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AMEDISYS Inc (NASDAQ:AMED)
Q3 2020 Earnings Call
Oct 29, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Amedisys, Inc. Third Quarter 2020 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to introduce your host, Mr. Nick Muscato, Senior Vice President of Finance. Thank you, sir. You may now begin.

Nick Muscato -- Vice President of Strategic Finance

Thank you, operator, and welcome to the Amedisys investor conference call to discuss the results of the third quarter ended September 30, 2020. A copy of our press release, supplemental slides and related Form 8-K filing with the SEC are available on the Investor Relations page of our website. Speaking on today's call from Amedisys will be Paul Kusserow, Chairman, CEO and President; and Scott Ginn, Chief Financial Officer. Also joining us is Chris Gerard, Chief Operating Officer; and Dave Kemmerly, Chief Legal and Government Affairs Officer. Before we get started with our call, I would like to remind everyone that statements made on this conference call today may constitute 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.

The company assumes no obligation to update information provided on this call to reflect subsequent events other than as required under applicable securities laws. These forward-looking statements may involve a number of risks and uncertainties, which may cause the company's results or 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. In addition, as required by SEC Regulation G, a reconciliation of any non-GAAP measure mentioned during our call today to the most comparable GAAP measure will be available in our forms 10-K, 10-Q and 8-K.

Thank you. And now I'll turn the call over to Amedisys' CEO, Paul Kusserow.

Paul Kusserow -- President And Chief Executive Officer

Thanks, Nick, and welcome to the Amedisys Third Quarter 2020 Earnings Call. I'm extremely proud of our performance this quarter as we have once again generated prodigious clinical, operational and financial results, besting both our internal and external expectations in a tumultuous environment with the ongoing COVID pandemic, still resurging and the once-in-20-year payment system overhaul, PDGM. We delivered on our four strategic pillars, all while we and the country continue to deal with this crippling pandemic and our industry with the transition to PDGM. Our performance throughout this quarter once again shows the resiliency and persistence of our caregiving company. Our clinical team and all of us to support them who will stop at nothing to provide the high-quality clinical care to our patients.

Our performance is a direct result of all the incredible [Indecipherable] in increasingly hard circumstances, and I want to send a heartfelt thank you to each and every one of you. This quarter, we will briefly spend time reviewing our progress against our four strategic pillars, digging into our underlying business performance, updating our outlook for 2020 and diving into COVID-19's varying impact on 3Q results as well as exploring our even stronger outlook for 2021 and beyond. During this call, Scott Ginn and I will cover the following. Our performance in Q3, which bested our internal modeling and street expectations and highlights how important, essential and resilient home health, hospice and personal care are to the healthcare delivery system.

We'll talk about COVID-19, which has now sadly settled more into a business as usual. We are carefully monitoring these concerning surges and are learning how to execute successfully in this unusual environment and working to turn headwinds into tailwinds. The reimbursement outlook for both home health and hospice which will set up 2021 to be our best Medicare reimbursement year in recent history. Post-COVID, including our updated view of 2020 guidance, what we're doing to position ourselves for a strong 2021 and beyond and why the future value proposition of all our business segments looks even more promising. With that, let's dive right into our progress against the four strategic pillars, which are the drivers of our company and its success. Always starting with quality. We achieved a quality of patient care star QPC score of 4.33, and we had 95% of our care centers at four stars or above and 65% of our care centers at 4.5 stars or above. Our SHP score is 4.5 stars, which is important as there will be no more QPC updates until January 2022. SHP will be our interim standard.

Our hospice business once again significantly outperformed the hospice item set national average in all measurement categories and puts us at the top quality wise of the national players. Next is growth. In home health, we grew total admits by 5% and total volume by 6%, showing just how strong and quickly, the business has recovered from the initial impact of COVID-19. We expect these trends to strengthen throughout Q4, setting us up for strong growth in 2021. In hospice, we delivered strong total admits at an impressive 9%. ADC and hospice was flat as facilities, especially SNFs experienced COVID-related occupancy declines, and we faced some challenges related to access restrictions imposed by these facilities where COVID is resurging. Some other interesting data points on hospice in the time of COVID include: our business mix has shifted during COVID; facility-based census went from 43% in Q3 '19 to 35% in Q3 '20, with a corresponding average length of stay increase from 82 to 106 days.

Conversely, non-facility business is up from about 57% in Q3 '19 to 64% in Q3 '20. Our average length of stay in our home-based census dropped nearly 10 days as a result of patients on census with COVID-19, bringing down the average. These COVID-19 patients were typically on census for an average of 14 days. In order to combat these trends, we have leveraged our additional 73 BD feet on the street toward two strategies: one, focus on continuing to steal market share in facilities; and two, expand our referral base to new non facility-based accounts. And in all cases, continuing to educate all referral sources on identifying the need for hospice earlier. Finally, keep in mind that ADC growth lags admit growth by about a quarter. So 9% admit growth in Q3 will be reflected in ADC growth in Q4, and we expect to see attractive ADC growth into Q4 and beyond into 2021. Employer of choice.

We drove total voluntary turnover to 19.3% for the quarter and 18.5% year-to-date with an early exit rate of 11.3%, down from 13.2% in Q3 2019. Early exits, we define as employees that leave within their first 90 days has been a focus of ours this year, and we know how valuable our employees are and how hard it can be defined and secure the best talent. Once we have them, there is no reason why they should leave us. And this will continue to be a high priority going forward. We think we can and should do better on both fronts and expect to show improving results. Next, operational efficiency. We continue to make great progress in deploying PDGM cost levers. In the third quarter, we achieved an LPN RN ratio of 46.7%, up from 40.6% in Q3 '19 and a PTA PT ratio of 49.6%, up from 43.7% in Q3 '19.

As you can see, we are well on our way to our ratio goal of 50-50 by the end of this year which has -- will continue to provide significant positive impact to margin and will improve our care as well. We also continue to make progress on optimizing our planning and visits, realizing a nearly 2.5 visits per episode reduction during the quarter while delivering equal or greater quality and learning to employ high frequency, low-cost tools like telehealth into our care delivery models. Overall, our productivity has been improving at a quarter-over-quarter and sequential rate of approximately 5%, as we continue to refine our scheduling practices and documentation, becoming even more efficient in how we take care of our patients. Our performance this quarter has allowed us to increase our EBITDA guidance range from $245 million to $255 million to $269 million to $272 million, raising the midpoint of our EBITDA range by $20.5 million. Scott will cover the details in his remarks.

None of these results would be possible without our over 21,000 employees' unwavering commitment to providing outstanding care to our patients in their homes. I want to thank every one of you for helping to deliver such a strong clinical, operational and financial results. It all begins with our culture of caregiving, which put the patient first. As we said, great care equals great economics. Now on to the regulatory front. And as we reported last quarter, we are very pleased with how the rate environment for 2021 is shaping up. In July, CMS finalized the fiscal year 2021 hospice rule, which was comprised of a 2.4% payment rate update. This correlates directly to our specific hospice payment rate increase of about 2.4%. Given our organic and inorganic growth in hospice, positive rate updates are increasingly impactful and meaningful to our business and position us well for top and bottom line growth in 2021. Similarly, in late June, CMS issued the calendar 2021 home health prospective payment system rate update where CMS proposed to increase payments by 2.6% beginning in January.

In addition to this positive payment update, CMS also proposed to make permanent the telehealth flexibilities that has been previously granted to home health agencies during the current public health emergency. Just last week, two bills were introduced into Congress, one in the House and one in the Senate that similarly seek to provide telehealth flexibility and importantly, payment for telehealth visits during the current and future public health emergencies. We applaud CMS and our congressional champions for their proposals to extend telehealth flexibilities and payment for those visits during this crisis and beyond. We look forward to working with them on this important policy initiative for the home health industry and our patients. We expect the home health rule to be finalized in the coming days and to be consistent with our comments here. The rule traditionally comes out around or on Halloween.

We don't expect to be scared this year, a treat, not a trick. These two payment updates will be significant tailwinds for our company as we enter 2021, producing an approximate incremental $40 million in 2021. The 2021 rate updates for both home health and hospice are just a small piece of why we continue to be increasingly excited about what the next few years appear to have in-store for our company. I want to spend a little time talking about the tremendous opportunity we see in front of us that could propel us to significant future growth and innovation for 2021 and beyond. Last week, we completed our annual strategic planning process. Our market and regulatory analysis projects the next five years based on what we see demographically and regulatorily as well as the industry dynamics to be very strong tailwinds, which should drive outsized growth for Amedisys and the industries we play in.

For example, demographics are in our favor, thanks to the baby boomers, now between 56 and 76, keeping in mind our average patient age is 78 to 80, meaning we will be experiencing a surge of potential patients in the coming years as baby boomers age into the at-home care sweet spot. More people are turning 65 years old and aging into Medicare faster than they have ever before, over 10,000 a day. The burgeoning 75-plus population, coupled with ever-increasing unsustainable healthcare costs, puts us in a very advantageous position, as an aging-in-place company, delivering the highest quality care at the lowest cost to seniors. Also, besides demographics, psychographics are in our favor. nine out of 10 of these baby boomers want to age and die at home. Add to that, economics, at home care is what people want. It's the cheapest type of care and it's the most suitable for the types of long length, chronic illnesses that we will be treating in the future.

Moving to regulatory. CMS implemented massive and comprehensive home health payment reform in 2020. So the rate outlook over the next five years is projected to be stable and positive in both home health and hospice. When you put all the market forces together, add what we have, quality, scale and capital, things look very promising, and that's why we're so excited. Besides demographics, psychographics, economics and regulatory, there is a new accelerator, COVID-19. It is not new news that COVID-19 severely impacted patients in institutional settings, such as skilled nursing facilities and assisted living facilities. A significant portion of COVID-19 deaths have occurred in institutional settings. COVID has accelerated the desire to be cared for in the home, which is now stronger and more urgent today than it ever has been, and we are innovating to meet this demand, working to be able to increase our capacity to care for more traditional patients as well as moving up the acuity scale, focusing on new sicker patients that had no other options but institutions.

By developing a SNF-at-home product, for those who want to avoid a SNF stay, we are showing we can give patients a home alternative. We have made good progress in this product development, which focuses on a package of services in conjunction with traditional home health, aimed at keeping higher acuity patients at home and out of institutions. SNF- at-home represents an interesting new growth avenue for the company and will be an opportunity for growth even beyond the pandemic. The time to work with referral sources on taking their higher acuity patients is now. And we're capitalizing on that.

Finally, given our scale, acquisition and integration capabilities, strong cash flows and balance sheet flexibility when the current temporary COVID subsidies holding the home health market together are lifted, the true impact of PDGM will finally be felt within our industry.

We will be ready to continue our organic and inorganic expansion in home health and are well positioned to capture more and more market share of a still highly fragmented market. As a result of our 2019 planning and 2020 execution, we are thriving in PDGM and have worked incredibly hard and proactively to turn headwinds into tailwinds. We have navigated and are understanding how to audit during COVID. We are active on building new territories via de novos and innovating around our core, as mentioned. The growth algorithms we've developed for Amedisys in 2021 and beyond are truly exciting. And I believe we have positioned ourselves optimally to fully capture any opportunities that come our way. Finally, as noted in our August 10, 8-K for tax and estate planning purposes, I exercised 500,000 of my vested stock options and retained 100% of the underlying shares after tax and option costs.

As I just laid out, and as Scott will expand upon, we have many years of tailwinds ahead of us, and I am excited to retain approximately 1.3% ownership of the company. During my almost six years at Amedisys, I have not sold a share. This transaction resulted in a very positive tax benefit and subsequent EPS impact, which Scott will deal with in his prepared remarks. We believe this method was the best course of action for the company and our shareholders.

With that, I'll turn the call over to Scott, who will run us through our Q3 performance and full year 2020 guidance. Scott?

Scott Ginn -- Chief Financial Officer

Thanks, Paul. I'm very pleased to report another impressive quarter of results, which was highlighted by a return to growth following COVID-19 disruption in Q2 and meaningful expansion in our margins. For the third quarter on a GAAP basis, we delivered net income of $2.16 per diluted share, an increase of $1.13 on $544 million in revenue, an increase of $49 million or 10% compared to 2019. Our GAAP results include our recognition of Cares Act funds, which is included as other operating income in our statement of operations. As a reminder, we have chosen to apply our Cares Act funds only to direct costs associated with COVID-19. The majority of these costs are included in cost of service and consists of the following: PPE of nearly $2 million, testing costs of $1.5 million and quarantine pay of approximately $1 million. Our results were impacted by income or expense items, adjusting our GAAP results that we have characterized as noncore, temporary or onetime in nature. Slide 15 of our supplemental slides provides detail regarding these items and the income statement line items each adjustment impacts.

You'll note that our adjustments include the recognition of Cares Act Funds and direct costs associated with COVID-19. For the quarter on an adjusted basis, our results were as follows: revenue increased $49 million or 10% to $544 million. EBITDA increased $19 million or 33% to $76 million. EBITDA as a percentage of revenue increased 240 basis points and EPS increased $1.09 to $2.24 per share. During the quarter, EPS benefited $0.72 from a $24 million tax benefit as a result of executive stock option exercises. Once again, keep in mind our adjusted results do not include any of the Cares Act funds or COVID-19 direct cost. Additional items impacting our Q3 2020 performance are as follows: The suspension of sequestration added $9 million to our revenue and gross margin for the quarter; continued improvements in clinical utilization and a shift in clinical staffing mix drove a substantial portion of our 440 basis point improvement in gross margin; strong cash selections drove lower revenue adjustments; health and workers' compensation increased $6.4 million, driven by the shift of costs from Q2 to Q3 due to COVID-19 as well as the inclusion of AseraCare, which closed in June and ranges which would effect August 1.

Sequentially, EBITDA increased $9 million, driven by a $59 million increase in revenue and gross margin expansion. Now turning to our third quarter adjusted segment performance. Keep in mind, segment level EBITDA is pre-corporate allocation. In home health, revenue was $326 million, up $15 million or 5% compared to prior year, driven by our strong recovery in total admissions and total volume. On a same-store basis, total admissions were up 5%, and total volume was up 6%. Revenue per episode was up $50 or 1.8%, which was driven by the suspension of sequestration and reduction in LUPAs, lost billing periods and an increase in case mix. Visiting commission cost per visit increased 5% over prior year. The increase was driven by planned wage increases effective August 1, increased health insurance expense as a result of COVID-19, which has caused a more significant sequential increase than normal seasonality, contractor utilization and the impact of lower visit volume on fixed costs.

Our gross margin improvement of 600 basis points was driven by our significant progress on clinical staffing mix and utilization, an 80 basis point impact from sequestration relief and the variable nature of our business model, which benefited from higher volumes. Segment EBITDA was $70 million, up $22 million, with an EBITDA margin of 21.3%, representing a 620 basis point improvement. Other items impacting the third quarter results of our home health segment include: an increase in G&A of approximately $3 million, mainly driven by planned wage increases; the addition of resources to support growth; higher health and workers' compensation costs; increases in incentive comp accruals and investments related to PDGM, partially offset by lower travel and training spend. EBITDA was up $16 million sequentially, driven by a $36 million increase in revenue, highlighted by a 15% sequential increase in total admissions. I want to provide a little more color on our PDGM performance and observations.

As a reminder, entering the year, the Amedisys rate impact as a result of PDGM was a negative 2.8%. During the quarter, our revenue per episode was positively impacted by the sequestration and suspension. Excluding the impact of sequestration, our revenue per episode was down only 0.2% from prior year, which is a material improvement as we were down from 3.7% and 2.3% in Q1 and Q2, respectively. As a result of our continued focus on operationalizing PDGM, we made significant progress on overcoming the rate impact. Our clinical staffing, we ended the quarter with a 46.7% LPN utilization, up from 40.6% in the third quarter of 2019 and a 49.6% PTA utilization, up from 43.7% in the third quarter of 2019. This continued progress keeps us on track toward a 50% LPN and PTA utilization by the end of 2020. Keep in mind that every 1% shift in utilization equates to approximately $450,000 of cost savings. On utilization, we ended the second quarter at 14.4 visits per episode, which was down nearly 2.5 visits year-over-year and one visit sequentially.

As of the end of August, 100% of our care centers are utilizing the Medalogix Care product. As a reminder, the care product uses analytics to create a patient-specific care plan to drive the most optimal outcomes. Our business metrics only include in-person visits performed by a clinician. We have deployed the use of telehealth visits in response to our patients' needs during the COVID-19 pandemic. During Q3, we averaged approximately 0.4 telehealth business episode, which was down from 0.6 in Q2. We have also rolled out the Medalogix touch product which is an outbound calling product use to identify and check on our patients at higher risk of readmission. So these additional virtual touch points are not counted in our business per episode. There are another key tool we use to provide the highest quality clinical care and helps ensure the best outcomes for our patients. I want to commend our entire home health leadership and operations, the speed at which you recovered volumes and the efficiency in which you did so was a big driver of our performance this quarter.

Congratulations on your performance, and thank you for your efforts. Turning now to our hospice segment. Revenue was $200 million, up $37 million over prior year, an increase of 23%, which includes the addition of two acquisitions closed during 2020. Asana On January one and AseraCare on June 1. Net revenue per day was up 2% to $155.57, driven by sequestration suspension. Our ADC was up slightly over prior year as the segment continues its recovery from the impact of COVID-19. Our facility-based census has been most significantly impacted. However, we continue to see gains in our non-facility volumes as evidenced by a 9% growth in same-store admissions compared to a 1% decline in Q2.

We anticipate Q4 ADC growth and census growth generally lives admissions. Hospice cost per day increased $0.47. The increase was driven by raises in health insurance offset by a significant decline in visits performed by variable cost employees and lower transportation costs, as we've experienced limitations and access to our facility based patients, which has resulted in a 40% decline in visits for ADC. G&A as a percentage of revenue was up 200 basis points or $12 million over prior year. The increase is driven by acquisitions with that at approximately $9 million to the segment. Excluding acquisition activity, G&A is up approximately $3 million due to the addition of resources to support census growth, planned wage increases and higher health insurance costs, partially offset by reductions in travel and training. EBITDA was $49 million, up approximately $7 million, an increase of 17%. Our Personal Care segment generated approximately $18 million in revenue in the third quarter and maintained EBITDA margin over prior year. COVID-19 continued to impact billable hours and clients served in Q3 on a year-over-year basis.

However, we have seen positive sequential trends in our Personal Care segment, including an increase in hiring of approximately 46%, growth in clients of 2% and growth in hours of 5%. Turning to our total general and administrative expenses. On an adjusted basis, total G&A was $176 million or 32.3% of total revenue, which is up 200 basis points over prior year, which includes $11 million in additional costs related to our acquisition, $9 million in our Hospice segment and $2 million in corporate. Additionally, incentive comp accruals, taxes and stock option exercises, raises and health and workers' comp account for approximately $11 million. Sequentially, total G&A was up $24 million and $17 million, excluding the AseraCare acquisition. The drivers of the sequential G&A growth or expected increases related to planned wage increases and higher health as well as higher incentive comp accruals, driven by our strong Q3 performance. We expect G&A to moderate to a more normalized percentage of revenue in 2021 through growth in top line in both our legacy and acquisition businesses.

Our impressive cash flow generation continued in the third quarter as we produced $83 million in cash flow from operations. The increase in cash flow was driven by a 2-day reduction in DSO to 40 days from the end of the second quarter; $18 million in payroll tax deferrals under the Cares Act; $10 million related to an increase in our estimated usage of Cares Act funding, which will be used to offset increased costs related to COVID-19, expected to be incurred through June 30, 2021, in accordance with the updated guidance issued by HHS in September. With our cash flow performance in the third quarter, we expect to generate approximately $300 million to $310 million in cash flow from operations for the full year of 2020. This makes the third straight year of generating cash flow from operations in excess of $200 million, which allows us to significantly pay down our outstanding revolver or fund additional acquisition activity.

Finally, as Paul mentioned in his opening remarks, we are increasing our guidance ranges for 2020. Our new guidance ranges represent our best view of the business at this time and are as follows: revenue of $2.067 billion to $2.072 billion; adjusted EBITDA of $269 million to $272 million; and adjusted EPS of $6.02 to $6.08. I'm very pleased with our ability to increase our guidance ranges given the challenges of implementing PDGM, completing the AseraCare acquisition and continue to operationalize our other acquisitions, all while dealing with the COVID-19 pandemic. As a reminder, our 2020 performance has been impacted by COVID-19, and we expect some of these items to normalize in 2021. These items include: positive impact from the suspension of sequestration, which expires December 31; impact of missed visits on visit utilization, which impacted revenue and visits per episode; a hospice margin benefit from lower home health aid visits due to facility access limitations; and a decreased travel and training costs.

Based on our terrific Q3 performance, we are very pleased with our trajectory as we enter Q4, and we are very confident and excited about our growth prospects for 2021. While we will see normalization on our run rates for the items mentioned, we head into 2021 with some meaningful tailwinds: a 2.4% reimbursement increase in hospice and a proposed home health increase of 2.6%; continued operational improvement in our four hospice acquisition; significant opportunity for admission growth aided by BD staff expansion in 2020 COVID-19 disruption; and significant improvements in our gross margin driven by changes to visit utilization and staffing mix in the second half of 2020.

This will conclude our prepared remarks. Operator, please open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is coming from Brian Tanquilut of Jefferies

Brian Tanquilut -- Jefferies -- Analyst

Good morning, guys. Congrats on a very strong quarter. I guess, if we're limited to one question, Paul, I'll just ask. As we think about growth, right, so you clearly showed acceleration in the second -- in the third quarter from Q2 despite COVID being in the background. So how should we think about the remaining growth acceleration opportunities? And what do you think will be driving that both from a macro and company-specific perspective? I guess to add to that, where do you think volume growth could go from that 6% organic number that you saw in Q3? Thank you.

Paul Kusserow -- President And Chief Executive Officer

Thanks, Brian. Yes. We feel good about where we are, obviously, in terms of growth. I think the key for us is on the hospice side. Our admit growth is very good and strong. What we've -- when you have a flat ADC, it's going to pass through. And so we should start to see a good ADC increase, which is what we've been focused on. So we can tee up particularly good -- particularly well for next year. So we feel good about it. In home health, the growth has just been fantastic. I don't know, Chris is with me. Do you have any comments on that?

Chris Gerard -- Chief Operating Officer

Yes. Yes. I probably -- Brian, I'll just kind of through home health and then hospice as well. So on the home health side, yes, we're really happy with how we came out of Q3. We also progressed nicely through the quarter. So that gives us some encouraging signs for the balance of the year. We see that really, it's an opportunity for us to continue taking share, which we feel like we're doing, both with facility business as well as with our physicians groups. We had 17 -- over 1,700 unique new referral sources in Q3 that had not referred patients to us in the previous year. Our team is really gelling nicely. And we've got a bunch of reps that are really starting to get into that kind of the maturing stage, if you will, where they're starting to see some additional growth on top of the ramp-up from being new hires. So I feel really good about the home health side. Hospice, what we like that you see that we had the 9% admit growth in Q3, but flat on ADC. And so if you look at the previous three quarters, we had 1% admit growth -- 1% admit growth and 0%. And our length of stay has been relatively flat. So there's -- it's not a surprise that we were flat in ADC in Q3.

But a couple -- a few data points is, one, is we had the 9% admit growth that we should see acceleration in ADC in Q4 and beyond. On top of that, we also had over 800 uniquely, our new referral sources referring to us in the quarter that had not in the previous year. And then also, we had a really good progression throughout the quarter on admit growth on hospice. So that's encouraging for us for future kind of ADC growth and continued to admit growth. And the last piece I'd say is that we've really invested in new reps on the hospice side. We have 73 new reps in Q3 this year versus last year. It's a 20% increase in the number of reps. So as they get really kind of productive and get on board, that's going to open up opportunities for additional growth.

Brian Tanquilut -- Jefferies -- Analyst

Thank you.

Chris Gerard -- Chief Operating Officer

Thanks, Brian.

Operator

Our next question is coming from Matt Larew of William Blair.

Chris Gerard -- Chief Operating Officer

Hi, Matt.

Matt Larew -- William Blair -- Analyst

Good morning. I wanted to ask a little bit more specifically about the fourth quarter. And Scott, obviously, a relatively tight range there. So does that maybe just reflect the visibility that you guys have into the cost profile into PDGM, perhaps even into the hospice census? Maybe just help us understand what it assumes about volume growth dynamics and just kind of where the upside downside stress test is around fourth quarter.

Scott Ginn -- Chief Financial Officer

Yes, Matt, thanks. I mean we feel good. And kind of, as Chris has talked about the trajectory we're seeing going in, I mean, it's certainly a nice progression for us. And in those rates, we're assuming kind of a similar growth type movement that we see here. We do think admits around hospice will accelerate as we move forward, just the timing growing ADC is a little slower as we talked about the lag, but we do see that accelerating. You're going to see the normal increases in cost as we move into that around what we see around health insurance going up. I mean, you have some of those movements, we do have a rate good guide. But yes, we feel like the visibility is there, especially on the cost side, really felt good with the revenue levers coming through this quarter on the rate side. That really offset that year-over-year impact of -- I mean excuse me, PDGM. So yes, I mean, we feel that it's certainly in our sites, less fearful of kind of the ability to handle COVID. So most of the costs are baked in. We're looking at a nice October from a volume perspective. So we feel good. That's why we tightened the range.

Paul Kusserow -- President And Chief Executive Officer

And I think you know, Matt, I mean, we increased it in the mid-range of $20.5 million. So it's a big jump. So we feel good about that.

Matt Larew -- William Blair -- Analyst

Yes. Indeed. And then Paul, just quickly on SNF-at-home, the product you're developing. Maybe just give a sense for what the payment mechanism might be given that there might be an additional basket of services associated with it? And would you be targeting [to miss at] payers that referral sources? Would be interested to hear a little bit about that. And then I'll jump off. Thank you.

Paul Kusserow -- President And Chief Executive Officer

Yes. Thanks, Matt. Yes, the SNF- at-home, basically, we've always been anxious to show since we've been producing very good quality, as you've shown in your research quality equals growth. We believe that there is an opportunity, particularly as the market is demanding, unless people want to go into SNFs particularly people with less acuity. And it's become less attractive for the SNFs to take these that there's an opportunity to take the lower acuity patients in SNFs and take care of them at home. Fee-for-service really doesn't have the payment mechanisms to do this. So the people we're talking with now are largely risk-based entities. So in risk-based taking an MA, also bundles, also ACOs.

So that's where we've been focusing on it. If there's not -- what we're trying to do is have traditional home health and then use some of our personal care networks around that. And then we're working with some doc groups that would refer into that. So we have to piece it together. It's a different model. We want to show it works. We anticipate if we do it in a capitated environment and then we can take it to CMS and see if -- because the benefits would be much lower in cost, if we could then take it to CMS and see if we could get some changes in the fee-for-service rule. But starting without any proof is a hiding to nothing in CMS. Thanks, Matt.

Operator

Our next question is coming from A.J. Rice of Credit Suisse.

A.J. Rice -- Credit Suisse -- Analyst

Maybe I'll just ask from my one question about the acquisition landscape, what you're seeing out there, both in home health and hospice? How has pricing changed? And I know Cares Act and some of that funding have pushed off some of the deals you thought you might see in the back half into the first half of next year. Is that still you're thinking as to when we'll see some of that roll out?

Paul Kusserow -- President And Chief Executive Officer

Yes, the last deals we saw, and then I'll have Scott talk about it because it comes -- this comes under him. But we've seen -- and hospice pricing has been very high. So we've seen -- and frankly, we've done in the last 18 months, we've done four deals. Really happy with the deals and the pricing we got post synergies as well as just the ability to incorporate them into our legacy system. So that's what we're focused on in hospice. We're always looking. We have some regional hospices that were out there looking nice-sized regional hospices that were out there looking at. We think now, obviously, with the -- how home health is performing, though. It's a real opportunity to go out and look for home health assets. Home health, particularly in some of the areas where we think that we can start to fill in. Also, and I'll have Scott cover this, we've been doing an incredibly good job on de novos and are still putting out between 10 and 15 de novos a year. So I'll turn that over to Scott.

Scott Ginn -- Chief Financial Officer

Yes. But yes, I agree with Paul's comments around the pipeline, excited about it. And certainly, heavy lean on the home health side. And if you look at our cash flow position, we've got tremendous opportunity into 2021 to really take some inorganic growth into the portfolio. Excited about that. De novo, as Paul said, it's been a big win for us. We continue to move forward on those. We did do a little bit of a pause this year when we hit COVID, but those are running well. We're doing branches, that's really a nice view for us. We're probably kind of getting those open anywhere from eight to 12 months by an average cost to license of about $400,000. But we've built a nice rhythm there. And would you expect to see us as we talk about 2021 when we give guidance. We want to invest some dollars in increasing that pipeline of de novos.

Paul Kusserow -- President And Chief Executive Officer

And to answer your question specifically, A.J. We're seeing hospice decently run hospices with no -- that are relatively clean over 15 times. So it's gotten a little crazy, particularly when it is a PE platform with which they can use to lever. They can justify their pricing that way or at least they tell us. There hasn't been many home health deals that have been clean. So they've always had these other assets around them. What we expect is if sequestration is added back on and when the loans become due for the receivables and for payroll is that's when we expect the shakeout to occur. If the government pushes this out further, it's probably going to hold us back on what we anticipate as a large consolidation opportunity with PDGM in full, particularly as the RAP is going to be eliminated in January. But we're -- what we've seen rough throughout is trading maybe 12 times, 13 times, something like that. But post synergies, it's below 10% for us. So that's why we're looking and that's where we think the market is going to be. And a lot of our competitors now, frankly, have seen what we've been doing in hospice center now deciding to go after hospice. So I think that's going to push the hospice pricing up even more. Our next question is coming from Joanna Gajuk of Bank of America.

Joanna Gajuk -- Bank of America. -- Analyst

Good morning. Thank you for taking the question here. So another topic here. Can you talk about your Medicare Advantage book of business on the home health side? Can you kind of update us on the progress toward your goal of increasing that risk-sharing percentage of your contracts? So -- and with that, what are you seeing in terms of average pricing? Have you seen improvement just looking on the average book of business for MA? Thank you.

Paul Kusserow -- President And Chief Executive Officer

Yes, I'm going to punt to Chris on that. But in general, we're really happy with where we're at. We've got a great team doing this. Just have made a lot of progress so we feel -- we know this is the future, and so we're very aggressive in terms of our ability to go out and learn as much as we can in risk-bearing environments. But Chris, why don't you talk about what we got?

Chris Gerard -- Chief Operating Officer

Yes. Joanna, so it's still -- it's kind of a slow and grueling progress -- or process that we're going through in terms of just getting plans to give us opportunity to earn additional rate based on quality metrics. The plans are very open to that. They're doing that. We have now over 20% of our actual contracts out there that have some sort of upside based on quality metrics. We did some recent analysis. It's over 30% of our actual MA admits have some upside opportunity. Many of those are still new enough arrangements that we're not able to really report out the actual gains from that, but we should be able to do that in upcoming quarters. Again, the makeup is typically still a per visit rate that may be a little bit better than what we've experienced in the past with upside in a percent range based on those quality metrics. Ideally, we want to really kind of close the gap between our Medicare fee-for-service and our Medicare Advantage.

The challenges that we run into is it's still a very fragmented industry out there even though the plans are interested in quality. A lot of times, they're also just as interesting who's going to take the lowest rate. And until there's some consolidation in the industry and some of those willing to take unfavorable rates are off the table, it's probably still going to be an uphill battle for us. But we're still -- we're moving it forward. Our rates are inching up, but we still got quite a ways to go.

Paul Kusserow -- President And Chief Executive Officer

Yes. And we're also seeing, Joanna, we're seeing some opportunities with bundles and hospitals. So we're getting -- having more conversations there, large areas where they do have specific regional concentration, which plays well when we have that coverage. Also, Chris and his team have done a fantastic job on driving down our readmissions rate. So what's our rate? It's like 11% or something.

Chris Gerard -- Chief Operating Officer

So our 30-day rate is 11% and our ACH rates are 14.5%

Paul Kusserow -- President And Chief Executive Officer

Yes. So it's really good. So we're continuing to drive that down, continuing to show differentials there, and that's what a lot of the payers are interested in. And in certain marketplace -- marketplaces, we're able with the cooperation, particularly of hospitals, to drive that into single digits. So we feel very good about it, and that's what a lot of the payers are very interested in.

Operator

Our next question is coming from Matthew Gillmor of Baird.

Matthew Gillmor -- Baird -- Analyst

Okay thanks. I have a question back at you. I heard you didn't like the music.

Matt Larew -- William Blair -- Analyst

Paul, it's just -- I think it's fortunate that you're good at your job. You don't have to be DJ-ing and pick up that song.

Paul Kusserow -- President And Chief Executive Officer

I'll let you pick next time, how about that?

Matthew Gillmor -- Baird -- Analyst

Let me try to follow-up on some of the 2021 comments. I know you're not in a position to give guidance, but just hoping you could help us sort of think through a framework. If we did the math right, I think you're sort of at a $75 million quarterly run rate for the back half of this year. Is that kind of a good jumping-off point as we're then thinking about organic growth into 2021? And sort of what are the puts and takes? I know, obviously, the sequester is one of those things. But just how would you frame it up versus the back half run rate.

Paul Kusserow -- President And Chief Executive Officer

Scott, you got that?

Scott Ginn -- Chief Financial Officer

Yes. Yes. I got it, Matt. So yes, I think, Matt, you're right. That's a good starting point. I mean, there's some noise in there, but $75 million I would say is good. And if you look at our guidance, we kind of put fourth quarter in a similar range of that $75 million number. I think there's probably four things off the bat I'd consider moving into there. One is rate. We've talked to that before. And you think of what we expect in rate increases for next year, net a sequestration, that's probably about a $20 million good guide. I would talk to -- the other one will be CCH and AseraCare as they expand. We had said before, just a loan on CCH, we get a $14 million to 16 million expansion and expected to close somewhere around $34 million to $36 million for this year. Obviously, with COVID-19, that will be impacted for us. So that number, I think, still sequentially, you're probably between those two, somewhere around that $20-ish million range. And then the other items to think through are -- I do think some hospice visits are going to come back for us. I talked about that in the prepared comments. We're seeing a reduction in visits in facilities, specifically, which is probably about 110 basis point good guide in the hospice margins. So I see that's coming back. And then traveling training will come back around.

We've seen that probably for the quarter, down around $4 million year-over-year. So some of that will normalize for us. And then we think our growth prospects are very strong. You see us moving into what was there in Q3. We think that continues to move forward and certainly with some low marks in Q2, we're going to have an ability to grow that pretty significantly. The other thing that we'll be looking at, and Paul mentioned earlier with de novos. We're going to want to continue to expand that. That certainly is going to be an EBITDA drag, but we think those in our data we're seeing on our de novos make us pretty bullish on doing that. And then we're going to make some investments in the organization at this high rate of growth. We're going to continue to look at that. But those are the big items to look at. But just off the bat of between rate and CCH, we're talking about giving you roughly $40 million as you move forward. And then the other items, we'll work to finalize as we get closer to -- close out the year and kind of look at our plans for next year.

Paul Kusserow -- President And Chief Executive Officer

Yes. Thanks. And also, Matt, my radio station, we're going to put that in, too.

Operator

Our next question is coming from Andrew Mok of Barclays.

Andrew Mok -- Barclays -- Analyst

Hi. Good morning. I wanted to follow-up on your SNF- at-home service and your desire to expand capacity to take market share. How far along are you in that process? And has capacity been a constraint to volume growth from SNF diversion so far into the pandemic? Thanks.

Paul Kusserow -- President And Chief Executive Officer

Yes. Let's talk about jump-ball. And then, Scott, why don't you talk about SNF- at-home or either way, Chris.

Chris Gerard -- Chief Operating Officer

Yes. I'll start. This is Chris. On the SNF diversion, which we kind of distinguish that from kind of the futuristic SNF- at-home, which is more kind of down the road. It is real. It's happening right now. There are some pockets of areas out there in. Our growth rates were even a little bit ahead of our internal expectations in Q3 and accelerating into Q4. So we have run into some areas where we do have some staffing constraints. But what we've shown that we can do in the past and we continue to do today is when we see those areas, we react pretty quickly. And we've been able to utilize contract clinicians where necessary as well as kind of triaging visits if necessary as well so that we can make sure we take care of the patients.

We're not turning away any business related to capacity. The one thing I'll put out there, though, is about 2% of our clinical staff at any given point in time over the last few months has been on quarantine leave related to COVID-19. So if we run into any kind of spike there, then that would also kind of create some additional constraints. But our staffing -- our clinical capacity right now is not inhibiting our growth.

Paul Kusserow -- President And Chief Executive Officer

Scott, why don't you take the other one?

Scott Ginn -- Chief Financial Officer

The -- yes. The SNF- at-home piece, I'd tell you that we're getting pretty close. We've got to finalize a contract, which we're working pretty hard to get that done over the next few weeks. It will be a pilot. So what that may look like in the first iteration of it could ultimately change before we push it out much further. We're excited about it. I think it gives us the ability to move up the scale here from an acuity level, which is what we want to do as far as our strategy in the home. And I think we're going to build it in a way that gives us some certain upside, if we do a great job that we think we will. So we're excited about it. I need to get it across the finish line, but we'll be talking more about it as that pilot kind of begins to roll out. And ultimately, when we see -- we are able to measure our success.

Paul Kusserow -- President And Chief Executive Officer

Yes. So we feel good about it. Jump-ball business, we're winning more than we used to and then getting clearly some interest, again, risk-bearing payers deciding that they want to push more from the lower acuity levels in the SNF into the home. So we're feeling good about it.

Operator

Our next question is coming from Matthew Borsch of BMO Capital Markets.

Matthew Borsch -- BMO Capital Markets -- Analyst

So I wanted to ask about what you're seeing in terms of competition or potential competition in home health from large hospital systems, large physician groups, possibly integrated plans like Optum. How much of that is on your radar screen now? And should it be?

Paul Kusserow -- President And Chief Executive Officer

Yes. I think, obviously, we look at competition. Home health is still very much a local and a regional play. And so it varies. Sometimes we see some of the folks you talk to in some of the bigger national players. In general, though, it's a mom-and-pop business. So we see a lot of players there. Again, we believe with our quality scores and the correlations that come out of that from a growth perspective, as long as we focus on quality, good service, good transition, we're tending to win pretty disproportionately. We're gaining share out there. So we feel very good about that. We don't see much disruptors out there, outside of the traditional space. There's a lot of news and noise on it in the venture and PE worlds, but we haven't seen a lot of -- or virtually any disruption from some of these new models that are out there. I don't know, Chris?

Chris Gerard -- Chief Operating Officer

No, I agree. I think that for these large systems, if they want to enter into the space, it's not a simple thing to do. And it's -- and for them to be able to do it in a way that actually is, either kind of harms us anywhere or takes share away from us, we're just not seeing it. Navigating kind of their own existing kind of payer world in systems, a lot of times, it doesn't line up well with home health, which is more of a traditional Medicare fee-for-service business. So we see it in pockets, but it really is an area that a lot of times, our flexibility, our service reach, geographic service reach and things like that actually helps us gain business from these hospitals that have their own systems.

Paul Kusserow -- President And Chief Executive Officer

What we are seeing, though, due to COVID is we're seeing hospitals start to put together preferred provider relationships, which means instead of 15 home health agencies that are calling in, what they'll do is they'll generally go by quality and then they'll limit it. And so we -- it's the same pie of fewer players. So we find that attractive. And then also, frankly, what we're also seeing is a lot of people, if they can have procedures done outside of hospitals, in ambulatory environments, we've seen some good growth there. So we're out there looking at some of the ambulatory world as well. Again, institutions in this environment, we've just seen a lot of real consumer reluctance to want to, to walk into an institution. So we're trying to be good partners on one side, and yet, we're also trying to follow the business on the other side.

Operator

Our next question is coming from Justin Bowers of Deutsche Bank.

Justin Bowers -- Deutsche Bank. -- Analyst

Paul, I'm actually surprised it took this long. Is it due for someone to comment on Timbuk 3. Although I would have thought I would have been one of the elder statesmen. So just on just taking a step back, Paul, it sounds like you guys have gone under a bit of a strategic process. And if I think about some of the comments you made about the tailwinds earlier, how are you guys thinking about kind of the long-term growth algorithm of the enterprise? Is there any way that we could, at a high level, like maybe put some numbers around that?

Paul Kusserow -- President And Chief Executive Officer

Yes. I mean, we just -- superstar Nick here did a wonderful job, but we just finished up with it and the Board. And what we do after we do strategic planning is we take it out to our leaders, about 100 of them, and we make sure they buy into it, and then we turn it into a work plan and deliver it against the work plan. I mean, I think that if you just apply the -- and we'll start to push this out. But if you look at the natural growth rates in home health and hospice and Personal Care, they're the best in anything in healthcare. If you look at the margins, home health and hospice, tremendous margins. If you look at -- so just with the regular wind at our back from an industry perspective, you also look ahead at regulatory, you're looking at very good updates, good consistent updates, which we haven't seen in home health in the past 10 years. Now the PDGM is settling in, we have -- we can start to implement against that. So we feel very good if we just sit in place and stay in our core businesses. I think we have the best business mix of anybody out there with very good weighting in home health and hospice, and then moving on personal care largely into networking.

So I think we feel very good about it. If we go above the industry, which is what we expect, that's going to clearly accelerate even more. So we expect to be 2, three points above the industry from a growth perspective. If we -- due to our cash flow, if you add $300 million, $250 million, $300 million a year in M&A, and you add that, which we can easily do, stay still very low leveraged. You add that in and then you're going to accelerate even more growth. And then you add in some of our innovative products that's going to ease even more growth. So we'll be bringing this out, but it's -- you add all this together, again, if we just sit and float down the river, it's still pretty nice. It's a nice ride for the next four or five years. Scott, do you want to add anything? I don't know if I cover that.

Scott Ginn -- Chief Financial Officer

No. I think you hit a lot of high points. And I think certainly, we're bullish about where we are as a company. The opportunity in front of us is tremendous. And I think the fact that we've come through COVID-19 as strong as we have, we continue to accelerate margins, which was really -- if you think about our ability to do acquisitions and as we start looking at pricing on home health assets, looking at our own internal margin, is going to help us be very competitive there. So prospects are great. I always have some work to do, but really feel wonderful moving into 2021.

Operator

Our next question is coming from Bill Sutherland of the Benchmark Company.

Bill Sutherland -- Benchmark Company -- Analyst

So I've been hearing that the actual PDGM up codings apparently running behind what CMS had estimated originally. So given it's supposed to be budget-neutral, is there a potential down the road for some positive offset to this, if this really is -- I mean, are you seeing that?

Paul Kusserow -- President And Chief Executive Officer

Yes. First of all, thank you. I love that question. Yes, after 2022. And so if you look at the Dobson DaVanzo report, which came out from the partnership, it showed that there was a gap in spending or an anticipated gap in spending of about 21.5%. If this continues, then I think as of 2022, I'll turn to Dave Kemmerly here.

David Kemmerly -- Chief Legal And Government Affairs Officer

Yes, Bill, good question. It's important to note and remember that the bipartisan budget Act of 2018 mandated that the transition to a new payment model, in this case, PDGM in 2020 be budget neutral. And it even provides a mechanism for a true-up, if you will, in 2022. So thus, if the data from the early part of 2020 holds throughout the year, the remainder of this year and then into 2021, there will be a rate give-back or increase in the payment rate update for 2022. So when you see that final rule in November of 2021, there should be a rate update for 2022 if the behavioral functions are playing out like the row. It was flawed. We said it was flawed going in, and it's playing out even prior to COVID that data that Paul referenced from Dobson DaVanzo, that study which looked at data from January, February, March, maybe in early April, clearly showed that it wasn't budget neutral.

Paul Kusserow -- President And Chief Executive Officer

Yes. So while we aren't going to wait by the mailbox for checks from CMS, what we will anticipate is we will go to Congress, and we will push this if there is continued underspending because of the mandate. And we have some good friends there, so we anticipate the industry will do this. And then my guess is they'll try to make it up on rates. So I view this as a very positive. I also -- if you look at the fragmented nature of the industry, what you see is a lot of people are still paper-based. A lot of people are still having problem with the rules. It's just as we said, it increased in the amount of administrivia and everyone has to deal with. So -- and we think they guessed wrong on the cut. So we think at some point, they're going to have to make it up. So it's a good sign, in my opinion. Thanks, Bill.

Operator

Our next question is coming from John Ransom of Raymond James.

John Ransom -- Raymond James -- Analyst

So just for the record, Paul, what kind of music do you like? I'm just -- I need to get caught up on this.

Paul Kusserow -- President And Chief Executive Officer

Human Nature. I like it if Steve Earle is here in town. So any time he's playing -- or Neil Young, which shows my I'm outdated. So -- but I can't know him unless we play that here so.

John Ransom -- Raymond James -- Analyst

At least you didn't say smooth jazz or bro-country.

Paul Kusserow -- President And Chief Executive Officer

Elevator music, yes, there we go

John Ransom -- Raymond James -- Analyst

I guess it just strikes me that all of us in the chattering community killed a lot of trees over the past 12 months obsessing over PDGM. And for you guys, it just ended up kind of being basically net flat. So just maybe help understand a little bit all the doom and gloom versus the reality. What levers you pulled maybe with LUPA, maybe with codings, but just a little more behind the covers of how you turn what everybody thought was dogs living with cats and the John Pillsbury Doughboy walking around those [Indecipherable]. It just kind of turning into a net flat. Wouldn't that be a lot of chatter for something like this just ended up not being a big deal?

Paul Kusserow -- President And Chief Executive Officer

Yes, I think for us, and I got to give -- not that I like to do this, but I got to give Chris Gerard, a lot of credit. He had us drilling on this. He and Tiani, who runs home health, had literally set up trial and pilots that were acting like PDGM was there the last fall. So the amount of prep work that was done, the amount -- and our coding folks did a fantastic job. They were prepping. Melissa Butler there has just done a fantastic job. So we were really working hard on this, and we were working scared, too, but we were very planful. And so I think the result has been extraordinary. I don't know if, Chris -- he's swooning that I complimented him so much.

Chris Gerard -- Chief Operating Officer

No, it was really -- it was preparation. It was really us disaggregating all the components, identifying the revenue levers and the cost levers and picking a path to those. I mean, we. Utilized Medalogix Care, which has helped us tremendously in our PSE management side. We really drilled down into our 2019 data to see how those would play out in 2020 under PDGM. And we really quickly identified opportunities around lost billing periods and coding opportunities as well. And then just really just kind of spreading that through the organization and creating kind of our own kind of scorecards that we managed off of, allowed us to really identify quickly where we're seizing the opportunity where we had more opportunity to seize and just executed on it. So it sounds like it was easy. It was not easy at all, and it still is a challenge for us, and we still have work to do but I think it's just a good old preparation, breaking it down, communicating well all the way upstream and downstream and then, again, execution.

Paul Kusserow -- President And Chief Executive Officer

Yes, it's just like we don't -- behind all this beauty, John, there's a lot of work, just so you know that. That was a joke.

Operator

Our next question is from Benjamin Mayo of UBS.

Benjamin Mayo -- UBS -- Analyst

I got pulled off for a little bit. So if I -- if you guys covered this, just tell me and I'll cut back in the queue. But can I get an update to Asana and AseraCare? Really just how they're tracking versus plan -- any modifications to the integration plan given the pandemic changes? Anything change in your view on the slope of the integration plan? And maybe just some comments on the team, turnover would be helpful.

Paul Kusserow -- President And Chief Executive Officer

Turnover on the newly acquired company?

Benjamin Mayo -- UBS -- Analyst

Yes. Yes. Anything -- yes, any turnover that's beyond normal that you would call out positively or negatively.

Paul Kusserow -- President And Chief Executive Officer

Yes. I'd say, in general, the integration has gone extremely well. We've learned a lot from our early days when we acquired Infinity and then Tenet's assets. So we have a really strong team, Mike North has -- who we brought in from Humana a long time ago, who was in charge of integrations there, worked with me there, has been doing that. And then Kris Novak has done a great job. I think the idea is that the technical integrations have gone extraordinarily well, largely because we've been doing that. The -- also, the synergy pull outs have gone on track and on time. And so we've been tracking that. We have a pretty strong discipline and execution on that. The cultural pieces are always what you try to figure out when you get in. So we've been really good about retaining folks. There has been more cultural changes with CCH, which was more decentralized than with AseraCare, for example, and Asana. But in general, we feel really strong about it. Scott, this comes under Scott Ginn and Chris so I don't know if I missed anything, guys.

Scott Ginn -- Chief Financial Officer

No. I think we're pleased with -- certainly, you can't ignore the COVID-19 impact from a plan perspective and where we thought we would be. So we'll be a bit behind of that schedule in CCH, but we're seeing some nice improvement, some good growth numbers from admissions that are really getting us back in line with where we need to be. So we're pleased with that, but you've got the COVID distraction. As I said, I don't know if you're on when we talked about -- we've talked about a $14 million to $16 million incremental improvement coming out of CCH. We know we're going to be a little below where we thought we would exit, but still think the incremental build will be strong going into next year. AseraCare is a great asset. That one is really performing probably slightly ahead of expectations financially. And as we -- this cloud of COVID kind of becomes the norm to us, and we continue to operate more.

We're comfortable where we're heading from a plan perspective. I mean, just kudos to the team that did the integration, basically when we were in lockdowns, had to train remotely, couldn't get to see some of these folks. So it's a tribute to our team as well as the AseraCare team on that asset as well as all of our other operations folks to this time. But feel good about them. It's a nice group of assets. Now you pool all four of these together and blend them in with our legacy, we feel great about where this hospice asset heading in 2021.

Operator

Our next question is coming from Frank Morgan of RBC Capital Markets.

Frank Morgan -- RBC Capital Markets -- Analyst

Good morning. Most of my questions have been answered. But I guess, given your view of the industry backdrop over the next several years and the opportunities around potential acquisitions. I guess, what is your comfort with leverage when you think about doing deals, the size of deals and what type of leverage stretch would you be willing to assume given the backdrop? And then the second question was just about LUPAs in the quarter. I'm guessing that probably wasn't a big issue, but any specific data on that, that would be great. Thanks.

Paul Kusserow -- President And Chief Executive Officer

Yes. Scott doesn't let us lever up, so I'll let him take this one.

Scott Ginn -- Chief Financial Officer

Scott, we'll let us lever up. And I mean, it's just -- it's a great sign. I mean, so we're going to do -- to start with the obvious, I mean, cash flow from ops is going to be greater than $300 million this year. It had some really good things that helped us out. But just to be to be over $200 million, I think at least three straight years is strong for us. You can see through AseraCare, we'll continue to pay down our revolver pretty aggressively. I mean, we'll probably be close to pay it off by the end of the year. We'll probably leave that term loan out there. But from a pure leverage perspective, it's the right deal, the right assets. We would go up to 3 times. Anything above that, we would probably maybe potentially use our stock if it was right and something transformative, but we would let this thing lever up. I mean considering what's available under our revolver right now, with our availability in the -- from cash generation, you're looking at really close to $500 million right there from an ability to fund deals. So a lot of great opportunities out in front of us. And as our base operations continue to get better. It makes us more bullish and our belief that we can integrate well, operate well and then pay down the debt.

Chris Gerard -- Chief Operating Officer

And Frank, this is Chris. From a LUPA perspective, our Q3 number was 8.6%. That was down from 9.2% in Q2. So I feel really good about our ability to manage those.

Operator

At this time, I'd like to turn the floor back over to management for any additional or closing comments.

Paul Kusserow -- President And Chief Executive Officer

Great. Thank you very much, Donna, and thank you for the suggestion of Johnny Cash next time as intro music. We'll take a look at it. I do love Johnny Cash as well. But I want to thank everyone who joined us on our call today. I'd also like to thank, again, all of our employees in the field and those who support them and for helping to deliver such a strong quarter. Please keep doing what you're doing, taking care of the people who need us the most. We hope everyone has a wonderful day. We hope you stay safe, and we hope you vote on Tuesday, and we look forward to updating you on our ever-evolving progress and purposeful work on our next quarterly earnings call. Until then, take care. [Operator Closing Remarks]

Duration: 76 minutes

Call participants:

Nick Muscato -- Vice President of Strategic Finance

Paul Kusserow -- President And Chief Executive Officer

Scott Ginn -- Chief Financial Officer

Chris Gerard -- Chief Operating Officer

David Kemmerly -- Chief Legal And Government Affairs Officer

Brian Tanquilut -- Jefferies -- Analyst

Matt Larew -- William Blair -- Analyst

A.J. Rice -- Credit Suisse -- Analyst

Joanna Gajuk -- Bank of America. -- Analyst

Matthew Gillmor -- Baird -- Analyst

Andrew Mok -- Barclays -- Analyst

Matthew Borsch -- BMO Capital Markets -- Analyst

Justin Bowers -- Deutsche Bank. -- Analyst

Bill Sutherland -- Benchmark Company -- Analyst

John Ransom -- Raymond James -- Analyst

Benjamin Mayo -- UBS -- Analyst

Frank Morgan -- RBC Capital Markets -- Analyst

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