Jul 31, 2013
Executives
Thomas J. Dolan - Senior Vice President of Finance William F.
Borne - Founder, Chairman, Chief Executive Officer, Chief Executive Officer of Amedisys Specialized Medical Services Inc and President of Amedisys Specialized Medical Services Inc Ronald A. LaBorde - President, Chief Financial Officer and Director
Analysts
David S. MacDonald - SunTrust Robinson Humphrey, Inc., Research Division Kevin K.
Ellich - Piper Jaffray Companies, Research Division Dana Nentin Brian Tanquilut - Jefferies LLC, Research Division Frank G. Morgan - RBC Capital Markets, LLC, Research Division John W.
Ransom - Raymond James & Associates, Inc., Research Division Ralph Giacobbe - Crédit Suisse AG, Research Division Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
Operator
Good morning. My name is Steve, and I will be your conference operator today.
At this time, I would like to welcome everyone to the Amedisys Second Quarter Earnings Conference Call. [Operator Instructions] Thank you.
I would now like to turn the conference over to Tom Dolan, Senior Vice President of Finance and Treasurer. Please go ahead, sir.
Thomas J. Dolan
Thank you, Steve. Good morning and welcome to the Amedisys Investor Conference Call to discuss the results of the second quarter ended June 30, 2013.
A copy of our press release is accessible on the Investor Relations page on our website. Speaking on today's call from Amedisys will be Bill Borne, Chairman and Chief Executive Officer; and Ronnie LaBorde, President and Chief Financial Officer.
Before we get started with our call, I would like to remind everyone that any statements made on this conference call today or in our press releases that express a belief, estimation, projection, expectation, anticipation, intent or similar expression as well as those that are not limited to historical facts are considered forward-looking statements and are protected under the Safe Harbor of the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Amedisys today, and the company assumes no obligation to update these statements as circumstances change.
These forward-looking statements may involve a number of risks and uncertainties, which may cause the company's results or actual outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our Forms 10-K, 10-Q and 8-K.
The company disclaims any obligation to update information provided during this call other than as required under applicable security laws. Our company website address is amedisys.com.
We use our website as a channel of distribution for important information, including press releases, analyst presentations and financial information regarding the company. We may use our website to expedite public access to time-critical information regarding the company in advance of or in lieu of distributing a press release or a filing with the SEC disclosing the same information.
In addition, as required by SEC Regulation G, a reconciliation of any non-GAAP measures mentioned during our call today to the most comparable GAAP measures will be available on our website on the Investor Relations page under the tab Financial Reports, Non-GAAP. Thank you.
And now I'll turn the call over to Bill Borne.
William F. Borne
Thanks, Tom. Good morning and welcome to our second quarter earnings call.
I'm pleased to report today that for the quarter, Amedisys earned $0.17 per share on an adjusted basis. This is $0.03 higher than our first quarter adjusted results, more than offsetting the additional $0.09 negative impact of sequestration we faced during the quarter.
We continue to experience volume softness in both of our business units. However, we were able to generate material cost savings during the quarter, which drove positive sequential results.
Before going into further operational detail, let me spend a moment on quality. During the quarter, Amedisys commissions cared for over 120,000 patients.
We are particularly focused on the 30-day hospitalization rate in our home health division. Our hospitalization rate is approximately 16% for Medicare patients, a decrease of almost 100 basis points over the last 12 months.
This represents a 6% reduction in hospitalization over the last year and real cost savings to Medicare. For the most recent outcomes as reported by CMS, which includes the 12-month period ended March 13, we exceeded the average score of competitors in our footprint in 7 out of 9 measurements.
Turning to volume. In order to improve results, we are concentrating on a number of priorities, the most important of which is delivering superior clinical care.
This is increasingly becoming a key differentiator and value proposition for hospitals. Long term, we believe being the high-quality provider in our markets is the best strategy to drive additional volume and capture market share.
In the short term, we plan to increase our business development staff, mainly focused on hiring care transition coordinators, primarily based in hospitals. They have a clinical role in helping to transition patients from the facility to their home.
We believe this function serves a dual purpose of solidifying referral relationships and assisting to help reduce hospital readmissions. We also continue to train our staff on better utilization of our CRM tool, in particular that take a more focused approach on customer targeting.
In addition, we continue to develop closer relationships with hospitals, physician groups and payers in our markets. These can be in the form joint ventures, provider relationships, Accountable Care Organizations, bundled programs or others, all of which we are exploring with numerous potential partners.
Operationally, we are moving forward on a number of care management initiatives. As discussed during our last earnings call, we completed the rollout of our patient care management to all of our care centers in the late second quarter.
While it is too early to see any trends associated with this initiatives, we are focused on care consistency across all of our care centers while improving outcomes and efficiencies. The development of our AMS3, our new clinical operating system, will be complete in the fourth quarter and implementation will begin at that time.
This operating system will enhance clinician productivity, care center efficiencies, billing functionality, interoperability and reduce clinical compliance risk. Conversion will be complete in 2 years and we expect the use of this new system to generate annual net savings of $10 million to $15 million.
AMS3 also brings functionality to support our shared service center organization model. In this model, multiple care centers within close proximity will share a certain office functions and be managed as a unit, with 1 location acting as the lead care center for back office and administrative services.
These functions include billing, clinical support, intake, authorizations, scheduling, among others, and will generate more operational efficiency and consistency in care delivery. At the end of the quarter, we had 40 shared service centers operating with plans for all of our care centers to be organized into shared services groups by the end of this year.
We continue our preparation for participating in CMS' bundled payment for care improvement initiatives. We're currently evaluating our level of participation in this program.
The need to develop new care delivery and reimbursement models takes on a heightened importance with the backdrop of CMS' recently released 2014 proposed rule for home health. In this proposal, CMS calls for the maximum allowable reimbursement reduction of 3.5% per year over 4 years.
In addition to other changes, this will mean a 2014 reimbursement reduction for the industry of approximately 1.5%. Given the significant cuts the industry has faced over the last 3 years, we are very disappointed CMS' proposed rule proposed the full allowable cut under the healthcare reform legislation.
We believe there are numerous flaws in the assumptions and methodology CMS relied on to reach this proposal and are working with our peers in Washington in hopes that we can get a more balanced final rule for the industry. We announced on our first quarter call our plan to address 50 nonperforming care centers.
During the second quarter, we consolidated 17 home health and 2 hospice care centers and are holding 34 care centers for sale, including 3 additional care centers were recently added to the divestiture list. Our efforts to divest these care centers are proceeding, and we are hopeful that this process will be complete in the near term.
Separately, during the quarter, we sold 2 home health and 1 hospice care centers that we identified for sale earlier in the year. Before concluding my comments, I want to take a moment to thank our employees.
Together, we provided over 2 million visits during the quarter, providing high-quality skilled care to a very complex patient population in the lowest-cost setting, the patient's homes. Now I'll return the call over to Ronnie for his comments.
Ronald A. LaBorde
Thank you, Bill. For the quarter, on a GAAP basis, we generated earnings from continuing operations of $0.07 per diluted share.
This compares to $0.11 per share during the first quarter. During the second quarter, we incurred legal cost of $0.03 and $0.07 of exit costs associated with care centers we consolidated.
Adjusting for these items, we generated $0.17 in adjusted earnings per share compared to $0.14 in the first quarter. In summary, we were able to improve quarterly results by $0.03 sequentially in the face of a $0.09 incremental sequestration effect and [indiscernible].
Going forward, my comments will be on an adjusted continuing operations basis with the focus on sequential results except as noted. In the second quarter, we generated $313 million of revenue, a decrease of $13 million.
Of the $13 million decline, just over $5 million was due to the full quarter impact of sequestration. The remainder was due to lower volumes in both home health and hospice.
Adjusted net income for the quarter was $5.4 million, up from $4.8 million in the first quarter. Adjusted EBITDA was $19.1 million or 6.1% for the quarter, an improvement of $1.2 million and 60 basis points from Q1.
Cash flow from operations for the quarter was $33 million. Cash flow benefited from a continued drop in DSO to 34 days at quarter end from 42 days at the end of 2012.
Capital expenditures were $10 million and we reduced debt balances by $4 million, resulting in a leverage ratio of 1x EBITDA. We ended the quarter with $30 million of cash on our balance sheet.
Turning to our business segments, we experienced a $12 million decline in home health revenue. Our Medicare revenue declined $8 million, consisting of a $4 million incremental impact from a full quarter sequestration and a decline in volume.
On a same-store year-over-year basis, admissions were flat. However, sequentially, total admissions were down 4.6%, an approximate $3 million impact to revenue.
Our recert rate was 36.5% compared to 37.8% in the first quarter, contributing approximately $1 million to the revenue decline. Our home health non-Medicare revenue declined $4 million, also reflecting lower volumes.
Non-Medicare business was down 10% sequentially or approximately 40,000 visits. Most of this volume decline is by design and consistent with our efforts to rationalize our portfolio of lower margin business.
We will continue to pursue relationships where per visit rates and contract terms are favorable. In fact, per visit, our revenue per visit from our non-Medicare business increased sequentially by almost $4 per visit.
In our hospice operating unit, we generated $65 million in revenue, a decline of approximately $1 million or about 2% for the first quarter due to the sequestration cut. Lower admissions caused our average daily census to decrease, but this was largely offset by the additional calendar days in the second quarter.
As Bill stated previously, we are pleased with our cost control efforts during the quarter, which fully offset both sequestration and lower volumes. We were able to increase our overall gross margins by 30 basis points and more significantly, total G&A expenses declined over $7 million during the quarter.
Approximately $5 million of this savings was due to headcount reductions and other compensation related costs. Cost savings go across both our business units and our corporate operations.
In summary, we achieved our bottom line expectations for the quarter on a lower volume with better cost control. As a result, we are lowering our revenue guidance, but leaving EPS guidance for the year unchanged.
We expect revenue from continuing operations to be in a range of $1,240,000,000 to $1,280,000,000, and earnings to be in the range of $0.45 to $0.55 per share on an estimated $31.5 million fully diluted shares outstanding. This guidance does not include any one-time costs such as costs we have or may incur associated with our announced market exit activity or corporate expense initiatives.
It does include an estimate of legal costs associated with our ongoing government investigations, which we are estimating to be $8 million to $9 million for this year. We project capital expenditures to be in the range of $45 million to $50 million for the year.
This concludes our prepared remarks. Operator, please open up the call for questions
Operator
[Operator Instructions] And your first question comes from the line of David McDonald with SunTrust.
David S. MacDonald - SunTrust Robinson Humphrey, Inc., Research Division
Just a couple of quick questions. First of all, just on the cost savings, if I look at the run rate for the year in terms of EPS or EBITDA, and I look at the guidance, it certainly looks like it's certainly very attainable.
Is there any additional cost -- or maybe you just answered this, Ronnie, that we need to think about the back half of the year that isn't in the run rate. Did you say legal 'is' included in the guidance for the balance of the year?
Ronald A. LaBorde
Legal is included, yes.
David S. MacDonald - SunTrust Robinson Humphrey, Inc., Research Division
So that's another $8 million to $9 million drag just for the back half of the year, is that the way to think about it?
Ronald A. LaBorde
Or 1/2 of that, for the back half, of course.
David S. MacDonald - SunTrust Robinson Humphrey, Inc., Research Division
So that's an annual number?
Ronald A. LaBorde
Yes. The other -- let me just say the other cause that how will the run rate change you know at the end of the first quarter call, we talked about a $10 million savings or opportunity there with these divested care centers.
All of that is not reflected yet in our results. What we see -- what you see so far, is the disc ops [ph] piece of that, those care centers that we have we're trying to divest.
So that's reflecting disc ops [ph] . The other piece of that $10 million, is really a G&A reduction that will happen when the divestiture is completed.
So we do see that opportunity in the back half of the year. It'll be realized when we're successful and, hopefully, we will be with the divestiture of those care centers.
David S. MacDonald - SunTrust Robinson Humphrey, Inc., Research Division
Okay. I guess just a second question.
Bill, since the preliminary rule has come out, just talk briefly about M&A, the pipeline, are there increasing number of folks that have become more sober about the reimbursement backdrop? Are there more incoming phone calls in terms of folks who are looking at strategic alternatives?
And just any update that you've got there.
William F. Borne
I think, David, we've seen kind of an escalation of M&A activity actually probably over the last 3 months. You can say maybe slightly more heightened, expectations haven't changed a lot.
I think a lot of the sellers still want to get paid for the efficiencies that we could provide. We are very focused on the type of opportunities we're looking for.
We're looking for high concentrations in markets. We're looking to enter relationships with hospitals and so we're not looking for the one-offs.
So I think that the lack of demand from the big consolidators is there. But I think there's interest from other providers that may want to enter the industry.
So I'm not sure what's going to happen with pricing. But typically, we see pricing in between 50% and 75% of revenue for the home health line right now.
David S. MacDonald - SunTrust Robinson Humphrey, Inc., Research Division
And then again just last couple of questions. One, Bill, can you just run through again the hiring plans in terms of some of these folks who are going to be actually -- physically in the hospitals?
And then any other steps you're taking either in terms of changes to the sales force or how they're compensated or whatever, anything on that front to try to drive improved volumes?
William F. Borne
Yes. So what we see is a direct correlation between the number of sales force we have and the admissions.
We would like to be more of a relationship-driven sales force based on clinical activity and quality. We're looking for long-term relationships.
And over a period of time, we think we'd like to increase the number of care transition coordinators we have. Right now, it's about a 50-50 mix.
So most of our focus is on care transition coordinators. All of these coordinators are clinicians, most of them are nurses, registered nurses.
We do have 1 or 2 social workers. But they actually provide a clinical service that begins the episode of care in the facility.
We see a value there as I mentioned with the relationship from the people who work in the facility, also a value on starting that care transition. So we think that if we have more care transition coordinators focused exclusively in facilities, that it would drive our referral relationships.
And also help with our quality. So we have a full court press on hiring more nurses and care transition coordinators.
We will maintain our level of account executives, many of which are clinicians also. And as a reminder, these guys are focused and target hospitals and I mean, physicians and physician groups to help develop that segment of the business.
Operator
Your next question comes from the line of Kevin Ellich from Piper Jaffray.
Kevin K. Ellich - Piper Jaffray Companies, Research Division
Just a couple of questions. I guess, first, could you talk about what trends you're seeing in the home health business in terms of volumes?
Admissions seem to be improving a little bit, but still flat and then recertifications are still pretty weak. I guess, what do you think is causing that?
And when do you think we're going to see a turn?
William F. Borne
Well, if you take a look, Kevin, on the admission front, we still have expectations to turn that around. As we mentioned, we are looking for low single digit growth in admissions.
We think there's opportunities to do that by enhanced relationships with our partners. I mentioned there are all kinds of ways to develop those relationships and the opportunity is presenting itself.
And we have certain types of ongoing discussions with numerous of those potential partners. So we're not giving up on getting back to positive growth.
With the recertifications, as you're aware, they fell off over the last couple of 3 quarters. We do see that line flattening out.
We have patient care management across all of our operations now. The acuity level that we have is pretty consistent.
Doesn't really kind of justifies the drop off. We think a lot of that is behavioral as we mentioned, patient care management focusing on managed care, preparing for bundles, reduction in force that we had in the fourth quarter of last year, all contributed to behavioral activity.
And we think it's going to normalize. We don't know exactly when it's going to settle, but we think over the next quarter, we'll find what that normal rate will be.
Kevin K. Ellich - Piper Jaffray Companies, Research Division
Understood. And then Bill, I might have missed this if you said it already, but just wondering if you can provide a little update on the bundling demonstration from Medicare, the acute, post-acute demo.
William F. Borne
Yes. Well, CMS has put out its last set of data, which goes through 2012.
We're at the end-stage of analyzing that. There's a lot of opportunity.
We have 60 of our care centers that we are the sponsoring organization for, that are in 5 markets. And we're just coming to the final decision on how we want to proceed and in which markets and what DRGs or patient mix that we're willing to accept.
We have a lot of interest from partners, and we're just going to wait until the final analysis before we decide which markets and how much. All we really need, Kevin, is enough of proved concept.
So we don't have to dive in. We can walk in, and get enough volume and critical mass to be able to do that.
So we're using a lot of discretion on how we want to move forward.
Kevin K. Ellich - Piper Jaffray Companies, Research Division
Got you. And then in terms of the reimbursement and the payment, is it meaningfully better than what you're seeing now and who's controlling -- how much is allocated to the post-acute setting?
William F. Borne
Say that -- say that again -- ask that question again, Kevin?
Kevin K. Ellich - Piper Jaffray Companies, Research Division
In terms of the bundled payment, what are the -- are the levels looking better than what you're getting now? And who's ultimately determining if there's a bundled amount going for a complete episode of care?
How is that allocated between the various providers?
William F. Borne
Okay. So we're participating in different bundled groups.
But were the convener of the Model 3, which thought at discharge with patients that have the appropriate diagnosis that we choose. And the way CMS has approached that, they've taken a look at all the cost of care for a patient 90 days post discharge from a hospital that is admitted to a home health agency.
So the bundled reimbursement rate is an aggregation of home health, all post-acute care and all services. And then the government is looking for a 3% savings there and then the amount is aggregated into the bundled payment.
So what we see is some refining as we get new data sets. If -- but it kind of dovetails and parallels what we've seen in all health care.
Costs have come down a little bit, so the overall bundled pricing has come down a little bit. And you see some variances in different DRGs.
But if we can focus on reducing readmissions to hospitals, there's a wonderful opportunity to save CMS money and make money while doing it and providing good quality care for the patient, which is more important, right. I think you drive satisfaction by keeping more patients out of the hospital from being readmitted.
So I think there's adequate opportunity there. And they're playing in a much bigger pond where there's -- a lot more variables.
And when you look at enough volume, the risk really gets kind of blended out. So we just have to make sure we have the skill set to manage the patients that we pick.
Kevin K. Ellich - Piper Jaffray Companies, Research Division
Got it. That's very helpful, Bill.
One last question on hospice. We saw a little drop off in growth.
Anything unusual going on there? And I guess what do you expect going forward?
William F. Borne
Nothing unusual. As a reminder, our Northeast acquisition of Beacon, we converted that towards the end of last year, put in a whole new operating system.
We saw the growth kind of slow down a little bit there. And that's really driving kind of the flatness in our hospice.
All of our legacy hospices are hanging in there pretty good, and we think, again, that's a behavior issue, right, and that we'll move forward beyond that and our expectations. But it gets back to single-digit growth in both our home health and our hospice divisions.
Operator
Your next question is comes from the line of Dana Nentin from Deutsche Bank.
Dana Nentin
I just want to go back to the recert rate. And if you could, maybe describe for us the recert rate in terms of the trend over the course of the second quarter.
Just trying to get a sense for the trend line of that. And I think you said it was 36.5% versus, I missed the number of 37% in the first quarter.
But how did that look as you move through the second quarter?
William F. Borne
Right. I think, maybe we would step back a little further, go all the way back in the third quarter of '12.
And we saw a couple of percent -- 2.5% drop from the third to the fourth and then about a 2% drop from the fourth to the first quarter of this year. And now we're looking at about a 1.2%.
But we really see that flattening out, right. As we look at more current information.
So we feel really comfortable with that. It's at or near the bottom, we can't predict it.
And we don't know what it would do from there. Again, it’s driven by patients, their acuity and the care they need, individually.
And our mission is to make sure that patients get all the care that they require but not more than they need. So -- but we see the trend align really flattening as we move forward.
Dana Nentin
Okay. So I guess maybe stepping back in -- on -- in terms of the outlook for this year.
Can you maybe help us think about what your same-store revenue growth ranges look like? Obviously, they're in decline.
But what the decline would imply for both home health and hospice given your commentary that you think the research is flattening out. I'm assuming you think the volume, overall, is flattening out in hospice.
But maybe just a broadbrush for organic decline in both businesses. What's the outlook?
Ronald A. LaBorde
Dana, I think with -- as Bill commented around the recerts, I think the broadbrush certainly flat-ish to, hopefully, will be successful in our growth efforts and get single-digit admission growth in home health and see some positive admission growth in hospice. So we -- overall, I think we can kind of flattish from where we are, and if we're successful with our plans, that we would begin to show a little bit of growth.
Dana Nentin
And you'd expect that in the second half or is that just your overall outlook?
William F. Borne
It was -- from here -- from the second -- second quarter results. I think sequentially going forward that it certainly flat-ish is our view with the -- hopefully some successful efforts bearing fruit here.
Dana Nentin
Okay. So just maybe switching gears to hospice specifically.
I guess first of all, what was the amount of the Medicare cap, either in dollar terms or gross revenue percentages in the second quarter?
Ronald A. LaBorde
It was very low cap impact for this quarter, relative -- and we actually had a nice improvement from the first quarter, where we had a settlement flow-through in Q1. But in this quarter, it was more normalized or actually even a little bit below normalized levels for the quarter.
So we're -- we think we're adequately reserved, certainly, and minimal impact for this quarter actually.
Dana Nentin
Okay. So what was -- what's very low?
What's the number?
Ronald A. LaBorde
The number -- the impact for this quarter was 150,000.
Dana Nentin
Okay. And so you can capture normalized levels for the cap?
Ronald A. LaBorde
Yes, a little below -- yes, excuse me, for the quarter, it was a good quarter. A little bit below, perhaps, normal, what we might call normalized.
So again, good experience for this quarter.
Dana Nentin
Okay. And then what's your outlook for length of stay in hospice?
Any sense for how your mix is falling out and what are you seeing, directionally, length of stay is, is it up or down from where you ended in Q2?
William F. Borne
So it's down for the -- our patient discharge is down just a couple of days. And so it's 1 0 1, I believe it was for the second quarter.
And so we don't see any significant change there with -- it'll certainly -- as we work to again increase admits, get the right patient mix to sustain our business, we don't think that, that's -- could, would or should change materially, but we'll certainly be attentive to it.
Dana Nentin
Okay. And maybe just lastly, just as it relates to the government investigation, something you might be able to just give us an update on where things stand.
Are you in settlement negotiations with the government at this point? Are you still incoming with the discovery phase?
It's been going on for a long time. So I'm just -- I'm curious to maybe get a sense for where things stand at this juncture.
William F. Borne
Well, Dana, we can [indiscernible] has been going on for a long time and what we've done is cooperated every step of the way. We provided all of the information that the government has requested.
And we have ongoing dialogue with them.
Dana Nentin
Okay. So would you expect the $8 million to $9 million of expense to be evenly split over the back half of the year?
Or I guess 1/2 of that number, or will we see more in the third quarter versus the fourth quarter?
Ronald A. LaBorde
There's -- we don't really -- Dana, I've talked about the timing of that. I don't think it’s an unfair view to say that would be relatively evenly split.
We don't have -- anticipate at this point any significant shift on the timing of activities surrounding this effort. So I think that's a fair assumption as we said today.
Operator
Your next question comes from the line of Brian Tanquilut from Jefferies.
Brian Tanquilut - Jefferies LLC, Research Division
Bill, just wanted to hear your thoughts on DC. I know you're very involved in the industry's lobbying efforts.
With the rule out and all the chatter from the Ways and Means committee and the things that they're looking at as a way to fund a [indiscernible] , I mean, where do you stand as an industry and with your -- and as executives, what are your lobbying efforts and what are you hearing back in terms of feedback from those guys?
William F. Borne
Brian, as I mentioned we're disappointed, right. We've seen some cuts over the last 3 years and we think effectively the industry has been rebased.
We think the CMS went too far. It is not using all the information, all the data and not current data to make the decision they did.
So basically, we feel rebates are 0. As you're aware, the partnership has been working very aggressively establishing relationships with the legislation.
And right now, we have efforts on both the Senate and the House side in sponsoring senators and representatives that put together a letter asking CMS to reconsider their position. Now most recently, what I'm hearing is that we're going to get a significant or majority of both the Senate and the House to sign on this letter.
So we're getting a pretty good groundswell, and we also have a good grassroot activity that's going on. I can't commit either way that, that will be the case.
But I do think that we have a lot of attentiveness to the impact, especially when the partnership has proposed really selectively going after fraud and abuse. And as a reminder, with the outliers, especially in Miami-Dade and Hidalgo [ph] County, the industry made recommendation that saved over $10 billion.
And we think being selective on the amount of episodes of care, on average of patients and provider numbers and looking at things like Lupus, that selectively that we can go after the bad players, and drive the cost down. So I would hope that the groundswell would get Congress to be attentive to the fact that they can get savings in that, not just to make industry and use that as a blunt instrument.
So we're hopeful that before it's all said and final, that the recent reconsideration of the -- what we feel the absolutely extraordinary cut that they made to the industry.
Brian Tanquilut - Jefferies LLC, Research Division
Bill, if that's the case, why are they still thinking about a home health copay right now? I mean, just look at the house of Ways and Means discussions.
It seems like there's still target on copays.
William F. Borne
Right. The quick answer, Brian, is because it's been coming up for years.
It's been defeated. Home health is the only segment that does not have a copay in it.
There's a lot of good rationale for that. And one of the arguments the industry has made that, that the patient's investment is the fact that it's got its home and its family that's the primary care giver.
Stats show that $300 billion of free care is provided by family caregivers on an annual basis. So we do think that the co-pay is there.
And the other argument is that the frail people who can't afford might not be able to afford, maybe going to be in a higher cost setting. But as you're aware, the -- they can't really calculate, the OMV can't calculate savings from one care venue to the next.
So they don't look at that. So said simply, it's the only segment that doesn't have a co-pay, and it just continues to be a target.
But as a reminder, even in the proposals that have been put out there by MedPAC and the President's budget, the co-pay isn't very selective. It doesn't apply to patients who are discharged from hospitals, and it applies only for the first episode.
There's different -- various proposals out there. And also, we're not sure that GAAP coverage might not cover part of that.
I will tell you that we are prepared with our systems because of the activity with managed care to collect co-pays, should they be implemented. And it won't be something that we have to discover a way around to, put the system in place to that.
So we hope it doesn't happen, but we will prepare to be able to collect those co-pays if that's implemented.
Brian Tanquilut - Jefferies LLC, Research Division
Got it. And then Bill, dual eligibles is a topic that pops up quite often now.
I'm just wondering what you think your exposure is in that area, and how should we think about reimbursements for duals?
William F. Borne
Well, we did an analysis a couple of quarters ago on dual eligibles, and we only had a couple of markets. I think it was specific to Tennessee that we saw a little exposure, but it wasn't meaningful.
I think over time, there'll be more exposure. But our intent is, in our new care delivery model, as I mentioned earlier, I think we all have to move that way.
We certainly have to move that way with bundles and if we want to be a good provider of care, to managed care the way they think of things, as well as to Medicare, right, and to save money, that we have to figure out a way to provide better quality at a lower cost point. And if we do that, that will open up the opportunity to provide care to Medicare patients as well.
As you know, the big focus on Medicare is keeping them out of nursing homes, and many states have programs that actually supplement the care provided. They'll even pay the family caregivers to do that.
So we're exploring those options, and we think there'll be opportunities in that area as well.
Brian Tanquilut - Jefferies LLC, Research Division
Okay. And then last question for me.
Ronnie, on the guidance, just wondering what assumption you've baked in for rebasing in Q4. And also wondering what your thoughts are in terms of why we backed out the legal expense in the second quarter, and yet we're including it in the back half guidance.
Ronald A. LaBorde
Yes, Brian, it's -- nothing is baked in yet for rebasing. We're going to wait for the final rule, and then respond to that more specifically there.
Good question on the guidance. I know it gets a little bit confusing what's in, what's out.
And so if we look at that -- for the first half, our adjusted earnings of $0.31, $0.07 of that was for the legal cost. So that's $0.24 that I would say that's consistent with our guidance.
And so then if you look at Q2 precisely, that $0.17, minus the $0.03 of legal, so that would be a net $0.14. And that's what we are giving guidance around.
And I know the other part within, without, the exit activity or other things are not considered in our guidance.
Operator
Your next question comes from the line of Frank Morgan with RBC Capital Markets.
Frank G. Morgan - RBC Capital Markets, LLC, Research Division
I guess following up on rebasing. As we start to think about next year, I guess first, what is your view on your ability to control wage inflation next year?
What are you earning now, and where do you kind of see that trend as you go into next year, underlying wage cost inflation?
Ronald A. LaBorde
We do have -- we'd last had a, kind of across-the-board wage increase in 2012, nothing this year. And certainly, it becomes kind of a -- it's at least at some point stressful to the employees and to our clinicians.
We'll be -- we'll -- I guess a long way to say this, we'll be attentive to that. We're looking for other efficiencies in utilization to help offset that and to deal with that over time.
So I don't think we can stay compressed on wages over the long term, we'll see what actually we can think we can move on into next year. But the offset of that will be utilization and how we can be more efficient in the delivery of care inside of an episode for our Medicare patients.
Frank G. Morgan - RBC Capital Markets, LLC, Research Division
I got you. And well, the reason I ask is, I mean, on this whole topic of rebasing, if it really is, if it turns out to be the net 1.5% cut, I guess that's assuming the market basket list of 3.5%.
I mean, that, by itself, is like a 15 -- if I'm doing the math right, ain't that about a $15 million headwind, assuming there is no change in wage inflation. So I'm just wondering how you're thinking about that issue of potential wage inflation, at the same time, you're basing this $15 million headwind, if it turns out to be a 1.5% net cut.
William F. Borne
It's -- that's exactly right. And we're still on the path.
We made a little headway in this quarter as we stated previously. We clearly see our margins have been a little bit behind our peers.
We're working to close that gap. Our efforts will continue there, and then we'll have the additional effect, an impact of what you just talked about, rebasing and in the compensation pressures for our staff.
So it'll all be folded into our overall efforts to again, improve margins, get more efficient. Certainly, us as well as the industry will be challenged a little bit further, depending on how the final rule comes out and assuming it comes out as is.
William F. Borne
And Frank, we know it's kind of on the back end, but as a reminder, the implementation of our AMS3 operating system will provide a significant amount of efficiencies and cost savings. As well as, Ronnie had mentioned, the ongoing part of the back half of the initiatives that we've already taken.
So we're hopeful that we can just push forwards and manage the best we can to drive costs and make sure that we keep quality where it needs to be.
Frank G. Morgan - RBC Capital Markets, LLC, Research Division
Well one final, on the divestitures that you've got held in disc ops. What has been the success of Aurum [ph] on divesting those?
I mean, who is -- who are the buyers of those, typically? And just any kind of characterization you can give us on your ability to go ahead and get that wrapped up?
William F. Borne
Well, thank you, Frank. There's a lot of interest, all kind of buyers, every kind of denomination.
I'm not going to give specific names. But strategic buyers, nonstrategic, associated industries.
We've all had -- sort of had a lot, discussions of joint ventures with some of these. So there's a lot of interest across the board in the agencies.
Operator
Your next question comes from the line of John Ransom with Raymond James.
John W. Ransom - Raymond James & Associates, Inc., Research Division
I may have missed this, but did you say or disclose the EBITDA drag from the discontinued ops? I know they're out of your consolidated numbers, but what's the negative EBITDA associated with these facilities?
Ronald A. LaBorde
The -- well, John, it's not a stupid question. Why you do -- but let's say from the disc ops, that will be, it's $0.01 for this quarter, so it's about $0.5 million EBITDA.
John W. Ransom - Raymond James & Associates, Inc., Research Division
That's per quarter?
Ronald A. LaBorde
For the second quarter.
John W. Ransom - Raymond James & Associates, Inc., Research Division
Okay. So $2 million, roughly $2 million annualized is what you pick up.
Ronald A. LaBorde
Yes.
John W. Ransom - Raymond James & Associates, Inc., Research Division
And at this point, I mean just based on Bill's comments, you don't have any anxiety about your ability to sell those for at least some price?
Ronald A. LaBorde
No, we're making some good progress. Again, as we said, we'd hope to wrap this up in the near-term.
But we're pleased with what's come about so far. And yes, looking forward to it, to wrapping it up.
John W. Ransom - Raymond James & Associates, Inc., Research Division
And then other -- and I'm sorry, I was a bit on and off the call. But did you -- could you just recap, please, vague reduction in AR you saw this quarter, and was that related to the discontinued ops, or was there some -- you had some good cash flow from AR collection, could you just recap that, please?
William F. Borne
Sure. It's not really disc ops.
It's -- we just -- this year we've been working on that for a while and in 2012, AR crept up a little bit and through all of those efforts, we've now had 2 good quarters of collections. And so we started to feel like we can sustain this level, it'd be great to see some more improvement, but it's just been good collection efforts here in the first half of the year.
John W. Ransom - Raymond James & Associates, Inc., Research Division
And could you also just finally your, I mean, you don't have a lot of debt. But what are your thoughts about your capital structure and timing and if any work to do there, if any?
Ronald A. LaBorde
No, we don't. You're right.
We don't have very much leverage, and we're certainly think our facility is in good shape. As you know, it's in our disclosure.
We have $140 million thereabouts available under the facility. While at this time we can't access all of that, just because of the covenant structure.
And so we're starting to think our facility is adequate for our plans here, all with the remaining term of that facility.
John W. Ransom - Raymond James & Associates, Inc., Research Division
Okay. And then, and lastly, based on the business today with the sequester, and with the admission trends, what percent of your agencies would you say -- and I know you'd take care of this with your disc ops, but what percent of your agencies would you say are even a negative at this point?
William F. Borne
Well, John, it's a good question. We generally don't disclose that, just profile the portfolio.
But no question, sequestration and our action there on the 50 kind of respond to that, now looking forward to rebasing and the impact. We'll again, as we always do, continue to look at our portfolio, review that, see where we think the opportunities are longer-term, and make decisions about our portfolio.
But we haven't, in the past and not ready to disclose, kind of the -- how we stratify the portfolio.
Operator
Your next question comes from the line of Ralph Giacobbe from Crédit Suisse.
Ralph Giacobbe - Crédit Suisse AG, Research Division
Did you guys say or have you given an acuity number? Just wondering if -- are Q2 levels going higher?
Ronald A. LaBorde
As far as our case mix, Ralph?
Ralph Giacobbe - Crédit Suisse AG, Research Division
Yes.
Ronald A. LaBorde
Yes, they're about stable. As I referenced, we haven't seen much change in overall acuity.
As a reminder, our acuity's been a little higher than the industry average over the years because of the focus on the complex patients and age. So it's been pretty stable.
Ralph Giacobbe - Crédit Suisse AG, Research Division
Okay. And I hate to go back to this, it's beaten up a little bit, but I guess I'm still a little sort of confused on the research side, because the volumes seem to be stabilizing.
It seems like acuity's stable, but the recert rate continues to fall at a pretty rapid clip. So -- and I know you said, you're ultimately saying it's going to sort of flatten out, but is there any more color you can give, in terms of why it would be the case?
Whether it's because of the divested facilities, or anything along those lines on why that specific staff, which shows such a divergent trend from the other components that we generally look at?
William F. Borne
Right. So Ralph, we mentioned it earlier.
You just asked about the case mix. So if you look at the case mix that's pretty steady, and you have to ask, why did we have a drop off in the second -- the third quarter.
And again, we turned a lot of dials in the third quarter. And it manifested itself, and what we saw was a drop in recertifications.
So can't put a beat on it, but from all the things I mentioned earlier, we think it really -- it just -- it manifested itself from a behavioral activity. And right now, we've put together several programs, local care management as well as regional with the shared service center.
And centrally, we put in patient care management, which takes a look, by each section, of all patients. And it gives us opportunity to do a couple of things.
One is to identify, clinically, where we can improve things. But more important, educate the local care center.
We've also given them some refined tools to be able to take a better 360 view. And we think just through that education and that oversight, that we see more normalized behavior.
And we think it's behavior, and as a result of multiple things, as a result of trying to be more efficient and more effective. And as I said, we do see that flattening out.
And -- but we'll not show what the trend will look like from there. It would be -- it would be good to try to make a prediction, but I think next quarter, we certainly will have an understanding of what that trend will look like, more normal going forward.
Ralph Giacobbe - Crédit Suisse AG, Research Division
Okay. Fair enough.
I guess next question just -- can you give us what percentage of your referrals now come from, sort of an acute or post-acute setting versus physician office today?
William F. Borne
That fluctuates a little bit, Ralph, but it's probably in between the 40% and 50%. So you take 45%, that would be a good -- a good average.
Ralph Giacobbe - Crédit Suisse AG, Research Division
I'm sorry, 45% from where?
William F. Borne
From facilities.
Ralph Giacobbe - Crédit Suisse AG, Research Division
From facilities. 55% from -- direct from physicians’ office.
William F. Borne
Physicians’ offices and other referral sources. I think facilities, I'm kind of referring more to hospitals.
But we see referral sources coming in from LTACHs and from ERPs, and ALFs, and that kind of stuff, ILFs. So I'm referring more to hospitals on that 40% to 50%.
Ralph Giacobbe - Crédit Suisse AG, Research Division
Right. I guess maybe another way to ask the question, do you have what the percentages, just from physician office?
William F. Borne
We haven't looked at that to give you an exact number. But I would think that's probably in the 40% range as well.
We usually have kind of an equal balance as we look at that between hospitals and physicians. And then the mix comes from facilities and other activities.
Other types of nonhospital facilities.
Ralph Giacobbe - Crédit Suisse AG, Research Division
Okay. And then, just my last one.
Humana recently announced an acquisition of American Eldercare, I believe down in Florida. Sort of provider of, directing sort of long-term care patients and home health services.
So I guess, one, would you expect to see any benefit, potentially from that? I know it's only in one state, but any -- would you expect anything there?
And then two, any more interest from payers in sort of participating in sort of directing from that continuum of care? Any discussions there that you've had, and any color you could share would be helpful.
William F. Borne
Yes. I don't think we're going to see anything meaningful from the Humana acquisition.
But the level of communication we have with payers right now is more than just home care. From home care, from the Medicare design, we're talking about non-homecare -- non-homebound patients that receive home care.
And a lot of discussions about care transitions. And as you are aware, in my comments earlier with our care transition coordinators, as well as the efforts that we've had to put in to prepare for the bundles, and our partnerships with ACOs and that kind of risk activity, as well as large physician group ACOs, I might add that there are more physician ACOs right now than hospital ACOs.
We find ourselves having different dialogs, looking at different opportunities to create different revenue sources that are outside the Medicare home care benefit. And that's where we see the, the next huge opportunity in breakthrough.
And you see it our mix changing. We're able to refine the way we relate with managed care, mostly contractual, now, electronic exchange of information versus paper.
Our reimbursement rate is going up. Our collection rate is going to go up.
And we think that opens the opportunity for different models. And our mission is to be involved in overseeing and providing home health and hospice services, but overseeing the cost of the whole post-acute care continuum.
And with our new technology, we will have the ability to have a better visual on managing that whole cost component. And I won't get too detailed into that, but bundling predisposes us to have to look at and manage the other providers in a post-acute care continuum.
Operator
Your next question comes from the line of Sheryl Skolnick from CRT Capital group.
Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
I wanted to follow-up on a couple of things, if I might. First of all, I have to go back to the recert number because obviously, that's the number that's fixed out.
So if I understood your most -- the comments that you just made, Bill, you put in place this patient care management system, you're attempting to educate your caregivers. Just go through for me again, remind me of the timing of when that really started to get traction?
William F. Borne
So the patient care management we put in place as a response to Humana, and some of the questions they had in reference to our utilization and how they wanted their patients managed. At that time, they didn't really have a UM function for the home care side.
So we put one in, and that's when we kind of started from our perspective, and focused mostly on Humana and as well as the -- the big uniting contract that we had signed. And what we recognize is that we had variation amongst the agencies, but less variation where we had PCM in place.
And we're actually getting better quality. So we looked at our process to be able to put that practice for the whole organization.
But recognizing we didn't want to manage clinical functions centrally. So what we established was clinical tools to allow the care centers individually to manage that day-to-day clinical decision-making.
And then with the shared service tenants, we had resources there that were more focused on consistency of care in narrowing down the variation. And then the patient care management is more of a central -- it's designed to look at what we call outliers, and if we see care that's extraordinary, too low or too much on both ends of the continuum, I'd add, then we reach down and we do a clinical consultation with a local care center, and give them a different perspective to look at, so they could make a final decision.
And what we've seen is that has reduced variation, but the more important thing is, there's an opportunity to selectively educate those clinical managers and director of operations, as well as the therapists that are involved on what the best practices is for the best outcome. And at the end of the second quarter, May, fully implemented by June, we were able to have that central process fully in place as well as all the tools that are needed locally and the regional oversight.
So we feel pretty good that going forward, we're going to see this really normalize.
Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
Okay. So that's extremely helpful.
So by June, it was completely rolled out. So then the second quarter recert and the recert -- the drop in the recert, never mind the recert rate, the actual drop in the number of recerts accelerated in the first quarter, 17% decline year-over-year on a same-store basis, 18% in the second quarter.
So it looks like it's accelerating, not decelerating from that perspective. And can you attribute the decline, the actual number decline to this process, as opposed to change in the nature of the patients?
Have you been able to do that work and figure out how much of that decline is self induced, as opposed to how much of it is market-driven?
William F. Borne
Right. Well, Sheryl, what our stats show is that we had the biggest decline in the fourth quarter of last year, about 2.5%.
And then we had about a 2% decline again in the first quarter. And now we had about 1.2% decline in the second quarter.
Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
That's in the rate, but not in the numbers, and the numbers, unfortunately are driving your results in terms of completed episodes. So I understand the rate argument, because that's going to vary with your admissions.
So I get some interaction here, but what I'm trying to isolate is, how much of the number decline in recert, I'm sorry for interrupting, is related to this clinical practices that are clearly admirable, clearly the right things to be doing, but how much of it is related to that?
William F. Borne
Right. So when you go back, you think that it's behavioral.
And the behavioral piece is a combination of all the things that I mentioned. It's putting in clinical programs, it is taking a look at the staff reductions that we made at the time, it's preparing for a different type of reimbursement, such as bundling.
And we think all of that, really drove a behavioral change, which has got some clinical components to it. And we think the oversight that we put in place and the education, will reduce the behavioral anomaly and give us some normalization.
So I feel -- you have another question?
Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
Yes, no -- I understand that, and I would agree that you'll reduce the behavioral anomaly, but what I'm trying to say is that, if you just fully rolled this out, on an absolute numbers basis, that's the number of patients coming in, and the number of patients that are not getting recert, that could well not anniversary until 1 year from now. So there could, be presumably less steep declines numbers of recerts year-over-year, not necessarily recert rate, but number of recerts year-over-year.
There could be less steep declines going to next year, but it sounds like we're not going to anniversary the full impact of the full rollout until 1 year from now. Is that fair?
William F. Borne
Well, no, I don't think that's fair. I think that we've been preparing for the oversight, again as a result of bundles and managed care activity.
And when we get to the fourth quarter, it will be 1 year. It's fully in place, and fully operational.
So I would expect, not knowing which direction it will move in, I would expect for it to normalize, as I mentioned, in the third quarter, and to be predictive of the trend going forward. So I don't think we're looking at 1 year.
I think we're looking at a quarter.
Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
Okay. Then I must have misunderstood when you said that it was rolled out fully in June.
I understand I thought you had began last December, but okay, so we'll see on that. And then the other question that I have is, if we can go through for a second, just what you expect to spend on hiring the new care transition coordinators and expect to spend on the IT and Clinical System, so that we can get a sense of what the incremental cost will be as against the cost savings that you've -- the admirable cost savings that you've achieved so far?
Ronald A. LaBorde
So Sheryl, let me make sure I understand you. You got 2 parts there.
The incremental cost of hiring BD staff?
Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
Yes, the care transition coordinators, right, as well as and separately, it's also an incremental cost question, so that's why I grouped them together, the rollout of the new Clinical Systems, and then the footnote to that is will those systems be able to assist in the transition to ICD-10.
William F. Borne
The -- well, no. We shouldn't see any incremental cost as we kind of focused on hiring additional BD staff.
I mean, in our -- we're not expecting to have that, have an impact from that. It will just be normal operations with a focus on the care transition coordinators.
So on the IT, if I'm understanding your question, so the development cost we're incurring this year, which will finish in the fourth quarter, that's capitalized. And there will be, as we go out with implementation over the next 2 years, really in '14 and '15, that implementation cost, a good portion of that will be capitalized also.
And then the other implementation cost of it, we -- where our view is just -- we haven't quantified, we'll shift current resources into the rollout process. So no incremental cost there.
That's our plan at this stage.
Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
Okay. That's very helpful.
And then the final question that I have is, on, well, the last question for that part was, will this assist in the transition to ICD-10 on October 1 of '14, is that your plan?
William F. Borne
Yes. Clearly focus the organization, and we're clearly focused on ICD-10 implementation, and it's all -- AMS3 is all part of that.
So we're -- we certainly are preparing for that, and we think we have a good plan.
Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
Okay, great. And then the final question that, if you'll allow me, is when we look at the -- when we're looking at the overall headwinds that your business is facing, and you basically, in this quarter have gotten $40 million of annualized cost savings year-over-year, you’re on the -- on just on the salaries, wages and benefits line alone, and that does -- you have there a lot of revenue headwinds so far this year, both in the hospice and in the home health business, got that.
It has a nice job of offsetting it. How much more do you think you have available within the organization to offset the cut.
The question was asked a little bit differently earlier, to offset the anticipated cuts if indeed you don't get any relief on rebasing?
Ronald A. LaBorde
Sheryl, this is Ronnie, and I'll start. The -- again, with respect to -- we still have a little bit more with respect to the divestiture strategy and the $10 million that we targeted.
So that's not all fully baked in yet. We'll realize that when the rest of these care centers are finally divested.
And the operating part of that certainly being captured in disc ops. But the -- we're certainly anticipating, kind of rightsizing the organization and seeing some reductions in G&A from that.
So more of that to come, so we believe that's still -- still will manifest itself. Secondly, and we go back just -- which we haven't quantified, it's certainly challenging, but we -- as we said we acknowledge that our margins have been a little bit behind our peers, and so we're working to close that gap.
So we still -- and as we said before, our opportunities are in gross margin and in G&A. And so we'll certainly try to -- and it's all consistent with the initiatives on patient care, to be more efficient in utilization, of achieving and sustaining and improving outcomes, but being more efficient while we do that, and then G&A.
The G&A line will reflect that. One other thing, the other initiative that shows up and allows for efficiency that's kind of building the foundation for the AMS3 rollout.
And we talked about the $10 million or $15 million we'll ultimately save from AMS3, that's our estimate as we sit -- hopefully that turns out to be conservative. But I'm going to forecast that will stand with our number.
But the shared service center model and AMS3 rollout certainly allows us to have a foundation of being more efficient, administratively, if you will, along with clinically. So those 2 coming together, we think, allow us to continue to rationalize cost, and be a more efficient operator.
Sheryl R. Skolnick - CRT Capital Group LLC, Research Division
Yes, I guess what I'm trying to get to is, with the cuts that you got already in the run rate, and the cuts that are coming, can you -- can you ever get ahead of the pressures on the business to shrink it? And I guess you're trying the best you can, but that remains to be seen.
William F. Borne
Well, Sheryl, that kind of depends what happens with the final rule. As I mentioned, there's a lot of activity there.
We're not giving up. We also continue to make the case, both to MedPAC and to Congress, that home care is obviously, our cost effective setting.
What we've seen, is obviously a shift to patients. So you've seen growth in the home health industry.
And one of the things that they pick on is the fact that the home health industry has had growth. Well, the bottom line is that, more than hospitals, is that a lot of the patients have shifted out of hospitals to the home health industry.
So the question is, is how much has been shifted to the industry versus just abnormal growth? And all of our information indicates that it's a shifting.
Also, indicates and we've put out reports with the partnership -- [indiscernible], a very good report, that this shows that home care is not only more cost-effective, but reduces readmissions, which has been, kind of a buzz, both in the medical as well as the political circuit. So we just have to keep proven value proposition.
We have to focus on targeting this problem of use, and getting savings there. And I think when it's all said and done, there'll be a rational approach to home health, and we'll get some relief.
So I don't think it's all internal. The other thing is, we have to be careful on cost.
And as Ronnie said, I think there's more. But you don't want to cut something out, that sort of go throws the baby out with the bathwater.
You've got to make sure that you're still putting resources in to grow, because a big part of it, is not just cutting cost, but actually getting back to that single-digit growth. That will cure a lot of the challenges that we have.
So when you balance them -- and then you go follow it, and hope to make some positive change in the rules, there's a lot of opportunity. And now that's not talking about what home health can evolve into, how we can provide transition of care programs, how we can be, take bundles, and be at risk there.
There are lots of opportunities that we can evolve to as an organization, to ignite our growth. I'm not talking about slow growth, but really nice, growth that we enjoyed over the years.
Operator
And this concludes the question-and-answer portion of the call. I'll turn it back to Bill Borne for any closing comments.
William F. Borne
Okay. Thanks, Steve, and thanks to everyone who joined the call today.
We sincerely appreciate your interest in the company, and we look forward to updating you on our next quarterly earnings call. Everybody have a great day.
Operator
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.