of March is typically where we close out a lot of the patients in terms of providing the actual devices. We build up the WIP in January and February. We close out the patients in March.

Typically, if you have weather adjust in January -- we expect to pick it up in March. But in this case we went all the way through March, so it's really what hit us.

So it sounds like you are getting pushed out a full quarter, almost, or half a quarter. Or what have you.

Okay, couple of questions on the cost side. So the increased cost for financial infrastructure, back office stuff, for controls -- is that -- it's about, it looks like $0.25 now on a full-year basis year over year. Two questions to that.

Going forward, is that a sustainable level? Does that go up? Is some of it one time? And part B, is most of that going into I guess is it mix [15] personnel cost and your cost of goods and then other operating expenses?

About $0.19 of that cost was anticipated in the original budget that we gave guidance in the beginning of the year and $0.05 is new, a penny being what we spent on the K, which will not reoccur. Some of that cost will be one-time. It's not a significant amount of that.

Now, remember, a big part of the $0.19 was the revenue cycle management that we are staffing. We had to staff ahead of the savings that we anticipate. And that cost is all going to be part of our structure going forward. But we do anticipate savings going into 2015 and we do anticipate that some of those costs will be one-time in nature.

But frankly, we need to see a little more of the outcome of the work we are doing right now before we can opine on that.

This is Russell. I'll add one thing. All the investments we are making, new investments we are making, in the back half of this year are not necessarily accounting. They are investments in our inventory processes which led to our material weaknesses, a different type of skill set in investment there.

Just a couple more quickies -- debt went up sequentially about $50 million. I realize it usually goes up Q1 over Q4 but it looks like it went up a little bit more and it seems to be driven by working capital requirements and higher receivables.

Is this something that will unwind itself through the year or not necessarily?

There's one more piece that you missed there, Larry. We closed about $20 million in acquisitions in the first quarter.

Got it, okay. So that was the primary culprit, then?

That's a fair amount of cash flow going out the door, so we don't expect that to -- well, if it does reoccur, I will be pretty happy, honestly, because it's a great investment for us.

Just lastly, on WalkAide, just remind me -- the CMS -- didn't you guys work very closely with them, so they essentially set the parameters and the guidelines for this trial. Is that correct?

Kind of. They don't set the parameters. Typically, we set the parameters and the guidelines and we have had numerous discussions with them about the guidelines, the trial design, et cetera, throughout the process. That's correct.

Because I remember going back we thought -- at least the impression I had was this trial meets its endpoints and these guys have already signed off on it; it should be -- it's never a formality with the government. So it seems like the insufficient data -- either they are saying that your analysis is incorrect or it wasn't done correctly. So it just kind of makes me think.

And then on that point, why do an equivocal study? Why not do a study which shows your product is better if you are trying to get reimbursement, you are trying to show economic incentive? To show that it's just equivocal -- I could see maybe for just a regular approval, a much lower hurdle rate. But to me it seems like a waste of so many years of time if you are just going to prove that it's worth -- a piece of equipment that cost $100 versus a $5,000 piece of equipment.

First off, I think the environment is -- the letter is a reflection of environment, the change in rules, et cetera. But the trial design really was -- the primary endpoint was equivalence to [gate] philosophy, which is how far you speak it, how far you walk. If the data came in superior, then that's what we would have shown. It doesn't stop us from showing superior data. It's just the endpoint for the trial.

Okay, fair enough. Thanks.

Mike Petusky.

George, it sounded like you gave how much revenue you had acquired so far today, or maybe that got garbled. Did you guys just say that you had acquired something like $20 million in M&A, or did I totally not hear that right?

Yes. We made a release, actually, in January and disclosed that we had acquired about $20 million in revenue.

Okay, but nothing since then? Since that release, it's nothing incremental since then, even after the quarter?

This is Russell. We have made acquisitions since then. We haven't given an update on the run rate to date. But we did reaffirm our full-year guidance in that $35 million to $45 million range. We are seeing a little bit more acceleration early in the year of that $35 million to $45 million.

But, although that will bring some revenue closer in, it doesn't bring a lot of EBITDA early on, in the earlier stages, due to the integration costs.

If you think about our acquisition history in the past, typically it is the second half of the year where we see most of that activity.

Right. But it sounds like this year you are making a bigger effort to get it, at least the lion's share of it, earlier. Is that a fair point?

No. If you think about the acquisitions we closed in January, most of them were because of the efforts of the second half of last year that filtered over into January. The environment is obviously better in terms of sellers being more open to selling, so the pipeline is full. But typically, the second half is when we normally see most of our activity.

All right. So then to me, it sounds like this $35 million to $45 million of acquired revenue, if you are including the initial $20 million or so in that, maybe there's a reasonable chance you can exceed that as you finish up the year?

Yes. Anything is possible but we want to reaffirm the guidance, to $35 million to $45 million because remember, typically in a year if we have $20 million in revenues, say if you do $5 million in the first half and $15 million in the second, there's still some in the first half that do occur.

So at this point I just want to reiterate our guidance of $35 million to $45 million in acquisitions.

And if you could give an -- did you guys give an actual comp on Linkia for the quarter versus same period last year?

No, we didn't. I think it was somewhere in the 8% growth range. We can verify it and come back to you.

Okay. And the only other question I had is when specifically is that discussion or meeting happening with CMS, around where you are going to share the 12-month data, etc.?

We have just got an agreement within that will set it up so we haven't set it up yet. We were gathering the 12-month data. We are going to make sure it's tabulated well. We are going to try and get that and then set it up. So maybe in the next two or three months is my guess.

Right, that's all I got. Thanks.

Dana Hambly, Stephens.

Just on the same-store growth, I appreciate that the weather impacted through the end of the quarter that you are building again and that the WIP is where you want it to be now. But are we going to still see maybe at the lower end in the second quarter and that progresses throughout the year? Or do you think we can get back to that 3% to 5% in the second quarter?

Well, we do believe that we will get that to the 3% -- the 5% range for the remainder of the year. As you know, we don't give quarterly guidance. But based on that, we believe we are going to get to that 2% to 4% for the full year.

You mentioned Dosteon too, that you are hoping to have it -- I don't know if fixed is the right word, but back to stable by the end of second quarter. Was there any drag actually in the first quarter from Dosteon?

There was drag, but we had baked into our guidance because we knew about the issue back when we gave the guidance.

Okay, so that was already in there. That's helpful. And just on the commercial reimbursement, you are seeing some more pressure on preauthorization, little longer to collect. Is it widespread across the different payers or are you seeing it isolated to a few different big payers? Any color on that?

It's pretty much across the board in Medicare and commercial payers. We are seeing it across the board.

The Medicare has been going on for a while. Has the commercial really just creeped up here in the past four or five months or maybe the last 12 months?

I'd say it is been creeping up slowly, not as fast as Medicare, in the last 12 months.

And just last one from me -- I saw the Blues plan in Michigan, I think, announced that they are going to start rejecting any demi post claims for O&P, where they are not from a certified O&P provider.

One, have you seen that? Two, are you seeing that from any of the other commercial payers? And how does that help you guys out longer term?

That's something we have been pushing, anyway, to make sure that certified clinicians are actually providing the care. In the state of Michigan we don't have a huge market share so it will help us a little bit but not a lot at this point. And typically, some of the other states will likely go there but that's the piece we are pushing across the country. We haven't seen widespread use of that approach. There are only 14 or 15 states that are looking at it.

Okay. Do you think longer term would that help out on some of these reimbursement issues? Is this a huge black eye for the industry?

I don't think so. It's probably better for the industry where you have certified providers providing the care. So I wouldn't say it's a black eye. It's something, again, the industry has been pushing.

I'm just saying, is it a black eye currently, where you have a lot of noncertified folks billing for O&P?

I think that's less on the O&P side. Demi post is DME and O&P. It's more on the DME side, where this is creating a lot of unrest. And I think the black eye is more on the DME side than the O&P side currently.

That's it for me. Thanks.

There are no further questions at this time.

Great. Well, thank you all for joining the first-quarter call and we will speak to you all in the month of July as we close out the second quarter. Thanks very much.

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.