Thanks for joining us today. My pleasure to have the team from BrightSpring. We've got Jon Rousseau and Jennifer Phipps. Maybe just to get started, Jon, you guys have made a lot of investments around administrative procurement efficiency initiatives. A lot of this stuff is underway. Feels like the slope of the margin curve is moving up into the right with a lot of these AI initiatives. Maybe just like step back and put into perspective some of the just operating initiatives that you have that you're working on right now.
Sure. Well, nice to see you, Whit. Good afternoon, everybody. Yeah, I mean, I think as we step back, that's been a piece of our long-term growth over nine years. It's really been three things. It's been our volume growth and what you just talked about, overall operational efficiency from a lot of specific initiatives and cultural processes that we've now embedded. Number three is selective and accretive M&A. You know, within the operational efficiency bucket and with a focus on you know margins, you know, it's always a function of numerous things. For us, that volume growth is continuing to drive margin with economies of scale, leveraging some of those fixed costs. You've got some product mix in there.
The business units that we specifically focus for growth on, you know, are all a part of that effort. You know, just operating organizationally as efficiently as you can, from a process and a system standpoint. We're always looking to enable our employees with the best tools that they possibly can from a quality perspective and to be able to do our jobs most efficiently. You know, a couple of things. We've got a centralized procurement team for the organization, that is, you know, working every year to continue to leverage our scale, you know, with our suppliers.
You know, I think sometimes we don't get quite enough, maybe, I don't know if recognition is the right word, but the advantages that we do have from scale, you know, as really the largest independent home and community health services provider out there today. You know, that one enterprise and scaled approach we have has a lot of benefits, including in procurement. I would say second, you know, there is a lean culture within the organization. You know, just even in the last year, we've formalized, you know, white, green, black belt training throughout our company. Literally over a 100 projects within the organization down in the business units that people identify and execute on for themselves. You know, a third piece to the efficiency bucket would be just continuing to invest in systems.
You know, leading systems within our organization, so that employees can work most efficiently, we can have real-time data, and we can drive the best outcomes possible. I would say, you know, really last and most recent is focusing on more and more automation and AI projects. You know, we hired an excellent CTO about six, seven months ago. We're also building out an internal team for AI in addition to working with external vendors. I mean, there's seven or eight key initiatives for 2026 that we're focused on, that are all directly linked to planned efficiency improvements throughout the year. You know, it spans across our buying ability. It spans across what we're doing internally around just lean process, always putting new systems in place, and now trying to be as automated as we can where it makes sense.
These are multi-year initiatives, of course. When we look at the overall growth of the pharmacy segment, specifically, specialty, obviously we've been in an environment of very elevated growth rates. How sustainable do you think this type of growth is? Obviously, you've guided to a level of moderation right now, but you continue to win a ton of LDDs, brand and generic, and you've got a lot of visibility into the development of a lot of these oncology drugs. Maybe just put into perspective how you think about just the sustainability of this type of growth.
Yeah. I think we've been able to put, you know, a really good business model in place over 10+ years now. You know, that's fundamentally rooted in our quality and service levels, in relationships and partnerships with pharma and, you know, within our specialty business, specifically, you know, it is multifactorial, you know, from pharma launching innovative new therapies that we are always honored to be a partner with them in, you know, very small limited pharmacy networks. You know, we expect to continue to partner with them, you know, upwards of 20 new brand launches again this year. You know, some of those, most of those are oncology, but there are also a lot of interesting rare and orphan therapies in other related classes.
You know, first, you know, I think you will continue to see a very robust pharma pipeline pull through with our track record and relationships with them. You know, secondly, we've got a ever-increasing fee-for-service business. These are hub programs for pharma. These are Service Agreements, Data Agreements with pharma. That continues to grow. And then third, over time, some brands will ultimately go off patent and convert to generic. We've been focused on driving generic utilization where there are opportunities as well. And again, all of it's enabled by our quality and service levels and our clinical liaisons who are in thousands of doctors' offices every day, you know, really trying to provide world-class support for prescribing physicians and the patients and their families.
Whether it's in any one of those three different growth drivers specific to that specialty business, you know, we see a lot of continuity there and, you know, the oncology industry in totality is growing, you know, I think upwards of maybe 15%. Specialty writ large is growing, you know, I think double digits or right around there. You know, because of the LDD launches, because of some of the generic conversions, you know, we've been able to grow our market share at rates above that. You know, we see that algorithm continuing to play out, you know, at least as far as we have visibility into.
We've spoken to some of the manufacturers that you work with, but why do you think it is that you have become or a, you know, preferred partner of choice versus some of the larger, more integrated, vertically integrated, pharmacies?
Yeah, I think, you know, at this point, we've got 15 years of data and track record around quality and service levels, and, you know, whether it's Net Promoter Score, whether it's Medication Possession Ratio s, whether it's time to fill, you know. There's upwards of, you know, 30+ activities that you have to execute with patients throughout their journey and, you know, that's something that we've invested heavily in, you know, across all dimensions, you know, of that continuum for the patient.
I think a lot of trust has been built up over the years and, you know, it starts, you know, well ahead of commercialization and, you know, we just try to white glove everything we can. You know, over time, our scope has expanded across, you know, almost every geography in the United States at this point. I think we have a, you know, a national presence that we can provide and, you know, we wanna continue to try to be the best partner we can.
Yeah. You've worked on a host of initiatives and things around the Salesforce, and maybe elaborate a little bit on what you've done there and how you feel like that's tracking against your expectations.
Yeah. You know, I think, you know, fundamentals 101 of Salesforce is just reach and frequency. You know, every year, we've continued to invest in more liaisons in the business, you know, at this point, almost shrinking territories so that, you know, we can service patients, their families, and prescribers as best possible, you know, with high touch in those offices, providing, you know, excellent clinical resource and education to them about everything that's going on in their therapeutic state and with their specific therapies. We've just continued to invest in that with a very well-educated, you know, high touch, team out in the field every day. You know, it's something that we're adding to again this year.
Let's talk about the IRA. There's some headwinds this year, but there's also some mitigation. Can you talk about that and what the enhanced dispensing fee is?
Sure. Jen, do you wanna hit this?
Sure. As we've mentioned, we have been able to mitigate the headwinds to approximately $15 million, which is our expected headwinds for 2026. We were able to do that via negotiations with the PBMs regarding enhanced dispensing fees. That is where they pay us an additional fee on top of what is basically no drug spread in order to dispense the drug.
Okay. Let's talk about PharMerica for a bit, your institutional pharmacy business. I feel like there's been a little bit of life back within the SNF industry today. How is that business performing right now?
Yeah. That's one of our three, you know, closed-door pharmacy businesses, Home & Community Pharmacy. You know, the history of that business has changed so much in the last decade. You know, used to serve, you know, primarily all Skilled Nursing facilities, and the Skilled Nursing facilities today are doing very, very well. I mean, just look at a handful of the public companies out there. You know, our larger customers, you know, by and large, are doing great. That industry looks pretty healthy today, but it's actually become the third or fourth, you know, largest end market for us. Senior Living, Behavioral, IDD Pharmacy, Hospice Pharmacy, getting into PACE Pharmacy, you know, these are all very interesting end markets where I think we provide great service, but where there is a lot more growth opportunity.
You know, this year, with the growth rate that we've been experiencing, you know, we have been continuing to invest in the company, you know, whether that's in corporate resources, HR, IT, this AI, or whether it's in sales and marketing. Home & Community Pharmacy would be a really good example of where we've hired a lot more resources from an automation and technology perspective, but then in each one of those end markets, we've hired more sales and marketers. You know, excited about where that can go over time. You know, pharmacy is an industry where you have to have scale. You know, I think home and community, almost more than anything else, you have to have a tremendous amount of scale.
you know, our thought there is how do we continue to grow volume through industry-leading quality and services for our customers, and how do you do that in the most efficient way from a cost perspective? you know, that business, more than anything else, is where we are leaning into AI and technology, whether it's intake, whether it's rev cycle, you name it. you know, we have a team there really since last summer who's very skilled at doing this. you know, the future of that business is volume and efficiency, and that's what we're focused on.
All right. Let's talk about infusion for a minute. You've indicated desire to look at the acute infusion market. It's a very complicated, complex lot of high barriers to entry, low margin for error business. How are you thinking about that opportunity right now?
Yeah. Infusion, you know, we really think of in a bifurcated way and run that way. You have acute infusion, and then you have the chronic infusion, also called Specialty Infusion . The demands of the customer and the patient base and the referral sources are very different for those two types of infusion. Acute is harder just from a logistics and an X's and O's standpoint. You have to be local. You have to be somewhere within an hour if you need to provide that acute infusion. You know, we have over 30 local pharmacies that do that. You know, we're really focused on turnaround time, you know, to be able to take a referral quickly, run it through the benefits verification, and get to that patient very quickly.
You know, it's an area that a lot of people have retrenched from, and, you know, that's something that we embrace. Acute is a very large market, and, you know, we view it as incredibly steady, incredibly necessary. You know us, and then there's Option Care, and you really have a lot of local players. It's an area we continue to lean into. You know, we've been growing that part of our business 10%, but we think there's so much more opportunity. On the chronic side of infusion, you know, that's a business that, you know, we are also updating our operational processes around. A little bit more of a specialized business with centralized hubs servicing that.
We have been, I would say, comparatively underweight on the chronic therapy side, given the history of the company on the acute side, and I think that's a significant opportunity as well. We are investing in that sales force and in that team too. You know, as evidence of that, obviously we've got close to 150 LDDs on the oncology side in our Specialty business in oral and injectables. You know, we have turned our focus from an LDD perspective also to infusion. In the chronic and specialty side of infusion, you know, we've won, you know, several LDDs here just in the last few months with an increased focus on it. Excited about both acute and chronic infusion. Writ large within the infusion industry, you look at the pipeline, you know, we think that's an attractive space.
When you think about organic and inorganic growth, I mean, there have been some assets that have traded and have come to market with some pretty high expectations around valuation. Would you expect to be active in that space from an M&A perspective or more of an organic type of growth opportunity?
From an infusion standpoint, we, you know, are excited to continue to look at deals. I think, you know, we took a pause from that for the last couple of years as we were really focusing on making sure our operations and our operating models were where we wanted to be, and we had the team in place. We are very excited that we have gotten to that place, and so we continue to look at those deals. I think, you know, we'll continue to look. We'll obviously be very strategic and smart about anything that we would do, paying close attention from a multiple standpoint. I think where we could expand some geographies beyond where we are today, I think that's where we would be primarily interested.
Yeah, I mean, I think the answer is both compared to a couple years ago. You know, with the platform, the way it's exists today and with the team we have, you know, we are open to opportunities in that space. You know, acquisition multiples for infusion deals have been extremely elevated, as you say, Whit. I mean, over 20x, you know, have been the valuations for infusion companies. You know, you have to be very selective and, you know, see if you can make something work, you know, maybe lower down in the market. You know, I give our team and Jen and the company a lot of credit for where the leverage ratio has come.
You know, we're under 3x at the end of 2025, coming off of 4.6, 4.7 at the IPO two years ago. Pro forma for the Community Living divestiture will be about 2.65x leverage at the end of last year. You know, if we hit our plan this year, you know, we will be under 2x leverage, excluding any other uses of capital. You know, I think we're in a position where we do have a lot of flexibility. You know, in our M&A history, we're 75 out of 77 on deals.
You know, 75 of the deals we've done, the EBITDA is higher than when we acquired it. You know, we're literally almost 100% on M&A, and we just put a lot of care and attention into it. If we find something that we're interested in, you know, I would say infusion would be one of our top two or three markets, definitely in terms of perhaps more of an openness and willingness to M&A as we get to the later part of this year and into next year.
Okay. Let's shift to the provider segment. As you mentioned, you're divesting the Community Living business, kind of de-risking the portfolio, de-emphasizing Medicaid, a little bit. Inside of that, you've got a collection of different assets, and Dave and I talk about this all the time. It's almost like no individual one can outperform or underperform enough to change the overall growth profile of the business. Maybe talk about some of the underperformers or outperformers right now.
Yeah. You know, within our home and community platform, you know, we always just, you know, run it and think about it as three, you know, excellent leading pharmacy businesses, you know, closed-door Home & Community Pharmacy, and then three provider businesses, fundamentally Home Health, Home Healthcare, Hospice, and Rehab. Each one of those three provider businesses is doing really well. You know, Hospice has had good stability from a reimbursement standpoint. You know, the ROI is clearly evident. It's extremely strong and most people who have had any experience with palliative or Hospice care, you know, 99% satisfaction rates. You know, that's an excellent team. We continue to scale that business within our current markets. We continue to step into some adjacent markets.
We did an average to smaller size deal in Florida 1.5 year ago that's gone incredibly well. You know, I think we really like Hospice. Home Health, we just closed the deal in December, acquiring some assets that United was divesting in their transaction of Amedisys. Excited about that. The integration is already going very well. I think by the end of this year, we'll be fully integrated. I think there's some real volume growth opportunity there as well as some margin opportunity. On the Rehab side, it's a very neuro-focused Rehab business, a lot of commercial and workers' comp in there.
We are expanding from that payer and patient base more into the senior side, Part B, because that is very synergistic with Home Health when you're in these same Home Health settings, to serve Medicare individuals with Rehab. We're excited about that synergy. You know, all of those markets fundamentally growing at 4%-7%, you know, and I think we've done a good job of taking share. You know, our target for every one of those businesses is to get to double-digit growth. You have de novos in there, you have some tuck-in M&A.
We view all of these markets as really being, you know, a key solution for high-quality, lower-cost healthcare of the future, and we're just continuing to scale that platform. We see double-digit, you know, growth potential, and that's what we're driving to in each one of those businesses. Hospice has probably been a little bit of the star performer there in the last couple years, but everybody's done a really nice job.
Right. On the United transaction, you now own some of the LHC and Amedisys assets, and knowing those businesses pretty well, they are very well run. Where, from an operating standpoint, do you see the largest opportunities?
Yeah, one of the things we like the most about that transaction was the quality and compliance reviews and audits. The scores that they had historically, the audits that we did, you know, really, really fantastic quality. For us, how do we continue to just grow that platform more with maybe a little bit more of a commercial execution focus? Most of these states are CON states with a little bit less competition.
You know, we're excited to try to apply a lot of our best practices. For example, we have centralized intake, and, you know, I think there's things that we can bring to bear in that business that we're super excited about. You know, I think, you know, give it a year or so for good integration work, but you know, we would expect to see, you know, a census growth rate and a margin profile that, you know, exceeds the historicals. You know, I think by the end of this year, you know, we should be on track for that.
Many of the industry participants and the stakeholders, lobbyists have a view within Home Health that CMS may in fact not be required to further implement any of the behavioral adjustment cuts. I'm just curious your perspective on the rule, the language, what you think about that.
Yeah. We continue to remain very optimistic. We're very focused from a government relations standpoint, advocating and beginning to really lead. We do in lots of our different business lines lead the industries associated with those government relations activities. We know that the evidence has never been stronger related to the support and the outcomes that Home Health generates and what it does to reduce cost to the system and reduce hospitalizations. We just feel it's very important to continue to advocate for appropriate rate support in that business line.
Yeah, I mean, the final rule was, you know, the thinking that went into it and the outcome was good, was helpful to see. Hopefully with more and more education, you know, we can get to a place where there's, you know, normal, reasonable net rate increases a year and, you know, over the next year we'll see how that plays out.
Okay. We don't have a lot of metrics for each of the individual provider segments, which that's fine. When you look at just Home Health in general and like cost per visit per episode, are there opportunities within your broader Home Health platform today to drive those lower or gain more productivity?
Yeah. I think we do pretty well from an efficiency and operational standpoint. I would say, you know, quality as well, 91% of our branches are four-star or better. So just really. Just recently here, I think 70% of our branches were named U.S. News Best in the country, top rated performance in the country. So I think our opportunities in Home Health and in Hospice as well are primarily in two areas, which would be census growth. You know, continuing to execute from a clinical liaison perspective in each and every one of our markets, maybe adding to that sales force in every market, and doing de novos just to drive top line in census.
Second, as we deploy more and more technology and AI into that business, you know, there's tools that we've implemented just in the last six months around, you know, that are extremely helpful in centralized intake, and even a lot of hospitals will put referrals out into portals, you know, that are available to Home Health companies. You know, automating the acquisition of those portfolios, the vetting of them.
I think in Home Health and Hospice largely characterized by what can we continue to do to bring our leading quality to more and more patients investing in sales and de novos. What can we do to continue to automate the business, you know, as much as we can and have it be, you know, have it truly, you know, can that business truly have a profile as being the most technologically advanced in the industry? I mean, that's certainly where we're headed and what we're aiming for.
Jen, how do you feel about your MA contracts in Home Health today?
Yeah. We've been able to drive differentiated rate because of our high-quality services, so we're increasingly seeing and having payers come to us from an MA standpoint to take more of their patients. Ultimately, we've been able to negotiate better rates that are oftentimes tied to outcomes that we're able to achieve, which has been very helpful.
Yeah. I mean, it's all underpinned on quality. I remember there was a quote by a certain CEO of one of the biggest payers in the country three years ago that said, "In all of our work, we've never seen something that improves quality and drive costs down more than Home Health." You know, as we've gotten our star ratings to where they are over time, as we continue to increase our scale, you know, we advocate for ourselves in working with our payer partners.
How much more of an opportunity do you have to bring your pharmacy solutions back into your Hospice assets?
Yeah. Hospice, I would say across providers broadly, there's more opportunity there. Hospice would be a great example of, I think, where we've executed really well. All of our Hospice patients today get our high-quality pharmacy from our own pharmacy internally. I think there's opportunity to do that on Home Health. There's a little more opportunity to do that on Rehab. You know, there's even more opportunity from an Integrated Care perspective. You know, we sort of define growth internally between core growth and strategic growth. Core growth would be those six core service lines that we have. I think every one of those industries, you know, and businesses can continue to scale much more. You look at strategic growth, you know, an example of one of four areas of strategic growth for us would be Integrated Care .
You know, you look at several 100,000 individuals that are going home from Skilled Nursing facilities every year. They're discharging, going home, where we're the pharmacy in that building, right? We're increasingly the Primary Care in that building, house calls, right? If you're able to care coordinate, care manage that patient upon discharge, there are a lot more opportunities to improve their transition back into the home and the community with your other provider services. A lot of those patients, 40% of them will go on Home Health, some will go on Rehab. We're really looking at making sure we try to, over time, you know, have the right care management capabilities in the organization to partner in those transitions.
Do you also have opportunities to be the payer? In some of those instances, you acquired an I-SNF. Don't really hear much about that much more. How's that performing?
Yeah, it's going fine. We have a growing house calls business. We have about 15,000 patients, but we do wanna get that to over 100,000 patients in the next five years. We have an ACO capability. You know, we're looking at what the next evolution of that needs to be, with some of these REACH-type models going permanent in 2028. There's three different ways that you can potentially, you know, be a payer or receive value-based care payer-like economics. It's through an ACO capability, it's through an I-SNF capability and ALFs and SNFs, and it's through partnering with payers. It's all underpinned by the ability to drive better outcomes for the highest cost, most at-risk patients, and we think you need three things to do that.
You need Primary Care going into the place where they live. You need to put the meds on lockdown through an effective med management program because that's one of the top two reasons why people go to the hospital is the meds. You know, we have a study that was published two years ago in JAMA that showed we reduce hospitalization rates by 70% with our meds in the home program. Then number third, we think you need a care management hub. You know, the med program we have, we can universally provide that in all 50 states today. Primary Care is building out. We're in several states today, and then we're further building out our hub capabilities.
Those three capabilities, going into the Home on P rimary Care, managing the meds, and then solving the in-between time when you're in the home, when issues come up, and proactively care coordinating patients, that's what our model is. Increasingly, we're gonna go in and try to partner with payers for their high-risk members to get them better outcomes.
Jen, on the cash flow this year, I can't remember if you guided to cash flow from ops and free cash flow. It might be helpful just to refresh my memory.
Sure. No, we did not guide to free cash flow or operating cash flow for this year.
I didn't forget.
You did not forget. There's a couple reasons. Obviously, we expect to close the Community Living transaction later this quarter. We're also looking to get some better interest rate post that transaction. I think there's a couple of things that, moving pieces that we expect to have more information on, when we get to the Q1 Earnings Call. Just as a reminder, as it relates to our really strong operating cash flow for 2025, when you look at, we did have Community Living in our cash flow the entirety of 2025. When you look at the EBITDA that we hadn't achieved in 2025 compared to our guide in 2026, they're very similar in terms of that. We would expect a continuation of what we saw in 2025.
There was one discrete positive cash flow item related, you know, due to a discrete tax savings initiative that we had that was worth about $20 million. Outside of that, would expect, you know, continuation of just working capital management, focus on delivering, you know, more and more of that value, which we've been able to do over time and, you know, it'll look very similar. Just only one other thing, which we'll talk more about in Q1, the cash taxes that we do have to pay for the Community Living transaction will go through operating cash flow. It'll obviously be a discrete item that, you know, certainly has been in the net number we've been talking about related to that. Just geography, it will be sitting in operating cash flow.
We can add and subtract, so.
Correct. Exactly.
We can figure it out.
Yeah.
All right. Well, we're just out of time. Jon, Jen, thank you so much. This was great.
Yeah. Thank you.
Thank you, Whit.