Q1 2020 Earnings Call
Welcome to Apple and help earnings conference call for the quarter ended March 31st 2020.
My mind does this conference call is being recorded your host for the call today is Mr. Frank William Chief Executive Officer Evelyn help.
This call would be archive and available for later this evening and for next week via the web cast on the company's website in the section entitled Investor Relations. You know some of the important introductory information. This call contains forward looking statements under the U.S. Federal security.
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These statements are subject to risk and uncertainty that could cause actual results with different materially from historical experience or present expectation.
Some of these risk and uncertainty can be found in the company's report that our file with the security in exchange Commission, including costs should marry statements included in the current periodic pilot for additional information on the company's result, and outlook. Please refer to its second.
Quarter News press release issued earlier today.
As a reminder, reconciliations of non gap measures discussed during today's call to the most direct comparable gun measures are available in the company's press release, it should today and posted on the Investor Relations section of the company's website.
I I R dot.
Evelyn how dot com and the eight K. filed with the company with the S.E.C. earlier today at this time I will turn to call over to the company's Chief Executive Officer, Mr. Frank will yeah.
Thank you in good either.
Hank Williams, Chief Executive Officer Bubbling Health.
I'm joined by Schuch walkway, our president and John drops on our Chief Financial Officer.
First and foremost I hope you and your families are all staying safe and healthy from what I know has been an extraordinarily difficult period for both personal and public health perspective.
The Corona viruses have an unprecedented impact on the population health care delivery system and the overall economy.
During the seasons call Oh sure our perspective on the impacted Kobe 19 is having on the healthcare industry in particular as well as how we work collaboratively with our partners provide support to vulnerable patient populations in an effort to reduce infection rates and mortality.
Also provide a general update on the business.
They do they operations and the pipe one John will take us through a more detailed review of the first quarter.
And then all closed with the summary of our progress on everyone's key strategic priorities for the year.
Always will be happy to take questions at the end of a call.
In terms of our results for the quarter.
Total adjusted revenue for the quarter ended March 31st 2020 increased 24.7% to 247.3 million from the comparable quarter of the prior year.
Adjusted either die for the quarter ended March 31st 2000 23.6 million.
March 31st 2020, we had approximately 3.4 million total lives on the platform with two a partner additions this quarter. We welcome three new partners for the other one national network already this year.
Overall, we're pleased that we met R.P. financial objectives for the quarter and we continue to feel confident about meeting the revenue and profit targets for 2020 that we outlined at the beginning of the year.
Specifically, we have strong visibility into a minimum of 20 per cent revenue growth in our service business for this year, achieving our goal of becoming cash flow positive by this fall and driving a strong exit run raid on the bottom line as we enter 2021.
At this stage, we haven't experienced any material negative impact from covert 19.
Business remains well positioned in the market given the mission critical nature of our service offering and our diversified customer base.
We of course acknowledge that this is involving an unprecedented situation. We continue to closely monitor each of our businesses to ensure we're prepared to address any major issues should they arise.
In addition, we're continuing to make significant progress or margin enhancement efforts or expanding and diversifying our national network and pair and provider partners.
Most importantly across the last several weeks or team responded quickly and comprehensively to support our partners during a rapidly evolving public health crisis in our collective work as had a significant and positive impact.
Turning specifically to covert 19.
Yesterday, there have been approximately 1.2 million positive diagnosis, and 70000 doubts and the United States.
The impact on the health care system has been unprecedented in terms of equipment shortages inpatient capacity constraints and the toll on physicians and nurses.
The response across our partner base and across the country has been truly inspirational given the acute challenges of a public health crisis or the speed and magnitude.
Our perspective on how the pandemic is impacting the healthcare industry has there been formed through the lens of working with our partners for on the front lines every day from a patient care and community health perspective.
Has the potential severity of the virus came into focus across the last several weeks and months or teams mobilize quickly to leverage our analytics than predicted modeling capability phone and web based outreach and care management resources and are integrated health care platform to proactively address risks for vulnerable segments of the population.
From a public health standpoint, everyone has been focused on two main goals with our partners.
Flatten the curve to avoid severe capacity constraints across the healthcare system and reducing the mortality rate, particularly in vulnerable populations were social determinants can lead the vast differences in life expectancy.
From our experience in Chicago, New York City, Miami, Houston, Kentucky, Indiana, and Idaho. For example, we're seeing that the virus impacts communities in very different ways and depends on a number of factors <unk>.
The structure of the regional health care delivery system. The density of the population the steepness of the initial incidents curve testing capacity, social determinants and local community leadership all play an important role in the effectiveness of the response.
Such we believe it takes a population health approach that leverage is data and high powered analytics as well as targeted virtual clinical interventions to address the health needs are the most vulnerable patients before they're exposed to the virus or have a devastating acute episode.
More specifically in terms of flattening the curve we've been focused on a couple key priorities first we've worked actively with our partners to disseminate important public health product as an education across the communities would serve.
We're actively leveraging our tell a help capabilities to our virtual care management teams to share C.D.C. guidelines and to help thousands of numbers and patience navigate increasingly complex web of health information.
More broadly we've also collaborated on public education campaigns for online messages Billboards and other public forums.
Second we've been working closely with our partners to find innovative ways to expand testing resources and clinical capacity at local health care facilities.
In terms of testing, we've worked with our partners to free up lob capacity and improve access to remember education, and offering drive-thru capabilities where possible.
Our alignment with local providers. This hope to make this a collaborative effort to facilitate access to rapid covert 19 testing in an effort to quickly identify those to the contracted the virus.
Terms of inpatient capacity or partners are working with their networks in our teams to ship protocols and accelerate discharge planning for stable impatience to expand capacity for more severe covert 19 cases.
We're also supporting our partners in securing necessary medical equipment, and staffing expanded capacity field hospitals where necessary.
Any of our nursing staff have volunteered to serve and local field hospitals, if called upon which is a testament to their commitment to our mission and community health.
In terms of reducing the mortality rate or experience tells us that it's critical to use extensive data and predictive analytics to identify those <unk> high risk and then proactively engage them to reduce their likelihood of contracting the virus or suffering in acute opposite.
First in terms of data and analytics, it's important to have a date infrastructure that aggregates as much information as possible on the population to identify hot spots across communities and those who are potentially most at risk.
Consider the compounding the fact that cold morbidities and social determinants, such as access to food and lock unstable housing have on the likelihood of who contracted the virus.
Actively addressing social determinants as part of a holistic approach to population Hall is paramount to making an empire.
Cordingley, we rapidly developed and deploy it a specialized who've at 19 wrist stratification model, which levers is our private cherry predictive analytics engine as little as machine learning and artificial intelligence to analyze clinical claims social determinants data and a number of other factors.
Second how you target those at risk is paramount to reducing the mortality rate.
Based on our experience managing chronic conditions, we believe it is essential to deploy an integrated care model that incorporates multiple modalities of engagement.
Provider outreach to personal calls to text messages to pharmacy and specialty care consults done remotely.
Using predictive experience to know when and how to engage members makes a significant impact on outcomes.
This model help the Midwest Health plan micro segment several hundred thousand members down to the 8500 highest risk and the next 20000 modest risk individuals.
Over the course of a week or teams outreach over 3500 patience a day to ensure they were following their care plans were social distancing and had adequate support in terms of pharmacy delivery food resources and access to social services.
Are integrated approach also comes to life with a new century house, where the team assesses patience realistically well implement encoded 19, <unk> clinical pathways and assessing appropriate treatment options for their underlying condition.
The result is a more effective way to manage those who may be at increased risk of complications from the virus, particularly with on college, you patience with suppressed immune systems, we still need to continue that are of course a tree.
Across the board or teams appear advisers nurses, social workers and many others are doing an amazing job deploying creative solutions to support our partners in their communities and there are certainly more work to do.
Across our solution areas. We believed are combined efforts will prevent thousands of hospital that days per month at a time that is especially critical to alleviating capacity issues and elevating overall public health.
We're hurting by the fact that the investments we've made in our differentiated asset base, including our approach to do the aggravation population health and virtual care management has played an important role and providing our partners with a very strong infrastructure with which to respond and make an impact during the covert 19 pandemic and be on.
As we step back and reflect we believe that covert 19 pandemic highlights the need for more integrated less silent approach to community health in the United States.
In a situation such as a pandemic within increasingly high incidence of chronic conditions. We believe it's essential to integrate large data sets of individual health information to identify hot spots perform sophisticated analysis and quickly identify those most at risk.
Wrong with wrist stratification identification you need the clinical depth to develop early intervention strategies and the ability to reach members through multiple my values of engagement.
This outreach must take place in coordination with the provider and pair community through an integrated health model to ensure coordination of care and a seamless experience for those receiving service.
The pandemic has also shine the light on the challenge is the most vulnerable members of our society face, whether they're on Medicaid or Medicare or lack access to a central factors that promote good health.
This makes an integrated approach to patient care with deep ties to providers and community resources all that more critical.
Other ones population health orientation, an integrated sweet clinical and administered solutions are based on these philosophies and a bit immensely valuable during this public health crisis.
We believe our role serving as a bridge between parent provider fosters a trust space relationship. That's also critical to breaking down silos and the hope fair system that get in a way of improving health outcomes.
We think are provider and pair partners ultimately benefit from our approach providing whole person care in a proactive data driven away.
In terms of a general update on the business. We continue to believe that our core solutions that address total cost of care specialty care and administrative simplification are highly relevant and today's healthcare environment.
Our role as a bridge between providers in pairs and Catalyzing improvements in health outcomes and driving greater efficiency on the administrative side is increasingly important in a world were federal state an employer budgets will be under increased pressure.
Because I discussed earlier based on what we know today, we feel comfortable with our original outlook for 2020, which currently assumes that we do not add any additional new partner revenue this year.
The pipeline, which is really about setting up 2021 and beyond feels good relative to historical metrics and we continue to see meaningful engagement across a number of pursuits that are targeted to close in the summer and fall time frame.
In particular were continuing to see significant interest in new century health specialty management capabilities as on college, you spend and quality remains a key priority for health plans across the country.
Well, we may see some delay and timing for deal closure due to <unk>, we feel comfortable with our projected range of adding six to eight new partners across the calendar year and maintaining renewal performance in line with last year.
<unk>, we're excited to announce to new partners, which brings us to three for this calendar year.
First new century, his partner with emblem, how one of the nation's largest nonprofit health insurers with 3.2 million members and an 80 year legacy of serving New York's communities.
Emblemhealth will be the point value based new century health offering to support a segment of its adult Medicaid Medicare advantage and commercial an individual exchange membership.
Do central focus initially on leveraging its evidence base precision pathways and peer based cooperation model to focus on improving cost and quality of care and assisting emblem and establishing a high performing network.
New century has been providing value based on college, you management for connect to care, an emblem subsidiary for the past two years and the success of that partnership led to the addition of emblems broader membership based this year.
Really exciting with the potential to drive tremendous impact across multiple populations in the northeast.
Second new century health as also partnered with a regional non for profit Hope plan based in the northeast to provide comprehensive uncalled G. management services over 185000, Medicaid dual eligible and exchange numbers, new centuries comprehensive solution and their ability to address medical oncology.
Radiation therapy, and genetic testing and the outpatient settings were important factors and the evaluation process.
Exciting to add to highly respected new partners with strong reputations in their respective communities. We anticipate both of these partnerships launching sometime this year and to be fully operational in 2021.
In terms of same store gross we're excited to announce that new century house of also expanded its existing partnership with some team.
As you recall during our lost earnings calling late February we announced a new partnership with a national pair organization initially deploying Allied air So version of our new century health offering across five states to support it's on college and costs and quality management goals.
That Paris, and teen and we're pleased to announce that we've expanded our work with 17 to include two additional markets one in New Hampshire, and one in Washington State.
Overall, we're delighted to see new and expanded partnerships for new century, as well and continued momentum in our overall pipeline.
Before I turn it to John I'd like to provide a brief update on a few other areas in our business.
As we step back and look across the enterprise as a whole overall, we feel well positioned strategically in today's healthcare environment.
Our ability to focus our capabilities alongside our partners to positively impact the response to prove it 19 solidifies the relevance of developing an infrastructure to support population health as well as virtual an integrated care management solutions outside of the pandemic given the priorities that will emerge repairs and.
<unk>, our ability to virtually manage total cost of terror, especially costs and provide highly efficient administrative solutions will likely be in high demand across the next several years.
In terms of an operational update first or Evelyn how surfaces teen rapidly pivoted resources to continue to support our payer partners at a high level.
Are passed investments in supporting a robust remote infrastructure put us in a very good position to mobilize the team, while ensuring interrupt or operations and timely outreach to tens of thousands of numbers.
Even during a time of rapid change in our partner organizations will moving to a remote model. The team continue to perform at a high level operationally in terms of its key members services provider support and call Center management activities.
<unk> to help new Mexico came into the year with solid growth and overall membership and continues to remain on track and perform well overall in terms of medical costs performance quality and service.
To help responded quickly to covert 19, and it's done an outstanding job serving its members providers and the broader community. The plan is played a key role and proactively addressing care needs to help mitigate the impact of the virus, particularly when spend the most vulnerable segments of its membership.
Third in respect to our Medicare advantage partnership with global Health in Oklahoma, We've made the decision to not put additional capital into the joint venture.
Well, we will maintain a meaningful service relationship of global how the recent capital call as a result of reserve requirements related to cope at 19 from the Oklahoma insurance regulators to not feel like an essential priority given our desire to focus our capital investments on our core service business and passport.
They have an opportunity just like an ownership stake in the future whoever for now we anticipate writing down our original investment.
Lastly, or partner passport health plan, and Kentucky has demonstrated solid inconsistent operational and financial performance and it's delivered a positive operating margin from July 2019, rape or this year.
The plan is adequately Capitalised and has responded rapidly and holistic the to the coven 19 crisis in service of approximately 300000 Medicaid beneficiaries.
Passports innovative approach to care management and deep ties to its community have helped the plan proactively address social determinants of health factors and work alongside its partners in the community to provide much needed support and resources such as community education virtual care management, expanding testing capacity with University of Louisville.
Access to food virtual substance use disorder counseling and much more.
In terms of the Kentucky, Medicaid R.P. passport originally anticipated an official decision on the R.P. in the May time frame for the new contract convincing on January 1st 2021.
But this point, we haven't received an update on the timing of the R.T. decision or any specifics related to the potential timing impact from probing 19.
Overall, we believe this public health crisis as demonstrated that our platform and solutions remain highly relevant in today's environment.
Oh, the stand weapons support our partners.
There are still a number of important unknowns relative to cope with 19 and its impact on sub segments of the healthcare industry and the overall economy.
Based on our best estimates at this time, we feel good about maintaining our original outlook for this year as well as the medium term demand environment for service offered.
Our focus will continue to be on deploying are integrated infrastructure and clinical knowledge base alongside our partners to improve health outcomes related to the pandemic and also to manage the health of the populations, we serve particularly those with chronic conditions and other high risk factors without overview alternate over to John to speak about our.
Financial performance on the court.
Hey, Frank did anything every one.
And I my thoughts are <unk>, everyone facing challenges during that difficult and unprecedented time.
Oh that also like to express my gratitude for the dedication and professionalism with which the Evolent team is tackling the challenge is presented by this crisis and preserving service for our partners in this most critical time.
Our first corner results for right on track with expectations.
Solid execution against our key priorities in the corner.
Before taking you through the details I wanted to spend a moment discussing that possible effects of the curve in 19 and demick on our financials.
As Frank mentioned during his remarks, we did not see a significant net impact on our results during the first quarter.
This is consistent with expectations given the recurring nature of our revenue model and the visibility we have into our revenue range for the year.
The diversity of our revenue streams across Medicaid Medicare and commercial lines of business <unk> fee based in performance based in principally source from health plan partners further contributes to our financial stability.
We're monitoring the pandemic across all areas or business, but in particular in the three area that membership medical utilization trends and liquidity.
Cursed many expect pandemic to change enrollment profiles with increased unemployment driving in an increase in Medicaid enrollment and they decrease in commercial membership.
Through April we have not seen material changes in our membership and based on what we know today, we're not expecting a net economic impact for membership at this time.
That said with over 50 per cent of our lives in Medicaid a shift towards higher Medicaid enrollments would likely be a net positive for us second with respect to medical utilization trends, we may see impact in our health plans as well as in performance based arrangements. This one is particularly difficult to forecast given the possibility.
<unk> pent up demand bounced back and other factors.
We would expect a reduction in overall medical utilization for a year to driving net benefit per hour economics.
On a detailed review of what we know today for our current portfolio across our fee in performance based partnerships at this time, we're projecting net neutral or potentially positive impact.
But given the range of possible outcomes and uncertainty we're not incorporating this into our guidance at this time.
Finally liquidity remains an important focus as an area, where we believe our strong balance sheet with no near term maternity sets us up nicely as we move through the pandemic.
Remain ontrack to reach our previously stated goal at positive cash flow by this fall.
Now let me take you through our results for the quarter before turning to games.
Beginning with our consolidated results adjusted revenue increased 24.7 per cent your every year.
247.3 million.
Adjusted either for you to 3.6 million relative to minus 14.8 million in the same period of the prior year.
Adjusted loss available to common shareholders was minus 12.1 million or minus 14 cents per common share for the quarter compared to minus 25.3 million, where minus 31 cents per common share in the same period prior year.
That that segment level, both our services and true health businesses recorded first quarter earnings that were in line with our own expectation is coming into the here.
In our services segment first quarter adjusted revenue increase 43.5%.
221.4 million up from 154.3 million in the same period of the prior year <unk>.
The increase was primarily driven by cross l. expansions within our existing partner base and buy new partner additions.
Adjusted platform and operations revenue accounted for 216.2 million, where 97.6% of our total service revenue for the corner compared to 150.9 million in the same corner last year.
As of March 31st we had approximately 3.4 million lives on our services platform.
Our average P.M.D.N.P. for the quarter with $20.22 compared to $14.30 in the same period prior year and $18.16 in the fourth quarter of 2018.
<unk> nearing the trend to the mix shift towards higher revenue services.
Adjusted either from our services segments of the quarter was 3.9 million compared to minus 15.5 million and the prior year.
Turning to our to Hell segment, we had premium revenue 32.4 million in the first quarter down 15 million from the same corner last year due to exiting the reinsurance and granted with new Mexico Hell connections and fourth quarter of 2019 offset by membership in the individual and federal employee markets.
True health served an average at just over 24000 members in new Mexico in the corner up from approximately 17000 members in the fourth quarter of 2019 and due to the plans expansion into the individually federal lines of business.
Claims expense as a percentage of premium revenue, the 73.6% and the first corner.
<unk> health for the corner with minus point 2 million.
Turning to the balance sheet. We finished the first quarter with 87.2 million in cash cash equivalents and investments and decrease 32.3 million first year in 2019 in principally driven by seasonal working capital requirements that were consistent with our expectations.
During the quarter cash used in operations is 20.1 million.
She used and investing activities with 10.8 million.
Aspirin divided by financing activities during the quarter. It was 32.1 million and largely comprised increases to restrict it to cash account hold on behalf of our partners or claims processing purposes.
Passport health plan, where we account for our investment using the equity method continues to perform ontrack relatives, who are expectations of an overall profitable year.
Finally, it's Frank mentioned are adjusted even that results exclude at one time noncash write down associated with our investments in global health.
In light of the covert 19 pandemic the state of Oklahoma required global health to materially increase its statutory capital in the form of the capital infusion.
Given our focus on executing our core good strategy and on passport, we chose not to participate in this round a financing, which we expect for clothes during may.
As such we wrote down substantially all of the value of our stink, resulting in a charge 46.1 million that does not impact cash for our forward financial projections as we will maintain our services relationship with global.
Well, we didn't anticipate an additional capital call is resulted code that given the focus and strength of our current growth strategy, we felt comfortable not putting in additional capital at this time.
Overall, we are pleased with their progress against our financial objectives for this year, so far and desperate noted we are reiterating are full year guidance with continued confidence.
Forecasting total adjusted revenue 935 to 985 million account junior 2020.
The components of full year 2020, adjusted revenue artists on us.
We expect adjusted services, rather needs to be in the range of 830 to 870 million.
We're forecasting true health segment revenues of 125 to 135 million.
We're forecasting intercompany eliminations minus 20 million.
With respect to full year adjusted either we continue to forecast arranged as 24 to 32 million.
But the second quarter, specifically, we're forecasting total adjusted rather than you have 236 to 247 million.
The components adjusted revenue for the second quarter of 2020 Ernst on us.
We expect adjusted services revenues of 210 to 220 million.
We're forecasting to how segment rather than use 30 to 32 million.
We're forecasting intercompany elimination says minus four to minus 5 million.
We're forecasting adjusted either five to 8 million.
But that I will turn it back over to Frank.
Thanks, John.
I want to close with a few updates on our progress against or key strategic focus areas for the year.
First and foremost we are intently focus on continuing to leverage are differentiated solutions and talented employee base to provide the maximum support we can for Parker's.
Every week, we're seeing new innovations across our partner base in terms of ways to support the communities that are a partner serve.
We're documenting and disseminating these best practices across the network in an effort to minimize the impact of covert 19 and support community health.
Second we believe this pandemic and the broader healthcare environment is emphasized the importance of our data driven population health orientation as well as are integrated suite of clinical and administrative solutions.
There's also helped us to refine are predicted modeling deployment of AI, an expansion of our virtual care management capabilities, which we believe will further drive or differentiation and dumb ensemble improvements in cost and quality.
Third.
We're focused on continuing to enhance our impact by driving consistent growth as well as meeting our financial objectives for 2020.
We continue to make significant progress on achieving increased efficiency across the business in an effort to be cash flow break even this fall and consistently expand margins long term.
Possibly will continue to emphasize building a high performance organization, which feels particularly essential in this moment as our employees in their families do their best to balance so many aspects of their personal and professional lives. During this time.
We were providing a number of important resources to support our employees with a focus on maintaining a sense of community and connectedness in a remote working environment as well as supporting employees that have unique beads. During this time.
I'm hardened and frankly amazed by How're employees have responded in this moment and know they'll continue to provide excellent service to our partners in their communities over the coming months.
Our partners are heroes, and we feel honored reserve them in some capacity.
Thank you again for participating in tonight's call without we'll end or a formal remarks, and we're happy to take questions.
We will begin the question and answer session to ask a question you May Press Star then one on your Touchstone from.
If you're using a speaker phone tends to pick up your hands that'd be for pressing a key to withdraw your question Press then too.
At this time, we will paused momentarily to assemble I roster.
I first question is from towns.
T from coal and go ahead.
Yeah, Hey, thanks, Thanks for taking the questions.
What are just.
Touch on guidance since this sort of the last thing you guys were talking about here down and and.
And.
The the right down in global health.
Does that.
Just a little bit more you're saying that it doesn't impact guidance, but this year, but what are the you know how would that affected the financial is going forward. If we were to retains isn't is there any way to.
Kinda recoup this where we no longer a partner on the health plan side of it and now just a a service provider too.
Yeah. This is this is Frank I'll I'll take that I mean, and Jon you can feel free to add I mean, I would say if you look at our Medicare strategy as a whole.
We have how to focus on delegated risk arrangement with national and regional payers, we have specialty management through new century, and then we support scaled plan to our service business.
So when we entered into this joint venture. The thought was here is a longer horizon investment we could make that is really UN owned model for a segment of the market.
With the idea being that it would be a multiple your investment on on something that we could see an equity return from over time I.
I would say looking at the strength of our strategy and and where we are we feel very good about our medium from both outlook. We still have a service relationship with global which may enable us to continue to grow service revenues in the future in our core business and sort of given those two.
Two things and our desire to really focus and prioritize our allocation of Capitol. We did decide that look from a pure equity return if the the need is for us to put additional capital one at this time relatives or other priorities were simply not going to do that so it was John said.
You see no impact on our guidance that we just reiterated for this year and as we mentioned we think we could get a additional service revenues out of out of global on on as they continue to grow and expand we would obviously grow with that in the future.
However, we don't think in most cases, we will see much of a return from the financial an equity investment that we met.
Again, I think it's the right priority and the most important thing is we feel very good about our overall pro strategy over the medium term.
No that that's helpful and I'm just too quick clarification on the Emblemhealth announcement, you partnership here.
Should we be adding 3.2 million members were it's a subset of their total membership.
[noise] Yeah, we've had a couple of arrangements recently that started out, particularly with new century as a what we call a light management model, where there's essentially a management fee for a segment of the population and that's what we're starting out fear with emblem. We don't include those in our life.
<unk> when it's a management fee based arrangement, we do think it can expand overtime and obviously could go beyond a couple of hundred thousand lives to cover you know several hundred but but again, we're not counting those in our life count, but it will be a significant revenue contributor as we go into 2021.
Okay. So just gonna, we should not be adding.
Members because of this deal.
This year is that the right way to think about that.
Yes. It is it get given how we again <unk>, we sort of call about the A.S. So portion of our new century business and we do not count those in our overall life count because it is a lower P.M.P.M. It still is a substantial revenue relationship. So we feel very good about its contribution to 2021, but we will not end.
Glued them in our life count at this point.
Okay, and then you're talking about <unk> last question just on pipeline you you said <unk>.
In any type of disruption you know in terms of.
As a result of covered in terms of meeting times and scheduling and getting people to engage with you or are really at this point as you said.
Any material change.
Well I'd say look we're we're we came into the year with a really good pipeline, we're happy with close three thus far this year, we feel good about our value proposition given the overall environment surely we expect to see you know some delay and decision process. You know you could see 30 to.
60 days away as we talked about we're really dependent on the pipeline per set up for 2021. So when you think about meeting our target of six to eight new partners. You know by the end of the year, we feel very comfortable given the adjustment in timeline that we can hit that objective.
Given that will be well set up as we go into 2021 based on what we know today.
Right, Thank you and progress in the corner.
Thanks.
I mean next question is from Robert Jones from Goldman Sachs Go ahead.
Oh, great. Thanks, Thanks to the questions I, just Frank maybe just to to pick up there on you know the confidence of adding the six to eight.
New partners for the year you know you mentioned you already have three secured I'm just trying to think about the mix of new wins in this environment. You know the to announce Tonight were you were obviously on the new century side anything you can share is just as far as where you're seeing greater appetite given all that's going on is it more you know new century, you know health plan.
And side of of the World or you know as they're still an appetite count them on the traditional sale of the total cost management model.
Yeah, you know I would say that you know in C.H. has been particularly strong because of the immediate value proposition that drives savings that are substantive right out of the gates in in a world where there is increased budget pressure on.
Also a need to really manage complex specialties like cardiovascular care and on college G. I think we are seeing a very strong pipeline. There you know if you step back I'd be organizations that have substantially developed value based businesses are more protected today than those.
It's simply stayed for fee for service you know if you have a prepaid model and one that can balance some of the impacts on utilization I I think it highlights that having diversification across your revenue base from fee for service to value is the right strategic move to make particularly in this.
Environment and we all know this could stick around for awhile. So I would just I would say that it surely helps with organizations that have been considering putting you know more dollars or more effort into their value strategies. This environment would highlight the need to do that we're seeing demand you know as organizations.
Think through delegated risk arrangements, you know shifting away from fee for service and getting more upfront pre budgeted paid healthcare I think that's a big opportunity for us and I think you know, we'll continue to see opportunities on the health plans support.
Administrative piece, where organizations need you know greater efficiency and really are looking you know to drive savings through an integrated infrastructure. So as I said you know, we'll surely you know just the last month people have been scrambling and that surely has you know slowed down a decision cycles, but we feel pretty <unk>.
Confident in the level of overall demand you know people still are engaging so we're still moving things through processes, you know largely call and video based so prospects are moving forward and again. The overall I would say this is a validation that a diverse and value based revenue strategy makes.
It's given a the sort of thing that's going on you know with a pandemic and chronic fairy utilization.
No. That's helpful. In the I guess, maybe just one follow up <unk> and it's kind of a bigger picture question, Frank but you guys mentioned you know the lower costs trend seems to overall be a favorable favorable dynamic across the business in understanding that you know you're arrangements take on many different forms across the various customer types that you.
Have but it does seem like that lower costs trend is is you know favorable at least directional a dynamic for for the company. How should we think about the ability to help your clients control cost as utilization comes back you know whether that's you know later this year next year does that pose any of this.
Tunnel challenges just in the way that you help your customers managed costa in into the different arrangements that you have.
No I think what I would say if you step back and think of the potential impact on Cove, a couple things to keep in mind and John highlighted those very diverse customer base, we obviously sell both to providers and payers diverse from a population perspective. So I think there is some natural buffer from that.
But if you look at our balance one you know over half our lives are in Medicaid and we're likely to see growth in membership.
In Medicaid across this year that surely would have a positive impact we're not you know taking that into account and our guidance today and if you think on the utilization side.
You know there's lots of different estimates out there surely in the short term, you'll see utilization improvement in in both Medicaid and in many Medicare populations frankly, it depends on geography and also you know in commercial population. So I do think you naturally.
Would get some utilization benefit in the short term and then you know in a difficult economy and we noticed from historical standards, you know the level of elective procedures and those types of utilization patterns, usually don't go back to their normal for some time people who are worried about.
Being out of work people, who are worried about getting infected probably will not go back at the same rate you know over the medium term.
You'll eventually see a bounce back but if you just look about overall picture I would say again, we're calling it you know neutral.
Not positive and I think that's inappropriate framework, given our particular mix of revenue and the populations that we serve you know on your cost question you know as you get into next year and again, if you step back.
Fine.
Help brown, if I'm a provider in a value based business if I'm a provider in fee for service.
With all the things that we've seen one I'm going to want to manage capacity in my facilities. If there continues to be pressure from the pandemic.
Because I'm going to have a lot of medical cases, I've still got chronic patience and that's absolutely what we do in our population help model. We've adjusted our stratification do include Cove, It and other risk factors. We've engaged those patients successfully not only reduce costs for performance in the value does.
And this but also helps on the utilization side as well so I see this overall hours you know a positive trend around the investments, we've been making and a business model ship, but I think we're going to continue to see on the provider side, we're having a balanced value based business is going to be <unk> an important.
Offside to lower utilization on the fee for service side should that continue. So that's you know yeah not to view, it's an opinion, but that's where we see things to that.
Okay got it thanks Rick.
Thanks.
I mean next question is some Ryan Daniels from William Black.
Go ahead.
Okay. Thanks for taking the questions Frank maybe one for you given the strengths are seeing a new century.
There have been internal debate about shifting some investment dollars towards asset, especially as it relates to moving beyond a cardiac in ecology specialty services and the other areas.
Hey, Ryan it's it's up I can I can take that one.
You know I think the the first fact on new century in terms of opportunity is just the fact that were.
You know really some five per cent penetrated today around cardiology non colleges. So the the overwhelming opportunities to continue to do more of what we're doing with cardiology not ecology and so you know within that we've certainly done a lot in terms of adding key talent ended up business that have helped at scale and <unk>.
Continue to help at scale. So there's clearly something we've already done there and I think the biggest opportunity rise to just keep going down that vector stay focused and executing on what's right here in front of US which is going from you know reasonably modest market share to something much more substantial and get the scale benefits of that overtime.
I do think there's a unique model we have of sitting in between the pair and the provider, where we're helping drive down costs for would do it in a way that the oncologist and cardiologist and ultimately other specialists primary care physicians I think feel better about then maybe the traditional approach to manage.
Care. So I think the model does apply quite well outside of cardiology non colleges. So what I would say in a medium term is is absolutely.
In the short term will likely stay a bit more focused on on a couple of specialties in you know if something.
Comes along in the medium term that that we feel like we can apply the same model to I can certainly look at it.
Okay. That's also color and then Frank any thoughts on the interim file rule around the Medicare easy is it seems overall favorable that they won't hold providers accountable for code costs are along to automated extensions for the year <unk>. So.
I'm curious one your overall costs to.
That are real that impacts.
Given that are not so long and it turns into that.
Yeah.
[noise] Yeah, Great question, Ryan I agree with you I think overall the response from C.M.S. has been strong they've been actively working with us with our provider partners. They want to get it right. They ultimately want to move payment to these types of models in there.
Where they want to be supportive in some of the models you know, it's a comparative regional benchmark so as long as you've done a good job given the situation that you're in a which you know we feel we have with our partners you can still perform well and obviously they need to look at the overall data and make up.
Procreate adjustments, but I think they've been very very reasonable I think you know to Horacio program and you just look at the opportunities to.
Work with other payers there are certain programs, where there may not be restrictions you know, we don't see it as a major issue impacting our pipeline at this point. So again, good same store growth potential with the existing partners that we have and then there may be segments, you know program segments.
I still will you know be expanding as we go into 2021, but nothing material there.
Okay.
Well that follow up in this is critically important but I just I'm not sure I understand it.
Required to write down effect.
Vastness simply because you didn't participate in the most recent.
For.
Oh.
Mm.
Hey, Ryan it's John.
I think that as we think about the evaluation of that financing round here in the middle of the pandemic it wasn't down valuation, which led to the write down and <unk> not mm mm optimal capital markets right now.
Still we believe the rights strategic call.
Okay.
So much.
Thanks.
I next question is from Sandy Draper from <unk>.
[noise] Oh I have.
Thank you very much maybe a follow up actually to I think Charles is first question, maybe for John or Frank feel free to chime in one us when it makes her understand that the three customers.
Sign so far today are they having any meaningful contribution to revenue or lives. This year I wasn't quite clear if there's three partners were in this year at all or really I know you talk a lot about deals. This year set up next year I just wanted to make sure I was clear on that.
Primarily they will represent growth going into next year. So they will <unk> kick off you know we think in the second half of the year, but there'll be fully ramped by January of next year and so they're really contributed to grow on next year.
Okay that that's that's my first question second is if I take your first quarter that you did and and the mid point of the second quarter for adjusted services revenue.
To to get to the midpoint and you did raise the guidance and a little bit at least I think you did.
It would imply that you're actually having down services revenue and the third and fourth quarter is there anything that that I'm forgetting that's rolling off or anything that would cause that or what but I'm just trying to understand obviously the mid to upper end of the range. It's not that is what's the conservatism. It would suggest that that revenue would actually be down.
Down in the 34th quarter.
Hey, this is John I'll take that one jump in the.
We look at the.
Overall sort of arc of the year here.
The [noise].
Quarter of recorder rose.
From key for into Q1, and then he wanted to Q. too.
Sort of played out as we expected.
With strong growth coming from both new partners and the full weights, the passport and county care cross cells coming in from N.C.H.
As we look at the rest of the year.
We've put out set of guidance that we feel quite confident and very comfortable with and also recognize that were in the middle academic and and so.
Are seeing without guidance at this time.
Yeah, and I would just say, it's handy I think I think your specific question is a little bit about Q1 versus the rest of the year, we had a little bit of a pass through expense into one in an increase there that we knew thought was likely to happen and so that's why you see a slow.
Right.
Increase their but we sort of expected revenue to be somewhat readable throughout the year. Obviously, if you look at our two three and Q. for growth versus the prior year. You know we're we're at a growth rate you know north of of 20%. It's possible as I said, we'll get a revenue pick up as we find out more.
About enrollments you know, particularly in Medicaid throughout the year, but we're not factoring out into our bags at this point.
Okay really appreciate the comments.
I last question is from Jessica Sam from Piper Sandler go ahead.
Hi, Thanks for taking request and [noise] I think we are just interested to know if you can talk a little bit I got qualitatively about and personal care capability that new century.
And just kind of how many of the providers or anything or <unk>.
You made a technique in order to me about that okay. The first corner and any that May continue on and second third thing.
Hey, Jessica it's up.
Yeah, like I think I'll answer that a little bit more broadly at first and then we can talk about the virtual care just in general we pulled together our entire scientific advisory board nationally around oncology in particular, given that obviously you know cancer in many cases more dangerous than covitz at the treatments have to.
Go on.
And put together a very holistic update on all the pathways that.
We think are relevant for for patients. So everything from how do we treat patients in the home where they need infusion how do you provide longer lasting agents. They don't have to come in as frequently they do have to come in and then you know bird chores. One piece of that brought a puzzle, but had you know six or seven different elements to it so we sort of rolled.
That out nationally the tele medicine capabilities are capabilities that the providers have directly on their own we facilitated them and then we've helped make decisions with the positions on when telling medicines appropriate when <unk>, you know, bringing them into the into the office settings appropriate and we've done that again through just in our pathways, but also just.
And you know the the way that the drug regimens go I think I'll have a specific number for you in the per cent increase and tell them medicine, but it's you know incredibly large in food you know multiples and multiples of what it was pretty coven. It probably accounts for you know up to 30 to half a patient visits in many practices.
So it has become very substantial but I think the important thing is it's part of a broader pathway redesign that we did a whole list thickly around code that which I think Don colleges really appreciate and.
Certainly the right answer for the patient.
I would just out you know out <unk>, sorry outside of new century, no. Our traditional model has been to have multiple modalities of a virtual care management in ways. We can interact with patients. We also have an integrated health approach. So you know in our Medicaid populations, where you'd have a synagogue.
Apple high incidence of substance abuse disorder during a pandemic.
Want those patients to still have access to counseling. So that they can you know continue to stick with their treatment regimen and so we've been able to integrate whether it's virtual behavioral health substance abuse counseling, no our normal care management for more severe chronic patience.
And so it's just been an extension of what we've been doing historically, but I think it <unk> said, we made some specific investments across the last couple of months.
I'm I'm really quickly and then you can tell you have that that I know spending less but.
Oh, and P.M.C.N. or they tried to.
Outcomes their volume restaurant.
The nice thing with you know new century is you know as we talked about we're getting paid a base fee is an example in the emblem relationship but we also have a performance incentives you know if we perform well on on quality metrics on overall cost.
Metrics done.
You can have increased profitability or with a without arrangement and frankly in a lot of our.
Relationships within C.H.
<unk>.
Yeah.
Thanks.
This includes a question and answer session I would know like to turn the conference or to Frankwell them for closing Vermont.
[noise] Oh, we appreciate everyone participating in the call I know there are some virtual conferences coming up which will be participating in and we look forward to interacting with many of you.
During those conferences the thanks again for participating Tonight.
Can I.
The conference is now concluded. Thank you for attending today's presentation you may know disconnect.