We’ll give you the update in Q2. And then in terms of your — the first question on how long it takes to get referrals. I mean that referral becomes a patient in a chair. And obviously, the more treatments we have, it plays into the treatment number — pretty quickly, but obviously, on new patient and one treatment adds so a lower number to the numerator, if you will. I think, obviously, we want to make sure that, that referral gets scheduled, get into our clinic that they’re not missing their treatment and overall, that’s adding to the growth. But obviously, that does take time to show up in because of the number of patients, the number of treatments in the base takes one additional patient. It takes a while to show up in the number and we need a lot of patients to get that back.
But we’re optimistic. I feel really confident with the work the team is doing. I think we’re addressing it the right way. We’re pulling apart processes and improving them end-to-end. So I’m optimistic that it’s going to translate into real growth.
Hugo Solvet: Thank you very much.
Dominik Heger: Thank you, Hugo. The next question comes from [indiscernible] from JPMorgan.
Unidentified Analyst: Hi, good afternoon. Thanks for taking my call. My call is on behalf of David Adlington. I had two, please. Firstly, can you please quantify how much of a benefit the BBC was in Q1? And how should we be thinking about that for the rest of the year? And then second one is just a follow-up on the labor inflation. Could you comment on how much your agency costs have reduced year-on-year? And can you take these agency costs down further?
Helen Giza: Thanks [Indiscernible]. I think I’ll take both of those. The BBC business, as you know, obviously fluctuates up and down depending on the kind of the — kind of the claims and experience there. I think probably the number that’s meaningful for Q1 is that we saw a low double-digit positive amount in the quarter. So, that kind of gives you a sense of when we talk about the phasing of the earnings contribution in Q1 was low double-digits. And that’s in euros. The kind of — how that plays out through the rest of the year will depend on that — the kind of the contract and the way the revenue flows. In terms of your labor question, as quickly as that temporary labor market rose and what I referred to as the hot mess of the summer of 2022, and those weights increased that all dissipated as well.
So, our use of contract labor is down significantly year-over-year and quarter-over-quarter. We’re using it selectively. I would say, though, where we know that it makes sense to use it. There’s really tight controls over using it in certain metro areas, hotspots or clear constrained clinics where we need to get temporary labor in, but definitely down in usage and significantly down in rates.
Unidentified Analyst: Perfect. That’s very helpful. Thanks Helen.
Dominik Heger: thank you. The next question comes from Oliver from ODDO BHF.
Oliver Metzger: Yes, good afternoon. Thanks for taking my questions. So, the first one is also on labor. So, recent data suggest a stronger-than-expected economy of U.S., also some more positive labor data. So can you elaborate about the current labor shortage situations? And also in this context, maybe after a bad experience you made two years ago, if the situation deteriorates quickly, have you learned something from two years ago where you can adapt that the consequences might not be as severe, just talking in an extreme case scenario? Second question is a summer is not far away. So, some indication about the next years, the bundled rate increase should come — so I assume you have a lot of interactions with CMS and also government.
So, is there already any tenancy? How do you think the next year’s bundle rate might look like? Also in this context, how is your experience about the weak bundled price increase this year to spread into the commercial plans? How is the mechanism also time-wise? Do you see there an immediate impact from PMS price than a few months later, you see also commercial prices to that also a slower increase. So, that would be very helpful. Thank you.
Helen Giza: Thanks Oliver to both those questions. Yes, look, I think the — the labor trends, I think we’re balancing, as Martin said, balancing the merit increases and being selective about where we’re paying for that labor, but offset by labor efficiencies, that’s key. I think also I’m really encouraged by another reduction of 500 open positions in Q1. And when I look at now this open position number, 3,000, 3,500. It’s still actually at the same kind of split between nurses and PCTs. Our overall turnover is also improving. So that — and I think also about one-third of those hires that we now are getting in are what we call boomerangs, returning employees. So, the benefit of that is we’re making inroads into the open positions.
We’re hiring back experienced tenured employees that require less training and our overall turnover is improving as well. I think we’ve also — we have learned a lot from the summer of 2022. I think in terms of being able with our metrics to see those signals earlier in a clinic and also this kind of very dedicated use of temporary labor. I think the market doesn’t feel like it was, but obviously, in some areas, we’re still watching it quite closely. I love the crystal ball of what the PPS rate is going to look like. And I just about the cost. But I think what we know is MedPAC has put out a suggested 1.8%, I hope that after the spikes of cost inflation and things being a little out of control over the last few years, as things settle down, the reimbursement rate and the mechanisms that we have relied on for years come back into play.
And I don’t know, common sense on the normality play now. Saying that, we haven’t built our guidance on egregious increases. So I think as you’ve — as we’ve said, been quite consistent, we have assumed moderate overall rate increases and if they’re higher grade. So I think we’re being cautiously conservative there and appropriately so until we know anything else.
Oliver Metzger: Okay. Thank you. And regarding the spillover from the bundled rate into the commercial contracts, what’s your–
Helen Giza: Yes. Sorry, I missed that. I missed that second part of that question, my apologies. Look, the commercial rate for both MA and commercial are obviously contracted separately. We obviously take into account what — when we’re entering into any negotiation, it’s kind of kind of taking the impact of the PPS rate as a baseline into those negotiations and always kind of a healthy trade-off between volume and price, network adequacy and coverage. So I think our overall guidance is moderate overall rate increases. So, I think the what we — we have a new head of contracting strategy who is really, really terrific. And I think overall, helping us with our future contracting strategy here. They’re not all automatically linked to the PPS weight.
I think you know that some have escalators in them, CPI. So they’re all quite different. But overall, as I said, we’re assuming a moderate increase of the 1% to 2% rate. So, yes, I think everything looks good and on track there.
Oliver Metzger: Okay, great. Thank you very much.
Dominik Heger: So, we have time for one last caller. Falko from Deutsche Bank.
Falko Friedrichs: Thank you very much. Helen, I have two clarification questions on guidance, please. Firstly, on the same-store treatment growth guidance and specifically the upper end, the 2%. Can we still consider that as a realistic average growth rate for this year? Or should we rather view this as a potential exit rate? And then look at the lower end of 0.5% to 1% as a realistic average growth for this year? And then secondly, I was a little surprised that you confirmed your 2025 EBIT margin target again today. Is there actually still a realistic scenario in which you can get to a 14% margin next year? And if that’s not the case, I’m just a little surprised that sort of you keep this type of aggressive hurdle here.
Helen Giza: Yes, I think it’s a fair question, and it’s obviously one that we are working through in real-time on the back of flat same market treatment growth in Q1. Obviously, we’ve got a guidance range out there. I think it’s fair to assume that, that 2% is more of an exit rate than an average rate at this point. And I think, obviously, as we get another quarter under our belt, we will refine or adjust or update accordingly. On your second question, I don’t feel it’s aggressive. We clearly have a range out there for our EBIT margin. I think I’ve been pretty consistent in my commitment to try and give an update on that band itself by half one. I think that is still my plan — you know me by now. I’m trying to take it a quarter at a time.
I’m really pleased with the progress. It’s on track and the financials and bottom line performance are clearly speaking for themselves. I know there’s a question out there of what’s it going to take to get to the top end of those EBIT margins. But I think the progress that we’re making will continue to inform that and for now, I’m not going to change it today. But clearly, it’s top of mind for me knowing that the time I get to half one, the end of 2025 is only 18 months away. So we’ll continue to provide the appropriate color and kind of how we’re seeing those guidance ranges as the year goes on.
Falko Friedrichs: Okay, thank you Helen.
Helen Giza: You bet Falco.
Dominik Heger: So, we have run out of time. Thank you, everyone, for this contribution. This is great for I know what you all have a busy day. Thank you very much. We’ll appreciate that. And we’ll meet you on the road and our latest next quarter. Thank you.
Helen Giza: Thanks everyone. Thanks for your continuing support. Take care.
Martin Fischer: Take care.
