Q4 2019 Earnings Call
Ladies and gentlemen, you were currently on hold for today's conference call. At this time, there's demonstrates what do you sometimes see under very shortly thank you for your patience. Please remain on the line.
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Good day, everyone and welcome to the New Frontier Hedged Corporation fourth quarter on fiscal 2019, Our news conference call. Please note today's conference is being recorded.
Now, let's turn the conference over to Mr. busy Myles I see our please go ahead.
Operator, Hello, everyone and welcome to New Frontier House fourth quarter fiscal 2019.
Oh.
Okay fourth quarter earnings results were released earlier today that are available.
Hi.
[laughter] age.
Yeah.
Remarks today will be a company by presentation also.
Hi or website.
Well we continue please note that the discussion today will contain forward looking statements made under the safe Harbor.
You asked private securities.
Sure Reform Act.
Hi.
Forward looking statements involve inherent risks and uncertainties.
Our results not materially different from the views expressed today.
Information regarding these and other risks and uncertainties is included in our form 20 outside the U.S. Securities Exchange Commission.
22019.
Documents filed with the U.S. easy.
Frontier House does not assume any obligation.
Forward looking statements, except as required under applicable law.
This press release, all since its financial measures that are not calculated in accordance with international financial reporting standards issued by the international accounting standards for.
Conciliation of these measures are most comparable measures calculated in accordance with you.
Please see the earnings release or Investor presentation, published by New Frontier Health today.
Yes, you see on form 6K.
Let me to introduce the management team on the call today.
Yeah, Chairman of the board of directors kick off the call with a brief overview, that's Roberta Lipson Chief Executive Officer will provide updates on operating performance.
Mr. Walter Shoe Chief Financial Officer will review, the Companys financial results and outlook.
Carl Lou Chairman of the Executive Committee of the Board will further review operations and discuss strategic priorities.
The call. We will also help chief operating officer, Jeff Staples VP of revenue on financial planning Jenny I.
An executive director of New Frontier Health, David sign comical.
I will start of the Q1 I Sasha.
Oh I prepare management's prepared remarks, we will open up the call to questions.
That said I would now like turn the call over to Anthony.
Tony Please go ahead.
Well, thank you bill.
Cool for joining all full quota in fiscal <unk> earnings Conference call.
Good day is an important milestone.
It's all system earnings call.
This is combination between deal front your cooperation that you'd like to family health care.
During 2019, we reinforce our leadership into private <unk> health care sector in China, as we continue to screens and develop our medical to the ability to handle more complicated medical conditions and continue.
But that's medical and other general trends from the World.
That's what became Twentytwenty.
I believe all of us.
So you can Pete and basket challenges.
All depends damage, which is full time the impact in trying to that so as globally.
Oh ops thoughts with the people.
Offended Easter that affected.
Yeah, we hope that conditions within pool.
And the difficulties would go away soon.
Despite the recent challenges caused by the goals at 19 synthetic.
The board meets or exceeds the coupled with the direction of the company.
We remain optimistic about the future.
It's experienced management team.
Based on the very strong foundation.
One of the largest classic health care providers in China.
Well I'll pass on to will touch on.
What we discussed to get on campus or something.
Operating performance reviews will disappear.
Thank you Anthony side as well.
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[laughter], ladies and gentlemen, we're experiencing a momentary interruption in today's call you know going home. Please standby.
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Great our apologies for the interruption on Mister car, where we'll be reading.
Section of the conference call and Roberta and her team will be joining the call momentarily, but Carl what country due from the beginning Roberta section Carl Please go ahead.
Hi, everyone does it's called the.
I apologies for that connection era.
I would like to keep said some a real financial results and that's something that's what's in the 90.
Turning to all breaking achievements this quarter and the physical yet piece tend to slight htwo inception.
As a wider recognition hope all Britain and consumers companion confidence enough. So this is increased the number of outpatient visits by 11%, Yeah, we'll be yet for the fourth quarter and the number inpatient admissions grew by 20% yeah older yet for the full year outpatient visits reached a new high.
633000 increased 12% year over year.
Lilly inpatient admission reached 11000 increased 22%, yes, yes.
There were several developments during the call. It said that supported this growth shown on slide 14.
Do you want all putting that's it.
Continue to strengthen though medical capabilities throughout the network Beijing Hospital had several groundbreaking robotic surgeries and likes demonstrations that's well that's good recovery often hold true spend that you a baby bond, it's only 25 years.
Couldn't do five weeks old.
Oh, yes agent and wait or 590 grains Beijing Hospital also received GGP approval from 58, which allows the hospital to put some clinical drug trials.
The success, just demonstrates how its industry, leading capabilities and outgoing patient and potential patient base.
We're also excited by the Red occasional if I was Shanghai, Pucci hospitals, which occur at the end up the quota.
Yes.
End of sets out said that the last quarter. The new wholesale has more than tripled the size will fall, because you're lucky, making room for new patients and new and more advanced equipment technology.
The new facility will be able to extend out. So this is two new more specialties and walk acute and high margin procedures.
In tier two operating assets you can think Oh I V. S said it does continue to expand its capability with the addition of the beat deal Incubators. This technology is expected to further improve pregnancy success rates and it allows prospective parents to what should be better than most embryos session.
In June I didn't have to cheese world class success rate of about 40% for women, aged 78, yes old and younger and about 30% for women that yes older and older.
Recently came to United has maintained a significantly lower multiple pregnancy rates.
They do rehabilitation hospital, which in addition to its post pots and we have to the patient visits specializes in orthopedics, you a logical and cardiac rehabilitation.
Well, it's a new height dependency units that's units provides a new high margin. So that's like the facility and the supporting serious cases, requiring ventilated base intensive care.
Oh extension assets, including the one Joe and Pudong facilities continue to recall strong rent bumps speak to the yet.
These new facilities.
These new hospitals have achieved 331.9 million I'm beat up annualized revenue base on December 20, Nike monthly revenue.
He said well, but that's no doubt Bakken I'm happy to talk to them.
Well go to overachieve.
Thank you Carl finally, we continue to attract the best in class talents in the World Eutwenty 19, we welcome Dr. Catherine Kelly Anne Retrain senior orthopedic expert with over 24 years of clinical experience to our Shanghai policy because silly.
See where she has joined the orthopedic team.
It's actually achieve a joint reconstruction.
The Joseph Someway, and obstetrics and gynecology I'll start with over 30 years of experience has professor medical leader and mission at some of America's top medical institutions has joined our attention facility at the new Chief Medical Officer.
Professor looting James has joined our Beijing Hospital. It she felt radiology following illustrious career as professor and she had picking Union Medical College Hospital, and Dr., Jacob well Gee I specialist, who joined our call Joe Hospital. After serving for 20 years has a professor and clinical.
For the public P.L.A. Channel Hospital and medical College.
Please turn to slide 15.
Throughout 2019 outbreak.
Hang true to our mission, we have been following international best practices for epidemic control, while working with the health care authority to provide the high level International standard health care services that are patients have come to expect.
Upon learning about the cold at 19 Dodd Frank we immediately established fever clinics with the guidance of local health departments in order to screen and test patients with fever for potential infection by the coldest 19 virus.
I seem to love the government's confidence in our standards processing thing clinical experiences. We became one of a handful of private health care operators in China designated by the Chinese government to operating for care centers in our hospital facilities in order to come back the outbreak.
We also elaborate stallions international supply chain to send urgently needed medical supplies to Uh huh.
The epidemic containment and treatment efforts, while making sure that often issuance has sufficient protective supply to work safely in the coming up.
We raised funds from a CRO partner for the company and used to be fun, Johnny hundreds of thousands of Matt.
Well I'll say she also has gone.
Well it doesn't so I see you ventilator and other leading a quick to the hospital any epidemic sell.
To protect though that we have the following current teams for stocks attorneys to work for another study establishing flexible work schedule.
Quiring temperature checks and personal protective equipment at our facilities as well as providing epidemic control education and training to our staff.
We are pleased to report said I. So today, we have had no phone cases, coupled with 19, among gastar and dark hair 14, and high to policies have been short appropriate levels and staffing throughout all of our facilities.
For patients.
It sounds like temperature checkers stations restricted last patient traffic established social justice in policy for patients inside of our facilities I provided free education, though literature in multiple languages to patients.
That's the direction of the Health Authority. We also temporarily closed all but emergency services at our dental and tea and then dockets. He departments for several weeks as procedures at least apartment prevents the highest risk for the spread of viral contamination.
At the same time, we took this opportunity to launch the online telephony videos consultation services to our patients and so far we've offered online consultation directly to more than 3001 individual.
And our public wide screen Hell like Intelliflex yours have viewed by more than 3 million people even though.
The pandemic out Blake caused patient volume set off facilities to drop significantly from the lunar new year holiday at the end of January through February we're starting to see those trends were birthing most of the previously college curtail services have reopened including debt.
Yes, he and endoscopy and we are expecting a full return to normal levels of operations and the second quarter of 2020.
Our CFO traveling will provide an overview of financial results.
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Thanks for joining the call I Renault [laughter] things all financial performance in the Rins are talking halter until fiscal year.
No [laughter] all numbers [laughter] all year over year [laughter] also involves the company acquired.
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Related to the relocation.
Certainly reflects the fuel churn rent obligation please refer to slide 14.
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Page 23.
It's a summary of our portfolio today and the relative contribution of featured calls how assets.
As you know a portfolio of cooks in the piece that's quite young.
The majority of dog tier one facilities, such as we see who don't and gonzo.
Maybe in operation for less than 18 month.
Oh tier two facilities. That's also recently broken you've been and not yet to from that food potential.
Well no tier one operating assets contributed 74% hopes total revenue.
And about 483 million I'm be in terms of EBITDA.
Thats currently about 300% about total pro forma adjusted EBITDA.
Second is growing at 9% <unk> nine generating 27% pro forma adjusted EBITDA margin.
The segment. It's also the most mature with the Beijing.
In Shanghai, Pucci hosted though generating 14 million I'm, B and 10.8 million habit IB revenue per bed.
As you know the puts you at hospital has recently read located to the brand new upgraded facilities at about three times a site is yet to be cootey ramped up.
That productivity it pushes load in Beijing, given recent be extend that number that's on the bread occasions.
Yeah, one operating assets the comfortable from the 20% to 25% book up that capacity and that includes the number that some beijing dots in hospital exclude since it.
Dear to all putting assets up breaking even on an EBITDA basis, as a group and contributing 14.6% of the total revenue while growing at 21%, Yes, and 29 Pete.
Pardon me the group was operating at 1.7 billion I'd be a breadth and you could set in terms of productivity at the segment continues to ramp up we would expect <unk> EBITDA margin from this segment overtime.
Expansion assets other news facilities growing at hundred 70% yoga area growth.
The segment contributed 11.4% of total revenue in 2019 encouraged the only operate at 1.5 million, Brad and you put that.
It's both facilities are located in central locations within tier one cities in China.
The productivity level of this group to continue to ramp up and go into the future.
Page 24 shows the long term maturity cycle of the various facilities that we all great, which hopefully gives you a picture of how the extension facilities have performed relative to other markets over a longer hit so it's always <unk>.
Well Joe market at Chico's run rate revenue of 200 million I'm beat as of December which is equivalent to Beijing, Yeah, H revenue and Shanghai's, Yes, Vice president.
Hi, Pudong also.
Generated 131, many of run but revenue in December 20, uniting despite only officially stopping to operate in November 28.
Both of these run rate revenue numbers up based on an annualized December monthly revenue.
However, as you know a maturity pod its long term.
Aging United as an example, despite having being the route for 23 years has continued to grow by extending into new capabilities and performing more complex procedures.
Having said that even though most material hospital such as Beijing. It's just you at the early stage of acuity upgrades.
Luckily I would like to share with you a teams and she'd be focus will twentytwenty.
On page 25.
So to me, we've implemented a markets reorganization and that's a business in two three major trio graphic business groups.
The Beijing market no groups together, all putting facilities, including the China Hospital, the new thoughts when possible the new hope cancer center, the rehab hospitals, and the outpatient and dental clinics in Beijing, that's well that's the wild clinics in high nodes.
He said synergies were previously been separately and have smell being group under one single consolidated leadership.
The Shanghai markets consists of Pucci, <unk> and Pudong, United That's what's that you're trying to take Smith.
The Glendale market consists of one duty United and its affiliated clinics that work.
Reorganization well without the H. Q2 continue to manage operations clinical quality and standards of said this is essentially while creating additional you shouldn't see by removing certain duplicate overheads and streamline on the grounds decision making process.
But the more outpatient and the mature markets such as Beijing can know experience truly seamless school life cycle experience ranging from <unk> home health to primary care to acute care could be happy that patient services.
Secondly, Weve recently launched three sales to us facility, and pushy, who don't and Quanzhou.
While we have to cheat initial success and the ramp up these facilities just few fossil mature enough super forming a fraction of out more mature facilities in Beijing, and Oh pushy facility on both revenue could that that's where else margins.
Priority is to continue to drive patient believe recoup talented medical stuff and upgrade capabilities. These exciting usage deliveries.
Number three will continue seeing best no called docket, particularly the thought tier one cities will be launching L. Plus 60 cents, a clinic and Bellekeno Shanghai sinking deep this coming quarter and we'll continue to be you may expect a clinic network, which excepting <unk> strategic fund, though to a larger hospitals.
Let's see.
We've also expanded capabilities to new specialties, including orthopedics.
Ecology oncology said visits and many other oh.
Oh, which have a cheap can you show success and growth we intend to continue to extent features and capabilities and these new especially with the areas and continue to expand so this is particularly to Chinese patients, which now have exceeded 70% spoke all patients age.
The short term.
In the unprecedented scale and the impact of the Corona virus, we remain highly focused on cost and catch control.
Particularly with implemented companywide hiring threes with the exception and flexibility of cultural fit you shouldn't hiring that's where you see high quality medical stuff more willing to switch to private Douglass, that's what's leading other private providers that lack of scale and Brent.
But the more monitoring capex spend and corporate overhead citizens recovers and remain nimble and react to the market conditions.
Lastly, our teams are working hard to enjoy a safe.
Oh, sorry about this is a cross sell system, including the reopening of southern especially with eat and outpatient clinics.
Lastly, well focus on launching two new exciting facilities in Beijing and since then.
The Beijing doctors and hospitals is situated in the northwest site Beijing, another fluent catchment in Beijing.
Wed previously told me I'm hosted though was not able to fall to the other told them House, though is situated on that you cycle Beijing, The Beijing Docs in hospital will focus on women's and children's health and will help rebalance the capacity from the Charlie on hospital, which will continue to develop new especially with each other this touches oncology.
Also BD and robotic surgery.
I hope to complete the construction and launch the thoughts when you make the hospital throughout the end of this year.
That can be we're also working hotdogs engine United hosted Oak.
Since in hopes of though itself does management contract facility and situated at the city's endo since in Fujian The Street, that's off the Salway Metro stations.
Since then as one of the wealthiest 'cause cosmopolitan areas in China, let's do Lex sizeable high quality private healthcare infrastructure.
Facility will be one of the third is high and private facilities in downtown since it is expected to launch in Q3, Oh certainty that next year.
Lastly, as the trend of the executive committee or what closely along that well, but ER and support Shetland ingest the execution of thought Suji cars.
Next I'd like to discuss all financial outlooks for the next quarter.
Based on current markets and operating conditions, we expect revenue for the fiscal deals twentytwenty to be between 450 million I'm beat to 435 million I'd be.
Well, 25% to 28% decline from Q1's going to 19.
Cost reflects the company's current and preliminary view, which is subject to change.
We expect to see positive trends, which we have seen much and continue that's the epidemic situation continues to improve in China, We hope to return to normal expected gross voting by December.
Last but not least we'd like to keep our highest gratitude to all health care professionals from all over the world, which who have been fighting pilots lead to keep everyone unsafe during this crisis.
Ladies and gentlemen, if you wish to ask a question I'm just trying to signal by pressing star one on your telephone keypad.
He is get speakerphone. Please make sure your mute function is turned off to an I guess you know to reach our equipment.
Again that is star one to ask a question then pause for just a moments to know if an opportunity to pick him for questions.
I will now take our first question from Jason New of Credit Suisse. Please go ahead.
And I know it's open.
Hi, Thank you Hi, this is James from credit Suisse. Congrats on the results and they become or and bids and thanks for taking my question.
Exactly your questions. The first question Overburden mentioned that we are seeing positive patient volume trends and full recovery by second half 2020.
Wondering at this point can we get more color on to how much has been recovered or maybe a percentage or where are we at this point.
Second question is more along the lines.
Fighting the revenue guidance for first quarter at 2020.
I was wondering how this affects the full year guidance and anymore that we can share on this angle and then the last question is regarding growth initiatives.
I know and Ah that's lives, we talk about a potential M&A opportunities I'm more curious to know whether its teams continue look for a strategic acquisitions here or continue look on expanding management contract approach like beach and in hospital. Thank you.
Well [laughter] say that [noise].
I knew where it started out very strong Oh, we saw up until the Chinese new year.
At the end of January.
Court at 19% year on year.
Growth in inpatient.
Number.
Patient.
Oh, Unfortunately around the time of Chinese new year.
The virus.
And.
We saw tougher separately.
If I step or the volume outpatient in inpatient drop without pension funds dropping more than inpatient volume.
In fact inpatient volumes dropped by only about 20%.
Patient volumes dropped by about 50% over the previous years.
Although during that time, all by nearly all of our well all of our hospitals and doctors are.
Kinda.
Stayed open for.
Yeah, Oh, Steve non fever patients.
We did begin to see a point being canceled and reduced patient flow intact.
Government also as I mentioned on [laughter] asked us to close some of the Iris Department.
Yeah.
In addition captured the holiday myself for the international schools were closed.
Its local schools and international school.
Then travel restrictions were put on and many people where we're staying at home.
Following government instructions for asking quarantined at stake again coming back.
Because so many people were staying Oh, we didn't see the normal flu season that we usually see in February and March people weren't at school, where normally that can get the virus guests and normal seasonal flu and bring it home to mom and dad. So it was.
Sort of a double whammy.
I.
Sorry.
The best be gassy recovery.
We've been thinking about 10%, we got we grow.
Revenue.
I can watch.
So I'm very pleased to see that people are returning the department that were previously closed in the hospital how for the most part for me Okay.
A couple of Arts and it's still are not opened at government request that we extract over the next week Oh and by end of March [noise].
For all departments, and all hospitals and clinics being backed offering Nestle services.
[laughter] same time during that quarter, we saw some really positive thing for example.
[laughter] Public hospital also has some very.
Stringent control they.
If they had even one coal that case.
In many cases hospitals in Beijing, and Shanghai they'd be shut out throughout the patients. So many patients.
Ordinarily see care at the public capital.
In fact, we're able to access their normal provider and came to us.
So [laughter], particularly true for example.
People that were in the middle of cancer care.
Where they were halfway through with chemo or radiation.
Therapy cycle.
And they came to us so oh, our oncology services is abating.
By 37% year over year.
February.
So we continue to see but it's really high call him.
Cancer care and we also have really high bonds for serious surgery cases.
Because all boats Beijing and Shanghai. So for example is shaking we saw our davinci volumes increased by 50% year over year from robotic surgeries and wouldn't be handled many more serious surgery center.
Okay normally.
Oh these patients that came from the public hospital became.
Enthusiastic I'm very vocal supporter so far services because.
They may not have ever considered coming to a high private provider before but as the result of not having a choice they got to experience our incredible care and service level and they've been very political and social media that will patients have taken public person interviews and I think that.
It's just that.
After the Sars epidemic.
Oh, No group of China patient began considering private healthcare I expect that we'll see that this time as well during that period. We also.
Watched our online services and both telephone and online consultations for patients and we saw really enthusiastic response to that.
Mark doctors and patients that felt that wasn't a great service that we could continue to carry on after the epidemic not for free but actually revenue generating service.
So.
I'd say, if there is from sorry, if anything to see.
We really had a very quick recovery during that three.
Three offering despite the fact that we also had a very rough quarter at the height of the outbreak.
The number to reduce quite so much because Beijing hospital with doing it very quick growth rate. So during Q2 2003.
Revenues grew by only 4%, but I can handle your.
Fourth quarter, we went from 27% you're hoping here from the previous here and here at home with 15%. So we also saw a huge searching commercial health insurance after that and we also saw really enthusiastic response from the government.
Well, what private healthcare might be able to right. So you know we're not we can say wants to hear will bring.
But I think if we consider.
With that already begun improving.
We will expect that farmers will start coming but we've already seen the ex cat populations begin to return to Beijing and Shanghai.
But given that schools, one an open until I'm probably next fall.
In fact, we will see it continue depression in our ex cat population, but at the same time to doesn't reasons I just mentioned I think we can see an enthusiastic rebound in our Chinese.
Patient base demand so.
19 is more or less.
Okay in China by the end of Q2, and we already see that happened in that number.
Hey, good locally.
Infected use cases.
[laughter] virtually zero from any day now.
Hey.
Sounds double digit cases coming from outside China.
Really feel we can be cautiously optimistic about the recovery gross [laughter] second half of 220 2020 across all of our constantly.
Long term I have to say I think that this impact.
It's really a one off situation.
And maybe with some long term positive impact.
So we remain very very confident about long term long term prospects prosper.
And the Kindred healthcare service industry in general.
I think that [noise].
Oh.
Yes, it's all your questions, Jason if I've missed anything maybe my colleagues with like to fill in.
Hi, Jason maybe to respond to your second question and the night and management contract I think on and then they we are continuing to be do a and B C, where we bought back if we do execute anything.
I think.
One small kidney acquisition that we done what's that you can be clinic.
Ah, which we recently.
Executed that was previously.
Disclosed that's probably about a merger.
Fighting and that's the.
Clinique that was previously owned by Dupont Tia and there was acquired by end of H. No. It doesn't cost now this clinic comedy since the middle Shanghai and as you know commute license its very difficult to obtain within the in the ring in Shanghai bolt on Hubzu pushy and put them how slow sits on the middle <unk>.
No just hospital, we expect to become a colt hub network and hopefully a fun no traffic into I'll make possible. So that was acquired.
By the beach and I expect it to launch in the coming quoted a in terms of management contract, where we being opportunities. Obviously the <unk>. These are the rent puzzled by current facilities. As you know these are very central Pope EBITDA or red pop growth, but we continue to review opportunities and also to then from the process.
Working on this management contract.
And since it so more to come on that.
Got it. Thank you. Thank you for taking my question.
And once again as a reminder, ladies and gentlemen, it a star one if you wish to ask a question.
You can now take our next question from Rachel Yang of HSBC. Please go ahead.
And it's open.
Hi, Thanks, Mike and congratulations.
Hey, nice troops out.
Two Nike so.
You bet town.
True it's Linda.
Korea, or Cobiz, Nike and I think I had before not quite sure on that and do a half or they just got to hospitals. It's got to to talk about accretion dispute. So we'll get a break because he thought impact on the.
Yeah I do.
A question exactly.
The second degree.
Actually the second question.
Like I truly got good.
Kindreds I can get outbreak of the disease actually highlighted to try to use of China's shockey, just Mexico to focus.
And do so there's always expectations that private hospitals should be encouraging to she had a bridging the topic medications.
And then how could go up create or have you seen.
Any kind of like that you have to something that gets me excited not extend ah joking toward the private huh.
And they show, we back and Oh, Okay actually.
In the coming like one or two years.
Yes.
Thank you Rachel.
[laughter], we are extremely focused on being able to complete the construction.
Be ready to open by the end of this here.
On the government has been extremely supportive they actually designated this that's the key Beijing.
Project and that haven't been said you know I mean, we've got permission to basically continue our work on the on the on site and I've had actually proactive outreach from but they shouldn't government.
To see if we have been experiencing any pain point isn't that process that they can help with that in fact I've had a people from the government come to meeting I think it was actually.
Secondly in February to help us with Saddam licensing issues that we needed for going forward with the project.
So I'm very encouraged about their attitude specifically on that project I can't say you know.
Nothing unexpected happens during the year in the outbreak.
You know everything becomes a reconsideration, but according to our current on timeline.
We should be able to complete the construction before the end, but the here.
About the second question about regulatory changes there has not changed any non Colombia related that's been plenty of Colgate related regulatory changes almost almost daily basis.
There has really not being any non coal that specific regulatory changes during this period, but that having been said I would feel the attitude of the government seen really positive chip steak reached out to us we've actually had some of our Ali.
Leadership invited to a committee by the Central How commission to talk about what was.
Aspect, we feel like might be limiting our development. We also had another outreach by or.
By the commercial Ministry I'm asking.
If we felt as a foreign company, but what I pain points, where and how they might be able to help us. So I really believe that very much actively her experience. After sorry, when the government decided that we could really be a useful supplemental to the public system and.
At that point certain regulations begets change, which were helpful to like developing I do expect to see that after the filing since.
And I really isn't there.
Okay. Thank you so much more to kind of the teachers.
Yeah.
Thank you.
And again, ladies and gentlemen, as a reminder to star one if you wish to ask the question.
We can now take our next question from when they some of you P.S. teams go ahead.
I think kill asking too much before taking that question I I think on the first question. It's a it's a follow up about you know about see adds a day to develop a bunch of things Oh, probably healthcare service industry. So maybe can you kind of budget can you give a science I live.
The more color about you know how how oh, how have you seen the dynamic change up the overall.
Probably a house private healthcare service a in the past history like Oh. My thing you know went what would have seen you then dissect the I am merging for all the ground Pops the commercial insurance on the definitely more higher income.
Population.
And so are you happy missing industries like for decades. So how happy are seen you know the dynamics of the market changes recently as compared with the historical purebred half they have to leasing inside her trend.
But what do you expect statue evolved in the future and also the and also as a indeed I said that either in this area what can we do.
Takes me to you know in terms of for though a intensified commercially insured and it's a lot of marketing well either kept all other activities what kind of weak due to active proactively gain while I'm not sure Joakim warranty care ship your knees in these in this industry I guess my first question and my second.
Question is shot if.
It's a it's it's how we look catch the Oh God the gross.
I didn't you know backed by the area. So by the hospitals do we have like a breakdown of six wells momentum I could talk funds like about also Phoenix, So search meal, Adam matrix departmental how do we see that girls momentum sense. That's that's my next question.
Okay. Thank you Wendy I guess.
What's interesting today I was interviewed by a major Chinese industry.
Allocation.
Park for an article about the development of private healthcare and the journalist reminded me back in 2003, they'll only about 3% of the hospital in.
I know where private.
Now, we're talking about 60% huh.
The hospital in China [noise].
And.
And then if I look at [noise].
Our patient base.
Parents to going back to 2003, probably only about 20% about patients where local Chinese it's almost 80% of our patients coming from the ex Pat residence of China.
No obviously, it's completely reversed probably closer to 80% of thought business comes from local Chinese patients.
So there's definitely change and Ah willingness and that the acceptance.
The Chinese consumer to private health care.
In terms of commercial insurance.
We have seen very serious growth Oh, I, an average gross stuff somewhere north of 50% for commercial insurance. If you look back over the last five or six years, we are extremely interested in.
So some creative ways of working with insurance companies to be able to take.
Take advantage of the Chinese populations, increasing infection commercial insurance selling willingness.
By commercial insurance on and through strong.
Product development and relationship with I'm certain insurance companies, we've been able to attract.
A large number of patients who become then very loyal customers and because we have we take on cargo. So [noise] capture outpatient care for example in a capitated way, we're able to really proactively work with those patients to keep.
That was healthy I'm sure was just the overall health care costs.
With patients, but at the same time make sure that they are loyal to the United family system, while increasing our leverage on in terms self honest the payer. So if we're just totally reactive.
As a provider and not participating on the insurance side, we will eventually lose our negotiating leverage and have much more price pressure, but if we take a proactive lead and worked proactively as we are with insurance company offering.
Products that are talented that evolving needs of the Chinese population I think that we will do you have to stay ahead of it and trial.
Pretty thin patient base due to patients who have taken on that concept of commercial health insurance.
I think that's also has oh, the Chinese public insurance.
Oh becomes the under increasing pressure as it will be it already is struggling.
To keep up and keep the head up so oh the needs of the Chinese people in that I'm sure pool.
I think the government will be increasingly supportive of the development of commercial health insurance and that will also accrue to our benefit and the benefit of private health care and channel.
Oh, Yeah, So I think I've also.
Yes.
Yes.
But I think I'd also add that you would know attracting more and more Chinese sauces, including those that come up from the most reputable medical teams when the well known University hospitals and attracted to US I didn't previously noted was.
What's known that the private market generally difficulty hiring the best trying to stop this but there are no attracted to us because the type of movies eat that the paid by the economics, but becomes yet on a reputable that's what they can do quality clinical but and well protected.
Some of the potential danger that you seem to public system and also the ability to contribute that said this is lines on the nation wide basis, which no other healthcare group to do so in the nation wide basis, and I think these no attractions that we're able to to know what tricks up the best Chinese stocks is and I think if you look at all I pay wrote today I'd be more than seven.
She presented itself you can medical Chuck all coming from the Chinese yeah, well known Chinese hopes to those no come from the top history hospitals and if you look at the problems. That's most of them already kind of Chinese because that's what does that you've got they'll do a major trends upsetting.
[laughter].
So called I think that's a really great client and I think just shifts we saw a stretch in Chinese stock and interest in leaving the public system. After sorry, I think we'll see a surge again after that.
So maybe I'll Jenny would you like to take that question about distribution of of compartment.
So.
So our primary counter to the cornerstone.
Philosophy continues to grow.
We have done.
Oh.
[noise], including.
Yeah.
Oh yeah.
Oh I'm in Atlanta.
In addition.
You see Qt thing, we see a very high growth.
Surgery.
Wow.
Well that policy.
In population.
Hello.
Very nicely.
Oh, okay.
Okay.
Okay, great. Thank you.
And we can now take our next question Jamie So have you HSBC. Please go ahead. Your line is open.
Oh, hopefully everybody is doing fine I had two quick questions. One in your prepared remarks, I noted that we.
We are the process of doing certain reorganization of the Oh, We're all head office I guess principal senior leadership wander to getting an understanding of.
Yes, if there's any sort of.
Cost savings.
Wolf with this exercise considering the fact that.
Yeah, it's about 169 million arm B bothers off it's too expensive so.
It's like one nine.
My second question is about the hub and spoke model.
Isn't that I guess with recent developments and.
Yes.
Oh, you hospitals ramping up are there any change and thoughts as far as a weapon.
Before I was concerned and if there's any guidance to kind of how the clinic network now is expected to be built over the next couple of years. Thanks.
I think that this thank you for the question I I do believe we will certainly see efficiencies.
Based on market consolidation in the three regions.
I think that it will outlets to do away with certain really started to see what kinda regions.
Where whereas we have certainly been done doesn't expenses between for example to clinics networking Beijing animal hospital in Beijing. So I think we will certainly be savings like ours that goes that there is I guess, the only real change.
How about the headquarter leadership is that we're very happy to have err on the guidance and and experience shared by the new frontier.
Executive.
Committee group, including that's some guidance of calling on his team as well as Sam to me I think that we are given I'm not so much for me to not the reorganization, but given.
Some of the pressure in South Dakota situation, we have really taken a very deep in hard look at where we can find cost savings and so some temporary savings are coming from things like.
The fact that we've stopped all travel all entertainment on meetings are done by video conference. So there's going to certainly B.S.G. and they.
Yes, certainly seeing.
Has some messaging any savings in the short term, but I think given the process of looking at the opportunities for those savings we will find things that we will get used to in the long term doing in a more economic way. We also I think Carl mentioned hiring.
<unk> as well as the salary and wage freeze as well as saying every opportunity for increasing our working efficiencies and perhaps not replacing people that might be leading in this period on so I I think we will see.
Sanction fees.
Thanks, that's the blessing of the input from our new frontier colleagues caused you know every time, there's new talent on the team they help us to look at things from more perspective, so, let's see how we might run more efficiently.
Oh I started to happen both model goes I think that were quite committed to that that model I think that we've seen in Beijing, so benefit of having a.
Reaching referral base that we own and we can share efficiencies with acute care me notation facilities in Beijing, we acquire patients very often when they're getting ready to have their first child in the family and because we have.
The primary care clinics that can continue to take care of those kids cough and cold minor needs for mom gynecology requirement.
We have acute care hospital to take care of the family has helped me to become more serious and now what we're seeing is that having been around here in Beijing for over 20 years in certain families were taking care of poor generation of family to have their baby here 20.
Years ago, So we see the benefits.
Developing that system, we have some high.
Less mature, but but developing.
Not all of that going now in Shanghai and one show is also starting and we do plan to open more network clinics and so its first tier cities that we have the strong foundation of the hospitals. So we can make sure to have died outreach.
Referral base to cover the whole city to get to patients and and be able to care for them in a proactive long term lifetime way.
Thank you.
All up I guess, that's my first question this.
Number we can put on this potential cost savings or is it a little too.
To quantify that and then you might look like.
No I can't believe it seemed a little bit too early.
Okay. Thank you very much.
And once again, ladies and gentlemen, it is star one if you wish to ask a question.
We appear to have no further questions I'd like to turn the call back to management for any closing remarks.
[noise] well do okay on for joining us today on the call. We really appreciate your ongoing support, especially at this very special time, taking the time to talk with that.
Understand more about our business Oh, we're looking forward to updating you on our progress in recent months ahead and wish everybody a healthy as safe good day.
[noise]. This concludes today's call. Thank you for your participation you may now disconnect.
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