Heath Sampson: Yeah. Well, first off, our focus really over these last 12 months, and especially over these last six months since we have great new leadership in there with Ann and Damon and the rest of the team there on the PCS side. We’re building a platform. This organization historically was made up of a lot of individual businesses and individual locations that were doing great work, but very challenging to scale and grow when you have this. So that has been the focus, and really that’s proud of this platform we’re building there. And then we do expect to get back to the right level of growth at the right margin after we finish with these investments. But to your question around the 80%-20%, that we knew it came out. So that 20% gross margin cap that is being proposed, again, most importantly, it doesn’t need to be implemented until six years from now, and we do think there will be challenges around that.
But there was something in there that is very beneficial, is what is the definition of the 20% and including these clinical costs or these nurse costs are really helpful for us, because really the impact if this was implemented, it’d be very manageable for us. So it was a good outcome by including those clinical costs, because that margin historically from a gross margin were at 21% to 22%. And if you include the nurse costs that really covers a lot of that as well. So, long story short, we do believe that this rule will develop and change. We’re in a really good position as a large scale company. Then even if it was to get in place six years from now, just because of how it was defined we feel like we’re in a really good spot to grow and maintain strong margins.
Bob Labick: Okay. Super. Thank you so much. I’ll jump back in queue.
Operator: Thank you. Our next question is from Raj Kumar with Stephens. Please proceed with your question.
Raj Kumar: Hi and good morning. I’m just kind of wanted to dive deeper into the home segment. Just kind of wanted to see like, if there’s kind of differentiation in terms of NEMT does have like a more of a back half ramp story to it, just given redeterminations and implementation of new contract wins by PCS and RPM seemed like just based on your commentary that it may have like a smoother path to getting towards those 2024 targets. So, just wanted to get confirmation on that. And then just as a follow up, just kind of walk us through and the acceleration in membership for RPM you know kind of versus 1Q?
Heath Sampson: Yes, so the home segment made up of PCS and RPM, actually they will be specifically in PCS because of what we had in Q1 which we explained a lot of that has to do with some of the costs that we’ve added to do with this transformation. We expect that those costs will come out. In addition with the team generally on the new platform that we’re building, we actually expect growth to accelerate as well. So but it is smoother, right? Then that mobility there still is a lot that in mobility because of the timing of getting our sales on our cost out. But there is still a growth that we expect within PCS, as well as RPM. RPM two and in the Q1 is a timing difference between some of the business that came off related to the MA, but we have a large client that is MA and they didn’t win as much business.
So we didn’t get as much volume and we had some costs that stayed on. So, we expect that that will accelerate coming out of Q1 as well. But you’re not at the slope that NEMT is and it’s sort of it’s a reasonable plan to ensure that we hit our targets as we as we come out.
Raj Kumar: Great, thank you. And then just as my second question, I’m just kind of wanted to double-click on the 80-20 provisions and just trying to get your updated thoughts on just like I know like company in the past has talked to 23% to 24% gross margin target longer term. And given the definitional changes and what adjustments you can make, do you think that’s still achievable longer term or and or if there’s like a kind of updated baseline based on the adjustments that you think you guys can make?
Heath Sampson: Yes. So, it therapy depends what states you’re in is depending what your gross margin is going to be. Hence why a lot of people are arguing around this not a one size fits all makes sense across the country. For us where we are in our states, again our gross margin was historically from 22%, 21.5% to 22%, so much more manageable as we go down. And I’ll repeat again having the clinical costs of the nursing costs, it costs in that, really we only — we think the gap is in two percentage less than definitely less than 2% to get down to 20. So it’s very manageable under the current construct that we have. But there’s other provisions in the proposal that really require demand centralization, better compliance, better reporting, that cost money.
And that’s a lot of stuff that we’ve been doing for the last 18 months and we’ll have that in place. So and then we’ll be able to get scale and leverage off of that as we grow ours as well. So, the 10% to 12% EBITDA margin that we’ve laid out is definitely possible even after that 80-20 rules did come in place. Again, that’s six years from now. We don’t think it will be that. But we really believe that we’re in a good spot to grow and manage through and hit those EBITDA targets that we’ve always said.
Raj Kumar: Awesome. Thank you. That’s all from me.
Heath Sampson: Thanks.
Operator: Thank you. Our next question is from Brian Tanquilut with Jefferies. Please proceed with your question.
Taji Phillips: Good morning. You have Taji Phillips on for Brian. Thanks for taking my question. So maybe first to kind of dive a little bit deeper on the cost savings initiatives. And clearly in the bridge you outlined in the slide deck, you showed $1 million being realized in the quarter, but then another $33 million to $37 million left in the tank. Maybe can you tell us what gives you confidence in your ability to execute on this and kind of lay out what else needs to happen for you to realize these savings throughout the year?
