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Hanger, Inc. (NYSE:HGR)

Q1 2014 Results Earnings Conference Call

May 06, 2014 09:00 AM ET

Executives

Russell Allen - Treasurer

Vinit Asar - Chief Executive Officer

George McHenry - Chief Financial Officer

Analysts

Dave MacDonald - SunTrust

Brian Tanquilut - Jefferies

Larry Solow - CJS Securities

Mike Petusky - Noble Financial

Dana Hambly - Stephens

Operator

Good morning. My name is Kristen and I will be your conference operator today. At this time, I would like to welcome everyone to the Hanger, Inc. First Quarter 2014 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

Mr. Russell Allen, Treasurer. You may begin your conference.

Russell Allen

Thank you, Kristen. Good morning and welcome to Hanger’s discussion of our 2014 first quarter results. Before we start our discussion, I will review with you our declaration of forward-looking statements.

During the call management we will make forward-looking statements related to the company’s results of operations. United States Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for certain forward-looking statements. Statements relating to future results of operations during this call reflect the views of management. However, various risks, uncertainties and contingencies could cause actual results or performance to differ materially from those expressed or implied by these statements. These include, but are not limited to the company’s ability to enter into and derive benefits from managed care contracts, demand for the company’s products and services, and the impact of reviews, audits, and investigations conducted from time-to-time by the governmental agencies and other factors identified in the company’s periodic reports on Form 10-K and 10-Q, which are filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. The company disclaims any intent or obligation to update publicly these forward-looking statements whether as a result of newer information, future events or otherwise.

Now, I'll turn the call over to our Chief Executive Officer, Vinit Asar.

Vinit Asar

Thank you Russel. And good morning and thank you all for joining our Q1 earnings call. As we reported in our press releases weather impacted Q1 results in our patient care business segment.

Total company revenues for the quarter came in at $235.6 million, an increase of $6.2 million from the first quarter of 2013. Adjusted diluted earnings per share were $0.19 for the quarter. These results reflect among other things the impact of adverse weather patterns across the country in Q1. Although it is not unusual in our business to see a negative weather impact in Q1, the severity and the duration of the severe winter weather was much worse than we have seen in quite a while. This year we saw approximately 1,000 closed clinic days across our network in Q1, primarily in the East and Central part of the country. This number of days was approximately 5 times greater than the number of days that we were affected by weather in Q1 of last year.

Our products and services segment perform largely in line with our expectations for the quarter, despite a slight weather impact on our distribution business and the continuation of the O&P industry headwinds affecting the independent providers.

Separately, during the quarter we found ourselves in a difficult situation in connection with the filing of our Form 10-K this year. The 10-K filing was delayed due to the identification of material weakness in our inventory control process.

Although the issues did not impact our reported results, we are not satisfied with either the delay or the material weaknesses and have begun to work to remediate the associated issues and prevent them from recurring.

During the quarter, we also announced that George McHenry, our CFO will retire from Hanger at the end of this year. Even though George will be with us for the remainder of the year, I want to take this opportunity to thank him for a dedication and service to the company as our CFO for the last 12 years. We have initiated a national search for his successor.

I want to provide a quick update also on the regulatory front. We recently received a letter regarding the WalkAide from the interim head of the CMS coverage analysis group indicating that there was not enough evidence to warrant a reopening of the existing non-coverage decision for Medicare reimbursement for WalkAide and stroke patients.

In other words, they would want more data to reopen the existing non-coverage decision. Now while this is disappointing to us, we are gathering additional evidence to bring the CMS for a meeting that they have already agreed to have with us.

As I have always maintained, we have been and remain guarded about the opportunity with WalkAide. While we’re trying to continue the dialogue with CMS, the letter has only increased the hurdle that has been set in an already tough reimbursement environment.

In other regulatory news, on a positive note, we recently received notice from the staff of the division and enforcement of the SEC regarding the investigation that they had opened in May of last year. The notice informed us that they have concluded their investigation and they do not intend to recommend an enforcement action. We are obviously very pleased with this outcome.

I will provide more color on all of this during the rest of our operations in Q1 results shortly. But at this time, let me turn the call over to George to take you though our financials.

George McHenry

Thank you, Vinit and good morning everyone. As Vinit mentioned, Q1 was a difficult quarter given the weather conditions that impacted much of the country resulting in significant number of loss days compared to 2013.

My specific comments on the quarter are as follows: Adjusted diluted EPS was $0.19 compared to $0.27 in the prior the year, the shortfall was driven by the impact of severe weather as Vinit mentioned earlier and the cost associated with the way filling of our 10-K.

The combination of lower than expected sales and increased cost negatively impacted our adjusted operating margins which were down from 10.1% in 2013 to 7.1% this year. at Patient Care, total sales increased 6.5 million or 3.5%, while comparable store sales declined 1.8% due principally to the adverse weather in the Central and Eastern part of the country in our Western zone where the weather was not a significant factor, comp sales increased by 2.4%.

Our products and services segment reported $300,000 decrease in the sales reflecting the impact of the weather on our distribution customers partially offset by a mid single-digit increased in sales of ACP.

Our materials rate of 28.6% was 90 basis points lower than last year due principally to a favorable mix of (inaudible) product sales which have a lower com rate, a slide increase in reimbursement rates and the impact of our materials management initiative which includes a purchasing portal that is now wide in all of our practices. This effort is helping us further concentrate on our purchasing power.

Our effective tax rate for the quarter was 39.6%, which included a 24,000 at a period adjustment or core rate excluding that adjustment was 37.2%, which is slightly better than our expectations.

Moving on to the balance sheet and the cash flow, our accounts receivable balance was $183.5 million at March 31, DSOs were 64 days which is one day better than Q4 but eight days higher than a year ago. CMS audit related receivables increased to $17.1 million compared to $15.2 million at the end of the year and our success rate on appeal remained just under 90%.

Bad debt expense was 1.5% compared to 2.1% in the prior year. AR over 120 days has increased to $65 million compared to $51.6 million at the end of 2013. The CMS audits have been a contributing factor but we have also seen a general slowdown in payments which have not yet significantly influenced our reserve calculations but we are watching this very closely.

Inventory was $154 million at 3/31/13. Inventory turns were 4.1 times which are unchanged from a year ago. Our CapEx for the quarter was $8.9 million compared to $5.4 million a year ago which is $3.5 million higher than 2013. The increase was related principally to the expenditures related to the rollout of our billing and scheduling system in our clinics.

Cash flow provided by operating activities, the company recorded a $10 million outflow of cash from operations for the three months ended March 31, 2014 compared to a $2.2 million cash inflow for the same period in the prior year. A $12.2 million swing in operating cash flow was driven by a lower operating income and increased working capital requirements.

Moving on to liquidity as of the end of the quarter, the company had $140 million in total liquidity including $56.6 million in cash and $84.4 million available under the revolving credit facility net of approximately $112 million in borrowings and $3.6 million in letters of credit.

Company’s leverage ratio is defined by its bank credit facilities was 2.99 times at the end of the quarter.

Now moving on to guidance, the company has lowered its 2014 full year adjusted diluted EPS guidance to a range of $2.01 to $2.11 which represents growth of between 3.1% and 8.2% over the prior year.

First, let me explain at a high level, the reasons for the $0.09 change in the range of our guidance.

There is really three components that we’re looking at, in Q1 the weather had a $0.04 impact on earnings that we do not expect to be able to recover over the balance of the year, given the length of the bad weather that we saw during the quarter. Our delayed filing costs were approximately $0.01 hit to EPS. And I think that was due to increased legal printing and labor costs. And given the outcome of the delayed filing, we will be adding additional resources to assist remediation of our control weakness and bolster our internal controls. That investment will cost us approximately $0.04 per share. Those three components make up the $0.09 change in our guidance range.

Company expects to grow same center sales between 3% and 5% for the remainder of 2014. When you take into account the impact of the first quarter results that will give us growth for the full year of between 2% and 4%.

The company also lowered 2014 full year net sales guidance to the range of between $1.1 billion and $1.120 billion. That reflects the -- moving on to cash flow, reflecting the lower earnings outlook and increased working capital requirements, the company lowered its expectations on cash flow from operations to a range of between $80 million and $90 million.

Company continues to anticipate acquiring O&P operations in 2014 with annualized sales of between $35 million and $45 million and we intend to invest between $40 and $50 in capital additions for the year.

That concludes my comments and I am now going to turn the call back over to Vinit, our CEO.

Vinit Asar

Thank you, George. Let me take the opportunity at this time to provide some color on our results. As mentioned earlier our patient care segment was impacted by weather throughout the quarter. The affect on us was exacerbated by a couple of factors. Almost 75% of our revenue is generated in the East and Central parts of the country in our business.

Unfortunately not only weather issues concentrated in this area but they persisted throughout the entire quarter. In addition to the weather and causing clinic closures, our referral sources were also affected. This in turn affected our ability to build up the patient pipeline or the WIP as we refer to that during the period.

As we look at the WIP now, we are beginning to see it return to normal levels. If we isolate the western part of the country which was not affected by weather, our results came in right on what we had anticipated. Overall despite the Q1 weather related results we remain confident in the fundamental patient flow of our core O&P business for the rest of the year.

Turning our attention to the reimbursement environment that we referenced in our press release last night. We continue to see Medicare audit activity increase. While the volume of RAC audits has slowed down for the time being, we have experienced an increase in the number of Medicare prepayment audits across all Medicare regions.

With the increased prepayment audit activity the time from claim submission to the initial payment is often significantly increased. I should also mention that prepayment audits target high dollar claims which affect our AR more than we have seen in the past. Most significantly the time to final the judication of all Medicare audits has increased with the recent moratorium on ALJ case assignment.

With the appeals process for RAC claims being stretched to several years in some cases, time of payment averages continue to drought our accounts receivable.

Lastly, on reimbursement just a reminder that this Q1 did not have sequestration in its prior year comp. And that this is the last quarter without any prior comp and sequestration, as it now begins to lap starting in Q2.

Switching gears to our O&P acquisition activity. It remains right on track as we see a continued healthy pipeline of independent O&P providers that are interested in selling their businesses to us. As in the past, we are carefully scrutinizing these opportunities to ensure we acquire businesses that are healthy, have a good record of regulatory and reimbursement compliance and are a good cultural fit.

We expect to close approximately $35 million to $45 million of annual revenues in acquisitions this year.

With regards to our Dosteon business, we continue to work on improving business processes and have implemented organizational and process changes to bring this question back to a healthy state by the end of Q2.

As mentioned before, if we're not satisfied with the results and the outlook at that time, we will take additional actions.

Our Janus clinic management system implementation continues to go as planned. We are pleased with the continued roll out and associated training events that our teams are going through as part of these implementation. We also remain on track to be live in approximately 300 sites by the end of this year.

Our efforts on the material management and purchasing initiatives continue to progress very well and we are beginning to see the positive signs of its impact on our cost of materials line. As George mentioned, during Q1 we reported a year-over-year improvement in our materials rate of 90 basis points, which impart came from our efforts in this area.

With regards to our network management business Linkia, we continue to be pleased with their progress. Our relationship with United Healthcare continues to develop as we had announced last quarter. While it's still very early in the partnership, we're seeing progress on three [Technical Difficulty] helping UHC controller, other network spend. Second, rightsizing local O&P networks and third collaborating with their clinical staff on O&P education and policy.

Separately, I should mention that we've been getting increased inquiries from several [blues] organizations about constructing narrow networks in the O&P space. While we have anticipated the need for narrow networks and created our network management team for this eventuality, we're pleased to see these additional inbound increase coming in.

Switching gears to our products and services segment, we were pleased to see the segment meet our expectations for the quarter. Both our SPS distribution and rehab solutions businesses performed well. While there was weather-related impact on our distribution business due to warehouse closure and disruption, our ACP rehab solutions results offset some of the impact. Our distribution business continues to feel the pressure of the independent O&P community and how they are dealing with the reimbursement environment I have talked about earlier. It is certainly not easy being an independent O&P provider, especially if you don’t have access to or they have not invested in regulatory or reimbursement experts these days.

Now let me switch gears and talk about the accounting and financial reporting issues we've had over the last year or so. As I mentioned earlier, we are glad to have finally filed our 2013 10-K and also glad to have received, we already mentioned, communication from the SEC enforcement staff, that its investigations concluded.

Nevertheless, we're taking the issues underlying these matters extremely seriously. Since the filing of the 10-K, we have taken the time to reflect and debrief on our internal control processes and as a result, made the decision to make additional investments in this area. Our investments will include prominent additions to our staff in a number of areas and we've engaged external accounting control experts to help us remediate our material weaknesses.

In addition, to ensure continuity on the finance leadership front, we've engaged an executive search firm to assist us in identifying experience, CFO successor for George as well as an experienced Chief Accounting Officer.

In summary, 2014 will be a year of significant investments in Janus, revenue cycle management, our purchasing initiative and our consult environment. While these investments will impact our earnings in the short-term, it will make us stronger in the future as we continue to grow our business. Despite these investments and the impact of the severe weather on the first quarter, we anticipate growth in revenue and earnings for the full year.

The fundamentals of our O&P business also remained strong when we look at our patient flow combined with our acquisition results and pipeline. We continue monitor and adapt to the changing reimbursement environment driven by the volume of Medicare audits and delayed appeals processes. Despite these challenges, our cash flow remains fundamentally strong at $80 million to $90 million of expected annual operating cash again this year reflecting the strength of our fundamentals. This cash flow will more than cover our needs to fund O&P acquisitions capital expenditures and debt reduction.

That concludes my prepared remarks. Operator please can you open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Dave MacDonald.

Dave MacDonald - SunTrust

Hey guys. Just a couple of questions. One, Vinit I was wondering if you could just give a little bit detail on the (inaudible) in terms of what just follow-up meeting means? And then if you assume that it does not move forward I would assume that there is a potential commercial strategy here where maybe your cut the price and you go direct to patients or just what are some of the thoughts around that?

Vinit Asar

Sure. Let me start with the first part of your question with regards to the letter we received. Over the last a year or so we have been in communication with the team under the head of CMS coverage and analysis group and made our submission based on that. Now we are dealing with an interim head or an acting head of the CMS coverage and analysis group. So we want to make sure we go back to this person and the team and take them through all the data that we submitted after discussions with them, but what this clearly reflects is the journey we have been on for the last eight years or so or nine years of the WalkAide the rules kind of do change and we just have to adapt to the changing environment.

In terms of the additional data, we have submitted as part of our official submission back in December the six months follow up to INSTRIDE trial in the patients. Now clearly time has elapsed since then and we now also have 12 months data. So depending on what they mean by insufficient data we are going to go in and talk to them about our 12 months data that we already have and see where the discussion goes. So that in a sense the summary of the discussions we are planning on having with CMS again with the acting head of the coverage and analysis group.

Dave MacDonald - SunTrust

Okay. Go ahead, I am sorry.

Vinit Asar

With regards to the commercial strategy, there are different options we can chose depending on what happens. One is we continue to sell the way we are, we get about $8 million or $9 million of revenue today for all the other indications such as incomplete final court injury and also through private pay. So one approach is to continue down that path, certainly we would look at is maybe a price label we are not sure how successful that will be, but we want to take one step at a time at this moment.

Dave MacDonald - SunTrust

Okay. And then can you guys just spend a quick minute on ACP; just I didn’t hear what the growth was in the quarter? And then also in that business are you guys starting to see any traction or success in terms of cross-selling it into other areas of post to Q?

Vinit Asar

Yes, I think I’m not sure if George mentioned it, but we did see about a mid single-digit increase in ACP for the first quarter this year. It’s pretty much right on track maybe even slightly better than we have thought with the business. What’s encouraging about the results is we’re seeing a continued stabilization within the customer base and also the increase is all in the lease revenue piece of it which is the most sustaining part of the business.

With regards to the cross-selling in other post areas we’re looking at ALS and other pieces but right now there are still we believe are more opportunity within the snips, now that the snip area seems to be stabilizing. We haven’t seen a lot of traction yet in the ALS because we haven’t put a lot of focus on it. Our focus has been to stabilize the snip piece over the last 12 months or so.

Dave MacDonald - SunTrust

Okay. And then guys just last question on collections and product activity, I assume there hasn’t been any change to the win rate that you guys are seeing when you fill these claims?

George McHenry

That’s correct. We’re still seeing a win rate of just a shed under 90% and the rest has been built in the receivables simply because the one many, many claims that are getting settle that dealer end of the equation.

Dave MacDonald - SunTrust

Okay. Thanks very much guys.

Vinit Asar

Thank you.

Operator

Your next question comes from the line of Brian Tanquilut.

Brian Tanquilut - Jefferies

Hey, good morning guys. Just going back to the WalkAide, do you guys have any feedback on how -- did with their trial if there is how CMS is reacting to that?

Vinit Asar

We don’t have any information on how CMS is reacting to adult trial, as you know they are not public, so that we don’t get much information in the public domain. We believe their trial results cannot really be compared to our trial results because they are slightly different in terms of the design of the trials, so not much information there Brian unfortunately.

Brian Tanquilut - Jefferies

Okay, got it. And then in the release your comments on reimbursement, so it seems to me like the reimbursement issues you are taking right now are all delayed and they are -- but it’s not like you are incremental rate cuts when you are talking about reimbursement headwinds?

Vinit Asar

Correct, that’s correct Brian. That’s why I want to provide more color in the commentary about exactly that, so we are not seeing any rate cuts on the reimbursement fronts.

George McHenry

Is that in Q1 or rates were up slightly, so we saw an extra and that’s we consider the fact that we still had one quarter left in sequestration to absorb that efficacy result.

Vinit Asar

Brain and also just to be little more transparent about the reimbursement, overall we are not seeing or sensing rate cuts, but individually every once in a while will get a cut in the certain product category or something off the shelf orthotics which doesn’t really affect the overall rate when we look our rates on the macro level, I just want to be clear on that.

Brian Tanquilut - Jefferies

Yes, let me get to the point, is that last point, I mean are you seeing any scrutiny on the higher tech items at this point where you know being micro processor needs in there. What pressure in that or the flip side of the question is are we seeing more share shift to you guys because the smaller guys are not do much of the high dollar items?

Vinit Asar

Yes. So the first part of it we are not seeing rate cuts on the higher priced items, we are certainly seeing more scrutiny in the sense it takes longer to get authorizations from payers for the higher ticket items, we have to provide little more documentation or answer more questions, we’re certainly seeing that piece, but we're not seeing rate cuts on the higher tech items for the most part.

And then in terms of share, I imagine we are, but right now it's difficult to really measure how much or what amount of share is coming over, because we clearly, our mantra to our clinicians is you got to make sure you fit the right device for the right patient.

And if we do get audited, whether it's a pre-pay or RAC, we are going to feel it, because we’ll have the confidence in our own paper work. So, that's our position, but it's hard to see, if we are actually getting a lot of share especially with the noise in the first quarter with weather, the data gets all garbled.

Brian Tanquilut - Jefferies

Vinit, last question for me, so as we think about O&P services, it is a necessary service. If people did not go to your clinics in Q1 because of the weather, aren't we supposed to expect that at some point they're going to show back up in your clinics?

Vinit Asar

Great question Brian and obviously we've had this discussion with our teams here over the last few months. You got to look at it a couple of ways, first off, throughout the first quarter we had weather and typically what would happen is, if we had weather in January, we would build up the way for the patient flow in February or March. So, we could start treating those patients in the second or the third quarter, because it does take a while to fill the device et cetera.

But in this case, we just lost a lot of time in the first quarter, because the weather persisted literally all the way to the last day of the quarter. So, we're in the process now of building up the WIP overall for the business in the whole product portfolio. So, that's, that just pushes everything out by almost a full quarter, in terms of building up the patient flow.

The second piece I think we should be cognizant of is, half of our revenues is prosthetics and half our revenues are orthotics. In orthotics, you have a certain segment of patient that maybe sports injuries or need a splint or a crutch et cetera. Those patients probably just now either got over the injury, because they didn't get in, they didn't get into see us in time or they may have gone elsewhere online or to CBS to pick-up some of the product and try to self, treat themselves in a way. So those are the two issues why wouldn’t see a lot of the revenues come back.

Brian Tanquilut - Jefferies

Got it. Thanks guys.

Vinit Asar

Thanks Brian.

Operator

And your final question comes from the line of Larry Solow.

Larry Solow - CJS Securities

Hi, good morning. Just to clarify a couple of things; the $0.04 impact from whether, I’m assuming that that sort of the additional impact from I guess mid February or from when you gave guidance or is that a year-over-year impact?

George McHenry

You are correct; it is the additional impact over and above what we expected when we were talking to you in the middle of February.

Larry Solow - CJS Securities

So could you quantify like the 800 miss days imagine that’s more than $0.04 and maybe even more than -- is that fair to say?

George McHenry

Some of the miss days that happened in the first half, but we certainly had many more days to include and I mean expected in the second half and we figure that added up to about 6 million sales which was the $0.04 impact.

Vinit Asar

Larry you also have to think about in the month of March, typically where we closed out of lot of the patients in terms of providing the actual devices we build up the weapons that January, February close-up the patients in March.

Larry Solow - CJS Securities

Right.

Vinit Asar

Typically we have weather adjust in January, we expect to make it up in March, but in this case, we went all the way through March, so that’s really what hit us.

Larry Solow - CJS Securities

Right. So (inaudible) pushed that full quarter or almost half a quarter. Okay, couple of questions on the cost side. So did you increase cost for financial infrastructure, back office does for controls, is that – it’s about looks like about $0.25 now in a full year basis year-over-year, two question for that.

Going forward is that sort of sustainable level, is that go up, is that some of it one-time and most of that going into I guess mix that same personnel costs in your cost of goods and then other operating expenses?

Vinit Asar

Well, about your $0.90 of that cost was anticipated in the original budgets that with guidance in the beginning of the year and that $0.05 is new penny being on what we spend on the Q, on the K which will not reoccur. Some of that costs will be one-time, it's not a significant amount of that now remember big part as a 90 was the reduce cycle management that we staffing that we have saving that we've recently. And that costs is all going to be part of our structure going forward, but we do anticipate savings going into 15 and we do it to speak about some of those costs will be one-time in nature, but frankly we need to see a little more of the outcome of the work we're doing right now before we and apply on that.

Russell Allen

Larry, this is Russell, I’ll add one thing. Large investments that we're making, the new investments we’re making in the back half of this year are not necessarily accounting, they are investments in our inventory processes, which will led to our material weakness.

Larry Solow - CJS Securities

Right.

Russell Allen

So it is a different type of skill set and investment there.

Larry Solow - CJS Securities

Right okay. Just a couple of more quickly that one out sequentially about $50 million really is a net debt really is [two] you should go that Q1 over Q4, but looks like it went up a little bit more and since the driven by working capital requirement higher receivable. Is there something on why itself through the year or not necessarily?

Russell Allen

I think there is one piece that you missed there Larry, we closed about [20 million] in acquisitions in the first...

Larry Solow - CJS Securities

Got it, okay. So that’s the primary culprit. That’s correct, okay.

George McHenry

(Inaudible) going out of the door, so we don’t expect that [12], if it does reoccur I will be pretty happy honestly because that’s a great investment for us.

Larry Solow - CJS Securities

Okay. And just lastly on WalkAide, just remind me, the CMS; I think you guys worked very closely with them, so they essentially set the parameters and the guidelines for this trial; is that correct?

Vinit Asar

Kind of, they don’t set the parameters, typically we set the parameters and guidelines and we have had discussions, numerous discussions with them about the guideline, the trial design et cetera throughout the process. That’s correct.

Larry Solow - CJS Securities

Because I remember going back we thought, at least the impression I had was that this trial meets its endpoint and these guys have already signed off on it, it should be -- it’s never a formality with the government. But so it seems like the insufficient data either they are saying that your analysis is incorrect or it wasn’t done correctly. So just kind of makes me think. And then on that point, why doing a [clinical] study, why not do a study which shows your product is better as you are trying to get reimbursement, you’re trying to show economic incentive, show that just a [clinical], I could see maybe for just a regular approval, with much lower hurdle rate but to me it seems like a waste of so many years of time, if you’re just going to prove that worth -- equipment that cost $100 versus a $5,000 piece of equipment. Thanks.

Vinit Asar

Yes, sure. First off, I think the environment is the lighter the reflection of the environment the changing rules et cetera but the trial design really was the endpoint, the primary endpoint was equivalent to get velocity which is how far you speak, how far you walk. If the data came in superior than that’s what we would have shown it, doesn’t stop us from showing superior data, that’s the endpoint for the trial.

Larry Solow - CJS Securities

Okay fair enough. Thanks.

Operator

Your next question comes from the line of Mike Petusky.

Mike Petusky - Noble Financial

Hi, good morning. George, it sounded like you gave how much revenue you required so far today or maybe that’s normal. If you guys are saying that you’ve acquired something like $20 million in M&A or did I totally not hear that right?

George McHenry

Yes. We’ve made a release actually in January and disclosed that we had acquired about $20 million in revenue.

Mike Petusky - Noble Financial

Okay. But nothing since then, I mean it’s just that release, nothing incremental since then after the quarter?

Russell Allen

This is Russell. We have made acquisitions since then, we haven’t given an update on the run rate to-date. But we did reaffirm our full year guidance of that 35 to 45 range. And now we’re seeing a little bit acceleration earlier in the year of that 35 to 45 but although we’re bringing some revenue closer in, it doesn’t bring a lot of EBITDA early on in the early stages due to the integration costs.

Vinit Asar

Mike if you think about our acquisition history in the past, typically it’s the second half of the year where we see most of the activity.

Mike Petusky - Noble Financial

Right. But it sounds like this year you’re making a bigger effort to get it at least the lion share out of it earlier; is that a fair way to think about it?

Vinit Asar

No, if you think about the acquisitions we closed in January, most of them were because of the efforts of the second half of last year that kind of filtered over into January. Now look, the environment is obviously better in terms of sellers being more opened to selling, so the pipeline is full. But typically the second half is when we normally see most of our activity.

Mike Petusky - Noble Financial

Okay, all right. So I mean then it sounds like maybe the $35 million to $45 million of acquired revenue appear here including the initial 20 or so in that, I mean maybe there is a reasonable chance to exceed that as you finish up the year?

Vinit Asar

Anything is possible, but we want to read from the guidance that 35 to 45 because remember typically in the year, if we have $20 million in revenues, safety to $5 million in the first half and $15 in the second, and there is still some in the first half that do occur. So at this point I just want to reiterate our guidance is 35 to 45 in acquisitions.

Mike Petusky - Noble Financial

Okay. And then did you guys give an actual comp on (inaudible) for the quarter versus think of last year?

Vinit Asar

No, we didn’t. I think it was somewhere in the 8% growth range, we can verify and come back to you.

Mike Petusky - Noble Financial

And then the only other question I had is when specifically is that discussion or meeting happening with CMS around what you’re going share the 12 month data et cetera?

Vinit Asar

We have just got an agreement with them that we will set it up, so we haven’t set it up yet but we were gathering the 12 months data, we are going to just make sure is tabulated well and try and get back and then set it up, so maybe in the next two or three months is my guess.

Mike Petusky - Noble Financial

Okay, all right. That’s all I got, thanks.

Vinit Asar

Thanks Mike.

Operator

Thank you. Our next question comes from the line of Dana Hambly, Stephens.

Vinit Asar

Hey, Dana.

Dana Hambly - Stephens

Hey, good morning. Just on the same store growth, I appreciate that the weather impacted through the end of the quarter but that you are building again and the WIP is where you want it to be now. But are we going to still see kind of maybe at the lower end in the second quarter and that progresses throughout the year or do you think we can get back to that 3% to 5% in the second quarter?

George McHenry

We do believe that we will get back to the 3% to 5% range for the remainder of the year, as you know we don't give quarterly guidance.

Dana Hambly - Stephens

Right.

George McHenry

But based on that, we believe we're going to get to that 2% to 4% for the full year.

Dana Hambly - Stephens

Okay. And just you mentioned Dosteon too should -- you are hoping to have it, I don't know if fixed is the right word, but back to stable by the end of second quarter. Was there any drag actually in the first quarter from Dosteon?

Vinit Asar

There was a drag but we had baked it into our guidance, as we knew about the issue back when we gave the guidance.

Dana Hambly - Stephens

Okay, so that was already in there. Alright, that's helpful. And then just on the commercial reimbursement, you are seeing some more pressure on pre-authorization, a little longer to collect. Is it widespread across the different payers or are you seeing it isolated to a few different big payers, just any color on that?

Vinit Asar

Yes, it's pretty much across the board, Medicare and the commercial payers, we're seeing it across the board.

Dana Hambly - Stephens

And, yes I know the Medicare has been going on for a while. Has the commercial really more just creeped up here in the past four or five months or is that maybe the last 12 months?

Vinit Asar

I would say it's been creeping up slowly not as fast as Medicare in the last 12 months.

Dana Hambly - Stephens

Okay, alright. And just last one from me, I saw the Blue’s plan in Michigan, I think, announced that they are going to start rejecting any demi post claims for O&P, where they are not from a certified O&P provider. Is that one, have you seen that? Two, are you seeing that from any of the other commercial payers? And how does that help you guys out longer term?

Vinit Asar

No, that's something we've been pushing anyways to make sure that certified clinicians actually providing the care. In the State of Michigan, we don't have a huge market share, so it will help us a little bit but not a lot at this point. And typically some of the other states will likely go there but that's the piece we're pushing across the country. We haven't seen widespread use of that approach 14 or 15 states that are looking at it.

Dana Hambly - Stephens

Okay. Do you think longer term -- would that kind of help out on some of these reimbursement issues? Is this kind of a huge black eye for the industry?

Vinit Asar

I don't think, so. It's probably better for the industry where you have certified providers providing the care. So, I wouldn’t say it's a black eye. It's something again the industry has been pushing.

Dana Hambly - Stephens

Yes, I am just saying, is it a black eye currently where you have a lot of non-certified folks going for O&P?

Vinit Asar

Yes, I think that’s more demi post is DME and O&P. it’s more on the DME where this is creating a lot of unrest and I think the black eye is more on the DME side than the O&P side currently.

Dana Hambly - Stephens

Okay, that’s it for me. Thanks.

Vinit Asar

Thanks, Dana.

Operator

And there are no further questions at this time.

Vinit Asar

Great, well thank you all for joining the first quarter call. And we will speak to you all in the month of July as we close out the second quarter. Thanks very much.

Operator

Ladies and gentlemen, this does conclude today’s conference call. You may now disconnect.

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