Newsfilter article unlocker

Thank you, Antonio. Sorry for running a few minutes late here. Very pleased to have CEO and CFO Ravi on healthcare. For anyone that doesn't know about this company, I just want to point out this thing is up 1,700% since he took ownership in end of 2022. to start off as a sub-1, distressed equity, almost not making payroll. Here we are, 14x of leverage. I'll get into arguably too low. This big move at 1,700%, that's not so bad. This move has basically been primarily moving into preferred networks, which is structurally involved for your entire company. So I guess, can you just talk about the preferred number strategy in each of the segments and where are we in terms of innings for each segment as you think about this over a one two three five year window and when it's going to start fully penetrated and start growing typically at more quote-unquote market growth sounds great and i want to take the compliment because you were one of the people who pointed out how bad we sucked on the way down from ten dollars back to one so i just want to say thank you peter for for giving us some some kudos on the other side of it, as you certainly brought out some of the realities to us back in 2021, 2022. But no, as you said, Peter, we've been on a multi-year journey. Matt and I and Debbie Stewart, our chief county officer, all kind of took our roles in early 2023. Coming out of COVID, we absolutely needed a strategy that dealt with the lack of caregiver capacity in our businesses, obviously with the hyper wages that all happened through the COVID period. We're in year four now of our preferred payer strategy, government payer strategy. Both are continuing to work incredibly well. As you talked about in each one of our businesses, we underpin our growth and where our clinicians are focused every day is to know where every one of our clinicians is going, why they're going there, not just the patient they're seeing, but who is the payer of the patient. They're seeing and is it, is that payer in our preferred network? And it's really the allocation of our clinical capacity. So start with our largest division, our Proprietary Services Division. 80% of our revenue is in Propriety Services. It's our most mature preferred payer market or segment. At the end of Q2, we had 37 preferred payer arrangements. Roughly 64% of all our total volumes are in one of those arrangements. That's up from 57% at the end-of-year. So nice movement year-to-date. and really seven preferred payer wins in 2026 to date and a couple more that we plan to announce in the second half of the year. So we're going to end. You can answer right now if you want. Oh, thank you. This has been webcast. Oh, this is only live. Sorry, we're live here. I'll give out the winning lottery ticket here in a few minutes. But really going to ended up being a great year for PDS. I'm sure we're gonna get to California. We're gonna talk about some of the government affairs wins as well, but really continued to be a great momentum with our PDS preferred payers, they want more. Even our very first preferred payer is still with us today. As a matter of fact, I think the CEO was here this morning. You guys were talking to her. So they've been a great preferred payer for us. They're still with US. They still want more capacity from us. Our very first referred payer, we're about 55% of their census in this specific state. We signed that first contract four years ago, and they still want us to take more. They want more nurses. They want more of our capacity because it truly is bending the total cost of care for them. So excited about where PDS goes. Put me over quickly to home health and hospice. Also really excited about what our home health and hospices teams are. We have 50 preferred payer agreements. Think of those as episodic agreements, both Medicare and Medicare Advantage, but all episodic in nature. Eighty-one percent of our business is aligned with an episodic contract in home health. That is, we believe it's industry-leading, certainly to the higher end of the industry, and we're growing 15, 15.5% year-over-year organically in the home health business. Really, really proud of that. Lastly, but not least, we've just finished the medical solutions modernization in 2025, coming in early 26, and мы've got our first 20 preferred payers identified. We're really working that preferred payer process in the med solutions. It's still, Matt, when I would tell you, it's in its infancy stages, but proud to be bringing the preferred payer strategy to MedSolutions as well. Yeah, so one of my biggest pushbacks in the last couple of years has been your conservatism, which is, you know, he should be whipped over there. And if anyone's bored, I would tell you to look at Bloomberg Surprise in terms of, you know, street numbers versus act numbers, and you're beating by, you know, 80% or 50%. It's maybe guiding the street to be too low. I guess, you know, if I think about growth in 26 and growth in 27, you get sort of put out sort of long-term growth rates here. You know, I guess the thing about like this, you You know, how much percent of those long-term growth rates are coming from just overall market growth? How much are they coming from sort of market share or preferred networks? And how much is it even coming from, just simplistically, you know, these sort of very sick kids that are stuck in hospitals that don't have, actually, a way of getting home? Let me start with why we kind of got to the long-terms, and Matt will jump in with the actual growth rates by segment. But, you know, you were kind enough at the end of Q1 to remind us how much we beat consensus by. And that was, you Know, too much from your professional experience. So we spent effectively May through the end of July with our board looking at re-underpinning all of our business units. And really the key drivers was we were 15 or 16 months into the one big, beautiful bill, and we had enough experience now with 32 states, with 32 Medicaid states. And with the rate wins from 25, we knew what the rate winds for 26 were shaping up to be. We had just gotten the California news that we had gotten in the California budget for 2027. That was a big deal for us, 32nd state. And then we hired Capstone to underwrite all 50 states, the impact of OBBA, and specifically what was the, in their best customization, what would the output be to the pediatric private duty nursing population? We had strong feelings because we're in it every day, but we really needed a market validation. And all of that kind of came together in the summer with the one big beautiful bill is real, and it does impact Medicaid. We know that. It does not primarily target pediatric PDN. And if anything, our pediatric PDM population is incredibly well insulated. States are going to continue to invest generally into pediatric pediatrics and care because it's a winning solution for them. The other thing that was helpful was we had, you know, we're big bettors on home health, adult geriatric home health. And we saw in the 25 final rule, what we thought was a turn in the policy of this administration. When we saw the proposed rule come out in July, it validated. We think home health has turned. We feel that we think the trough has happened and we're starting the way back up in home health. That was a nice validation for us to re-underwrite the growth algorithm, as Matt will talk about, really gave us confidence. And probably the best word I could give you is clarity. We felt like we had enough clarity at this point to readdress our long-term growth algorithms. Yeah, and, Tito, I think there was a compliment in there somewhere with 14 consecutive quarters of beating and raising guidance. By huge amounts. You know, baby steps here. With an average of 40% to 50%, it's been impressive. We've done a pretty nice job as an organization, but to kind of echo Jeff here a little bit with our long LRP updates that we had, there was a lot of noise that came out within the OBBA, and there was quite a bit of noise of just, what is this going to mean to us? Is there going to be friendly fire? Are we going to get clipped by this? Is it just going to be across the board cuts that happen in Medicaid? And what we have felt since then is absolutely nothing. We've had no interruption to our authorizations, no interruptions to our starter care, no interruptions to our payment cycles. Everything has just been business as usual in the best possible way out there. And so as we were even a little bit more conservative at the beginning of the year, just as we wanted to see things, how they settled with the OBPA. And year to date, seven state rate wins, right on plan with our expectations, seven additional preferred payers, getting that up to 64% of our MCO volumes, preferred payer contracts themselves. All that's just been more underpinning of just, hey, guys, this is the lowest cost setting that anybody can be in. We're going to continue in the PDS services, and they're not impacted by the OBBA. And so taking our PDS growth range, you know, LRPs from 3.5 to 5% to 5 to 6%, and as well as updating our home health and hospice from that 5 to 7% to the 8 to 10%, even on that one, looking at a positive rate environment for the first time in six years. And that's kind of, it was nice to see a proposed rule come out and not have parentheses around it for the first time in five years. And so seeing that be 2.4%, 2.5%, that's our expectation going forward as well. And so that gave us confidence to move that up another two percentage on our growth rate. And then even on the medical solution side, we kept that at that 8% to 10% range. In the last quarter, we were right around 9%. We expect that to get back to its single digits or high single digits, low double digits here in the next quarter or two, just as we finish off that modernization effort and put up or prepare work on that division as well. So a lot of great work that the teams have done thoughtfully over the last few years. You can't do it all at once. Focus on one, focus on the next, focus on next. We've been able to accomplish a lot and get the company to where it is right now. I know we'll get into M&A later, but also all of the execution the last three and a half years has led to, you've mentioned it, but a significantly improved capital structure, massive deleveraging the balance sheet, producing very nice free cash flow. So the other thing that we updated in the LRP was really the M&A update of, you know, we were effectively in the zero to 2%, and we updated that to 2% to 4%. We've been above that the last two years with Thrive and Family First. My assumption is we'll play on the higher end of that scale, if not above that, the next few years. But we were able to also, with an improved capital structure, lean back into M&As in a more material way. You know, like if I have to write, you You know, look at earnings note, 3Q of 27, so a year from now. And you guys have another big beat. You know. Basically, it's a different way of asking kind of, you know, where could these levels be conservatism? Would it be you keep on driving new preferred contracts? Is it you're driving debt within those contracts? Is it because more states in California reprice their offerings? Or is it just from the SG&E leverages? I don't think you're getting to a whole lot of margin expansion despite, you know, S&A coming down 140 basis points a year the last couple of years. Yeah, I would tell you it's growth. I mean, growth is going to be the main driver of that one. And we've done a great job. And I imagine we'll get into California here in a little bit. But California was the last state to kind of move 32 for 32. And we can now just compete in every single state. We're in pedo. Like, there was the black sheep over there that we just couldn't do anything with. We couldn't hire caregivers. We couldn'T provide good clinical outcomes. you know, families are upset, kids are stuck in the hospital. With the one-one-go-live of that one, that'll help California. And now in every single state, we're in 39 states, 32 in the PDS division, we can compete. It's never easy. It never going to be easy. You know, caregivers are in high demand. There's a lack of caregivers out there. It''s also the reason why the preferred payer strategy also works in there. But I think if there is a beat that comes out there, it'll continue to be on the volume side of things, less on the rate side, just because there continues to that pent-up demand for our services. I would also say just more of the same. So a year from now, with the exception of a little bit more meaningful M&A, I would tell you more ofthe same, that we're going to continue doing the things that have been incredibly successful for the last three and a half years, being very effective and efficient in the back office, to your point, getting SG&A leverage, removing some of our AI and automation from the back-office billing collections to the front-facing and scheduling and some other dictation-type exercises that are actually in the branch, in the homes. That'll bring some efficiencies to us in the future out years in the branches. But continue to drive the preferred payer strategy. I agree with Matt. We've solved the 32 states. We'll be back to the table with eight or 10 additional states next year. I'm looking for COLA level adjustments, meaning anywhere from two to I'd call it 10%. And we have about a third of our states every year that we're winning some form of rate. But I think at this point that those are going to be smaller rate enhancements. And we're okay with that. That works in our growth algorithm. And I just think doubling down on home health. I mean, we are living so far above what the industry is living today from a growth standpoint, a margin, a clunkle outcomes. We need to double down on that business with our team. Okay, so California, you know, obviously pretty, pretty big sort of shift there. And frankly, I'm a little, you Know, amazed that it came through, you knows, the economic savings, the state is so high. you know you guys have talked about sort of 10 million you know we modeled sort of like low 20s as you think about like the timing of sort of how california comes in the size of californIA and also i think you talked about start giving rates ahead of time and i think about 4q26 versus 4q27 let me start with just the just the work that was done and then matt will talk about the wage pass through side of it but but to your point we're five years into advocating and lobbying for this rate increase. We've had a 40%. There's one PDN rate in the entire state, which is simplistic, doesn't necessarily make sense for the wage metrics of the other state, but one PDEN rate of $44.12. We have asked for a 40%, we, the industry has been asking for a 50% PDEN increase now for almost five years. I think part of the story is just how if you stay at the table, you keep talking, you keep advocating. We don't leave states when we don't get rate increases, right? We stay at a table, We fight for our families. And so I think there's a story here of like just staying at it, being committed to the outcome to these families. And ultimately, the last four and a half years, our California business was just slowly dying on a vine with no rate lift, very, very few MCO opportunities in the state. Most of our children are still on the Medi-Cal program. The business went from relevant five years ago, last rate increase was eight and a a few years ago to irrelevant or unrelevant for our business model in 25 and 26. So as a company has been accelerating and growing, California is slowly dying behind the scenes. Clearly that's about to change in a material way. So we're excited to be able to put California back on the map, be relevant. We're one of the two largest providers in the state. We cover the entire state, which is great. So the infrastructure is there to be able to go execute. Matt, Matt would tell us more about our Q4 plans and how we grow in 2027. Yeah, really excited for our patients and our families, most importantly. I mean, it's been eight years, you know, eight and a half years since our last rate increase there. And in that time period, COVID happened, hyperinflation, nurse caregiver inflation. It's been a tough, tough environment for the last five years out there. In Q4, we're actually going to run this, you known, wage pass through a little bit. And so we're going to invest a couple million dollars in Q4 to continue the ramp up period. And it's going to think about it in kind of three stages, you do. The first stage is our current caregivers who are working for us at this time and maybe were their second job because they had to go work a different position that was paying more in a assisted living facility or skilled nursing facility. But when we're able to move their wages $5 an hour, $6 an hour $7 an hour they're going to want to pick up more shifts for us and that will focus on our patients themselves and getting their fill rates up from their authorized hours. Next step is going to be the caregivers who used to work for us. They love home care. They love the one-on-one patient experience. They love the patients, the families. They love also it being two and a half miles down the road from them instead of driving 25 miles into the city to provide care. Those are going to be the next ones that we pull over. They're already up on compliance. They probably have open shifts on the families that they previously worked. And they also, once again, love that home care. We can get them reengaged relatively quickly. Those are probably your two first big jumps that happen on a volume standpoint itself. And we'll do that with our cash flow, our expense, our risk. It's the right thing to do. a good investment. And think of, I think we've talked publicly, think of what should be between an 80 and 85% ideal fill rate in California, somewhere closer to 50% or sub 50% over the last four years. And to Matt's point, our goal is to reconnect that with the first two groups that you just talked about over the next three to six months. As soon as the rate table is published by the department, the Medi-Cal department, we'll start that pass through with the intention to start to reconnect quickly, 50 to 55 to 60 percent, eventually back to 80, 85 percent, all, Matt said, all with our current patients. Yeah, and the next step will be just new hires, new patients. So, obviously, the NICU PICUs are full in California. There's more than 10 children's hospitals in the state itself. So how do we get those beds empty? How do we get those patients home that have been sitting there for six months post-discharge day, eight months post discharge day, who just don't have nursing care? And that's the reason the state made the investment because those are the hard dollars that they can recognize very quickly and the hard savings they can recognise very quickly. We also don't want to take them home until we take care of our current patient base that have stuck with us the entire time too. So there'll be new caregivers, new hires, new started cares, new admissions. That'll take time. So the first one will be quicker, the next one will take 12, 18, 24 months before you kind of see that actual impact for what this rate is for us. And it's a little bit of the upfront investment that California has to make to get to the savings they desire as well. We saw this in Georgia three years ago. There's one children's hospital in Georgia, so it was easier, but it took about 120 days to pull 50 or so families out of the hospital and get them home for good. California will be that times 10. So I agree with Matt, this is going to take us and our peers probably close to a year to fully bake in getting an efficient stream of patients out ofthe hospital. If you think about two to four nurses for every patient we take home from the hospital. You think about how many patients you got to hire to basically empty the chronic medically fragile children out of 10 children's hospitals in the state of California. So it's a great growth algorithm for 27, but it's also a growth algorithm all the way through 28. I mean, just, you know, the type of way to talk about all those, you knows, 10 children's houses in California, and there are other hospitals where kids are being capitalized as tons of hospitals, you know, and obviously when their rate increases for five years, can you quantify the number of, in California, you know, of, of kids, you know, obviously use this for, for, for asking the government for money because you're going to quantify, you know, how, how many kids are currently in California stuck? As I think about your other states that you exist in, how big is that number? And I think about the states you aren't in today, sort of how big is the number? And this is not about like market share, it's just about how many kids sort of in those three buckets are still stuck in hospitals today. Think about your highest security patient. Yeah, and in that way, there's no perfect answer because there's not a perfect report. But the best we can tell in California, this is information we've shared with the governor's office and the head of the Department of Health and Human Services over the last four years, is roughly 4,000 children in California should be receiving at-home private nursing daily. in California, they only qualify if they have a VENT or TREG or both. So it's pretty high level compared to most other states. The best we can tell the number of kids being serviced is somewhere below 3,000. It's hard to tell at this point, but somewhere sub 3, 000. And factor Aviana and one of our national peers are the two largest providers, only providers that cover the entire state. So think of the opportunity being somewhere around 1,000 or 1,400 kids whose either parents are providing the care daily or are stuck in a hospital somewhere or have been in some kind of long-term institutional care waiting to get home. Now, that's a lot of children. That would take us normally five, six, seven, eight years to admit that many. Thankfully, we have peers in the market, But it just shows you the unlock in California is that significant. The idea for us to take a couple of hundred of new patients home in the state is a big deal in the course of the year. So, you know, I think we see the growth algorithm in California being a two- to three-year growth algorithm. Eventually, the new rate will run its course over probably a three- year period. But for the next, you now, year to two years, we see a clear path to being able to eat into that unlock. And Matt said it, but I'm going to go back to, if you're a parent of a child who's got to be seen 24 hours a day and you only have like 50 hours of nursing care a week, that's the only time you can sleep. That's the one time you could actually eat or go out of the house. So the idea that you could get, and your authorization might be up to 24 hours per day, seven days a week or $168 a week. The idea that your could get nursing up to that and be a human being again is so monumental for these families. So I say that to say it's a huge deal for the families in California. It's a big deal for Aviana. As you know, we've been talking about it for, I was just done talking to you about it. I mean, at some point I was hiding from you about California. So like you, I'm glad to have it now be fact, and we'll be more excited as we get into 27 where it's in print and we're actually out executing. Outside of that, we talked about seven states that we're not in that we want to be in in Medicaid. Think of, and I'm not picking on the Big Ten here, but think of Michigan, Ohio, West Virginia, Kentucky, Tennessee, Missouri, Arkansas, kind of the seven states we're not in in PDS that we feel like we need to round out. Our large peers, payer peers, are asking us to go to some of these states, specifically Tennessee and Ohio. So that's a nice fill-in for us. These are large Medicaid systems, you know, large, mature Medicaid systems. Not the highest PDN rates, but good, mature Medicare systems. So good Medicaid systems and good population density. They have good labor force that you can actually hire as well. And I think I'm going to echo one thing you said, Jeff. Our preferred payers are asking us to be there. You know, they're asking us go to Tennessee. They're asking to go to Ohio. They've got problems. And so that's an area that we want to focus on getting there sooner than later. And to your point, all-new geography, all new preferred payer opportunities, you know, and for us, a diversification of a Medicaid portfolio makes a ton of sense. We've seen it with the 32 states. We really benefited from being in that and taking 37, sorry, 32, closer to 40 long-term to us makes a lot of sense So, I mean, sir, you Know, I guess the same California question is the thing about, you Now, Tennessee and Ohio, You know, what percent of those orders are getting filled? Just not by you guys, but Much more robust. I mean, I would tell you, to the best of our knowledge, in those seven states, six of the seven or seven of the Seven had appropriate rate structures where the rate's not broken. So it's not a California-like. For us, to Matt's point, it's the payer saying, we want you to go there, and we have a preferred rate already in place for you, and we want to help you solve some of our problems. Michigan and Ohio are probably the two biggest Medicaid states in those Seven States we listed. Those are very, very large Medicaid state. But they're just important for us. As we round out our portfolio, you talked about 27, but as we think about 28, 29, 30, us being around a 40 state, 40, 41 state Medicaid provider is probably the ideal. I know you'd like us to be in Montana for personal reasons and maybe Idaho and places like that where the fishing is good and the hunting is good. And eventually we'll get there. But right now we're got some more focus where our partners are asking us to really fill in the core states and then and then we can start doing my hunting so you know so matt just to bring you on to this you know we've seen ar reserve tailwinds for the last two consecutive years can you keep this going like is this you knows how much more is there you know because they're to do here and then more in all seriousness you know there's been a lot of you know besides rates and preferred networks and EBITDA growth with the cash flows and a lot of these things happening, like cranking down reserves. Can you talk about the other benefits you've seen in terms of this new operational structure in the last couple of years? That's exactly what it's been, Tito. And this is a surprise we didn't necessarily expect when we rolled out the preferred payer agreements, the preferred buyer contracts. They caused us to meet with our preferred payers monthly, quarterly, and you're sitting across the table with them at any given time. And in those conversations, you're working on hospitalization rates. You're talking about HBR scores and your cohort of patient base and where we're currently sitting at. And you're asking them, hey, what problems do you have? And like, hey these five patients are really difficult for us. There's been re-hospitalizations three times. Can you lean into this one? And in that conversation, they also return the favor and say, what issues are you having? It's like, well, I've had this AR that's locked up from 2020, you know, 2023, it's fully reserved. It's gone through a waterfall process. It all accounted for, but it missed XYZ paperwork. Can we get that taken care of? I'm like, yeah, sure. Of course you provided the care. You did what you asked. Like, yeah. No problem. That never happened prior to this one, probably because we didn't have somebody to call, you know. Previously we were calling a 1-800 number or, you now, hotline to try to get somebody not yet. No, thanks. And it was really the relationships that we built out there with the preferred payer network, that we're getting paid faster, we're resolving issues quicker, and it's just working together as a partner is really the easiest, simplest way to put it. To your point, we've had some tailwinds here with some of that aged AR pickups out there. Those won't last. You know, we picked up $5 million here, $6 million there, but our reserve rates have never been lower in all three of our divisions, not beyond a history, in the history of it. So between all threeof them, our reserve that we are actually booking is the lowest it has ever, ever been. A lot of that is through some automation we've put into place. We've acquired two companies over the last two years. We added Xero to our RCM. You know, we've been able to not backfill some positions as we've had some turnover occur. And we put some automation, some AI technology in there that's really helped us just leverage that piece. And you alluded to our SG&A leverage, leverage our entire SG&E platform as well. We're going to start pulling that across in 2027 to more of being a forward-facing, but we've done a really nice job on the SG&A front with it too. That's a good CFO. He's told me every quarter, there's no more reserve left, right? He's telling me the same thing whenever I push him on these, you know, post earnings calls and at some point I just don't buy it anymore. I will validate. Prices are good sometimes. It is such a nice partnership when your payer partner wants to help you solve a claims issue. Many times it's just the adjudication of claims that is tough. And Matt said that the fact that our payer partners are wanting to help us solve these issues, it goes against everything that people hear it's anecdotal but sometimes people ask me what do you do I'm in healthcare and they're like oh you don't United Healthcare I'm like yeah I know United they suck I'm Like they actually don't suck they're actually good human beings they actually try really hard to work with their partners and take care of their beneficiaries I always ask people do you have United as a coverage no I don't they just suck I'M Like okay we work them every day they're actually great people and they do a great job And they hold you a high level of accountability as a provider. They expect high things from you. All of our preferred payers expect high quality from us. But when you treat them as a business partner, they will treat you as a business partner. And we have found that to be, to your point on accounts receivable and collections, just a win-win. So if I want to put a negative hat on here, this is one of the big debates that always happens. If you're all under recession, states are required to balance their budget by law, which means all of a sudden tax revenues go down and typically costs go up. And therefore, the question around Medicaid rates is always there. You know, what happens in your states, whether it's Medicare for People's Service or managed Medicaid, if we roll into a recession, tax revenues collapse, they're looking for savings. Do they really realize enough how much your area is savings or do you guys just get caught up in just the mass cuts that seem to happen every recession? Well, let's give you two examples of it, because I think both is the answer. So many of our states are managed Medicaid now. Take Texas as an example. We don't see, we don't care for any, I say any, it may be less than 1% of our business is actually Medicaid reimbursed in Texas, because 99% of your business is paid through the MCOs, which means the MCOS are at risk, right? They are the capitated risk in that scenario. And I would tell you in that scenario, they absolutely understand the cost savings, and they would push us harder for even more savings. Now, they may not give us rate increases, but they would put us harder and harder for lower the HPR percentage in our contract, save us more money. We like that. We like where the answer is the MCO is the person who's responsible for not balancing the budget, but ultimately is the outsourced Medicaid product. But most Medicaid systems like Georgia, now like California, they understand the value proposition. So we've seen it play through and material rate increases. We have one example of, and it's Colorado, of a state that has a global Medicaid issue, and they've come across with a 2% temporary rate decrease, right? And we're part of that. That's been in place now. It's two last fiscal year and this fiscal year. And, you know, in Colorado, they kind of ran off the tracks of Medicaid, unfortunately. They kind of covered everything, not just PDN, but everything under the sun, and eventually just disconnected, you know, reimbursement and expenses disconnected. We are actually, I hate to say pleased, we understand what Colorado has to go through. We're one of the largest providers of PDN in Colorado, and we're going to be there on the other side of Colorado's fixing their Medicaid product. And so I'd use that as an example of like 32 states, well-diversified. Colorado is a big state for us, and we're proud to be there. And we're fighting through a 2% temporary rate cut there. But it's one of 32 states that's implemented that. And when it's all said and done, our growth algorithm doesn't change because Colorado put a 2 percent rate decrease. We don't like it, but we will be one of the companies that survives while some of the mom and pops, I think that some of our competitors ultimately cannot be efficient enough to make it through that. Yeah. Colorado also had 10 years in a row. That's fair. That's right. Every single year too. So with a pop in there of a 20% one time as well. So they've been a great state to operate in and will continue to be a great state to operating. But I think the diversity of our 39 States that we're in as the real big winner there, I'd also say PETO kind of totally shifting away from, you know, the reimbursement structure. If that situation had occurred, which in a way likes to whisper out loud, we are an area that the workforce can come back to. Our demand for services is always going to be there. And so if an LPN or RN needs to get back in the workforce, maybe they left for a period of time, maybe they went to go take care of their own children as they aged and grew up, we are opportunity for them to re-engage into the workforce quickly and to get a paycheck very quickly as well. So there's actually a positive on the labor front for us as well because of the demand for the services, but I understand where you're getting at on the reimbursement side. We also think just being the lowest cost setting is always going to win out at the end of the day. Like the moment you're a 10x savings as opposed to a acute care setting, people are going to pay attention to you. And that's where we finally got this this summer with the one big beautiful bill was all of the noise about Minnesota, all the noise about California. Both states implemented a PDN rate increase over the last 18 months. Both states north of 30 percent PDN increase. They didn't do it to be to be wasteful. They didn't do it to be despiteful to CMS. And by the way, CMS will have had to approve both of those rates, and they approved them in Minnesota. We know that we expect them to approve the California with no drama. So even CMS is saying, yes, this is a good place to invest in and rate to save total cost of care. Almost all of it, not all of our value-based contracts and our 15 value- based contracts, I think it's true, almost all of them are underpinned by a total cost-of-care. So the only way we earn a bonus is if we are lowering the total cost of care, which I think is a great – we love that because now we've got the higher rate, we're paying the higher wage. Now, quarter by quarter, we are looking at our cohort of patients and think of that cohort being between 100 patients and maybe 500 patients for the specific payer. And if we don't beat the HPR percentage in that cohort, we don' t get paid a bonus. Shifting to home health a little bit here. uh it's been a challenging sector the last five years uh several pump companies have gone poof um how do you see the the m&a markets today you know what do you look for how good are the assets and where are the multiples and almost more importantly what do You see the competition sort of throughout the country now that these large public company acquirers have are gargling How much white space has been created? I'd say it's a lot. But first of all, we're robust on home health. By the way, we love hospice, too. We're just not buyers at 13, 15 times in that space. But we love home health and hospice. We've been doing it, as you know, for almost 30 years. The space looks different. I tell Matt, you've been through this for 27 years. One day you're young, and the next day you wake up and you realize, where did everybody go? and most of them retired or had moved on. But you look around and the large players, the Ametis, the LHCGs, the Gentivas, the Inhabits, the Encompasses, the companies we all knew in this space are effectively all gone somewhere, most of the payers, right, or private. So I do think it's created this opportunity for the next up, the next groups that are building up, the regional home health and hospice providers, as well as building national networks. And we want to be one of those. We want to the next, whether it's Gentiva or MediSchool, we want be one the next semi-national and eventually national home health and hospice providers. We're about 70, three-fourths home health, one-fourth hospice in our home health hospice segment. So 300 million, we're three-quarters home health. So we'll be more of a home health acquirer. And Matt loves doting on our team. We've just got an amazing team. We've known this team for almost three decades. You know, they're growing organically 15.5% year-over-year, 53%, 54% gross margin, 4.5 stars on the funnel. Yeah, TPS scores. Come on, keep going. Value-based TPS score winners. 50% episodic emission. So it just is a win-win for us. We need to give them more geography. They are hungry for more. They have fixed everything we've given them. They've found everything we're giving them. We need them. We need you to give that more geography, Both in a tuck-in format, a small regional platform, and eventually something larger in nature. If I think about your preferred payer deals in home health, historically home health has been known as an area where providers really optimize visits in order to optimize revenues and EBITDA. You guys show up with all kinds of different models here. I mean, how much does this structurally shift the entire market as payers look for a segment that historically was, we'll say, politely highly optimized? Yeah, and we think managing utilization is not the way to go. Like, trying to manage somebody's care, like, provide the right amount of care and the perfect amount ofcare. And we have 50 preferred payers in that division, and that's up from 45 beginning this year. And we've really seen that flip. one of those is Medicare. The other 49 are MA payers out there. And we've been able to flip those MA payors from pay-per-visit models to episodic models because they're getting the savings at the end of the day here, Peto. And, you know, we talk about the great, you know, financial results we're seeing out there, but the reason we're getting it is the clinical results and the savings at end of day. You know, our star rating, our TPS scores are going up. We're getting rate increases from TPS Scores every single year. That's where we're seeing it, and people are realizing paying $3,000 over a 60-day period to prevent a hospitalization is really, really worth it. And it's things on the administrative side as well. I mean, our caregivers in our back office isn't having to run down another authorization after they did four PT visits when they needed to do 16 and a combination of visits that are going there as well, and so we're saying it all kind of relates down to an access to care issue and, you know, payers trying to get to that lowest call settings that I talked about previously, but we're not seeing that slow down at all at 81 episodic emissions it could be a little hot we would tell you that a really good company does 70 a great company does 75 and us at 81 like all right that could bea little bit hot out there if it slowly kind of trailed back down but we still grew it 15 16 organically we'd be more than happy with that as well but i i agree with matt this is the model this is the model we're enough we're gonna benefit from it our peers are coming around and we're not the only one doing this model at this point, but 80% episodic. And the payers are getting more and more comfortable with adjudicating claims on an episodic arrangement. They tried for 10, 15 years to beat down the pay-per-visit, fee-per service, and just drive down utilization. I just don't think it worked. I think at the end of the day, it just created this huge fight between providers and payers. We just said no so many times that people eventually needed us back in their network, and they signed. But I think we can grow this. I think that's what we're trying to do. I think it's important that we can do this. You know, we would like significant more geography over time, but I think these trends can continue in home health and hospice. So, a fancy question here is, you know, SG&A margin, SG & Leverage, again, I'm going to come back to this one again. You're guiding long-term margins, 14, 15, and you've been getting the last bunch of years, 100 plus, 140 base points of SG&L leverage. As you were talking earlier about using AI for billing, all these create potential leverage. I'm not talking about margins within the three segments, but simply as you guys keep on scaling here, why should you guys not be sort of 30, 50 basis point margin expansion annually? I think there's a combination there. Right now, if you actually look at our LRPs for our gross margin, we're on the higher end of every single one of those. In home health and hospice, we guide to 52-ish percent, and medical solutions are 42 to 44. We're sitting at 44 percent, in PDS, we're at 26, 28, and we're sitting on 29. So we're doing that because there's a little bit of wage pass-through that's still planned. It's still driving our volume. It's also driving our value north of that 6 percent because of that. And so I think as that kind of matures and comes down a little bit and just settles and normalizes out, plus some of those AR benefits you talked about, PETO, are beneficial to my gross margin as well, one time in nature. we'll still continue to leverage we will continue to leverage that SG&A as size scale density automation continue to play out our team does a really good job of looking for it every single day so that just kind of settles a little bit we'll see the expansion or the reduction in SG&H still and kind of end up at that same 14 and change number we feel really comfortable being a services company right there I'll go Matt so the more we get into home health and hospice, the more you have to get comfortable with the PICs, the UPICs the ZPICs. That's just a part of that business that in Medicaid, it's very infrequent that you're getting audits at that pace. In home health hospice you're getting those every day. So there is a cost of that that you've got to factor in. But I think your point, being a Medicaid driven company, we're still 80% plus Medicaid. Being a Medicaid driven company at roughly north to 14% EBITDA feels very, very good to us, comfortable. You know, we don't try to gain the gross margin line. Our payers want to know that this is going to the caregivers. So we focus on driving gross margin almost down. Sounds crazy, but it's really passing the wage to the caregiver and then being as efficient as we possibly can. Could we hit 15% EBIDDA? Of course. I mean, I'm sure it's going to happen. But I think we use the guide to kind of 12 to 14. we're comfortably at 14 now I think you'll see us between high 13s and and kind of mid to high 14s for the foreseeable future yeah I mean you know the one thing is to credit you guys have been very transparent about is as these rates come through you know you're simply saying like it's coming down it's coming down just to help drive it and then the crash numbers again so it's a different conversation um all right we're running out of time here so I'm gonna ask a couple questions balance sheet again my favorite part of the balance sheet is that before it was terrible and now it's great, lots of things to fix that. And EBITDA doubling somehow does a good job on leverage ratios as does generating cash. What is the right leverage ratio to be running this business at in the long term? And at some point, you know, I know that there's M&A and I know the things are going, but your EBIT is big and you keep on growing with these deals. At some point do you just draw a line in the sand and say, hey, this is the right level, the X and Y, but at X, we'll never go below X because we'll just do share repo. And that gives you enough scale that you need to buy the bigger deals. You're having a one-turn range in there. You can buy a lot of deals for that. And for a former, you can buy a lot big ones without breaking that band. I mean, really proud. And obviously, Peter, from what we've been able to do on the leverage profile, I mean we were, when Jeff and I took our positions, it was double digits at that point in time. And so, like, we've done a lot of work since there. And going up. Yes, yeah. Taking costs out, taking costs out all three of our divisions. And even on corporate, you know, so that drove our EBITDA up as well. The efficiencies we put in the preferred payer model, all the things that we listed here earlier. We've done an nice job getting it down to, you Know, right around four times, just sub four times leverage. And there's still work to do, though. Like, and we know there's work to doing. We have a really nice line of sight to get that to a sub three times. And that's our goal. We want to be a sub-three times, you Now, leveraged company. We think that's the right balance to be out there long-term itself. I think Family First is a great example of don't be foolish, though, and don't have your blinders on just for anything at any given time. We closed Family First in Q2. We had one month of results in our financials itself. We spent, round up with fees, $180 million of cash on hand from pre-cash flow and cash generated. Awesome to be able to do so. And we went up 0.2 turns on that leverage. So that means we still grieve it organically. We still produced $75 million pre-cash flow in Q2. So we did everything else to be able to go get that deal done, create density in four states that we really wanted to create density, kind of put a bow on those states at the same time. So I think it's just the thoughtfulness of being conscious about your leverage and having a goal to get to sub three times. But don't put your blinders on too much. That inhibits your growth, whether it be an organic growth driver or an inorganic growth driver. I agree. So 275, that's a point where if it goes below that, I'm going to come yell at you and say, to start buying. Go do something. Certainly 2.5. But I agree, Matt. We've had a clear goal to be sub-3 for now for two years. And we're on that march. We can see it in mid to late 27. Exactly what Matt said, I agree with. We will absolutely do a deal slightly lever to de-lever right afterwards. And our answer would be, let's do both. At the end of the day, let's keep growing. Let's keep driving the company north of double digits. You have your growth and be able to delever at the same time. Perfect. That's it. We're out of time, guys. Thank you so much, and thank you guys for being with us. Thanks so much. Appreciate it, guys. Thank you.