Q1 2020 Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to our one RC in Q1.
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Oh.
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Their systems.
Fine for the next available operator.
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Please go ahead sorry.
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Well prepared comments by Joe fundamentals CEO whole bank.
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Border with strategic and cost saving initiatives.
Yeah.
Oh liquidity position on the growth opportunities I don't know financial performance are forward looking statements.
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So I May plan project would and similar expressions are variations.
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By applicable law.
Our 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 potential impacts of the corporate 19 pandemic I'm the factors discussed.
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And your report our latest form 10-K annual or quarterly report on form 10-Q for the quarter ended March 31st 2020.
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I would like to update you on our response to the Cobiz 19 pandemic.
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Specialty want to thank our 5000 cost registration and hospital based personnel.
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Part of our teams quick response to the crisis on how we helps our customers as true partners.
Our actions in response to covert Nineteena fsrus centered around three key areas first the health and safety of our workforce second supporting our customers on the patients in communities. They serve and third financial navigation of the crisis in a way that ensures our continued success.
Starting with the health and safety of our workforce at the onset of this crisis, we restricted all non essential travel initiated plans to transition to a work from home environment and insured personal protective equipment or PPD and other precautionary measures were in place for our frontline employees.
Across our service delivery settings, we activated contingency plans and Im pleased to report that more than 15000 employees globally have been working from home at satisfactory productivity levels, we have implemented appreciation bonuses for our frontline employees enabled pre cobot testing and expand the paid time off for employees.
Effected by low volumes are leaders have done a tremendous job reassigning and retrading associates to areas most in need of support.
Collectively the team has come together and mobilized exceptionally well as a result, we continue to serve our customers without any disruption to our operations as I mentioned in the intro. The next major focus area for us back to provide maximum support to our customers as they are operating partner to help them navigate the challenges they face.
Our value proposition currently stands out during times like these when provider space multiple headwinds we view this as an opportunity to demonstrate our deep commitment and the cultural mindset, we have across the company to be a long term partner to our customers. Let me provide a few examples.
First we have raised the performance targets with respect to the conversion of billings to cash across our operations with a goal of helping our customers generate cash faster in order to pay for supplies and other expenses.
This is a financial driver for us to since our topline is tied to cash collections. In addition to the increased operating targets. We're also providing advanced analytical support to the teams within our customers who interact with managed care organizations to streamline claim processing and negotiate policy adjustments witnesses.
Barry and coordinate interfaces with payers.
In March we launched a new remote registration of mobile solution to minimize contact between patients and registrars and help our clients conserve pp.
This solution as the deployed quickly and requires minimal client IP resources to bring online we've been able to reduce up to two thirds of patient interactions with registrars, while realizing around the 40% improvement in productivity.
Our fully integrated patient registration solution also continues to expand while navigating coven 19.
Our teams are working to increase utilization overall productivity and expansion of the solution to additional clients can use cases.
Through a combination of our in house capability and external advisors. We have helped our customers navigate complex compliance and regulatory changes within data analysis guidance materials and Webinars to address key provisions of the care Zac and various CMS HHS.
Yes, and state specific updates.
With the increased use of technology enabled clinical visits during the pandemic, we have ramped up tele health resources for our customers. Our goal is to ensure providers have the administrative information to implement tele health services, and an expedited and compliant manner.
We have created a specialized tele health denials program led by our performance management organization to isolate denials trending on Tele health claims to monitor payer behavior and identify any claims that need to be changed to allow for payment.
Our revenue integrity team is helping identify claims that may have been paid incorrectly or are eligible for billing or coding changes based on regulations that can be applied retrospectively.
With our capabilities now tested and proven we feel very well positioned to help clients attract patients as bill for Tele health business at scale moving forward.
Finally, and potentially most importantly by leveraging the capabilities. We have acquired via the Sci acquisition, we are assisting our customers with the restart or rebo processes for elective procedures now more than ever it is critical for health systems too.
Forecast demand systematically of smartly match that demand to appropriately resource capacity measure and optimize the utilization of that capacity and enabled digital patient and provider interactions from ordering and scheduling through onboarding.
Hi, guys platform has proven to be very effective in enabling customers to navigate these core areas and quickly respond to different scheduling scenarios. This is a highly strategic capability, both audience alone and as part of our end to end value proposition.
The actions, we are taking our strengthening our customer relationships. We have received broad positive feedback to this APAC. This is also establishing very credible proof points as good examples of our stewardship to prospective customers in our pipeline.
Long term, we believe the approach we've taken will contribute to our growth trajectory.
The major challenge brought about by pandemic and widespread lockouts is a falloff in patient volumes starting in mid March we saw a deterioration in patient volumes across our customer base, which accelerated into late March.
These volume declined started to stabilize in mid April and over the last couple of weeks. We have started to see elective procedures being scheduled in states that are easing restrictions or were not severely impacted by closing 19.
While it is difficult to forecast with precision when volumes will return to normal we're prepared to successfully navigate a variety of scenarios while simultaneously ensuring the company is positioned for long term growth.
Let me walk you through some other factors guiding our decision making over the coming months.
As a starting point, it's important to understand that because of the structure of our customer contracts. The vast majority of our net operating fees lag cash collections at our customers by roughly four months.
Consequently as of today, we have a high degree of visibility into net operating fees through early September.
Revenue from modular engagements smaller physician customers and incentive fees are generated based on intra quarter metrics.
The revenue visibility inherent in our model gives us time to plan our capacity needs.
Today, we have taken action to control costs in cash spend via present hiring for non critical roles, reducing capex, eliminating discretionary spending and suspending our four one k. match as well as non essential travel for the remainder of 2020.
We've also accelerated a corporate cost savings initiatives that was originally planned for the fourth quarter.
The goal of this program is to maintain and competitive corporate cost structure and ensure we continue to get margin expansion via SGN, a leverage as we grow the business.
Accelerating these savings to the start of the third quarter results in and being net cash flow positive in 2020 and locking in a full year benefit for 2021.
Long term, we remain very bullish on the significant growth opportunity in our target markets and we're seeing emerging signs that health systems are seeing new advantages and using a service such as ours for the revenue cycle needs. It's critical for us to balance this long term opportunity with near term factors we have.
Therefore completed a comprehensive review of the cost structure and capex needs across the company to itemize and quantify all potential levers available to us to further reduce our cost structure and preserve liquidity without constraining our ability to grow.
A good example of this dynamic is that we continued to employ our workforce that is idled due to lower patient volumes because it is important to have that capacity available to serve our customers as volumes return.
From a liquidity standpoint, we're well prepared to navigate a variety of scenarios with our current cash position and availability under the revolver.
We do not currently anticipate requiring additional financing and with a net leverage ratio of less than 2.75 times as per our credit agreement, we have ample capacity for additional borrowings should the need to rise the combination of this borrowing capacity and the ability to further reduce our cost structure gives us a high.
The degree of confidence in our liquidity position.
Given our end to end coverage over the revenue cycle and broad customer base. Our one is in a unique position to view data in trends at a very granular level.
We are monitoring key metrics related to scheduling admissions charges posted and cash collections in real time.
Current trends in healthcare utilization on very dynamic provider cash collections are challenging to forecast accurately due to a number of factors, including the timing of when local and state restrictions will be lifted.
Patient behavior, when restrictions are lifted and clinical capacity on our customers.
In light of all this uncertainty are ones financial performance for the rest of the year could fall in a wide range notwithstanding our strong basis for believing that our growth trajectory is fundamentally intact and perhaps improved over the long term.
Therefore, we feel the prudent thing to do at this stage is to acknowledge the broad uncertainty in health care and suspend our previously issued guidance. We will continue to provide expected revenue trends for the upcoming quarters to the extent possible and expect to provide updated 2020 guidance. When we have improved visibility on our second half revenue.
Looking out to 2021, given the cost reduction actions, we've taken as well as the sharpened focus on operational excellence cost the company.
We see favorability to our previous 2021, adjusted EBITDA guidance, if patient volumes return to normal that fall this year.
Now I'd like to turn our attention away from covered for a few minutes and discuss our ongoing business.
Q1 revenue of $320.5 million and adjusted EBITDA of $61.6 billion. We're ahead of the expectations. We said on the last earnings call driven by continued strong operational execution and lower employee expenses.
Our ongoing deployments continue to progress notwithstanding local and state cobot 19 restrictions.
We started to onboard rush in January with no significant delays in the on boarding today.
Both the Russian our one teams have moved to a virtual model to continue collaboration and execution of the Onboarding Workstreams.
Continued kobin 19 restrictions may impact the pace at which operational initiatives are implemented, particularly those related to patient access functions. However, we are optimistic that we will complete the onboarding of garage by the entity.
For the 700 million dollar NPR physician contract, we signed in the third quarter of 2019, we're halfway through our deployment plan on May Onest. We just went live in four regional markets for this customer and are on track for completion early in the fourth quarter.
Deployment activities at coral are largely complete with the remainder to be completed over the coming months.
On April 1st we completed the acquisition of Sci solutions. Our plan with this acquisition is to digitally transform the pre service processes for our clients and create high performing digital marketplaces for health care.
As we integrate Sci, we will focus on client outreach and engagement integrating the commercial function and launching detailed plans to achieve targeted operational and growth synergies. We've made good progress in these areas in the five weeks since we closed the acquisition.
Customer receptivity has been very positive and the timing could not have been better.
Sci positions us extremely well to make the four critical scheduling functions I mentioned earlier, a competitive advantage for our customers and the covert crisis, which has accelerated the rollout of Sci capabilities gives us improved visibility to the synergy targets, we laid out when we announced the acquisition.
On the commercial from last week, we signed a five year co managed agreement with Penn State health covering their end to end processes in the acute and ambulatory settings. Penn State has approximately $2.2 billion in NPR and is one of the most well known academic health systems in the country.
We are delighted and honored that Penn state selected us to support them for the revenue cycle in patient experience needs, notably we work through substantive portion of this negotiation during the cold in 19 crisis.
We are encouraged with the amount of activity and signings for our module offerings as well one deal in particular I wanted to highlight is Lakeland Regional Health Medical Center, which we signed on for our revenue integrity services module, along with comprehensive patient collection services. Additionally, given our rapid operational response to the.
Crisis, we've received inbound requests from providers was operations have been disruptive and we are pleased to be able to extend our modular capacity to these providers over.
Overall commercial activity continues to progress. Despite the current backdrop. In addition to signing Penn State and the module activity I mentioned, we're very encouraged by the progression of our end to end deals to date. These opportunities are progressing at a normal pace and customers continue to allocate time and capacity to us.
Yes relationships looking forward. We believe this event has the potential to accelerate providers inclination to enter into end to end agreements. Some of the emerging themes. We are hearing from prospects are as follows there was a higher inclination to variabilized their cost structure.
They are questioning the need to leverage their own balance sheet revenue cycle infrastructure.
The inefficiencies associated with multiple third party vendors is coming to light and the business continuity and infrastructure resiliency, we've been able to demonstrate through this crisis is viewed favorably.
They are seeking partners, who are economically aligned and a holistic solution to drive patient engagement and coverage for uninsured patients is increasingly important.
Some of these themes are not new we've discussed them on prior calls and we are encouraged to see a discussions intensify along these lines. We believe the current environment increases the propensity of providers to use of technology enabled service like ours.
In closing I'd like to say once again, how proud I am to be part of the all one team. There are many learnings from this crisis, which will make our one is stronger company as the situation normalizes. The Tms mobilize quickly demonstrating a steadfast commitment to the success from our customers and the patients and communities they serve.
The challenges presented by this crisis have brought us closer to our customers to drive innovative new solutions as a company we have become more agile and learn that we can collaborate in new ways. We expect to emerge from this crisis stronger and we believe our long term growth prospects may be catalyzed by some of the challenges from.
Liners are facing.
Lastly, I'd like to thank rig for his leadership over the past seven plus months, Rick has done a tremendous job leading the finance team and driving continued strong financial performance and navigating this through an unprecedented time in recent weeks the entire leadership team and our board is very appreciative of Rex work and I'd like to sake.
Say a big thank you on everyone's behalf.
Nick will continue with our one in his prior role as corporate controller and Chief Accounting Officer.
As you saw the press release, we issued yesterday, Rachel Wilson will be joining us of CFO effective June firms. Rachel brings 25 years of experience across a number of finance roles, including financial planning analysis Investor Relations and Treasury operations. We're excited to have rates will join us and look forward to her contribution.
On to our wins continued growth.
Now I'd like to turn the call over in Iraq.
Thank you Joe These last seven months had been a tremendous experience for me and Im extremely proud of the way that finance team came together during this time.
Thank you all for joining us I'll begin with a short recap of our first quarter results I'd like to remind everyone that we will be referencing non-GAAP metrics on today's call for a reconciliation of non-GAAP amounts mentioned to their equivalent GAAP amounts. Please refer to our press release.
First quarter revenues came in at $320.5 million at 44.6 million or 16% year over year, driven by $21.4 million increase in net operating fees from new customers on boarded over the course at 2019, a $4.6 million increase in incentive fees as well as organic growth across our cut.
Summer base.
Great cost standpoint, non-GAAP cost of services in Q1, or 237.69, compared to 246.3 million last quarter and $223.5 million a year ago.
The sequential decline was driven by continued productivity improvement and lower employee expenses, while the year over year increases largely driven by the onboarding of new customers.
Non-GAAP as DNA expenses in Q1 were 21.3 million down 1.3 main sequentially, primarily due to lower travel and employee expenses compared to a year ago non-GAAP SGN expenses were up $2.3 million, primarily due to investments in our sales and marketing and HR capabilities adjusted EBITDA for the first quarter.
It was $61.6 million compared to $45.1 million last quarter, and 33.4 million a year ago. The sequential growth was driven by a continued ramp up in profitability at onboarded customers as well as lower employee expenses.
Year over year growth was driven by continued progression of operating partner customers, along the profitability curve offset partly by onboarding costs for new customers.
Lastly, we incurred $8.7 million and other costs in Q1 compared to $9.3 million last quarter due to $3.2 million in strategic initiative costs and $2.6 million in expenses pertaining to appreciation bonuses for the company's frontline employees mobilization efforts and other costs related to the covered 19 pandemic.
Okay.
Turning to the balance sheet and liquidity.
Net debt at the end of the first quarter includes an unrestricted cash was 275.8 million up from 254.4 main at the end of 2019. The primary driver of the increase was the use of cash related to the timing of annual incentive compensation, which was paid in the first quarter.
At the onset of the Kovac crisis, we do re drew down a portion of our revolver in order to maintain more cash on our balance sheet than we normally do we also increased our borrowing at the close of the FDA acquisition to preserve cash on the balance sheet.
Taking into account the additional debt from the Sci acquisition, which closed on April Onest. Our current gross debt is just under $580 million, we have just under $20 million in mandatory debt repayments over the remainder of 2020.
We are also deferring our payroll tax remittances to the federal government has allowed under the care that we expect this deferral to provide approximately $15 million to $20 million in additional liquidity in 2020, we believe this action combined with our current cash balance and revolver availability along with additional borrowing capacity under our current credit agree.
And the cost containment actions, we're taking will provide us with sufficient liquidity to withstand a wide range of scenarios stemming from the coded crisis.
Turning to our financial outlook as Joe noted, we will continue to provide a directional revenue view during the interim period and have suspended our previously issued guidance for the second quarter, we expect revenue to decline $10 million to $20 million sequentially, driven by lower volumes for our smaller physician customers and lower modular revenue.
In closing I am proud of how quickly the team mobilized to refunded the coated crisis, we expect to emerge from this crisis as a leaner more efficient company that is well positioned to drive continued strong performance for our customers as well as our shareholders.
Now I'll turn the call over to the operator for Q in AG.
Operator.
At this time, because I'd like to ask a question. Please press Star then number one and our telephone keypad.
Your first question comes from Charles Rhyee Cowen.
Yeah, Hey, good morning, guys and thanks for taking the questions.
Joe maybe I can start here.
Okay.
I understand here that you talked about a range of scenarios in terms of how volumes are going to come back here.
Despite the fact that you pull the guys.
What what is sort of maybe then the main assumption you have.
In terms of what you expect for utilization to come back.
Talking about number scenarios, but if you look at it looks like a number of companies have already reported so far.
Have all good tended to give some estimation for obviously a week to Q in terms of volume.
But starting to bounce back in Threeq and Fourq Hughes.
Maybe maybe start there just get your sense on how you see the ramp.
In terms of a return to normalization. Thanks.
Yes, Thanks, Charles and maybe maybe too.
To break that question dollar to provide some additional context Charles.
Both near term and then looking to the second half of the year.
From what are we seeing and kind of.
Directionally.
What may be what we made seat think is a likely progression.
For us as you know cash collections.
It's really the the highest correlating factor as it relates to the bulk of our business, which is those relationships that said in operating partnerships and so if you look at if you look at April.
If you look at March we are basically on our plan for cash collections, no really material change.
April was down about 17% and we anticipate made to be down circa 25% now our view is that may should be the low points.
And we have a fair degree of visibility in the sense that the last 10 days or so of April and that has progressed into the first couple of days in May we are seeing restart rebook activities in a number of our markets and we're seeing that.
Show up both in transactional activity, meaning the signals for scheduling and the signals from our for registration and financial clearance, but we're also seeing it on the leading indicators of of billings and and volume flowing through the various Rev cycle processes. So that's.
That we have visibility around that and kind of that's what we're seeing an i. I would say.
We have a fair degree of confidence.
Again based on the past two to three weeks activity.
That we would expect.
Maybe a low point June to be higher and so the real thing.
That creates the breadth of range of scenario is this the slope of the return to normal.
And any.
Secondary advance.
That may or may occur late summer early fall. That's the one thing that we just don't don't have a great.
Below the and I think I think our view, it's pretty consistent for sure in the discussions we've had with our provider customers pretty consistent with their view. So directionally, we would expect.
Progression back to normal.
Coming out of May and as I said, we are seeing that as we speak I would I would characterize it as about a third of our markets.
I would highlight Texas, Oklahoma, Kansas, Alabama, Tennessee, Florida, you'd saw as some examples of those markets, where we are definitely seeing.
And have been seeing for the past couple of weeks mobilization and restart reboot, we would expect that to continue as we progress through may and head into this summer.
Real question process just again.
Not that direction, but its with with any degree of specificity what does that spoke look like.
Adding through the balance of the year.
Okay. If I could just asked a couple follow ups can you give what is the key.
The key aspect of your business and allows you to see.
What gives you the visibility on sort of near real time activity is it really the FDIC scheduling capabilities that you can see people kind of rolling in or what acetate. What are the solutions in your senior suite of portfolio solutions that will allow you to see when that gives you the sense allegory seeing that will.
Kind of sloping items.
Slipping here a little bit in May.
Yes, what we see what we see because because some.
We are truly and meaning for most of our contracts we cover scheduling all the way through the patient collection process.
In the front end processes in most cases.
We are running the scheduling function as part of our relationship with the customers and so we are seeing real time, an impact where interface seeing.
With the clinical.
Decision, making forums on how that restart should be should.
Should be plans and what are the algorithms so to speak.
To start to.
Signal the schedulers to to be.
Rebooking and filling filling capacity.
I would care I would say that.
That function gives us and the fact that we operate that function in most cases gives us a fair amount of.
Early indicators and and that's what I'm referring to.
In some markets, we have sci installed already in other markets, where rapidly getting it installed because it absolutely provides that technology platform.
Provides an ability.
For the providers and the clinicians and their tree decision, making.
Teams as well as in partnership with our scheduling teams to run a multitude of scenarios real time that technology definitely.
Provides an advantage along those lines and as I mentioned in my prepared comments one of the tangential benefits looking out to 2021 and beyond is that this event has highlighted.
The capability that Sci brings above and beyond what typically sits in the whole system, a cerner outback or the whole system functionality and actual results of.
Thats demonstration of value we are locking in many cases accelerating to broad based deployment of that platform across our contract to book of business, which really fuels. The bulk of the synergies that we highlighted when we announced that deals so I couldn't comment enough on on the scheduling.
As an early indicator.
Preregistration.
Then which is basically working off the feed from scheduling and that team is doing outbound calls and outreach to patients.
Pair that up to comment so and not enough function, we're starting to get real sense of what is the mindset of the patient.
What is their propensity.
To to actually agree to comment and then.
As you fall off as you flow through that yes, we see charges posted and we see billings and we see collections as traditional measures. So as noted in my comments, Charles we feel relatively well positioned.
To respond in real time based on these indicators and my hope and and.
As I sit right now my expectation, but but that will be determined by kind of how we see progression through made us that will run our Q2 call we're able to.
Provide a bit more specificity.
And I think it's literally.
Seeing may and June.
Flow through and and getting again a sense of of.
How this progression back to normal hopefully is is.
Is shaping out.
Thanks, and just one last follow up you talked about.
Your views in terms of what you expect in terms of a rebound as the as you kind of come out of May June you said, it's kind of inline with how your clients are thinking.
Would you also expect that.
Looking at a catch up are you expecting I'll catch appears selective so basically running greater than 100% of sort of normal procedure volume as we as we exit the year.
And I guess more specifically is this sort of the anticipation from your clients.
You speak to them and how they're preparing for the back half of here. Thanks.
I don't think we've assumed that necessarily material catch up period.
In the range of outcomes that could occur.
It definitely could occur I think I think.
This is where we get into.
We we for sure from our vantage point.
And I would say even.
The provider our customers.
Some of the most sophisticated providers.
In that in the industry.
I don't think they necessarily have.
A great amount of visibility on this is a wide range of scenarios that could play through I would say our general planning assumption is as you would expect is is a prudent returned to normal profile.
And.
There definitely is scenarios that could surprise us to the upside or scenarios that equally could could surprise us to the downside, we just don't know.
Okay. Thanks, a lot guys.
Your next question comes from Matthew Gilmore with Baird.
Hey, Thanks for the question and Thanks for where you guys you got on the front lines here.
I guess do I wanted to ask about on some of the emerging themes you talked about with kind of it that it could be driving sales activity from from a pipeline perspective is that driving more outreach from new clients to our wanted to start a conversation.
Hi, guys themes things that are sort of sustaining at current conversation in the current pipeline activity.
I would say, it's both fit it definitely is not solely sustaining.
And keeping current pipeline activities.
Progressing.
Although I would I would say that this of that said our approach to this advance.
On on current active pipeline opportunities.
Is it is definitely contributing to their continued progression, but but we absolutely are seeing.
New opportunities come into the pipeline.
As were as we're progressing through this covert crisis and I think its unruly logical I mean, when you think about it we have invested heavily we have taken our role very seriously in terms of building world class infrastructure Thats resilient.
And and Ken in that sense.
Extend real meaningful scale leverage to our customers.
In a compliant.
And reliable way and.
I think this event is bringing to light if you look at how quickly we mobilized.
15000 people into a work from home environment.
Did not have any material disruption to our operations and in fact.
Have extended via modular agreements.
Non non encourage our non pre covert customers our services.
In the midst of this I think this is a testament to all the hard work and all the investments that we've made over the past three to four years. If you look at our hospital based employees.
Whether it be via technology on the mobile ranch.
Whether it be just rapid.
Segmentation, where physical interface does have to occur being very rapid on mobilizing not always in lock step with our customers I think its demonstrated.
And it's given us some very compelling proof points to sell off of that we we operate like an owner.
We're an extension of our customers organization.
And really that is the question Mark I don't think.
The question Mark never has been.
On value prop such as ours.
Our we'd deeper from RCM expertise standpoint.
Given thats, what we do all day long I think I think we've been able to credibly answer that.
This has helped us to again build on.
So my hope for my expectation.
Is that we definitely coming out of this and even real time are seeing increased activity.
Of new opportunities new discussions in the pipeline and continued progression of active discussions.
I also think.
Looking more long term.
Whether it be.
Operating or co managed agreements that we have in place or.
Our.
Pipeline opportunities that are out trying to decide.
Between the trade offs in the eyes of the customer of a co managed for operating partnership I think this events in the approach. We've taken has given us a very compelling proof points that we are good stewards. When we have control of the operation and I can't emphasize how important that is long term for.
Sure.
For the company and for the value.
Accretion of all stakeholders within the company.
Got it but that's helpful and then as a follow up I did want to ask about things that carries act emergency grant money that's been distributed do providers.
Our one three year contract technically have access to that money and even if you Dan are you.
Foregoing that.
To support providers, just give us some sense for habits getting treated.
Yeah, let me answer that across a couple of comments I should have I should have characterized when I when I answered Charles' question I provided the.
March April.
Anticipated may cash collections.
Those numbers include no benefit of the Medicare prepayment that acceleration of funds those funds, we will incur our fees have been care as delivered so so so I should highlight that.
Just for for avoidance of doubt.
Our relative to carriers out we're not participating in that.
And I would say Furthermore.
As Rick as you heard from Ricks comments.
We're investing in capacity to make sure that we're ready to serve.
Our customers as they navigate those puts but that is that's not something that.
We've we've availed ourselves too and it's not something we've ever even thought to talk with our customers about.
Got it fair enough. Thank you.
Your next question comes from Donald Hooker with Keybanc.
Donald Your line is open.
Oh, Hey, Im sorry can you hear me.
We can't.
Okay Super Hey, So obviously there was.
Some unfortunate news in the press around core I'm, having some financial difficulties and I'm sure that's.
Where folks are hearing that as well in the press around different provider groups and hospital struggling how are your contracts structured.
To protect you if things get worse, perhaps or their contractual protections in terms of.
No incentive fees in terms of can you just walk through kind of.
How you structure the contracts to so you're not less standing if the music stops at a particular client.
Yeah, I don't think we necessarily I mean, we've talked about Don.
We've talked a lot swift.
With core on or we've talked a lot of excuse me.
In past calls in Q I may just on our preparedness to navigate kinda quorum spin it as as a specific proxy and I think we've always said that said we continue to view this.
We have a we have a fair amount of visibility just given the relationship we have come up with customers. What we do a super critical to their ongoing sustainability, meaning the conversion of billings to cash.
The variability of our cost structure.
Is quite significant when you think about.
The percent of our cost Thats labor and the labor that sits at the hourly workforce.
I don't take this slightly and I.
But there's a fair amount of attrition in a fair amount of variability.
In.
That is and so there's a myriad of factors outside of the contract just on a normal operating basis that give us a high degree of competence.
Should've situation arise that we're able to navigate it and I think quorums a good a good example of that and you may have seen in the filings, but we were deemed essential vendor you know as it relates to quorum and all of our ongoing.
<unk> have been fully approved by the courts and so I think that's just an additional proof point or example of the credit quality of what we do and intimacy we have with the operations at our customers.
Super Yeah, just one of those nice to hear that reassurance and then maybe another separate question you guys got good success. Despite the pandemic with some code manage relationships and then with a couple of others <unk> or their conversations or is there a potential progression of these relationships.
From sort of modular and co manage deals to fool operating relationships for outsourcing relationships over time is that kind of how we should think about each of these sort of like if you take the pen deal when are they sort of you know where we are we sort of testing the waters and then maybe that progressive until fool outsourcing relationship or Howard had those discuss.
<unk>.
Likely drove off.
Yeah, I mean pen pen was just to now so I don't want to get ahead of myself, we our focus on on with Penn State.
The world class deployment, and really demonstrating the capability of our human capital, our technology and how that technology brings value above and beyond the whole system and then and then our central infrastructure. So far focus right now with.
Penn State is just a great great deployment, and we were honored and delighted.
That they selected us to meet her partner.
So <unk> what.
What I would say Don is is we have a very good track record. If you look at essential and enter my own as to most recent examples of progression from operating partner or from cold Mannish into operating partnership and without a doubt as you think about.
As an agreements we have encode managed relationships our our objective and we think there is significant value creation for the customers and strategic rationale is to progress those into operating partnerships and one of the reasons.
We we we <unk> we are so focused on.
Serving our customers.
In in this Kobe that is it's a great opportunity for us to demonstrate again that we are very good stewards when given control the operation as a partner and I I think I think coming out of this I feel very good and I'm proud of the team.
And the way they've approached those relationships that that will bode well as we look to progress over time those call manage relationships. We currently have and as we think about our pipeline in those discussions we have some very real time very compelling.
Examples.
You know, how we operate as a partner and I I think I can emphasize how important that is to long term value of the franchise rubber the company given you know what what are in our opinion is the very early and things.
Of a structural progression rather cycle I I would I would absolutely.
Remiss, if I didn't comment that while we have an event here if you take a step back there's a very big market, it's not well organized and there's a lot of value value to be delivered to the providers.
By rationalization of the revenue cycle infrastructure out large overtime.
Oh, thank you for that thanks.
Mm.
And again for any questions screen Christ Alright, then the number one.
On key pad and <unk> <unk> R.P.C. capital markets.
Yeah, I think good morning.
So Joe on the cost action, you're taking can you give us offensive how meaningful those are going to be is it gonna total and that the tens of millions of dollars or or more or less and then on on time and you mention accelerates plan for the fourth quarter into the third quarter, the others like no travel the for one.
K matches I'd imagine news do show up pretty quickly.
Yeah, Shaun thanks from across standpoint, I would say the cost actions, we're taking our and the tens of millions of dollars you know in in terms of in terms of you know those that we reference that we've put in put in place and and our executing against when we talk about.
The cost the the corporate cost action that we had originally planned for Q. for that we've pulled in.
To the start of July from an execution standpoint.
The start of two three.
That plans cost action that was sitting two four.
Was not dependent on cold, we had always spend monitoring and we've always known that.
<unk> there was opportunity for us to to assess you know on from our corporate standpoint, everything we're spending money on and to to gain some efficiency and really strategically we want to be diligent on always maintaining.
Corporate efficiency, because we do expect over time and I would say this is a longer aperture than just 2021 to get a scale leverage on our corporate costs as we as we growth the business since so.
Actually what we're doing is pulling that in.
To July as opposed to a cue for execution that ensures two things one were cash flow positive in the year on those actions and ensures we lock and a full 12 months of of benefit in 2021 and so.
It's it's not a reaction to Kosovo pull and yeah to some degree is from from just making sure.
We're cash flow positive want it in a year, but it's really a a proactive strategic intention of ours to maintain the efficiency from a corporate standpoint, as we drive significant growth on the business and so yeah. That's that's kind of you know you know a bit of Colorado.
On that specific action.
Okay.
Very helpful. Thanks, and then.
Maybe going back to the corn for just a another moment.
Your payments there that are outlined in in the court filings the interim operating budget that corn had filed as part of it it's profit.
In line with your initial contract terms or you had to make any adjustments to the contract or any confessions over the course of all of that.
In line with our operating assumptions no commercial adjustments of him.
Great. Thanks again.
Hi, I'm Shelley notified that questions at this time I now have to call back teacher assign again for closing remarks.
Great close to call I'd like to just tank everybody for joining us today in sincerely hope everyone's and their families stay healthy and try to get through this period as fast as possible.
We know, we'll eventually get through this and we look forward to updating everyone on our future calls a ashley thinks while you're hoping we can close the call.
Yeah, they'll come back increase today's conference thing keep your participation <unk>.
[laughter].
[laughter].