Q1 2020 Earnings Call
Greetings and welcome to the American renal Associates first quarter 2020, <unk> earnings Conference call.
This time all participants are in listen only mode question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad and as a reminder, this conference is being recorded its my pleasure to introduce your host Darren Lehrich Senior Vice President for American renal associates. Thank you Sir you may begin.
Thank you operator, good morning, everyone welcome to our first quarter 2020 earnings conference call and webcast.
I hope, you're all safe and healthy joining for today's presentation, or Joe Carlucci, or chairman and CEO, Mark Herbert for interim Chief Financial Officer, Dr. Dawn Williamson Persio while.
Also joining the call today, our said come all the president join Bernardo control, we're all participating today remotely from several different locations.
What I remind everyone that we may make certain remarks today that constitute forward looking statements within the meaning of the federal securities laws.
The company's actual results may differ materially from such statements due to a number of risks and uncertainties, including those described their most recent SEC filings.
Any forward looking statements made in this call are effective only as of today and the company undertakes no obligation to revise or update any forward looking statements running reason.
On today's call, we will refer to certain non-GAAP financial measures.
Conciliation did these non-GAAP financial measures to the most comparable GAAP measures are available.
As important information concerning the use of non-GAAP measures generally.
The earnings press release and are occurring Investor relations presentation deck.
Both of which are available within the Investor Relations section of website at American real dotcom.
I also want to remind you that our adjusted EBITDA lessens. The I calculations do not include the cost of certain legal and other matters, including costs related to certain litigation in the FCC investigation.
I'm pleased to turn the call over to Joe coaching.
Thank you Darin and good morning, everyone.
Few months abrupt presented at unprecedented time for our country and for our health care system.
The Cobot 19 pandemic has led to incredible disruptions to our daily lives our economy and it has impacted the health and wellbeing of hundreds of thousands of America.
During this time, our responsibility as a provider of like sustaining dialysis services could not be more important and I'm proud of how our organization has risen to the occasion.
Hey, Raycare give us across 27 states and the district of Columbia played a critical role day to day to keep patient since they are healthy and safe during this time.
We have remained the operational throughout our network of 247 dialysis clinics and have been working collaboratively with dialysis company peers hospitals, and other health care providers to manage a growing number of coal bed plausible and presumptive plausible to patients in both the inpatient thing I'm.
Patient dot outpatient dialysis settings.
I'm grateful to our staff and position partners for everything they're doing during this public health crisis.
I'll begin my remarks, with some thoughts about coal bed and some high level observations regarding the first quarter.
Then turn it over to Dr. Dawn Williamson for additional comments on cold and from clinical and operational perspective, and up and an update on our progress in home therapies.
And then Mark Herbers will provide a detailed review of the quarter, a financial position and our outlook.
As it relates to cope with 19, the safety of our patience staff and physician partners continues to be our primary focus and we have undertaken a number of steps to provide for their protection and enable our continued operation in the face of the pandemic.
We are following.
Centers for disease control and prevention guidance and working closely with local and National health authorities to ensure we implement appropriate infection control and clinical best practices.
In response to covert 19.
In addition, we've created a dedicated cobot 19 task force, so proactively implement business continuity plan and develop measures to ensure the ongoing availability of our dialysis services, while maintaining patient and their safety.
I want to highlight a number of measures we hope we have implemented.
[noise] restricting entry to our clinics to only patient staff and medical professionals.
Screening all individual for symptoms and exposure to cope with my team before allowing access to our clinics.
Implementing a master policy for every patient and staff member, who enters our clinics and requiring that math speed want at all times in our clinics.
Increased purchase of abuse of personal protective equipment for patients and staff and of cleaning <unk> sanitizing nation materials that are fulfilling to maintain infection control protocols that meet CDC guidelines.
Securing cobot 19 testing for patients and staff.
Implementing screening procedures for corporate office staff prior to entering our corporate offices, requiring social disciplined thing within work spaces and throughout our corporate office and restricting access to our corporate offices to only IRA style.
Engaging acquisition infectious disease consultants to assist us in the development of policies and procedures to protect our patience and staff.
Establishing dedicated Kobin 19 treatment ships at certain of our clinics when necessary to care for patients with confirmed or suspected cold at 19.
And modifying our sick leave policy to accommodate quarantine an isolation when warranted.
In addition to these safety measures, we implemented a hasn't pay program to provide increased pay twok clinics down on the front lines of the PM Demark.
We currently expect this program to be limited to the second quarter, but we may extend it will shorten that as appropriate in light of developments with PMDA Mark.
These and other measures we have taken in response to covert 19 have resulted in increased operating expenses, including higher salary and wage expense from the hasn't pay program.
Incremental hours and overtime needed to work.
The dedicated treatment shifts for patients with confirmed or suspected cobot 19.
Increased expenses from the higher utilization and cost of personal protective equipment.
An additional costs to purchase additional supplies and cleaning materials.
In addition, we've also incorporate incurred corporate office costs related to legal consulting and cleaning costs as well as increased purchases of computer equipment in information technology.
Provide additional infrastructure for staff, who are working remotely.
These it did these added expenses began to rise during the month of March and became more significant into April.
We expect to incur many of these additional operating expenses for the duration of the pandemic.
And at the severity of or geographic coverage of the pandemic increases. These additional expenses could also increase.
From a volume prospective patients suffering from end stage renal disease generally have comorbidities that often placed them at increased risk with the cold at 19, resulting in increased hospitalization.
Yes treatments and higher mortality.
Through March 31, 2020, we experienced an immaterial reduction in treatment volume as a result of patients contracting called midnight team.
But this him and impact in increase subsequent to March 31, 2020, and could become more significant in the event of a prolonged or increasingly severe pandemic.
In response to the pressures, we're seeing from cobot 19, as well as a first quarter 2020 performance, which was below internal forecasts, we have begun implementing a series of actions during the second quarter.
Some of which a temporary that will allow us to reduce corporate expenses.
None of these corporate changes will impact our ability to deliver life's sustaining dialysis services or are expected to directly impact clinics.
For our regional operations seems that are providing onsite support to our clinics during these unprecedented times.
We do not believe any of these changes will have an impact on the quality of management support services, we provide to our clinical operations.
In addition, we're also appreciable Congress and the administration's recognition of the burden. This pandemic is having on our nation's health care system and provide is like a array who have remained fully operational during this crisis to continue to provide life sustaining care and prevent prepare.
In response to cope at 19.
The passage of the cares Act in late March in combination with other regulatory relief from CMS will help health care providers like a array manage through this public health crises.
Some aspects of this relief received by a array include the following.
Approximately $5 million of additional revenue due to the kids to act provision that eliminates the 2% sequestration cuts from May 1st until December 31st 2020.
Approximately $27 million of cares Act ramped funds received during April 2020, although these funds are subject to terms and conditions and we may not be able to utilize all of this money.
The guidance from CMS has been fluid on this topic and CMS extended the Atas station period to give provide is more time to evaluate.
We believe the intent of the grant to fund was to reimburse providers for extra ordinary expenses and lost revenue related to the cold and pandemic.
So our plan to utilize these funds consistent with that intent and to reconcile their use fully in accordance with the terms and conditions.
Approximately 83 million of advanced payments on future Medicare revenue received during April 2020, under the CMS accelerated and advance payment program.
An estimated 12 million to 13 million liquidity benefit over the next three quarters related to the cares act provision that permits payment deferral of the employer portion social security payroll taxes.
And an estimated cash tax refund of approximately $5 million expected before December 31, 2020 related to specific tax code provisions of the cares.
Finally, before I move onto the quarter, let me take a moment to welcome to New Board members to erase board of directors.
I'm pleased to share that we recently announced the Jeremy Gelber empty and Chris and Christopher Hocevar joined a arrays board.
Jeremy has significant experience of the health care Investor and he has led Centerbridge partners healthcare vertical since 2018.
He joins the a or a board in connection with Steve Silvers departure after many years of service.
We're all very grateful to Steve's silver for his many contributions and his friendship and we believe the addition of Jeremy reinforces Centerbridge as strong commitment to its investment in a already.
Chris Hocevar joins the IRA Board with significant health insurance industry experience following a distinguished 16 year Korea at signal.
Now onto the first quarter.
At a very high level, we fell short of our internal plan by approximately $5 million on an adjusted EBITDA less NCI basis.
Well treatment growth an expense management was consistent with our plan revenue per treatment was below our expectations.
We continue to make strong progress progress in home therapies with double double digit first quarter on treatment growth.
Commercial treatment mix was up year over year, yet weaker collection trends explain the bulk of the impact to our revenue performance.
We had devoting additional resources and even greater focus to ensure that our collections and realized revenue rate improve as we move beyond the first quarter.
During the month of April our cash collections improved 4% year over year as compared to relatively flat year over year performance. During the first three months of here.
So I believe our focus in this area should show some improvement in Q2.
My purpose will cover the numbers in detail in a few moments.
With that I'm pleased to turn the call over to Dr. Dawn Williamson, our chief operating officer to provide a clinical update dawn.
Thank you Joe I'm pleased to join everyone today to provide the first quarter 2020 clinical update.
I'm going to focus my comments on some operational insights into how we are managing patients with cobot 19, and then I will share a brief update on our continued progress in home therapies.
First in terms of how we are managing patients with cobot 19, let me Echo Joe's sentiments about how grateful we are to our staff and physician partners for everything that they are doing.
To care for our patients.
They are responding to this pandemic heroically.
In recent weeks, we have operationalize dedicated cobot only treatment chefs and many of our clinics to provide patients who are perceived positive or who have tested positive.
Workover at night team.
These shifts are more expensive to operate because they involve additional pp cleaning and disinfecting may require staff overtime and may disrupt patient and staff schedules, resulting in decreased productivity.
And higher staffing to patient ratios, which in turn results in higher personnel cost for a period of time.
In certain markets. We're also working collaboratively through a participation agreement with other non IRA providers to manage these patients in a single dedicated coded 19 unit.
Currently we have a minimal number of coated patients that are dollarizing at these non AORA units.
All of these efforts are designed to ease the inpatient hospital burden to free up scarce acute care beds and manage patients in a lower cost outpatient setting.
Finally, we are hearing about many acutely ill cobot 19 hospitalized patients developing acute kidney injury, resulting in the need for dialysis.
We have not seen a significant increase in volume related these patients as they move out of the acute care setting, but we are watching that trend closely.
As the pandemic eases, we will be evaluating ways to safely dialogues occasional cobot 19 patients in isolation areas of our clinics without the need to establish as many covered only treatment shifts.
Moving on to the update on home therapies I am pleased to report that our normalized home therapy treatment growth. During the first quarter was approximately 13% consistent with a double digit growth we experienced in the fourth quarter of 2019.
Our home treatment mix during the first quarter of 2020 reached 10.8% up 90 basis points year over year.
We remain pleased with the additional focus within our entire organization on growing home therapies.
We are seeing the biggest gains in our parents in the old dialysis programs and we put additional emphasis within our clinic expansion plans to add Pee Dee Ann H.D. training rooms, and staff in many of our markets.
Finally, as we look into the future we believe the covidien lighting pandemic could ultimately speed the adoption of home modalities for certain of our patients, although we're not seeing that effect as of yet.
That concludes my remarks through the clinical section. So let me now I'll turn it over to Mark Herbert our interim Chief Financial Officer.
Thank you Dr. waves isn't good morning, everyone.
I plan to cover three key topics this morning.
First I will provide some additional details regarding our first quarter financial and operating trends.
Second I will review, our balance sheet position and cash flow performance for the first quarter.
As well as our current liquidity position.
And third I will review, our 2020 outlook.
First let me cover the first quarter trends.
First quarter 2020, adjusted EBITDA was 17.8 million.
And adjusted EBITDA less NCI, let's 12.9 million.
As compared to 19.2 million and 30.9 million respectively in the first quarter up 29 cheap.
Our volume performance remained solid in the first quarter normalized clinic sales and treatment days.
Total treatment growth during the first quarter was 4.7%.
Our first quarter normalized non acquired treatment growth was 4.4%.
And acquisitions contributed 8.3% to our total normalized treatment.
First quarter treatment volumes were consistent with our expectation.
We did not experience and material reduction in volumes as result of cold at 19.
Subsequent to March 31st 2020.
We experienced increased negative impact to our treatment volumes as resulted cobot Nike.
The impact could become more significant in the event or they prolonged are increasingly severe endemic.
Our first quarter revenue was 193.2 million up <unk>, 0.7% on the first quarter of 2019.
Despite our solid treatment volume trends revenue growth was impacted by lower than expected revenue.
Performance.
Our first quarter 2020 revenue per treatment was $312 as compared to 324 in the first quarter of 2019th.
Although our commercial treatment mix improved year over year slightly over 12% as compared to 11.5% in a prior year first quarter.
Three factors impacted our revenue per treatment trends, including.
Collections performance.
Well what contribution from Calcimimetic.
And continued growth in our network mix.
Among these three factors weaker than expected collections was the biggest driver of the revenue per treatment performance in the first quarter versus our internal plan.
To address our collections performance, we brought in additional outside resources and had action plans in place to approve in this area and you're starting to see some early results.
Turning to the expense side first quarter 2020 patient care cost per treatment.
For $249, representing a t., all up or treatment improvement year over year.
We experienced consistent labor productivity.
Normal wage increases during the first quarter.
The improvement primarily reflects lower ancillary costs, including E assays.
Some of that.
We began to experience higher patient costs related to the cobot 19 endemic throughout the month of March.
As a result in increased stocking of P.D. and other supply costs.
As well as additional labor costs.
Overall, the impact on a patient care costs is expected to be more significant during the second quarter of 2020.
So much higher TV supply costs usage, the implementation of a hazard pay program clinics staff.
Additional staffing overtime costs associated with the cold it only treatment shifts.
Negative impacts to labor productivity scheduling disruptions stemming from the pandemic.
Moving over to general and administrative expense first quarter 2020, adjusted G and H, that's the treatment was $38.
He's $6 per treatment improvement year over year.
We implemented certain corporate expense saving initiatives during 2019 any effective those initiatives to continue to carry over into 2020.
As many of the 2019 actions occurred during the second and third quarters.
As Joe indicated has prepared remarks, we now have additional corporate savings initiatives planned for 2020 to improve our operating efficiency as well as manage the business. During this period of uncertainty.
The aforementioned adjusted GE and extends for treatment figure excludes certain nonrecurring amounts that are described in the supplemental business metrics schedule in our press release.
Certain legal and other matters expense was 2.3 million during the first quarter of 2020.
As compared to 5.3 million to prior year quarter.
And down from 2.5 million during the fourth quarter 20 my team.
We continue to expect these costs, primarily related to that which state that certain are your financials and other legal matters should decline going forward.
I should also note that we are well underway in our process to a point of view and an auditor <unk> fiscal year 2020 odd.
I will now move on to a review of our balance sheet cash flow.
At March 31, 2020, we had consolidated cash of 62.4 million.
Consolidated debt Ssix hundred 17.9 million.
Yeah of unamortized.
<unk>.
As a precautionary measure to strengthen our liquidity in light of the cold It 90 endemic.
In March we drew down the full available capacity under our 100 million all the credit facility, bringing our first quarter dropped to 35.5 million.
And that additional cash is reflected on our balance sheet as at March 31.
Adjusted for our pro rata ownership of any cash in a pro rata portion of the clinic level that we guarantee.
Our adjusted own net debt, that's 519.4 million.
March 31 2020.
4.3 million from December 31, 2019.
Due primarily to the first quarter earnings performance and seasonal factors that are typical about first quarter.
Offset slightly by favorable working capital management.
As of March 31, 2020.
Clients with the consolidated net leverage ratio covenant in our credit agreement.
For the first quarter up 2020 cash provided by operating activities was 30.7 million.
As compared to a 10 million dollar use of cash during the first quarter of 28.
Adjusted cash provided by operating activities.
Yes distributions to NCR.
2.9 million.
First quarter 2020 capital expenditures totaled 5.8 million.
As compared to 8.5 million during the prior year quarter.
Primarily reflecting a more moderate development pace of activity and careful prioritization of routine capex needs.
During the first quarter, we opened one clinic.
We continue to take steps to enhance our financial flexibility.
Moving the expense management initiatives discussed previously estimated asset sales during 2020.
With held for sale assets totaling 49 million on our balance sheet.
Furthermore, we've been able to secure additional liquidity subsequent to March 31 to 2020.
To various government programs, including.
Approximately 27 million Cares Act grant funds. We served during received during April 2020.
Although these funds are subject to terms and condition and we may not be able to utilize all of this money.
Approximately 83 million of advance payments on future Medicare revenue received during April 2020 under the accelerated in advance payment program.
An estimated 12 million 13 million liquidity benefit over the next three quarters related to the cures Act provision and permits payments deferral of the employer portion of social security payroll taxes.
If you presented the deferred amounts due December 31 2021.
And the remaining 50% is due December 31 2022.
And lastly, an estimated cash tax refund of approximately $5 million expected before December 31 2020.
Related to specific exclude provisions of the carriers that.
Let me conclude my remarks, with a brief discussion related to our outlook.
Given the cold the 19th and make there are many new variables now part of our operating environment. We're not originally contemplated with our original 2020 guidance.
However, our dialysis clinics have remained fully operational and the demand for the license fee any dialysis services, we provide continues to be terrible.
At same time or operating costs are higher and.
And then.
And the treatment volume losses, we experienced in the coming quarters could be influenced significantly by the duration and seasonality that pandemic, which still remains fluid and out of our tool.
We are responding to the first quarter revenue shortfall by redoubling, our efforts to improve collection.
We believe there should be progress to report on the legal collections in future quarters, given the additional resources focus in this area.
We have taken a series of actions to reduce corporate expenses as discussed in gems prepared remarks, and there are a number of government programs that should help offset higher expenses and lost revenue okay.
As well as improve our liquidity.
In relation to the guidance range, we established in March we believe it's prudent to widen the 2020 adjusted EBITDA less NCI range at the lower end to account for increased uncertainty in any environment and to reflect our first quarter results.
As such we are providing guidance for 2020 adjusted EBITDA less NCR.
In a range of 87 million to 95 million.
And I note the lowering of the rain.
Millions of the original range of 90 million to 95 million.
Other specific detailed guidance items provided much such as revenue per treatment normalized treatment volume growth.
Our being withdrawn at this time due to the uncertainty the environment due primarily to kogut.
I'd like to provide a qualitative view on the key variables that could impact our guidance range as compared to your original guidance issued in March 2020.
Well its variables include.
Positive in fact impact from the Cures Act grant.
At this time, we are unable to get from how much of the approximate 27 million grant money, our clinics recede, we'll be able to be utilized under the CMS terms and conditions as or could be additional guidance.
A positive impact from additional corporate expense initiatives that had been activated the plan for subsequent to March 31.
I'll frame of potential positive impact.
These initiatives, we expect them to approximate the first quarter shortfall in a roughly offsetting that.
Positive impact from the Cures act sequence duration impact of approximately 5 million to revenue and approximately 3 million on an EBITDA less NCI basis.
Negative impact from cobot, including lost revenue due to treat and volumes and additional operating expenses attributed over it.
It's difficult to quantify these amounts however, we believe much of the grant funds should serve as an offset.
Negative impact from my first quarter results as Eric to our internal expectation.
Finally, we see revenue per treatment for the remainder of 2020 to have negative risks associated with higher unemployment.
Potentially lower commercial banks, although those are more likely to be longer term in.
We believe revenue per treatment trends could be offset slightly by our expectation for improved collection.
I previously mentioned she concentration impact.
Finally, while we are reiterating our commitment to reduce leverage by year end 2020, as compared to December 31 2019.
The pacing impacted by de levering will depend on some of the factors we've outlined in our guidance as well as a timing of divestitures planting our assets held for sale group.
With that let me turn it back to Jones for closing remarks.
Thank you Mark.
In closing I want to thank our entire team and our physician partners for their contributions in their unwavering dedication to providing excellent patient care.
I am incredibly humbled by how much sacrifice compassion employees. Our staff has demonstrated during these challenging times.
I hope everybody participating on the call stays healthy unsafe and thank you with that operator can you. Please open up the QNX session.
Thanks again everybody.
Thank you, ladies and gentlemen, we would not be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad confirmation trends indicate that your line is on the question Q.
Press Star Q, if he would like to remove your question from the Q.
Participants users speaker equipment and may be necessary to pick up your hands that much more pressing the star kids.
Our first question comes from the line of Andrew Mark with Barclays. Please proceed with your question.
Hi, good morning, everyone as well I appreciate all the color in your prepared remarks, I was hoping you could provide a bit more color on the developing kobin impact on two Q volumes and operations.
Sounds like the impact has ticked up but it's hard to get a sense of the disruption level are you able to excite me kobin related costs incurred in April and anything you can share on current volume trends would be helpful. Thanks.
No. Thanks for the question, it's Joe I'd like to turn that over to Darin and there may be a doctor Williamson can give additional color.
Thanks, Good morning, Andrew.
No I think as far as the second quarter volumes go so far it's been immaterial in terms of the impact we certainly have seen.
<unk> increased expenses as the pandemic has unfolded.
And we're monitoring the volumes very closely but don't have any you know numbers to put around that at this stage.
In terms of the costs Dr. Williamson you know in his prepared remarks discussed.
A number of things that we're doing a with fees covin positive shifts.
We have hazard pay are in a number of programs really to.
Able to respond to the crisis.
And make sure that our clinic south for.
Safe and taking care of three types of equipment.
I think you know Andrew in terms of.
The framework as you know he thinks about the costs.
And how that factors into our guidance I'm really I think the best way to to really freeing that would be to think about in three pieces from a covert standpoint, you should assume all the impacts.
That we're seeing should essentially be offset by the government relief, so post to grants and the sequenced ration.
And we expect to be able to utilize oh, some or all of that rent money.
In relation to those expenses.
Were to from the standpoint of the first quarter I mean, you should assume that our corporate expense initiatives should essentially offset the shortfall and that was about $5 million for the first quarter. So that's that's you know one offs.
In terms of expenses.
And then third we did widened the range.
And you know really that's just to reflect the potential for downside risks related to revenue per treatment. We do expect to see improvements in our collections performance is Joe.
Discussed we are seeing now in the second quarter, so far, but we think that's a prudent steps given some of the other uncertainties environment.
Thanks, Darren Don do you want to yeah, Andrew I'll, just add that you know there in the initial stages of the outbreak many of the Kobin positive patients were dollarizing in the acute care hospital and we're now seeing a trend for more of those patients to Dol lies in our outpatient setting.
Oh, So I think as Darren said the volume impact is just a little hard to size at this point, but we are getting most of those patients dollarizing in the outpatient facilities at this point.
Thank you Don Andrew any other questions on a <unk>, yes, a couple of follow up on the care they need and specifically as it relates to the $27 million and grant funds. How do you plan on accounting for that we'll all 27 million, but we see them April be recognized as revenue in Q2, just any clarity.
The recognition of the care spread pellets in the income statement would be helpful.
Before I pass that on two it's Joe before I pass that on to Mark Herbers.
Essentially the way we look at the cares grant money are for reimbursement due to additional costs for P. P E overtime hasn't pay et cetera, and so we think about them as reductions in expenses not increases in revenues, but mark I'd like to turn it over to you for additional.
Bucks on that.
Oh, yes, I concur.
The nature of the the grant funds as a grant as an offset to existing expenses and lost revenues. So as we recognize those expenses.
And incur those lost revenue as we will be able to draw the cares grant funds and they'll be a reduction of our expenses, primarily and lost revenues would be an increase to our income.
But we do expect revenues the fairly nominal.
Oh, it's a contra expense account so to speak up it would only recognized to the extent, but you have explicit expenses that you can point to.
Right. Those are the conditions are the grants yes.
Got it Okay. That's helpful and then on the revenue side collections came in below expectations for the last two quarters now you mentioned that you're allocating additional resources to improve that what specific actions you're taking temporary question here.
Yeah, Mark or Herbers can answer that and then maybe Darren can give additional color.
Sure.
So Andrew we did experience like Deteriorations in our aging and idea so increased slightly but that.
Remains within our normal bounds.
We're pursuing all any and all collections the available to us that primarily in the older age in categories.
That for a number of internal reasons, we weren't distracted from pursuing but we are now fully bent on.
Pursuing all aged receivables a zero to the aging of the accounts.
Thanks, Mark Darrin any thoughts.
Yeah. So so Andrew just add to that you know I think our first quarters. You know is always the lowest quarter of the year.
Due to patient responsibilities.
And you know on a year over year basis, the first quarter was lower by.
Boston was 4% and it was lower original expectations, just a little more than that so.
The drivers as you heard were collections Calcimimetic networks shift.
But the collections with the biggest factor of the Sthree you know if you think about a lower by 4% most of that sort of in by the collections and Aegions. She is it more just mentioned we did not have any major recent contract renewals that impacted this result, and overall the commercial mix.
So is it was up slightly from last year.
The the collections piece is driven by our actual cash performance versus what's expected in this quarter that was just simply below trend on the on the positive side, we've got more resources and focus you did see some improvement Oh you know.
In the 4% area in April and we're optimistic that we'll continue to see improvement in that area.
Andrew Thanks for the question.
Maybe we can open it up to another question Huh.
Thank you. Our next question comes from the line as Peter Chickering with Deutsche Bank. Please proceed with your question.
Hey, good morning, guys. Thanks for taking my questions on the commercial revenue you know a couple of questions for in this one you know the number treatments from personal went up about 800 basis points and revenue from commercial.
Also went up 200 basis points any in network also increased a couple of these points, 84%. So I assume that means a commercial pricing.
So I'll probably positive price increases across it book is there anyway to quantify that or do you see positive mix issue you have left exchanges and more commercial.
Darren you want to take that one.
Sure, Yes, so peto, our commercial volume mix was up slightly and if you're looking at the table.
You just if you are on a revenue basis, you know there are in whole number. So they can take that offline and you know maybe help you come through those numbers on you know, but as far as to the rate environment goes up we had in Medicare rate update.
We are seeing on you know relative stability in terms of our or like for like pricing with or network payers and so you know I think that the real driver is just you know the collections piece not.
Pricing.
And Darren it's Joe let me just add to that.
I said I mentioned in my prepared remarks. It we we had to a favorable trend in the month of April and we believe that we've got the right resources on this challenge and that will continue to.
Focus in this area of improved collections Peto, alright, too so all in cash collections keys to walk through it gets a little bit more I'm, a little bit computers for what what really change in the first quarter, our peers, making patients team or money or if it got a network Paris tend to fund structure to the patients unforeseen select those can you breakout.
The pair mix.
Won the collections you know what it was it collecting for patient was directly from commercial.
Honestly, what time period, you guys reserve went on personal collections.
Dan you want to take a crack at that one and then maybe mark Phil.
Yes, so Peter we're not going to you know get into the specific payer categories and with the collections performance was in and then you know individual Payor I think you know just.
The issue as we've discussed and instead a few times. She is you know collections in general.
And the agings of those collections and so on you know I would leave it at that Mark I don't know if you have anything else to add.
Oh no. The first quarter is our most difficult quarter as all insurance plans reset the car insurance deductible.
And as you're aware more plans are moving towards higher patient responsibilities.
So.
But what age do you guys reserve, 100%. He can you give me Lisa number.
There.
Oh.
Yeah, I don't have the the waterfall percentages in funding Tito we have no way he standard approach as things age. So we can get that number for you offline okay.
And I think Mark can assist you in that question as well Peter.
Okay.
Well first a quick question here.
We're also seeing large spikes of unemployment today.
What do you see sort of you know currently in terms of patients who are losing jobs are those going to Cobra funded by the UK or.
Are you going into exchanges drop right into Medicare. Thanks, So much that's a great question Peto, where we're focused on helping a through outpatient trends educators.
A lot that allow patients to make decisions on what's best for themselves and their families with regard to insurance.
And Cobra so.
As.
Where we sit today, we've not seen any changes, but clearly to the extent that unemployment remains very very high going forward that could change again I want to just mentioned that it's important for patients to choose the best plans for themselves and their families or add to the.
Extent that they lose their jobs and our have cobra benefits available to them.
So in theory for dialysis patients. They have 29 months of coverage do visibility under Cobra correct.
Yes.
Alright.
Thanks, so much of them back again.
Thanks Peter.
Thank you. Our next question comes from John Walsh with <unk> Capital. Please proceed with your question.
Hey, guys up the question I think it's been answered, but just wanted to to reconfirm. So with respect to that the characters Act grants the $5 million of additional revenue basically is his money good and that's sort of implicitly assumed or included in your revised guide.
But the 27 million because there are some terms attached to that with respect to the guide you're basically assuming that that is going to offset the additional expenses that you incurred this year as a result its cove it.
Correct.
This is Joe that's correct the 2% sequestration.
Has been eliminated from a first until the end of the year. So that's an increase in our Medicare rate essentially.
And moving over to the grant funds those are in fact, a funds to be used for increased corporate expenses and lost revenue. So I think you'd have a correct. Darren you want to add anything to that.
No Yeah, I think that's that's right.
Okay, Great and my my only other follow up is and the 83 million of advance payments is there a sort of an amortization schedule on that or do you. Just you get the 83 in the door and then as as the reimbursements would would typically be paid back that's effectively.
Yeah, and advance payment that you burn off and you will just continue burn it off to a youve to you've met that 83 million.
And in expenses that you would have otherwise been billing.
Sort of post treatment to to Medicare is that how that works.
Well, it's a little bit different that's it's.
And then van made to our company, which will be recoup.
In 210 days from the date I believe the date that its received so so that's how it works and Ah I don't know setting answers your question or not hi, John.
Yeah I believe it does thank you.
Sure I pleasure. Thank you.
Thank you we do have a follow up question come in line up you know check rain with what your bank. Please proceed with your question.
Oh, Hey, guys. Thanks for taking the follow ups or a couple of quick quick ones here.
I I you talked about home treatments are growing your template for senator told treatments what percent of or the students RPT, how fast things that grows and we see we exiting 2020 on P.D. and then more importantly, how do you view home treatments impacting margins in free cash flow.
Yeah. So Darren you want to take the beginning of that with regard to margins I think would be appropriate dawn.
If you wouldn't mind ticking the question about growth though.
Sure so.
You know, we we don't get into the margin of a particular product line. So I mean, we you know comment at this early on on PD in general.
I would say that the commercial mix tends to be a little bit higher in PD. You know so that that is one factor to consider when you think about the you know the overall margin profile, but from a growth perspective, and turn it to Dr. William seem to just talked about some of the progress that.
We're seeing and have really continued to see over the last year.
In particular.
Sure. Thanks Bear no Oh. This is we've seen a good growth in our home dialysis saw it represented about 10.8% of our treatment mix a in Q1 and that was up from 10.6 in Q4 and that was up about 0.9%.
From Q1 up night of 18, so the trajectory of our home treatment growth continues to be very strong a full year growth in 2019 was 10% Q1 of our this year was 13% and we would expect that trajectory to continue.
Thanks, Don and we're very focused peto on home therapies as I think you probably know and.
We've employed on many of our Nephrologist partners that.
I have experienced excellent growth and percentage of total patients as.
With home therapy, so to help build.
Build our best practice and improve our education for not only our staff, but our physician partners and work together from the it's a really a ground up solution and I and I'm pretty happy with the growth growth. Thus far thanks, Don Thanks Peter.
And Peter most of that is most of that just to follow up and you know too I think you asked about the.
TD versus the home Hemo and you know just see that most of that mix is is TD just.
Do you thought though.
Oh, one more follow up on Calcimimetic see walk us through what the mix today is a positive versus a rock how somebody next.
And how would you need about changing throughout 2020 [noise].
Thanks, John could you take that one please.
Sure happy to on Yeah, I mean, we we're still seeing you know the majority of our physician partners are prescribing the Ivy I don't have a breakdown, but its you know it's.
Most of the activity there and it's hard to really predict any changes that's a physician preference items you know in terms of the Calcimimetic. Overall these were headwind in the first quarter on a revenue due to the lower age P. For both you know both your oral any ivy.
In the erosion in the Pea.
You've seen from the the published today operates from CMS continues.
We'd expect.
Lower contribution from Canal Calcimimetic says, we progressed through the year.
Overall, so we'd expect.
Headwind on revenue per treatment to be approximately $10.
For the year, but it was slightly less than that in first quarter.
Great then last for fall off a quick modeling question fault blocks on the Andrew's question.
Obviously, a lot of some moving parts were now but can you quantify quantifies force with the cost per treatment was April o. versus first quarter 249 is that we had another $5 and there is that right ballpark and as possible. Thanks. So much.
Darren will take that.
Yeah, I don't think we're going to quantify the expenses, but I'd be you know because you haven't closed April so I think we'll provide an update in our second quarter and you know as far as the coated.
Costs and lost revenue goes you know we fully expect is to be offset by the grant money.
Great. Thanks, so much.
Thank you.
Thank you we have an additional follow up kind of from the line of Andrew <unk> with Barclays. Please proceed with your question.
Hi, Thanks, a follow up just a quick one on home dialysis have your patience expressed an elevated interest to pursue home therapy in response to the endemic and have your home training programs remained up and running during the crisis.
Yeah, Dan can tick yeah, Andrew I I'll answer that for you. The answer is yes, our home programs have continued to be up and running we've taken special precautions all in the home programs as well to make sure that every patient and is screened when they come in the front door exactly like we do with the Incent our facilities.
And I do think that it as third interest in our patients to pursue home we as I said in our prepared remarks, we haven't seen that rise yet, but as you can imagine a patients who have to come into dialysis three times a week for life sustaining dialysis, if they have an option to do that at home and.
This pandemic environment, where patients are quarantining there is some potential advantage. There. So I think our patients are more interested but once again, we just haven't seen that come to fruition at this point, but it makes sense.
Yeah absolutely.
And so you got some helpful.
That's all for me thank you.
Okay. Thank you Andrew.
And the other question Keith.
We have no additional questions at this time, so I'd like to pass the floor back over to management for any additional closing comments.
I think its thank you, it's Joe Carlucci, I, just want to and.
Session today by thanking all of our staff, especially all of the caregivers at the front lines physician partners. So on Williamson have enough. The Kobin task force here at the company along with a rough steps Dr., Ross bets and Dr., Jeff Walker and Sherry cousins, our senior Vice President I, usually don't name individuals.
But these folks have worked tirelessly to take good care patients and keep our staff in opposition part and safe. So thanks very much to everybody in the organization and thank you today for having interest and in American renal so that will conclude our remarks have a great day.
Once again, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.
[music].