HEALTHSOUTH Corp. (NYSE:HLS) Q4 2017 Earnings Conference Call Transcript

Feb 27, 2018 • 09:00 am ET


HEALTHSOUTH Corp. (NYSE:HLS) Q4 2017 Earnings Conference Call Transcript


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Good morning, everyone, and welcome to Encompass Health's Fourth Quarter 2017 Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded. If you have any objections, you may disconnect at this time.

I will now turn the call over to Crissy Carlisle, Encompass Health's Chief Investor Relations Officer.

Crissy Carlisle

Thank you, operator, and good morning, everyone. Thank you for joining Encompass Health's Fourth Quarter 2017 Earnings Call. With me on the call in Birmingham today are Mark Tarr, President and Chief Executive Officer; Doug Coltharp, Chief Financial Officer; Barb Jacobsmeyer, President, Inpatient Rehabilitation; Patrick Darby, General Counsel and Corporate Secretary; Andy Price, Chief Accounting Officer; Ed Fay, Treasurer; and Julie Duck, Senior Vice President of Financial Operations. April Anthony, Chief Executive Officer of our Home Health and Hospice segment, also is participating in today's call via phone.

Before we begin, if you do not already have a copy, the fourth quarter earnings release, supplemental information and related Form 8-K filed with the SEC are available on our website at (Forward-Looking Cautionary Statements) Our supplemental information and discussion on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information, at the end of the related press release and as part of the Form 8-K filed yesterday with the SEC, all of which are available on our website. (Operator Instructions)

With that, I'll turn the call over to Mark.

Mark Tarr

Thank you, Crissy, and good morning to everyone joining today's call. The fourth quarter was a strong finish to 2017. Strong volume and top line growth in both segments led to $208.2 million of adjusted EBITDA, a 4.7% increase over the fourth quarter of 2016. Growth in our inpatient rehabilitation segment was driven by volume, with same-store discharges increasing 3.9% over the fourth quarter of 2016. This volume growth, along with lower group medical and bad debt expenses, yielded $207.1 million of adjusted EBITDA, a 4.8% increase over the fourth quarter of 2016.

Our home health and hospice segment continued to experience strong organic volume growth, with same-store admissions increasing 10.1% over the fourth quarter of 2016. This strong volume, coupled with continued staffing productivity gains, generated $34.4 million of adjusted EBITDA in the fourth quarter of 2017, an increase of 22.9% over the prior year. Growth in our home health same-store admissions has averaged 12.4% over the last eight quarters. And the only quarter where this segment did not experience double-digit same-store admission growth was the third quarter of 2017 when its operations were impacted by three hurricanes.

As we discussed throughout 2017, the success of our clinical collaboration within our overlap markets varies widely and necessitated the identification and standardization of best practices to facilitate continued progress on our clinical collaboration rate. In February of 2017, we launched the TeamWorks clinical collaboration project, and I'm pleased to report the full implementation of the newly redesigned process was completed across all of our overlap