Jeff Shaner: Yes, that’s a great question. Thanks, Joanna. First, let us go on record with the entire home health and hospice industry by saying we do not think that, that putting the behavioral adjustment in 2024 is the right thing to do. We stand firm with the entire National Association for Home Care, all of our peers by saying that is a devastating temporary rate impact to the business, it’s unnecessary certainly inflation in the last three years of inflation have outpaced the basically flat to slightly negative rate in home health. So let me go on record by saying Aveanna supports the industry and saying that that’s not a good outcome. With that said, we are expecting rate to be continue to be a headwind or choppy for the next few years in home health.
And because of that, we’re focused on now, as Dave mentioned, we’re fully operational, fully implemented Homecare Homebase. We’re focused on operating the business, doing the things that we can do to provide the best care with the best outcomes and also provide an appropriate gross margin and margin profile. Part of that is we are committed to being an episodic reimbursed home health business. And in our comments, we commented that we’re 63% episodic business. We’re slightly ahead of that in the first quarter 2023. And I think we’re ahead of the industry in that, that we stay committed to being an episodic reimbursed primary reimbursed focus. The flip side of that is we’re not going to give away our limited home health and hospice clinical resources for discounted payers and discounted prices.
And so, we would rather take our resources and put them with the payers that value our services. And because of that, I think that we can stay and achieve and stay in that 45% to 46%, maybe 47% gross margin range here in 2023 and truly continue to grow the home health and hospice segment, but also maintain profitability at the gross margin and contribution line. Thanks, Joanna.
Joanna Gajuk: Thank you.
Operator: Thank you. Our next question is from Raj Kumar with Stephens Inc. Please proceed with your question.
Unidentified Analyst: Hi, yes this is Raja with Scott Fidel. So you just called out where you expect home health and hospice gross margins to land in 2023. So could you kind of – can you provide more insight into where you expect that to be for PDS and Medical Solutions business as well?
Jeff Shaner: Yes, Raj. I think – and Dave put it in some of his prepared remarks, AMS, we fully expect to stay in that 42% to 43% range. As you look at Q4, you’ll see we had a little bit of reserve adjustment in the quarter that brought it down just below 40%, but strong expectations for Medical Solutions this year, we’ll be right in that 42% to 43%, maybe 43.5% gross margin range. And then if you normalize PDS for that legal reserve that we took, we’re still in that 28.5%, just shy of 29% gross margin. I think, we would tell you that’s probably where we’ll land in 2023, even though we’re shifting volume away from lower-paying payers towards more appropriate paying payers with our preferred payer strategy. We will continue to pass on that incremental portion to our nurses and our caregivers to drive our volume growth. So, I think you’ll see us stay in that, Dave, I would say 28% to 29%, maybe slightly above 29% from a gross margin in PDS.
Unidentified Analyst: Right yes thank you for the color. And then as a follow-up, what are your expectations for operating cash flow and CapEx in 2023? And then what do you expect leverage to come to in 2023, at the end of 2023?
