Q4 2019 Earnings Call
Recession to ask a question during the session you will need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, a T for he head of Investor Relations. Please go ahead Sir.
Good morning, everyone and welcome to the call.
Certain statements made during this call maybe considered forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Particular, any statements about future growth plans and performance, including statements about the proposed acquisition of Sci anticipated benefits on the proposed acquisition of LCR and the expected timing of the proposed acquisition about <unk> are forward looking statements. These statements are often identified by the use of words such as anticipate believe.
Estimate expect intend designed May plan project ward or similar expressions are variations investors are cautioned not to place undue reliance on such forward looking statements. All forward looking statements made on todays call involve risks and uncertainties.
While we may elect to update these forward looking statements at some point in the future. We have no current intention of doing so except to the extent required by applicable law or actual results and outcomes could differ materially from those included in these forward looking statements as a result of various factors, including but not limited to the factors discussed under the heading risk factors that are annual report.
On our latest form 10-K.
Now I'd like to turn call over to Joe.
Thanks, a lot to good morning, everyone and thank you for joining US 2019 was another year of strong performance by our one with operating results new business signings and earnings ahead of the goals. We had set at the start of the year overall the team did a superb job of delivering on our customer Clements our disciplined deployment model along with a strong.
<unk> operational execution across more cost for base helped drive faster margin progression relative to our model targets for customers in the margin wrapping.
This in turn enabled us to raise adjusted EBITDA guidance twice over the course of 29 too.
We were also pleased with our progress on the commercial for 2019 was a breakthrough year, we signed $4.1 billion, a net patient revenue from new customers on it and 10 basis, the highest level in eight years more importantly, our new poor print was across a diverse base.
With Quorum health, we entered the for profit Arena via an operating partner model for profit health systems face the same challenges as many other systems in the country, increasing financial pressure growing Robin recycle complexly scarcity of capital to invest in the latest technology and evolving demands from patient.
We are confident that are operating partner model can deliver significant value to this segment of the market and in fact, the quorum when has opened up conversations with other prospective customers in the for profit Spanish.
In the third quarter, we signed an operating partner agreement with a large physician group aggregator with close to 700 million in NPR M&A activity within the physician market remains strong with large groups as well, especially focused physician groups, such as emergency and anesthesia continuing to consolidate we.
Can bring revenue cycle scale advantages to these groups VR built for purpose platform, which delivers a comprehensive suite of technology global delivery infrastructure and a best in class operating system to drive performance. We view the physician space has a highly attractive opportunity and I'll discuss this in more detail shortly.
Lastly on the commercial front, we signed Ross University Health system in December on our Cold manage model Rush is our first foray into the academic space, which has its own unique set of needs balancing leading edge care against growing cost and they desire to improve the overall patient experience.
Additionally, rushes an epic installed site demonstrating the each are agnostic nature of our offering.
In addition to these end and wins, we signed <unk> 91 modular agreements with some notable customers, including BJ see health care District Medical Trinity Health and Virginia Mason.
A diverse nature of these wins as a validation of our value proposition and ability to deliver results or cost health care settings, and host systems. We have a highly scalable platform to manage health care providers revenue cycle operations underpinned by a standardized operating system robust human capital global deliveries.
Senators and proprietary technology.
Technology is a critical element of our value proposition, while we have the broadest portfolio proprietary technology. Among our end to end peers, we continue to invest heavily to extend our competitive advantage.
Last June we opened a state of the our technology Innovation Center in Salt Lake City to accelerate our pace of innovation and development capability.
Given our end to end lens across the revenue cycle and a continuous improvement approach, we see tremendous opportunity to further advance our technological capabilities and with operational control over the processes. We can prioritize IP investments based on actual challenges we are seeing on the ground.
For example, the investments we've made and robotic process automation or our PPA and our patient experience for PX platform are born out of this approach. It's a powerful feedback loop that continuously increases the intensity of innovation in our technology enabled services platform and gives us significant scale advantage.
Which we can turn pass along to our customers.
In 2019, we invested heavily in our ARPU and patient experience capabilities as part of our digital transformation office or detail.
We have automated the equivalent of 1000 digital workers and expect further progress as we finalize the first phase of the detail effort in the coming months given current labor market conditions, our DTC investment is highly strategic and guarding against potential inflationary pressure and his simultaneously expected to deliver 15 to 20.
<unk> million dollars to our bottom line in 2020.
Our customers also benefit via improved yield and faster conversion of a Arctic cash and perhaps most importantly patient satisfaction has soared as RPX platform has been implemented with net promoter scores consistently above 70, and concurrent improvement in yield oriented key performance indicators.
As we rolled out the PX platform to our customer sites and 29 team it became clear to us very quickly that the opportunities to create value by digitally transforming the patient and provider journeys far exceeded our original stretch targets in particular, the pain points experienced in the ordering scheduling an authorization.
Processes today, and the value to be created by solving them emerged as priorities that deserved a new level of organizational focus. This was the primary driving factor behind the Sci acquisition, which we announced last month.
With this acquisition, we will have a robust digital front door capability digitizing orders scheduling and authorizations Sci has deep and highly differentiated IP in these areas. Let me provide a few examples.
Revenue leakage and patient no shows our major pain points for providers Sci in order to appointment conversion rate is 86% well above industry averages.
Hi, guys ability to aggregate all inbound demand, whether faxed called in submitted online or otherwise.
And to systematically match that demand with convenient access to supply again across a multitude of channels is second to none in the industry. The convenient user experience across these workflows drives higher conversion rates, which translates to significant market share advantage for Sci clients.
Scheduling is a highly complex process beyond the initial primary care visit and frequently cited as a number one pre service pain point by providers. There are numerous vendors that provide scheduling into primary care providers, which sci does as well.
However, the field to sparse when you look at complex schedule and the ability to refer schedule and manage interactions between the referring provider the patient and the rendering provider, which could be a specialist diagnostic imaging lab et cetera. This is important as several of these ancillary service lines are particularly critical.
Well to high quality care.
Is the only platform that digitizes the referral scheduling an authorization process in complex settings of care agnostic to the underlying each arm.
Hi, guys intake analytics offering as another critical capability since much of the referral and scheduling process is managed manually today health system struggled to obtain timely and accurate metrics such as demand by geography, and modality lead times to schedule and capacity utilization with the processes now digits.
Sized we can present this information to health system leaders to enable them to make better planning decisions, which we believe can drive material improvement in profitability over time.
We're very excited about the capabilities Sci adds to our portfolio with RPX platform deployed at over 150 locations. We have strong proof points on the value. It can deliver to also our customers and their patients.
In summary, 2019 was a very productive year for all one we grew adjusted EBITDA by 111 million driven by continued focus on superb operational execution. We added 4.1 billion in NPR across a diverse customer base and primed, our physician offering to capture the market opportunity.
Well ahead of US we were also pleased with the progress made by our DTA rollout for which in addition to the expected 15 to 20 million bottom line benefit in 2020 gave us the confidence to pursue the Sci acquisition with a high degree of conviction.
We entered 2020 with good momentum across the business, we have four major priorities for the year.
First and foremost new end to end business wins market dynamics remain favorable and our pipeline continues to grow we see continued progression of deals that were in our late stage pipeline exiting 2019, while the timing of contract signing is difficult to predict with precision we are encouraged by the quote.
So the of ongoing discussions with prospective customers and have a goal of signing 3 billion and NPR on an end 10 basis over the course of 2020.
Earlier this year, we refreshed our brand marketing to better reflect who we are as a company today.
With the investments we've made in the business and the performance proof points. We've generated we've updated our messaging to better communicate our value proposition and our focus on the patient experience, which is what matters most to our customers feedback from customers and prospects has been positive and are intended messaging is resonating well in.
The industry.
Second we want to successfully integrate sci into our workflow and commercialize the PX platform. We've partnered with Sci since 2017, so we're very familiar with the technology. Our first goal. After the closing of the acquisition is to integrate Sci digital patient interface Andrew.
Oral and scheduling technology with our ones registration engine or one access and our ones contract model based price calculation engine are one insight.
This will allow us to drive yield improvement and efficiency across the scheduling and registration processes, which today are highly manual. It also speeds up the time to present patients with accurate cost estimates, which is increasingly important as price transparency gains prominence we've mapped out and detailed the sources of.
Efficiency on our end, which gives us a high degree of confidence in our cost synergy targets. Additionally, we want to commercialize the PX platform and sell it on a modular basis, we've already seen positive receptivity to the combined solution based on activity in our pipeline. We believe the 10 million in revenue synergies.
Built into our production model is a modest target.
Third we want to ramp up our physician channel, we have a comprehensive differentiated offering for physician groups underpinned by our robust technology architecture, a dedicated team within our deployment function and the performance driven contracting framework last month, we formally launched this offering as our one professor.
Final targeted at large independent practices and hospital owned medical groups, we already have a large non acute footprint with over 7 billion and NPR under management across more than 27000 providers and 80 specialties, even with this presents our market share in our target markets is less than three per se.
We strongly believe we can grow our share meaningfully overtime.
The vendor base, serving these providers is highly fragmented with limited scale leverage as a result, both patients and providers are underserved by current solutions.
Despite the weak set of competitors solutions in the market large independent physician groups generally have a higher propensity to use external providers for revenue cycle services compared to health systems are one professional delivers a purpose built technology platform automation that scale, a digital patient financial experience.
It's aligned with consumer expectations and proven performance improvement capabilities that mpower financial visibility across large healthcare organizations. We're excited to launch this solution and expect to keep you updated on our traction.
Last but not least we remain focused on operational excellence to meet and exceed our commitments to our customers. We continue to perform well on our contracted book of business as I mentioned in my opening remarks, we were able to raise our EBITDA guidance last year on the back of strong execution, specifically our customers in the margin ramp phase.
In 2020, we have over $16 billion of NPR in the margin ramp phase, which is the primary driver of our approximately 100 million projected increase in adjusted EBITDA. We also expect TTR to contribute $15 million to $20 million to adjusted EBITDA, We're intently focused on implementing the.
Original pipeline of ditto opportunities by the end of Q1, and we continue to uncover new opportunities to capture incremental value are fully dedicated automation center of excellence is designed to ensure and ongoing effort to prioritize and develop automation routines with high value to the business.
And our customers.
Lastly for the three new end to end customers signed in 2019, we are fully mobilized with respect to our deployment efforts. This includes rush, where detailed operational planning technology implementation and all other aspects of Onboarding are underway in closing we are very excited about the journey ahead of us with three.
35 billion in NPR under management, we have a highly skilled platform to manage providers revenue cycle operations. This contracted book of business and our pace of execution gives us a high degree of visibility to our $260 million to $275 million and adjusted EBITDA guidance for 2020.
Importantly, we expect $15 billion contracted NPR to be in the margin ramp phase in 2021, which gives us visibility to our 2021, adjusted EBITDA guidance of $320 million to $340 million.
Market demand for offerings continues to grow and the investments we are making in expanding our functionality and capabilities continue to improve our competitive position and extend our lead in the market.
Most importantly, our customers and their patients our direct beneficiaries of these investments.
In summary, as a direct results of our differentiated value proposition. We look forward to continued growth given the sizable market opportunity ahead of us.
Now I'd like to turn the call over to Rick to review, our financial results in more detail.
Thank you Joe. Thank you all for joining us I'd like to remind everyone that we will be referencing non-GAAP metrics on todays call. The adjusted cost of services, an adjusted SDN any numbers exclude stock based compensation and depreciation and amortization expense.
Adjusted EBITDA excludes stock based compensation expense strategic initiative, a portion of DTR related expenses severance loss on debt extinguishment and certain other costs.
A reconciliation of GAAP to non-GAAP financials is available in todays earnings press release.
Now turning to our Q4 in 2019 result.
Revenue for the quarter with $314 million up 51.1 million or 19% year over year, driven by a $45.8 million increase in net operating fees from new customers on boarded over the course of 2019 as well as organic growth across our customer base.
Relative to Q3 2019 revenue was up 12 $12.8 million driven primarily by the Onboarding of the Quorum health contract for the full year revenue was up 317.6 million or 36.6% driven by the onboarding of the meta and presence earlier in the year a full year of Intermedics contribution continued onboarding of Isnt.
Medical group and core I'm in the fourth quarter.
From a cost standpoint, just the cost of services in Q4 was $246.3 million compared to 227.7 million last quarter and $211.3 million a year ago, the sequential and year over year increases were driven by the onboarding of new customers offset impart by project productivity improvement in the delivery of our.
Services for the full year adjusted cost of services increased to $930 million from $731.7 million in 2018, driven by the same factors I just mentioned.
Adjusted EPS DNA expenses in Q4 were 22.6 million down to meet sequentially, primarily due to the timing of certain corporate expenses for the full year SDN expenses increased $8.3 million as a result of investments and corporate IP and human resources infrastructure as well as sales and marketing expenses related to increased.
For it to pursue new business.
Adjusted EBITDA for the fourth quarter was $45.1 million compared to $48.9 million in the third quarter, primarily due to the ramp up and onboarding costs are from health and higher incentive compensation related the over attainment of new end to end NPR contracts signed in 2019, which came in at $4.1 billion versus our $3 billion go.
For the full year, adjusted EBITDA was $158 million compared to $57 million in 2018, driven by driven by continued progression of operating partner customers along the profitability curve offset partly by onboarding costs for new customers.
Lastly, we incurred $9.3 million another cost in Q4 up from 7.4 million in Q3, primarily due to cost associated with our strategic initiative for the full year, we incurred $36.2 million and other costs, primarily related to strategic initiatives and the ramping up of our DTA effort.
Turning to the balance sheet net debt at the end of 2019 inclusive the restricted cash was 254.4 million down from 313.6 remained at the end of 2018 over the course of 2019, we repaid $20 million on our revolver and $8 million on our term loan a.
Net interest expense in the fourth quarter was 4 million down from five meaning Q3, driven by favorable borrowing rates and a repayment of a portion of our debt. Following the refinancing of our debt last June quarterly interest expense declined at a $4 million to $5 million range compared to approximately $10 million per quarter prior to the refinancing.
We generated $70.6 million and cash from operating activities in Q4, driven by working capital changes, primarily the timing of employee compensation and customer receivables.
Capex in the quarter was $18 million related to capitalized software and purchases a software licenses and computer equipment for the full year, we generated $113.9 million in cash from operations compared to 18.3 million in 2018. The primary driver was improved profitability from continued operational execution across our customer.
Base.
Capex for the full year was $61 million up from 33.5 made in 2018 due to continued investments to support growth as well as capex associated with our depot effort.
Turning to our financial outlook earlier. This year, we provided guidance for 2020, which calls for revenue of $1.3 billion to $1.4 billion. Adjusted EBITDA of 260 to 275 million our guidance contemplates closing the CIA acquisition in the second quarter and we remain on track to do so in terms of quarterly for.
Aggression, we expect revenue to be up slightly sequentially and we expect adjusted EBITDA in the first half to mirror. The ramp we saw in 2019, which implies Q1 should account for just under 20% of full year adjusted EBITDA.
In closing I am proud of our achievements in 2019, we executed well across the board and are excited to enter 2020 was strong momentum.
Now, let's turn the call over to the operator for Q in a operator.
Thank you as a reminder to ask a question do you want me to press Star one on your telephone to withdraw your question, Chris founder hash key please standby when we come pilots una roster.
And our first question comes from the line of Charles raise from Cowen. Your line is open.
Okay.
Yes, good morning, thanks for taking the questions.
Good.
I guess the question is if we think about the model here on the fourth quarter obviously.
Onboarding costs related to Florida.
It was for the for the sequential step down as we think about the full year on 20.
And we kind of put those onboarding costs into.
Into reference.
A lot when do you how should we think about the ramped.
If we think about the fourth quarter 45 million sort of the jumping off point.
It should we expect sort of a linear ramp as we go through the course of the year, starting from Fourq youre or because of the benefits a detailed as we start realizing we might have a bigger step up in one Q and maybe some or even a progression of EBITDA. Thanks.
Yes, I would say Charles this is Joe the way, we should think about the progression of of EBITDA from a phasing standpoint or from a ramp standpoint.
Over the year is generally in line with.
With the ratios that we saw in prior years now what underpins kind of that progression. One is seasonality on cash collections on so one thing as we've talked about in prior discussions.
That seasonality.
So, it's pretty predictable and pretty consistent.
The second thing that comes into play and we see that very similar to prior years. It's just the progression of our maturity on our contracted book of business quarter to quarter over the year and then the third thing which has some variability at quarter to quarter is just the on boarding core costs given timing of of course.
Stock split, but if you look at those three factors. The first two I'm I mentioned are the primary drivers and that's really what.
Gives us visibility and and modeling that progression would be similar to the progression we saw in 2019.
So I guess just to is the as a better way then to do it is to think about if we think about presence in a meta early in the year. They have started onboarding as as now we get into maybe the third or fourth quarter for those contracts compared to quorum.
Is it possible then.
As those onboarding construct those falloff that will offset more of what the operating costs relative to corn was so that we could I guess, we're just trying to make sure that we're not as a big.
Overall, I think I'm modeling some big step up where in fact, we should be thinking that more of that will give the in the back half I guess question.
Yes, you're definitely going to see just on a quarterly basis.
Quarterly contribution stepping up as a percent of total EBITDA guidance over the course of the year and and the two primary drivers on that on that modeling is one seasonable seasonality of cash flows we see higher cash flows just as a general matter industry wide as we progress through the.
Sure and the second thing, which far outweighs the the variability in the on boarding court costs. It's just the progression of maturing our.
Contracted book of business and so that's really what gives us the visibility that.
That progression will be generally in line.
From a quarterly contribution standpoint to the prior year.
Okay Thats helpful. My last question would be.
When you guys acquired Intermedics.
Talked about the assumptions for growth there being sort of flat.
Now that you've kind of integrating you've lost Ed.
New client at the last year.
What are you building in specifically for Intermedics in the guidance, how should we think about the growth profile for that business on a separate from.
The core business.
Yes, we still have very modest growth assumptions on Intermedics I would characterize that Charles as a conservative.
By us in our estimates with VJ, joining and now.
Mobilizing and preparing our broader physician offering for growth as we look medium term I wouldnt characterize this as long term, but as we look medium term what we see an opportunity is if you. If you don't think about if you don't think about Intermedics stand alone and you think about our physician.
Business today as referenced in my comments, having roughly 7 billion of NPR under management, we see an opportunity to grow that base at a higher rates.
Again, it will take us some time, but at a higher rate.
And the core business. So you know solidly north of double digit growth rates and a proxy for that which has been a big priority for VJ and for Gary.
Gary long, our chief commercial officer.
As to drive the focus of our efforts on the more scaled independent physician groups and the medical groups of the integrated delivery systems and so just over the past six months for those two target markets, which our priorities we've seen averaged.
Deal size in the pipeline and up more than 50% and that's just in the past two quarters Q3 in Q4 as I look at Q1 activity. That's solidly up again, and so I'm generally very encouraged that VJ and Gary are doing a really nice job to Orient.
That platform to a more strategic end market than Intermedics historically operated on the final point I would say is we feel like we've got the operations ready to compete our performance indicators on cost our performance indicators on various revenue quality metrics into this end market are.
Very very strong right now and markedly different than where they were one intermedics on a standalone basis was running the business.
From a scale standpoint.
We've got significant capacity, we've put in place really to support that Mark and then as you know Charles it's a it's a strategic on market. It's a growing setting of care and we're encouraged that we feel well about our competitive position there.
Thanks, just to clarify a little bit when you talked about the deals and pipeline is should we look at this new position to specifically we signed late last year 700 million MPS is that sort of dee.
Average size of these type of deals and is there sort of though.
A tam that you can give around what is kind of opportunity in the scaled sort of physician groups is in aggregate.
Yes, I, it's we I don't want to characterize our average deal size in the physician group as we sit today as 700 million NPR.
What I would say is theres more deals like HPP than there ever has done and we would only expect that to continue.
The second thing I would say.
Charles when you think about 7 billion we see.
A billion dollars plus potential love of.
Of net new NPR that overtime, we would expect that to be additive to kind of this threebillion proxy that we have running in 2020, it's not going to happen in 2020, that's why characterized as medium term.
And.
But it's well within.
Medium range planning horizon from our standpoint.
Great. Thank you.
And again, if you'd like to ask a question that star one on your telephone. Our next question comes from the line of Matthew Gilmore from Baird. Your line is open.
Hey, good morning, Thanks for taking the question.
The first want to have was just on the pipeline I have been Joe or maybe Gary could sort of give us some color on not on the makeup of the current pipeline does it look more or less like 4.1 billion you signed.
During 2019, and then if you had any comments you could offer with respect to you said the pipeline continues to grow and there's more late stage opportunities, but if you could kind of characterize that fit the increase to those buckets that would be that'd be great.
Thanks, Matt This is show so.
As we've noted in prior communications.
Coming out of Q4.
We're encouraged by.
The number of late stage opportunities, we have and the way I'll characterize late stage opportunities is there there are passed an impact assessment, so an impact assessment, where we've gone in.
That spend time with the customer.
Looking at data looking out processes and conveying a specific value proposition.
Based on based on that body of work. So the good thing is we're excited to announce.
Rush, but but may be equally if not more important.
We're very excited that some.
There's there's a fairly sizable activity that's developed that we carry into Q4.
The second thing I would say staying on the topic of end to end pursuits. We've seen a nice addition in the first six weeks of this quarter of opportunities that have progressed and are in the impact assessment mode. So in general.
We carried into the corridor.
Develop activity and we see that.
That increasing six weeks into the quarter.
A bit more color on that I would say, we're seeing more RFP activity.
I think part of that is just driven by my comments on the team Orient themselves and looking out some much much larger physician pursuits.
We generally view structured RF p. activity as favorable and it's something that we monitored closely and we're encouraged that we're seeing that and the reason we characterize that as favorable it generally indicates to us that amongst the does decision makers in the product provider organization there.
General alignment on the course, they want to take sometimes when the pursuit originates from a point to point discussion with an individual in the C suite.
We still have to work through an assessment.
Is that perspective, and then of one or is that I've shared perspective from the all the all the decision makers or stakeholders that are going to influence that.
And we've we've demonstrated and Gary has done a tremendous job in those points appoint discussions to understand how to thoughtfully evolve them and convert them.
The RFP activity, we're seeing again, we see generally encouraging because it does mean that theres some consensus in some conviction.
And all of our pursuits, our competitive.
In one way shape or form and we feel good about competing in RFP processes.
Final comment.
Matt.
We generally see the same makeup and that's kind of the modeling assumption we have in a 3 billion, 50% roughly in the operating partner construct 50% roughly in a co managed construct and I would say.
If you look at our later stage and 10 pursuits, we see that mix.
You'll playing through.
And then the final thing.
Not so much just shifting staying on pipeline.
But shifting to the modular.
Reference in my comments in the prepared remarks, we did sign 91 off modular deals over the course of 29 team.
And whether that be.
The historical offerings or it be the PX offering we're seeing very nice progression of that activity and we feel good about our capability to serve that model at scale. So that is a very nice.
Incubator of relationships.
We would expect over time.
To evolve into a more structural broader partnership.
With those with those respective organizations and similar to my comments on the physician business. Gary has been very focused on making sure those modular pursuits or modular option opportunities are with strategic and customers that we have an opportunity to do more.
With and support there.
Their strategies and we're generally encouraged about the profile of of that side of our business.
Got it Thats helpful.
And one on the the Sci acquisition and that opportunity I was hoping you could conceptualize this helped a little bit for us.
Anyway, how does something like scheduling kind of work at it got Attritional health system, and then what does Sci bring to bear out without automated and then.
Within your existing client base how many.
What portion is already using these tools.
And does that cost synergies that you're talking about reflect sort of deployment of that and tier into your current client base.
Great.
So let me talk let me start at the highest level.
When we think about what is in scope as you define the revenue cycle. We solidly include the scheduling portion and the order referral portion that as the start of that process and so with that point of view, we've consciously didn't the majority.
Our end to end contracts.
Contracted the scheduling process and scheduling infrastructure as in scope and the reason we've done that.
It's because we know there is a significant amount of inefficiency in that process.
There's a significant amount of friction that is borne by the provider rendering provider or excuse me, referring provider for by the patient in dealing with that process.
Theres a lot of.
Strategic.
Our data elements that should be.
Used by health systems to make decisions born out of that process. It is in essence the demand signal.
And.
And the order for services that are going to be delivered.
That area.
Has not been an area we've made money on so we've contracted it we've run it as best we can it's highly highly manual.
So.
Our thesis on Sci and.
We're very confident in this thesis is that by deploying technology and first and foremost integrating that scheduling technology with the registration technology. We are in a great position to drive transformational efficiency on this process.
We're in a great position to improve the accuracy of the input to the health system that accuracy of input allows us to present, a much more accurate residual price estimate very very important right now for our customers and allows us to actual.
Lee comprehensively automate the authorization process very very important enabler and differentiator for our customers.
And then it also by integrating the scheduling process and the registration process. It allows us to significantly reduce the administrative burden of coordinating care by the provider and the.
Patient and so so we are.
Very excited.
To drive that value prop and the good thing is we are not dependent on going out in contracting or convincing.
The various stakeholders in the process.
All around that they intuitively believe that because they are included in the scope of work when we contracted these things and so.
We've been working with Sci since 2017. This acquisition is the culmination of a couple of years of us validating the thesis I just walked through and so as we think about some as we think about that we intend to move with pace, we intend to.
Take advantage of our technology coverage given that we own the registration engine, we own the scheduling an order referral engine and as you think about this in terms of financial impact to us.
The.
The underlying assumptions, we have on a cost synergy.
As a modest assumption across our contracted book of business, it's mainly.
What is in scope today at our top two customers now we see applicability of this across a much broader.
Footprint of our $35 billion of revenue under management and so we feel very good about the cost element that 20 million that we referenced.
Earlier in the year, when we announced the acquisition of synergies.
Just off that.
That modest assumption of our contractor book of business.
Got it thanks very much.
And again, if you'd like to ask a question that star one on your telephone keypad.
We have no further questions at this time I'll turn the call back over to our CEO, Joe Flanagan for closing remarks.
We didn't have a last minute question Q appear from gene Mannheimer from Dougherty and company. Your line is open.
Thanks. Good morning. Good good finished the year guys just a follow up on.
Our one professional.
I understand your your penetration is low in the market your competitors solutions are sub optimal.
And an increase in our fees.
Our customers looking urgently to replace these systems or is theres still a fair amount of inertia around.
Replacing that system, there is kind of entrenched in another words, what are the catalyst I guess to get them too to replace thank you.
Yeah, I think the great. The great thing about our offering is what we see is is some as as as consolidation has occurred with the physicians those consolidating organizations really looking for scale leverage.
And at the end of the day.
That's what we're able to do.
Building off of our historical approach and our historical value prop. So remember from a technology coverage standpoint, we're we're E HR or practice management system agnostic.
And we own all of our delivery infrastructure, meaning we will we own our offshore infrastructure, we own our onshore infrastructure and we're very very comfortable underwriting.
That scale, cominit, meaning underwriting our cost to collect and underwriting our revenue and working capital performance and so that is a unique value prop.
That's that we've historically delivered to health systems with an orientation to the acute care side of the health systems, but as you think about.
The power of that value prop given the dynamics in the physician on markets. That's really the catalyst, we're working off and we're seeing very strong receptivity to giving those consolidating.
Physician organizations and alternative to doing it themselves to get that scale leverage and offloading some of the execution risk.
Our around that in a in a more part nearly all relationship and and so thats what were really excited too so promotes into to compete from looking forward and we think we have a great platform. If you look at the fact that we cover 80 specialties, but the fact that we have 7 billion of NPR very.
Diverse across many different settings, serving 27000 providers on our own stand alone were one of the largest physician Rev cycle companies.
In the market and.
We're just we're just in the process of introducing that communicating that so we think theres a lot of opportunity on the heels of those efforts.
Great. Thank you.
And we have no further questions at this time I'll turn the call back over to our CEO, Joe Flanagan for closing remarks.
Thank you Lisa and thank you all for joining the call today, we're pleased to close 2019 on an excellent note with strong operational execution on new business wins ahead of the plan for 2019 and the successful implementation of our de to offer.
We entered 2020 with good momentum, we see continued uptick in demand as I noted via financial assessments, and adding new pursuits six weeks into the year.
And we're very excited around the innovation an extension of our competitive advantage that that we can drive on the heels of the Sci acquisition in closing, we look forward to updating the future and thank you so much for joining the call to.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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