Amedisys Inc
NASDAQ:AMED
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Amedisys Inc
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Greetings, and welcome to Amedisys First Quarter 2020 Earnings Conference Call. [Operator Instructions]. Please note, this conference call is being recorded.
It is now my pleasure to turn the conference over to your host, Nick Muscato. Thank you, you may begin.
Thank you, operator, and welcome to the Amedisys investor conference call to discuss the results of the first quarter ended March 31, 2020. A copy of our press release, supplemental slides and related Form 8-K filing with the SEC are available on the Investor Relations page of our website. Speaking on today's call from Amedisys will be Paul Kusserow President and Chief Executive Officer; and Scott Ginn, Chief Financial Officer. Also joining us is Chris Gerard, Chief Operating Officer; and Dave Kemmerly, Chief Legal and Government Affairs Officer.
Before we get started with our call, I would like to remind everyone that statements made on this conference call today may constitute 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. The company assumes no obligation to update information provided on this call to reflect subsequent events other than as required under applicable securities laws.
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.
In addition, as required by SEC Regulation G, a reconciliation of any non-GAAP measure mentioned during our call today to the most comparable GAAP measures will also be available in our forms 10-K, 10-Q and 8-K. Thank you. And now I'll turn the call over to Amedisys' CEO, Paul Kusserow.
Thanks, Nick, and welcome to the Amedisys First Quarter 2020 Earnings Call. Before we get started, now more than ever, I want to give a heartfelt thank you to our caregivers, our heroes, who, without hesitation, care for the most frail and vulnerable patients in the country. Including those with COVID-19. The dedication and courage of our incredible people highlights our unwavering commitment to our mission of caring for patients in their homes and shows that not even a pandemic will come between us and delivering the highest quality of care to our patients. I'm truly proud and amazed by each and every one of you. And once again, thank you from the bottom of my heart.
These are unprecedented times for our country and for our company. And as such, we will structure our prepared remarks differently than in the past.
During this call, Scott Ginn and I will covering the -- will be covering the following: our performance in Q1 where we bested our internal expectations and exceeded our performance measures in the early stages of PDGM. COVID-19 has been the focus of many questions, but I do not want to lose sight of the fact that we performed very well in Q1 and in the early stages of implementation of PDGM, which is now the Medicare payment structure, by which we all operate and which was our biggest 2020 initiative.
Secondly, COVID-19, for now, our new world and how it has impacted our business, beginning the second week of March and trends we are seeing through April, which are turning positive along with what we are doing for our patients and employees. And finally, what has changed on the regulatory and legislative fronts.
Third, post-COVID, how we will recover, what we're doing to finish the second half of 2020 strong and position ourselves for a great 2021 and why the future value proposition of all our business lines and company remains, and will be bolstered by the events of the past few months.
Finally, our Aseracare acquisition, which we signed in April and further demonstrates our ability to continue to execute against our hospice inorganic growth strategy.
Now I'm going to turn it over to Scott, who will run us through our Q1 performance and the COVID-19 impact on our businesses. Scott?
Thanks, Paul. I'm very pleased with both our Q1 results, which exceeded our internal expectations and our progress on PDGM implementation, which we made more challenging by COVID-19. For this call, I'll start off by reviewing our financial performance for the quarter and discuss our progress on PDGM. I'll then hand it back to Paul, who will conclude with the impact of COVID-19 on our business, trends we're seeing through April and for discussion of the rest of the year, what we are focusing on and what to expect.
For the first quarter on a GAAP basis, we delivered net income of $0.96 per diluted share or $492 million in revenue. An increase of $24 million or 5% compared to 2019. Our results were impacted by income or expense items adjusting our GAAP results that we have characterized as noncore, temporary or onetime in nature.
Slide 15 of our supplemental slides provides detail regarding these items and the income statement line items each adjustment impacts. For the quarter, on an adjusted basis, our results were as follows: revenue grew $24 million or 5% to $492 million. EBITDA decreased $1.6 million or 3% to $53 million. EBITDA as a percentage of revenue decreased 90 basis points and EPS decreased $0.06 to $1.05 per share.
As highlighted in my Q4 2019 comments, there were several items that would impact our progression from Q4 2019 to Q1 2020 as compared to prior year. Those items totaled $10 million and included an increase in reimbursement in Q1 of 2019 for both segments, totaling $5 million, the addition of CCH on February 1 and the benefit of nonrecurring fleet gains. Additional items impacting our Q1 2020 performance are as follows: PDGM rate impact was a headwind of approximately $6 million and COVID-19 impacted Q1 revenue by approximately $7 million. These impacts were offset by $11 million sequential reduction in health and workers' compensation, driven by the seasonality of health insurance claims and reductions in utilization and a continued shift in clinical staffing mix.
From a financial performance perspective, we began 2020 focused on growth across all segments, successfully implementing PDGM and reaching our 2 years -- our year 2 CCH EBITDA target. COVID-19 impacted our performance in all 3 of these measures.
Turning to our key cost metrics for Q1. Home health costs of visit increased 3.9% over prior year. The increase was driven by 2% related to raises, 2.5% as a result of the impact of lower volumes on fixed costs and pay practice changes, offset by a 60-basis-point reduction related to a shift in clinician staffing mix. Hospice costs per day increased 2.6%. The increase is driven by higher cost per day on our acquisitions as our legacy cost per day is down despite raises in August of 2019.
G&A is up 170 basis points or $15.3 million over the prior year. The increase is driven by $8 million related to acquisitions, the addition of 86 BD FTE since Q1 of 2019, annual raises and additional resources to support our growing hospice segment.
I want to provide a little more color on our PDGM observations. As we have previously disclosed, our PDGM impact was estimated to be 2.8% for the full year of 2020. Our 2020 strategy was focused on behavioral changes on the revenue side and cost reductions to mitigate the impact of the 2.8% reduction in reimbursement. Our revenue per episode was down approximately 4% from prior year. Keep in mind that this stat reflects episodes completed during the first quarter, which means that slightly over 50% of these episodes were in progress at 12/31, thus completed under pre-PDGM reimbursement. These episodes accounted for approximately 1% of our year-over-year decline in revenue per episode.
March was to be our first month to provide a full view of our PDGM progress to date. While we saw promising signs in our episodes in progress in March, the impact of COVID-19 ultimately led to increased LUPAs and lost billing periods in this population. The full impact of this will be seen in our Q2 completed stats. We remain confident that we can achieve our target improvements to mitigate the impact of behavioral assumptions once COVID-19 subsides.
Our 2 main areas of focus on the cost side are clinical staffing mix and utilization. We have made excellent progress to date in both measures.
On clinical staffing, we ended the quarter with a 45% LPN utilization, up from 39.2% in the first quarter of 2019 and a 46.3% PTA utilization, up from 42.1% in the first quarter of 2019. We're very pleased with the progress we're making here and are on track to achieve 50% LPN and PTA utilization by fourth quarter 2020. Keep in mind that every 1% shift in utilization equates to approximately $450,000 of cost savings.
On utilization, we ended the first quarter at 15.8 visits per episode, which is down 1.4 visits from Q1 2019 and one visit from Q4 2019. Some of the VPE decrease was driven by increased missed visits beginning in the second week of March and increasing through the remainder of the month. We have previously highlighted the rollout of the Medalogix care product as part of our PDGM strategy. As of today, we have 153 care centers on Care. However, we decided to pause the Care implementation due to COVID-19. We expect that once we resume the rollout, we should complete implementation within 12 to 13 weeks.
Another bright spot in PDGM has been our cash flow performance. We generated cash flow from operations of $6 million for the quarter, meeting our internal modeling by nearly $20 million. The majority of this outperformance was driven by DSO, which were 46.6 days during the quarter, up approximately 6 days from Q4 2019 with over 7 days below our original projection. We expect to see a 2- to 3-day increase in Q2 as some of the Q1 benefit is related to collections on accounts receivable as of 12/31. I'm very pleased with our cash flow performance, and we will update you with the new cash flow projection after the second quarter.
I want to add some additional color around the Aseracare acquisition from a liquidity perspective. While we do expect to see some increases in DSOs related to PDGM in Q2, our balance sheet remains strong as we currently have total liquidity of $478 million as of March 31, with a net leverage ratio of 1.0x. On a pro forma basis, Aseracare deal will reduce our liquidity to $225 million and move our leverage to 2.1x. We are very comfortable operating at that level based on historical cash generation.
Finally, in April, CMS released the full year 2021 proposed hospice rule, which comprised of a 3% market basket update offset by a 40-basis-point productivity adjusted for net proposed rate update of 2.6%. CMS also proposed increasing the capital amount by 2.6%. We expect our impact to be in line with the 2.6% rate update. Though this is a proposed rule and not yet finalized, positive rate updates in hospice are increasingly impactful to our business as we continue to grow hospice both organically and inorganically.
Now I'll turn the call back over to Paul for discussion around COVID-19's impact on our business, what we are doing for our patients and employees and our recovery plans. Paul?
Thanks, Scott. I'd like to segment my remarks into a few sections: First, the effect of COVID-19 on our business; second, our response for our patients and employees; third, legislative and regulatory developments; fourth, our recovery plans; and fifth, the Aseracare acquisition and hospice inorganic growth strategy.
Now turning to COVID-19's impact on Q1 and our April trends. Heading into March, we are pleased with our growth performance in both home health and hospice. As of March 13, our projected first quarter 2020 total home health admissions forecast was 6.2%. Our first signs of the COVID-19 impact began in the second week of March, as we experienced an increase in missed visits and declines in referral volumes.
As outlined on Slide 18 of our supplemental slide deck, all 3 lines of business witnessed similar trends. However, the disruption was greater in Home Health, which included a referral low point, the week of April 5. Since that time, we have seen a steady recovery in referral volumes in all lines of businesses and a corresponding drop in missed visits.
In hospice, referrals hit their low point, the week of March 22, while hospice admit volumes have significantly improved, the slowdown in March will impact legacy and CCH ADC early in Q2, but should recover as our admit volumes continue to ramp up.
On the cost side during the quarter, we had approximately $1 million in increased costs related to COVID-19, including increased training expense of approximately $600,000, and quarantine pay of approximately $200,000 and increased cost related to PPE, primarily mass of approximately $200,000. And noting that we are paying nearly 5x more for PPE than pre-COVID-19 prices. These items have been added back to arrive at our adjusted EBITDA. We have spent significant effort in dollars to ensure that we will have the necessary PPE to protect our patients and clinicians.
Q2 will see a significant impact in both the quantity of PPE purchased as well as an increase in cost per unit. As our current trends illustrate, we are seeing promising signs of volume recovery. However, it's too early to predict the pace of recovery. There are numerous unknown factors, including the continued increase or decrease in the number of COVID-19 cases nationwide; the pace at which elective procedures began and return to normal levels; the return of patient confidence to enter a hospital or a doctor's office;access to our patients in homes and facilities, particularly SNFs and ALFs; cost normalization around PPE and finally, any future or prolonged shelter-in-place orders.
Let's talk about our employees and patients. Employees, always our most important asset, and patients and their families, our most important commitment have been at the forefront of our decision-making during this pandemic. In order to ensure the safety of our employees and patients in the field, we have made the following protocol changes. We've implemented a new clinical protocol requiring all clinicians to wear a surgical ear loop mask at a minimum on all visits performed.
We've developed a COVID-19 positive patient treatment protocol and subsequent PPE policy for clinicians treating COVID-19 symptomatic and positive patients that includes utilizing N95 masks, gloves, gowns and face shields and also requires surgical mass to be worn by the patient. We have continued to find success in utilizing both traditional and nontraditional suppliers for our PPE needs. As a result, we have sourced enough PPE and to have 4 months of surgical masks, 6 months of N95 masks, 1 month of gowns with another 2 months of gowns coming. And for all other critical PPE, we have an average of 3 months of inventory on hand and will be continuing to source aggressively.
We've also created a centralized distribution center for all critical PPE, allowing us to flex our inventory on a care center by care center basis, depending on need and demand. Lastly, we've established a rapid response care center cleaning and sanitization network, allowing us to fully sterilize any care center within 24 hours of an employee exposure on an employee who's showing COVID-19 symptoms.
I'd like to take a minute to thank all of our supply chain management, and procurement teams that have worked tirelessly to get us into this position. This has been an extraordinary accomplishment. And it's because of your continued efforts that we are able to arm our clinicians with everything they need to stay healthy and safe while delivering the highest quality care.
On the legislative and regulatory relief front, between the CARES Act, the Paycheck Protection Program and Health Care Enhancement Act, CMS 1135 waivers, the CMS interim final rule and CMS guidance, much has changed almost daily over the past 8 weeks. Here are some of the highlights that directly impact our business.
First, the Provider Relief Fund. As previously disclosed, we received a cash payment of approximately $100 million from the Provider Relief Fund appropriated by Congress to the Department of Health and Human Services in the CARES Act. Our receipt of this cash payment was part of the first $30 billion in funds distributed to health care providers. Consistent with the terms and conditions for the receipt of the payment from HHS, we will utilize the funds to replace lost revenue and health care costs related to COVID-19. And we will properly and fully document the use of these funds in a required quarterly reports to HHS.
In order to properly attest to the receipt of our payment, we, like our colleagues throughout the entire health industry, are seeking clarity from HHS regarding the formula utilized to determine our receipt of the funds and the total amount of funds available to be used towards lost revenue and health care expenses related to COVID-19.
Based on the conversations, our trade organization, NAHC, and others, on our behalf, have had with HHS leadership, we expect written clarification in the coming days on the formula and the distribution of funds. At this time, we have fully segregated these funds into their own account and we will not be utilizing any of them until final written guidance is received from HHS. Again, we expect this guidance to be coming shortly.
Finally, on April 24, 2020, HHS distributed an additional $20 billion in funds to health care providers from the Provider Relief Fund. We did not receive nor apply for any additional funds from the second distribution from the Provider Relief Fund.
Secondly, we have a sequestration holiday, the suspension of the 2% sequestration from May 1 through December 31, 2020, will impact Amedisys' revenue favorably by approximately $20 million. Next is the advanced accelerated payment program in which CMS was authorized to provide Medicare providers and suppliers loans of up to 100% of Medicare payments for a 3-month period. However, we decided not to apply for the accelerated payments, primarily because we do not need the funds, nor is our cash balance seriously impaired.
Next, payroll tax deferral. The CARES Act allows employers and self-employed individuals to defer payment of the employer share of the social security tax they otherwise are responsible for paying in 2020 effective for payments due after the fact of enactment. All in all, this amounts to an approximately $50 million cash impact for Amedisys.
Nonphysician practitioners, nurse practitioners, physician assistance and certified nurse specialists may now certify eligibility for Home Health, order Home Health Services, establish and review plans of care and certify and recertify eligibility. This provision is something the industry has sought for a number of years legislatively and it creates an immediate new referral sources in those states where there has been similar state regulatory relaxations or waivers tied to the public health emergency.
Next, Telehealth. For Home Health, we are now able to provide Telehealth visits to our patients as long as it is part of a patient's care plan. However, there is still no reimbursement for Telehealth. And therefore, these visits do not count towards reaching Home Health LUPA thresholds.
Also, required face-to-face visits can be performed via Telehealth by a physician or nurse practitioner in Home Health and in hospice. Telehealth can now also be used for purposes of patient recertification for hospice. We are pleased with these provisions and we have started to utilize Telehealth when it is clinically appropriate for both our Home Health and hospice patients.
While nothing can take the place of hands-on care that our clinicians excel at providing, there are numerous benefits to utilizing Telehealth, including lessening of patient anxiety as no one has to physically enter their home, protecting both the patient and our clinicians, and a televisits also requires no PPE, which allows us to maximize the use of our current and future inventory.
This is not a comprehensive list of all that has come from the CARES Act and CMS Medicare waivers, however, it does capture the provisions that are potentially the most impactful to our businesses. I would like to take a moment to recognize and applaud the White House, HHS and CMS for their recognition of Home Health and hospice as integral parts in the delivery of care and is a meaningful part of the solution for our country to successfully navigate our way through this pandemic. We are also very grateful for the bipartisan support Congress continues to show to our nation's health care providers during this incredibly challenging moments in our nation's history.
Both the administration and Congress have moved with speed and thoughtfulness and we are hopeful that the implementation of many of these new policies last beyond the term of the public health emergency. As you can see, there's lots of moving pieces. Given all these factors, we have made a decision to suspend guidance until we have more definitive data that allows us to better model full year 2020 performance. Our hope is to update you with our new guidance range during our second quarter call.
Now let's discuss why our future remains so bright. The home has never played a more prominent role in everyone's daily life. It has become our office, our school our playground, our social circles and where we deliver and receive care. As our country starts to open up, some of these things may change. But what will remain is that the home is and always will be people's preference as a place to be cared for. More and more seniors selecting home to receive care only helps further solidify the compelling demographic trends that are currently a tailwind for our company.
Aside from the volume opportunity, demographic and consumer choice are driving, many of the changes implemented by CMS, and the White House could play an interesting role changing how care is delivered inside the home. Initiatives such as Telehealth, offer the opportunity for us to even further protect our clinicians and our patients all while delivering care even more efficiently and effectively.
Innovations, such as the use of virtual care centers and rapid adaptation of other collaboration and care managed technology will help us to optimize our cost structure and continue to evaluate delivery of quality care. The ability for nonphysician practitioners to certify the need for Home Health allows our BD staff to engage with an ever-expanding complement and alternative to doctors.
So what are we specifically doing now to recover our Census gap and finish the year strong, we have a two-pronged approach that will drive future growth and market share expansion. First, our rapid recovery strategy. We have rolled out focused area action plans created by our BD role VPs, AVPs and account executives and care transition coordinators, CTCs. We've put in place tailored call routing based on referral source segmentation, physician, hospital, long-term care, ambulatory surgery centers and other settings. We've continued hiring and onboarding BD FTEs during the slowdown. They're trained and ready to hit the streets. We've also developed patient and family-facing talking points for working through objections to Home Health and hospice out of fear of exposure.
And finally, we've leveraged the fact that we've been good citizens. And we have been open to taking COVID patients since day one. In fact, 166 of our Home Health care centers and 64 of our hospice care centers and all of our personal care center locations have treated COVID-19 patients during the pandemic. This has already resulted in new referral sources that were previously not sending us patients.
Our long-term market expansion strategy includes hiring of 2 SVPs of growth to lead our sales efforts in Home Health and hospice. Further leveraging our sales analytics capabilities, we continue to source Home Health, rescue opportunities. In fact, we have rescued a Home Health asset in Lee's Summit, Missouri at the end of 2019, a Home Health and personal care asset in Western Massachusetts during March of this year, a significant of need giving us access to 3 counties in Central and Eastern Kentucky, and we've also inked a deal for a JV with a university medical center in Lubbock, Texas.
Our businesses are seeing the signs of recovery. And when we are all on the other side of this public health emergency, Amedisys stands poised and prepared to take additional market share and further distinguish ourselves as leaders in our quest to deliver more and more care in the home.
Finally, I'd like to highlight and emphasize our recent signing of the Aseracare acquisition, which was announced on Monday, April 27. Aseracare is an extremely high-quality hospice asset that is in 14 states and operates 44 care centers with a census of approximately 2,100 and $117 million in revenue. This asset is a great addition to our portfolio. As noted in our press release, we signed a purchase agreement to acquire Aseracare for the purchase price of $235 million, and we will use the cash at hand at the time of close and funds from our revolving credit facility to fund the deal. None of the money we received as part of the CARES Act will be used to fund this transaction. We have followed Aseracare for a number of years and have always been impressed with the culture and the quality of their operations as well as their management. This, along with their complementary geographic footprint, makes our 2 organizations a great fit. We expect the deal to close in 30 days, but understand that COVID-19 impacts could extend the time to close. Once the deal does close, Amedisys will operate 190 hospice care centers in 35 states, while caring for an ADC of approximately 14,000 patients. We are very excited to sign this deal. And we are very much looking forward to welcoming all the Aseracare caregivers into the Amedisys family.
Since we developed our 3-pronged inorganic hospice strategy, which included larger hospice deals, tuck-ins and de novos, we have executed on each of these prongs. Larger hospice deals, including Compassionate Care Hospice, CCH, in 2019 and now Aseracare in early 2020. Hospice tuck-ins, including RoseRock in 2019 and Asana Hospice in 2020. Hospice de novos, of which, so far, we have launched 8.
In total, our inorganic hospice growth strategy accounts for the addition of over 6,000 ADC to our hospice business. I am very proud of the way we have executed against our hospice plan. We will now take some time to complete the integrations and to refine the operations of our newly acquired businesses and make everything one.
This will conclude our prepared remarks. Operator, please open up the line for questions.
[Operator Instructions] Our first question comes from Brian Tanquilut with Jefferies.
Paul, thanks for all that detail on your outlook. But I guess, the follow-up on that I was just wondering, how are you thinking about 2021 earnings power versus, let's just say, kind of like a pre-COVID baseline where you were looking at the outlook, say, in March -- early March of this year?
Yes. Thanks, Brian. We're feeling pretty good about it. I think, obviously, we're starting to -- we've come back very well in hospice. We're coming out pretty strongly in terms of Home Health. I think the key for us for the remainder of the year is to get in Q4 to a proper ADC level that pushes us to where we expect it to be this year. And I think we're in -- we have good sites to getting there. It's going to be a big lift, but we feel pretty confident we can get there. So most of our focus and most of our energy, some of the initiatives I talked about in terms of our hiring of BD, in terms of our quite considerable hiring, continuing hiring through the pandemic and onboarding in terms of BD. So we feel good about it. But I think the key is how fast -- what's the market going to look like? How fast is it going to pop back to 100%? Will it pop back to 100% of what it was pre-COVID. And what we are doing fundamentally is taking a conservative approach and understanding we're going to have to go out and steal share if it doesn't get back to 100% by Q4.
But we're feeling very good about it. We're feeling very good that we need to be teed up properly to roar into 2021. That's also assuming COVID 2.0 doesn't come in and shut things down temporarily again.
I appreciate that. And then I guess, shifting gears to Aseracare, it looks like a pretty good asset. Would you mind walking us through how you think about what you can do with that business and what the trend -- what the integration process would look like? And where the opportunities are and kind of like earnings power that we should be thinking about for 2021 and maybe 2022?
Yes. I think it's going to be, Paul, a similar trajectory that we talked about before when we did CCH, we're going to make sure we -- it's a really good, high-quality asset, very good culture, great quality scores, very nice geography in terms of complementary where we needed to be complementary and also adding on new territories. So we feel very good about that.
What you'll see is we're hoping to close on June 1. And then we're going to be, obviously, bringing them on to our instance of HomeCare HomeBase, they are already a HomeCare HomeBase company, which is very good for us, which should mean that disruption should be less. Then we're going to need to go in and add some sales folks to spur their growth. And so we believe the technical integration will go well. We'll probably need to make some investments in terms of over -- in terms of adding growth, people there. So we estimate we will get to some -- probably double the EBITDA again in the 2- to 3-year range, probably more towards the 3-year range. I don't know, Chris, would you have anything to add on that?
Not really, Paul. I think, again, just reiterating that there's a lot of similarities in their operating model that lines up well with ours. So some of the integration shocks should be much smoother relative to the CCH integration, them being on HomeCare HomeBase helps a lot, but there will still be that kind of integration disruption. We're going to be pretty methodical with it. And -- but we also -- it puts us in a lot of new markets, very little overlap. So our strategy lines up well just to go deeper in penetrating those markets to expand the margins over time. So feel good about it.
Our next question comes from Matt Larew with William Blair.
I wanted to ask a little bit about sort of the Home Health volume trends on both sides, both thinking about referrals and also patient call-offs. So on referrals, you, obviously, gave us the chart there on Slide 18. But could you just maybe give us a sense for what that's looked like in terms of institutional versus community, both on the downswing and then on the recovery. And in terms of missed visits, just breaking out what's been driven more by restricted visit policies from SNFs and ALFs versus patient-driven call-offs in the home?
Right. Chris, do you want to handle that?
Yes, sure. On the first side, on the volume on Home Health, what we saw was physician referrals dropped off earlier than hospital or facility referrals, but they both bottomed out in the same week. Physician referrals have rebounded faster than the hospital referrals as well, but the hospital referrals are also kind of coming up as well as we start to see some elective procedures to come out.
So all in all, I feel like it's -- the trend is staying consistent. The trajectory is in the right direction, and we're seeing referrals from all of our referral sources kind of by buckets started to come up.
One thing I would point out on referrals, I think, it's kind of interesting is that as we've moved through this, we picked up 600-ish unique new referral sources through some of our BD efforts. So we're not certain exactly what the upside potential is there, but we have a strategy around trying to cultivate those a little bit further and see if those are some new relationships that can build on our organic growth.
And as far as the patient objections and the facility relations as well, we saw late March, early April, kind of the biggest disruption around that. We have facilities that were pretty locked up that were concerned about outsiders coming in to take care of their patients. We saw that open up a little bit primarily with the SNFs related to hospice. And then the ALs and ILs are starting to open up as well. And then on the patient's objections on their homes, we're making good progress there as well in terms of them being comfortable with the PPE that our clinicians are donning when they come into the home to make sure that they're safe and our clinicians are safe. So that's trending -- these visits are trending down and access to facilities is trending up.
Okay. And then just a follow-up, this would be for Scott, just in terms of thinking about revenue per episode. Could you just give us an idea of pre-COVID, what did that look like? Just so we can get a sense for what the PDGM impact was versus perhaps a LUPA spike or change in episode mix as COVID onset and then also maybe give a sense for what it would look like in the second quarter now that the lingering episodes from December are out in the mix.
Right. So if you look, Matt, we're down about $104 year-over-year. And I would say about probably close to 70% of that was PDGM related, so about $70 of that. We had another roughly $20 related to episodes in progress over prior year that came in slightly below where we thought.
So that was kind of the bulk of it. We did have some COVID disruption and some other minor changes just in kind of our mix of the business. But that's what we saw. So we basically came in at that 4%, so I'd say, from a ex prior year numbers, we were somewhere in that -- close to 2.6%, 2.8%. So right on top of where we thought -- what we thought our model number was. So those early episodes were slightly below where our ending target would be, but we thought we were going to make that up into March, and that's where it got impacted where we see more LUPAs. And then lost building periods has really pulled that number back to some ones. And that's what you'll see more reflected because, as I said in my comments, that's a completed stat as those LUPAs ramp up. And if you think about right now, what a LUPA episode could look like, you're talking about that that's reimbursement, if it's in a billing period one, it's probably going to average somewhere around 400 billing period to somewhere around 200. So you can see as those numbers ramp up, that will pull back our revenue per episode.
So we expect some more disruption, especially in April and May because you'll still be seeing some of the effects of these on the back half of those episodes.
Our next question comes from Frank Morgan with RBC Capital Markets.
I guess staying on that topic around the LUPA rate. So you say that the negative effect of LUPA will carry over into the quarter. How much would -- as these new cases, say, like March and the later cases start coming in? I know you've talked about behavioral changes that would help on the revenue side, but do you -- it's just -- is the powerful effect of LUPA, just more than offset any positive effect of behavioral changes from a billing perspective under PDGM? That's my first question.
And then just secondly, on, it sounds like if things -- if we do have a 2.0 version as you used the term taking market share. I'm just curious, how you've been able to differentiate yourself. Is it all this investment in PPE? Are you doing things differently from anybody else in the marketplace that would increase the chances of driving that market share gain?
I'll answer the first one, I'm sorry, your second one, then I'm going to let Scott who is all things LUPA answer that. So I think what we've been just, in general, is good citizens. I think the idea that we've been taking a lot of COVID business, we've been -- our BD folks have actually been working very hard making sure that contacts are open and making sure that everybody knows we're available. We were very, very aggressive, as you've seen in terms of PPE. We overpaid for PPE initially. Hopefully, those prices will come down. But we're now ready, able, willing to go into homes when needed. And so we're -- that's a unique position against some of the moms and pops out there.
The other thing, as Chris mentioned, is clearly our business development folks have been widening the circle and we've been bringing in other folks who've basically heard of our reputation out there and saying, you guys are out there, you're working really hard. You're open to taking care of vulnerable people with COVID. So we'd like to sit down and talk with you.
So we think it's going to be -- we think just by being good citizens, by being prepared with PPE and by having great training for our employees about -- we've been really drilling everybody on a daily basis. And continuing to work our BD folks, which we've been increasing. So we're finding new ways to be aggressive and open the door. What that's going to mean from a pie perspective is our hope is the pie is back to where it needs to be in terms of where it was pre-COVID. The -- and remember that there's a congressional requirement that $18 billion is spent. So it's going to be very interesting to see at the end of this year, if there's $18 billion that will be spent here. And then what's the government going to do about that if actually the pie has shrunk.
But either way, we either have -- we have to take a bigger piece of the pie, and we're investing very, very strongly in that, and we'll be accountable for that on the second half of this year. We're -- we have to really drive our BD function now that we've built it up. So Scott, I'll turn it over to you on the LUPAs.
Yes, Frank. So just kind of making sure I touch on all your points there. But if you think about where we landed year-over-year, certainly well ahead on our cost metrics around responding to PDGM. So our visits per episode are down 1.4. If you think about that relative to, let's say, we do 75,000 episodes a quarter, you got roughly -- if you look at the variable piece, let's use $70, you're talking about a $70 million -- a $7 million good guy relative to the VPE.
If you think about mix, we're continuing to move that. We said it was roughly $450,000 for every 1-point move year-over-year. Combined LPN and PTA, it's basically a 10-point move, 5.8 on LPN and 4.2 on PTA. So there, you're looking on a quarter basis, another $1 million. So we're looking roughly $8 million on the cost side. [ It raise ] at that 2.8, that's probably somewhere around $6 million. So we're looking at a positive $2 million impact for us at this point. And that's what we're using a lot of our January starts because that's our first full view with what we think is the cleanest without the impact of COVID-19.
It will start to eat into that good guy, though. As you move down in the LUPA question you had, we moved more into that. As I said, the average cost and the reimbursement of LUPA is either 400 to 200, depending on what billing period you're in. So that will eat into that.
The metric though on visits are going to look better, though, right, because LUPAs are going to drive down my visits per episode, so you'll get an impact there. But it'll depending on how long this goes, it will certainly eat into that. But we're going into Q2, believing we're ahead about $2 million.
Got you. And maybe one final one, just on the financial side. You commented about your cash flow and how you thought that was better than budget, but it was definitely lower than like on a trailing 4- or 5-quarter basis. So was that all -- I see the changes in working capital, was that all just build up in AR? Or what was really driving that?
And on that subject, does all these government programs in terms of that opportunity to acquire because of PDGM, the opportunities, does that in any way change as a result of this government aid?
Yes, I'll start with the ARP. So looking at that, we knew it was going to impact because of the reduction of the ramp-down to 20%. So we expect it to get a hit there. So we actually probably thought it would be about 6 to 7 basis worse than we were really did well on cash collections off from what was kind of in our balance sheet as of 12/31. We think DSOs will move probably another 2 to 3 days. We're probably ahead of -- our internal number is about $20 million. So we feel great about our cash generation and are pleased.
I mean, $6 million is low. You look back at where we've been. We'll see what happens into Q2, but we're certainly on a good trajectory to have that number moving into more of a normalized run rate for us.
And then the second question is around -- and I know Paul has had a lot of thoughts on this. But around the impact and what this does. Certainly, they did throw everyone a lifeline to this. If you think about one of the big impacts we felt to be to our competitors was around the RAP eliminations. So going to 20% in 2020, going to 0 in 2021. And the ability for people to get advanced payments on that, that certainly will give them a lifetime, and now they got the additional dollars on the CARES Act. So I think in the near term, that will certainly be helpful. But long term, I think you're still going to see that. I think by the back half of the quarter when you have to pay some of this money back, I think it becomes problematic.
Yes, Frank. I mean, one of the things is that PDGM is the law of the land now. That's what we run by. What's happened with the most severe parts of PDGM is the industry has artificially been propped up through necessarily, obviously, in this crisis, but you're getting the sequestration, you're getting the payroll relief, payroll tax relief, you're getting AR relief, which was what the real teeth were in PDGM, they're now actually giving you 18 AR and they're giving it to you upfront. You owe it all back.
So I think what's going to happen is when all of this stops, which we assume will occur sometime in 2021, the impacts of PDGM will kick in. All these -- all the money will have to be returned. We're assuming that. And so I think there will be even more of a severe shakeout. My guess is if these -- if it follows this way this way, probably this time next year.
As you saw, we've done some rescues. These rescues were done before COVID. Everything's come off the list now in terms of the rescues. So this industry is being artificially held up. And we think at some point, it's going to go back to PDGM, and then it will be time to go back in and make some acquisitions.
Our next question comes from Matthew Gillmor with Baird.
I wanted to ask about the CARES funding, and it was probably for Scott, but I was just kind of curious from an accounting standpoint, how that would be treated? Will you be recognizing sort of all of the grant money in the second quarter or just the amount that you can document during that period that was impacted from lost revenue and costs? Just curious how you're thinking about that.
Yes, Matt, thanks. Good question. So we're looking at it kind of really as a deferred item. So we would take that number into the P&L as we had lost revenue or cost to justify that. So the simplest example is if you look at what we disclosed for the impact of March, $6.5 million on the revenue line. We had about $1 million from the cost side. So that's $7.5 million, we think we would move into the P&L.
Probably another income item type number, certainly not a revenue, it's really not revenue, but that's how we would pull that through. But we're going to be very careful with that and our -- we really needed some strong guidance on that and we're anxious to get some more information. We've got some questions out there around it. We certainly don't think we'll have to return it. But just the accounting for it. We got the dollars by tax ID number. So we're going to have to count more by it certainly by segment, so we have to go down to the tax ID number.
So it's all those things we got to get worked out in Q2 and looking for some more guidance on, but pretty comfortable with the overall treatment that it will be a deferred item. We'll be sitting on a balance sheet. And as we generate losses from a revenue perspective, and additional cost, we'll bring that in.
Our next question comes from Kevin Fischbeck with Bank of America.
I guess you talked about, I guess, some optimism, maybe is the right word for it, that maybe Q4 should get back to normal. Can you talk a little bit about the cost side? Because your guidance already kind of assumed a ramp of EBITDA as the year went on. I know the Medalogix rollout was going to be ramping up as the year went on. Do you think that the cost structure for Q4 should also be more or less where you wanted it to be? Or has COVID really meaningfully delayed the timing of that?
Yes. We're -- we came into the year with a PDGM prep assumption of being of staffing for some rescues. Those are going to be postponed. So we're taking serious looks at all cost items because the world is going to be different under PDGM. So we're -- we've been spending a lot of time looking at various cost structures and what are we going to have to do to optimize to get us to the right margin and EBITDA levels in Q4. I don't know, Scott or Chris, any additional comments on that?
This is Scott. I'll answer. If you go back and it's in our old guidance deck, what you probably don't have in front of you, but we had some items out there. We had additional spend on PDGM resources, which a lot of that was Medalogix, as we mentioned in our comments, we're delaying the rollout. So you'll see that. The timing of that may look different, but certainly something we want to roll out. We had another $4 million in de novos and not just because of COVID, but now that we have the Aseracare deal, we'll reevaluate that. So it's $9 million. So we'll look hard at our cost.But some of this, there is certain variable natures within our G&A, even from a travel perspective and all that, that will certainly come down. But as we get to Q4 and really want to get moving on an ADC recovery perspective, we're going to -- probably want to spend some money especially on the BD side to really get our numbers up as we move to 2021, which is really our year we've been most focused on as we've done all these things to be prepared for it.
One of the things that hasn't changed is our initial fact that 2020 is going to be a year of disruption. We've doubled that now. So clearly, it's a year of disruption. And then the key thing is how do we -- and we thought consolidation, I think consolidation is going to be delayed a year. So I think 2021 will be the year that we're still looking forward to get everything working together. And I still think that's going to occur. It's just we had double the disruption this year.
And then how do you think about the growth of the business during a recession? I guess there's a few things that we -- I'm thinking of, you might have more. But probably a positive impact on labor cost. I don't know how you think about whether there will be an impact on volumes at all. Obviously, senior populations should insulate you, but there may still be some. And then whether you would expect to see a shift towards Medicare Advantage during a recession and how that might impact you. So I guess, in general, net-net, how do you think about a recession impacting the growth of the company?
Yes, I think the way I look at it is, I think, again, we are just people, we have our assets, our people. And I think it will be very good in terms of turnover. I think it will be very good in terms of productivity. I think it will also give us an opportunity to bring in some top talent in places that have been more highly disruptive than us.
I mean, we're getting a lot of people who are quite interested from the SNF world, the ALF world, some of the other specialty surgery world. So I think we're going to be able to, particularly on the BD front to bring some people into to help us really drive that growth. So we're good there as well as on the clinical front, I think we'll be able to do that. So I feel, frankly, and with increasing Medicare Advantage, we've been growing our average contribution, we have a really good managed care team and that's been working very well.
We continue that and we're continuing, obviously, to take more and more risk, but we want to get paid better and better for it. So we're going to continue to drive the Medalogix tools that we have. We're going to continue to look at hospital readmissions, things like that, that really drive it. So but we do have to break out of the Medicare Advantage, 125 per visit versus 160. So that's what we're looking to do in the Medicare Advantage world. I don't know, Scott or Chris, do you have any ideas there?
No. Not much as Paul -- it's just that just related to the recession, I would say, the demand for services historically through recessions has not gone down or changed dramatically one way or the other for post-acute services. So I feel like we're still going to see that demand for the services. So it's really a function of our clinical capacity to be able to grow the business. Feel good about that.
I would say on the smaller part of our business, the PCL side, this is really where the corner does get turned in terms of access to lower-wage caregivers for the non-skilled side. So we expect to see some accelerated growth by just virtue of being able to recruit and retain these caregivers.
But Home Health hospice, post-acute care, has historically not been negatively impacted by a recession. And so for us, it's just an opportunity to, as Paul mentioned, kind of bolt-on or take on additional good quality staff as we grow into the future.
Our next question comes from A.J. Rice with Crédit Suisse.
Two quick questions, I guess, just maybe following up on that labor theme. You mentioned that your staffing ratios and what you were trying to do in the PDGM world moving more toward LPNs, PTAs. It sounds like you're on plan for that, maybe a little bit ahead. And does the current situation make more of those people available so that maybe you can accelerate that? Or is that not realistic?
No, that's a great question. We're way ahead. So Scott, you've got the percentages, right?
Yes, I do. Yes. So we're in -- we are way ahead. We're in great shape on that. I think significantly have -- year-over-year, it's been tremendous, and we're ahead of our internal numbers that we need to be. I think we want to be thoughtful on how, especially when you look at -- these are -- how we impact the people and the numbers over time and bleed that down to where we need to be. So I think we're pretty happy with schedule. I doubt that -- we kind of slowed down on Medalogix. We've got a lot of things going on right now as we evaluate staffing levels and make sure we're in the right place, we can take a look at it. But I think our pacing is probably appropriate for where we are now. Chris, I don't know if you have any other thoughts.
No. I think you're right. We're ahead of plan. We feel like we will actually hit kind of our targeted mix. We have to shift our caregiver mix as well, basically our employees as well. We've actually created some opportunity there, just -- we've created some movement there in terms of more LPNs and more PTAs on our staff. And then the next step would be as we're recruiting, making sure we're recruiting the right positions. But I'm happy with our execution so far, feel like we should be able to reach our goals.
Yes. And A.J., our LPNs -- our ratio is 45% and PTAs at 46.3%. So that's well ahead of where we anticipated. So we'll get to the 50-50 mark by the end of the year, maybe even surpass it. So we feel good about it.
Okay. And then my follow-up question, my other question would be around -- you've got this nice chart on Page 18 that shows the trend in missed Home Health visits coming down and peaking sort of like you said in the early -- late March, early April.
I guess it sounds like to me, as I hear you talk, there's 3 drivers between what's happened and what needs to turn around. One is seeing the referral source, for principally hospital discharges pick back up from elective procedures; getting patients comfortable with having the caregiver in the home again; and then you mentioned this increased referral sources both from clinicians and now can make referrals that couldn't before as well as using the virtual more.
Can you sort of talk about, in any way, what the driver of the improved trend is? Is any of those 3 buckets that you're particularly seeing a bit of a turn already and maybe talk about the staging of how those might come back? Patients getting comfortable if you have any view on that and how quick that can happen? And then I know a number of states are opening up elective procedures. I don't know what's your footprint is exactly on top of those states, but any thoughts about that?
Chris?
Yes. So I would say on the coming back on basically the rebound, patients comfortable with us being in the home, I would say, would be the driver number one as you can kind of see that evidence by the significant reduction in missed visits. So we track that on a daily basis, and we're seeing just kind of more openness. So I think that, that was probably the first thing that we saw come back.
Second would be around hospital discharges. Well, actually, the second would be around physician offices and starting to see kind of more flow of patients coming into see physicians. And then the hospital discharges are starting to kick up as well. Just in the last week or 2, then we start to see the elected procedures kind of start to resume. So we anticipate that to be kind of an accelerator, if you will, over the next several weeks as these patients decide to have these procedures and these hospitals start to perform them, and we anticipate that kicking up from there.
Our next question comes from Justin Bowers with Deutsche Bank.
Really appreciate all the additional disclosure that you guys provided around this. Just kind of piggyback on A.J.'s question a little bit. And in terms of the kind of the COVID impact on admissions, how much of that was related to hospital or institutional referrals versus physician offices?
Just -- and then secondly, we kind of know what your elective mix is. Were there any other case types or modalities that were disproportionately more impacted than others? And I'll stop there.
Chris, do you want to handle that?
Yes. I'd say on the second part, we really didn't -- the most noticeable, obviously, was the elective procedures and kind of rehab from those procedures or recovery across the other modalities, really, really not a ton of -- nothing significant that would differentiate one from the other.
As I mentioned earlier, both the physician referrals and facility referrals bottomed out at the same kind of deficit or kind of percentage off of a normal run rate. Just the physicians kind of went down sooner and started to recover sooner. And then the hospitals went down a little bit later and then started to recover a little bit later. And the trajectories are kind of similar between the 2 right now.
So it was equal parts, physician referrals, kind of declining through the bottom as well as the hospitals at the very bottom. But they're coming back up now.
Okay. And is your mix of volume, is it like approximately -- is it like split 50-50 between institutional and community? Or is it...
It's a little bit more heavily weighted towards institutional. I'd say, 55% to 58% institutional versus community.
Okay, great. And then just one follow-up. In terms of -- just curious what the dialogue has been with your MA partners throughout this? And if that's accelerated or slowed some of the initiatives you guys have underway there? And are there any opportunities do you think that can emerge from what we're going through now with MA Partners? And I'll stop there.
Yes. Chris would like to handle that one. Yes.
Yes. I'd say it's a couple of things. Number one, the dialogue around kind of more innovative payment arrangements and risk-bearing arrangements has not slowed down at all. We still are at the table trying to work with Medicare Advantage plans to find ways to partner for kind of new ways to take care of patients where the total cost of care comes down.
So that dialogue has not changed. I think getting something executed in this environment has taken a little bit longer than normal. And I'd say the other piece is really with the inclusion and kind of the surging of kind of telemedicine Telehealth out there, I think that we're having significantly more dialogue around how we can use kind of remote patient monitoring in telemedicine to be able to touch these patients in their homes at kind of a lower cost level. We have arrangements to get paid for these visits today that's really kind of formed over the last 6 weeks or so, but there's now dialogue around how do we kind of start thinking about using this in a more kind of longitudinal look at the patients. I think that will be a slow process, but opportunity nonetheless.
Yes. And I think some things that have changed there has been -- the plants have an MLR problem. They need to spend the money. So I think they're interested in being more creative about places to do that rather than write checks back to the government. So I think that's something we've been seeing.
Our next question comes from John Ransom with Raymond James.
If you think about -- I mean, obviously, this year, COVID threw us a curveball and the LUPA issue, some of the unintended consequences there. Is there anything else in the first 4 months of the year that you'd call out that was either a good guy or a bad guy that you didn't -- that wasn't factored into the planning?
I think our implementation on PDGM was going well. I think the -- I think also the rescues were teeing up very nicely. CCH was coming around. We were a little late on hiring sales folks. So I think that was going extremely well. We were looking forward to that. Clearly, for us, we were involved -- started to get involved with Aseracare. I think a lot of people are saying that was quite unusual timing for us to do this in the middle of a pandemic, but I think we were executing quite well on that. I think the -- some of the issues when the wheels came off the bus on COVID was, I think, the severity of which everything hit, particularly in Home Health in all sections where we get our business in community docs, in institutions, in other post-acute institutions, in other hospitals, I mean for the first institution, other post-acute institutions. I think what's also interesting to us is how quickly we're starting to see some recovery, particularly in hospice again. I don't know. Would you -- Chris or Scott, would you have anything to add on that?
No. That's it for me.
Yes. I think that covers it. I mean, I think we had a lot of good things going on. John, if you back up and kind of look at where we would have landed ex-COVID, we probably would have been in the $55 million-ish EBITDA range when you think about the impact. So certainly, we're performing well there. I hit on the LPN:RN ratios, I think that was better than we thought. Anything on the downside, I would say that a little behind on the PDGM, the revenue piece of that. I think we're closing that gap pretty quickly. And the good guys on visits and on our LPN:RN ratios would have made up for that.
So no big surprises there. I think doing the Aseracare deal, as I said earlier, as we think about de novos throughout the year, we'll reassess and look at the footprint and talk through that, but no big surprises. Certainly did well and our internal cost numbers came out below where we thought we would.
And just kind of thinking about how the industry has changed and sort of a follow-up to our conversation last night, what's your, I'd call it, intermediate-term outlook for the demand for therapists?
Chris? That's a buddy pass. Do you want to take that one?
You bet.
Thanks, boss.
There you go, it's a normal day for me. So yes. So I mean, we were already starting to see therapy kind of demand coming into 2020 with PDGM. For us, we see that appropriate visit utilization is going to be critical and making sure that we're providing valuable visits to our patients by the right disciplines. There is absolutely a supply of physical therapists and PTAs and out there to be hard, we have capacity right now, just related to kind of decrease of volume numbers, but it will be interesting to see. I think that as we went into this year, we still feel like the strategy around getting to about -- getting a visit per episode out. We're ahead of that plan right now, but we got to filter through kind of any COVID noise and having the right disciplines in place in utilizing technology like Medalogix care to help us make sure we do that, we think there will be a healthy balance. From a staffing opportunity perspective, I think that everything lines up for us to be able to have leverage in terms of attracting good talent and the right talent. It may be more heavily skilled nursing than therapy in 2020, but that wouldn't be a surprise to us.
And so just to make -- I know you guys have beat this to death, but just to make sure we're clear, that the LUPA issue you think it will bottom in the second quarter and you'll be through it by the fourth quarter with third quarter being kind of a transition period?
Yes. I do. I think that we were real clear coming into 2020 when COVID-19 was not even on the radar that the LUPA management was the area that we had the least visibility on. Again, clinicians that have been working in this industry for years have been accustomed to a 4-visit over 60-day episode threshold for LUPA and now it becomes a threshold every 30 days and it's a 2- to 9-visit kind of range.
So it's just repetition. It's focusing its visibility on scheduling. We have a lot of focus on that right now. So I feel really good that we're going to be able to kind of be in a normalized range, hopefully before Q4 as we continue to kind of operate and rationalize PDGM and run our strategy. So I think it is spiking coming out of PDGM, but we're not necessarily surprised by it, but I know that with our team, we're able to focus on this and we'll be able to kind of get our arms [ around it ] relatively soon.
Yes. We anticipate -- but we anticipate John, that this will be fixed in Q3 for sure.
Okay. I mean, I guess, easy for me to say, looking at spreadsheets, but it seems more mechanical and training than anything. Shouldn't be [ hard ] To overcome. Okay.
Exactly. It's more complicated in the sense of -- I think there's something like 200 variations, more than 200 variations on this now. So I think just that whole nature and then the fact that we have 2 billing periods. So I think as we're getting used to that, it's just settling in and as Chris said, going through the process over and over again. So we -- and training people appropriately so that they understand what -- how we need to set up for this.
And last for me is -- let's just assume for the sake of argument, that we come out of this thing and there's a bit of a structural reset on the demand side, call it, fewer electives, driven by old people not wanting to leave their house or high co-pay plans or what-have-you, physician attrition, whatever it is. So how should we think about opportunities on the fixed cost side, if that were to occur? Let's say you come out of this with a 5%, 10% sort of cliff and Home Health, it just never comes back for whatever structural reason. What are -- are there any fixed costs that could come out of the business? Or is it just -- we should just kind of model out the per visit and keep the fixed cost the same?
There are costs that can come out. Scott, do you want to talk a bit about that?
Yes. We're pretty prescriptive in how we staff, our care centers and so forth. So it's always based on census. So we flexed as that needs to go. So I'm comfortable. We'll keep that structure intact and we'll take a look at every area that we can to keep our business knowing that we have a certain G&A spend that we want to be relative to our revenue top line.
Our final question is from Bryan Ross with UBS.
I missed the earlier part of the call, so apologies if you've already addressed this, but sticking on the expense side, how do you think about proactively reallocating some of those expense categories that are down substantially right now, like T&E? And are those expense savings primarily being allocated to business development? And what other areas can you redeploy those savings into?
Yes. Mainly, BD, but Scott, I'll let you talk specifically.
Yes. I mean, that would be our focus. I think when you talk about it here through Paul's comments, I mean, we're all about, how do we get out of this, how do we get back on our trajectory as we exit because, as I said, it's about 2021. So we need to take some dollars around and make sure we bolster our BD and our efforts there to recover more quickly. That's going to pay dividends. So yes, we'd spend those dollars in the appropriate places. Otherwise, we'll hold on and weather this.
We have good news with our cost structure, especially on the Home Health side, we saw with our volumes come down, it did flex. We probably saved about $3 million in costs because we -- about 40,000, 45,000 visits came out. So I don't have a fixed cost structure on the Home Health side. So that helped with that. So we've got some -- enough variability there to help us weather the storm and having hospice, which more -- which is a more fixed cost model recover quickly will make us feel a lot better.
We have reached the end of the question-and-answer session. At this time, I'd like to turn the call back over to Paul Kusserow for closing comments.
Great. Thanks, Rob. I want to thank everybody who joined us on our call today, and I'd also like to again thank all of our employees who are out in the field, out in the front lines and battling this coronavirus. It's because of your daily actions that we're going to get through this together. Keep doing what you're doing, taking care of people who need us the most. We hope everyone has a wonderful day. And look forward to updating you on our ever-evolving progress and purposeful work on our next quarterly earnings call. So thanks, everybody, and have a wonderful day.
This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.