Q2 2020 American Renal Associates Holdings Inc Earnings Call
And welcome to the American Real Associates second quarter, 2020, <unk> earnings Conference call.
At this time, all participants are in listen only mode.
A brief question answer session will follow the formal presentation.
If anyone should require upper ever systems. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Victoria Labriola, Vice President General Counsel and Secretary. Thank you you may begin.
Thank you operator, good morning, everyone and welcome to our second quarter 2020 earnings conference call and webcast.
Thank you for joining us and hope you are continuing to remain healthy and safe during these challenging time.
Hi, Victoria, Labriola, Vice President General Counsel and Secretary for IRA.
Joining me for today's presentation, our Joe Carlucci, our chairman and CEO.
Dr. Donald Williams our.
Our chief operating officer will be providing the clinical and operational update.
And Mark Herbert our interim Chief Financial Officer, Colby, providing the financial reveal.
I want to 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 in our most recent FCC filings.
Any forward looking statements made on this call our effective only as of today.
And the company undertakes no obligation to revise or update any forward looking statements for any reason.
On today's call, we will refer to certain non-GAAP financial measures.
Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available.
As important information concerning the use of non-GAAP measures generally in the earnings press release, and our current Investor Relations presentation back.
Both of which are available within the Investor Relations section of our website at American renal dotcom.
I also want to remind you that our adjusted EBITDA less and see I calculation do not include the cost of certain legal and other matters.
Moving costs relating to certain litigation and the FCC investigation.
With that I'm pleased to turn the call over the Joe Carlucci.
Thank you Vicki and good morning, everyone.
When we last spoke our country, we're still in the early stages of trying to grapple with an unprecedented help crises crises with significant impact on a daily lives, our economy, and the safety and well being a ball American.
Well so many areas of the country are attempting to reopen with the hope that the worst that's tough.
All the regions of the United States are just starting to experience higher rates of transmission of Cobot 19.
Causing continued disruption to our nation.
Despite the ongoing impact of this help crises our business continuity plan together with other measures, we implemented some of which I highlighted last quarter.
Enabled us to remain fully operational across our entire network clinics.
We continue to treat our patient [laughter], including Cobot 19 positive patients.
Safely and the outpatient setting with relatively minor impacts to our staff and other resources.
The safety of our patients our staff and physician partners will always be our top priority and we will continue to adjust our operations as necessary to ensure that we meet this primary goal as the pandemic wall.
I want to reinforce how proud I am of our clinic staff.
Staff at the corporate office and our position partners for the extraordinary efforts to keep our patience and each other safe and for their dedication and professionalism that has allowed the company to operate seamlessly and on an uninterrupted basis.
We're seeing the positive impacts of our collective efforts and we're thrilled to report that many of our Kobin positive patients have recovered from the virus and are once again able to resume their normal treatment schedule.
Now moving on to the results of the second quarter.
The high level, we made significant and notable progress during the quarter to improve our collections performance.
We're also pleased with the disciplined and thoughtful expense management during the second quarter.
Adjusted for coated related expenses Q2 cost per treatment were consistent with our internal expectations.
Our second quarter treatment growth remained solid.
And we also continued to make strong progress in growing our home therapies.
Faster rate than overall treatment volume.
Last quarter, we shared with you that we would devoting additional resources and directing our focus so the revenue cycle and collections process in order to improve our performance from the first quarter of 2020.
Our Q1 rate per treatment lagged our internal expectations due in part to the 18 of government accounts receivables.
Primarily associated with secondary payers.
I'm pleased I'm pleased to share with you that those efforts were well directed the unsuccessful, resulting in a meaningful improvement in rate per treatment this quarter.
Second quarter revenue per treatment reflects an increase of 4.8% over Q1 due to both better current period collection and our ability to realize portions of aged receivables.
During the second quarter, our cash collections increased 4.4% year over year as compared to relatively flat year over year performance. During the first three months of 2020.
We believe the momentum we've experienced than the second quarter should continue through the second half of this year, especially given our commitment to these focused efforts.
The important takeaway here is that we've implemented effective enhancements to our revenue cycle and collections processes, which we believe will be sustained as we move forward.
On the expense side Cobot 19 impacted our reported results in several ways.
Adding higher labor costs due to hasn't pay programs and differential okay, and or lost productivity due to the coal, but all these ships.
We also experienced high cost for certain supplies and protective equipment to support the field and handle the operational and other challenges caused by the pandemic.
Most of these costs were reimbursed through the Kids Act and Mark will review the shortly.
Adjusted for these kobin related costs, our second quarter 2020 expenses were well managed.
We expand we experienced improvements in ancillary costs due to lower calcimimetic expenses and lower usage of E. F pace, while my well maintaining high quality patient outcomes and we also benefited from our corporate expense and <unk> initiatives.
Although a second quarter volume performance was consistent with our internal expectations factoring in the impact of coal bed, we did experience some volume losses due to miss treatments associated with covert pause or patients.
We're incredibly proud of our clinics. They are in physician partners for their tireless work to make sure as many as possible Iraq covert positive patients were able to receive their life sustaining dialysis treatments in our outpatient facilities instead of in the hospital setting.
We're also thankful as I noted earlier that many of these patients have now recovered.
Corporate related volume disruptions did however impact our treatment volume growth negatively by approximately 1.0% on a year over year basis.
The combined second quarter impact the impact of Kobin totaled approximately 10.2 million of which approximately 9.8 million was offset by use of the kids Yeah Grant money.
In accordance with the terms and conditions.
The amounts recognized on a piano during the second quarter from grant money represent 30%, 37% of the 27 million in total Kiszczak Grant money, we received from the government during April 2020.
Any grant funds remaining will be returned as may be required at the end of the public health emergency.
As we look to the future the operational measures, we've been Stewart instituted to manage the impact and effects of coal bid.
We remain in place to keep our patient staff and physician partners safe.
During the second quarter, we operated Kobin positive ships in less than one third of our clinics.
And then even fewer clinics in the last weeks of the quarter. Although we have seen an increase in the number of infected patients since quarter end.
We expect that May continue to rise as various regions of the country experience higher transmission rates.
In order to meet and areas need to treat such patients who will remain flexible and continue to swiftly adapt to operate co bid positive ships.
In terms of how cold it could impact the srd incidents in the growth trajectory of the patient population, it's too early to tell.
Given the long term effects of the virus or not yet established it is unknown at this time, if coal that could have a meaningful impact on the progression of disease among CKD patients.
Or if it could also the availability of organs for transplantation.
We continue to believe the demands characteristics for dialysis services will remain steady and.
We will continue to work closely with our physician partners to make sure. We what we are well positioned to care for the chronically ill patients.
In addition, we do believe one medium term effect of the cobot crisis could be increased patient demand for home based therapies.
For those that are appropriate candidates and so I'm thankful that our organization previously dedicated and developed additional resources.
Support this modality and is poised to support any future potential growth in home therapies in the future.
Finally, as we know 2021 will bring changes to the us our deep provider and patient communities.
First.
CMS issued proposed rules last month related to the inclusion of Calcimimetic send the payment bundle.
Consist consistent with our internal policies and past initiatives opposition partners in consultation with their patients will continue to make decisions that are in the best interest of the patient regardless of how such treatments and associated medications or therapies are built.
We look forward to the continued discussions within the industry and what CMS surrounding the proposed changes and Finalization of the proposed rules.
Second.
Yes, R&D patients will have the opportunity to enroll in Medicare advantage plans.
Having more options and access to additional benefits should allow our current and future patients to choose this coverage to experience improved coordination of care.
Let me close by saying that I'm truly pleased with the progress we made during the second quarter.
Our investments and directed focus to the collections process led to better revenue per treatment as compared to Q1, and we expect this momentum and improve performance to continue during the second half of 2020.
We delivered solid treatment volume growth.
We managed to expense as well and we strengthened our balance sheet by reducing leverage.
We're also appreciative of the government relief that allowed us to offset higher expenses and lost revenue due to call that.
And we're very pleased to be able to reaffirm our 2020 outlook for adjusted EBITDA less and see sorry in the range of 87 to 95 million.
With that I'm pleased to turn the call over to Dr., Don Williamson, our Chief operating officer to provide a clinical update dawn.
Thank you Joe.
It is my pleasure to join everyone today to provide the second quarter 2020 clinical update.
I'm going to focus my comments on our continued progress in home therapies and I will also share some statistics with respect to what we experienced due to co bid over the quarter.
First I am pleased to report that our normalized home therapy treatment growth here in the second quarter was approximately 14%.
We have now produced double digit home therapy treatment growth for four consecutive quarters.
Our home treatment mix normalized for cobot related Miss treatments during the second quarter of 2020 reached 11.1% up 110 basis points year over year and up from 10.8% and the first quarter.
We remain pleased with the additional focus within our entire organization on growing home therapies.
We are seeing the biggest games that are appeared to nail dialysis program.
While we have historically included PD and HD training rooms, and our clinics, we're placing additional emphasis on our expansion plans of these spaces to further increase our Pee Dee Ann HD opportunities in many of our markets.
Finally, as Joe mentioned, we believe the cobot 19 pandemic could ultimately speed the adoption of home modalities for certain of our patients.
We know from observing our own patient data that a much smaller percentage of our home therapy patients workover positive as compared to art and set our patient population.
Next I thought I would share some information with respect to our experience managing through coated.
As of June Thirtyth, approximately 4% of our patients had tested positive at a majority of these patients have recovered.
I missed treatments due to covert resulted in an estimated negative 1% impact to our year over year treatment growth during the second quarter.
Looking forward, we believe the impact of covert on our treatment volume growth could be similar or slightly higher during the second half of 2020.
The number of a our eight cobot patients hospitalized peaked in mid to late April and has since declined.
But may again increase as we move further into the second half of 2020.
Our ability to operationalize dedicated cobot only treatment shift ramped up significantly at the start of the second quarter and reached a peak of clinics operating covert shift in late may.
Since that time, the number of clinic needing to operate Kobin shift has remained below that peak, but we have seen some increase in the number following quarter in.
In terms of our staff at quarter in less than 3%.
Tested positive and we continue to carry out testing regimens for staff on a more frequent basis that is available in the general population.
We believe these statistics bear out that our cobot response team responsible for carrying out our business continuity plans adapted well to a dynamic operating environment with the common goal of keeping patients and staff healthy and safe.
Additionally, I am pleased to report that a arrays patient hospital days are down 22% from the first quarter and 13% from the second quarter of 2019 to 8.9 days, which is well below the national average.
Finally, with CMS late latest release of the preliminary five star rating I am excited to report the number of IRA clinics with a five star rating increased by 10% from last year.
That concludes my remarks for the clinical section. So let me now I'll turn it over to Mark Herbert.
Our interim Chief Financial Officer.
Thank you Dr. Levinson and good morning, everyone.
I plan to cover three topics this morning.
First I will provide some additional details regarding our second quarter financial and operating trends.
I will review, our balance sheet position and cash flow performance for the quarter as well as our current liquidity position.
And third I'll review, our 2020 outlook.
First let me cover the second quarter trends.
In the second quarter of 2020, our adjusted EBITDA less anti increased by 12.9 million from the first quarter.
2020, specifically.
Second quarter.
2020, adjusted EBITDA was 39.8 million.
And adjusted EBITDA less NCI was 25.8 million.
As compared to 37.6 million and 24.3 million respectively in the second quarter of 2019.
These improvements are largely due to the progress we've been making and our collections on revenue cycle.
Our volume performance remained solid in the second quarter.
Normalized for clinics sales and co good related Mistreatments total treatment growth and non acquired growth during the second quarter was 3.6%.
Second quarter treatment volumes were consistent with our expectation doesn't reflect approximately a 1% negative impact to the year over year treatment growth as result of missed treatments due to cold that 19.
Our second quarter revenue was 205.1 million down 3.8% from the second quarter of 2019.
Our second quarter 2020 revenue per treatment was $327 up $15 from the $312. We recorded in the first quarter.
Second quarter 2020 revenue per treatment was $20 lower year over year as compared to $347 in the second quarter of 2019.
The year over year comparison was the result of lower contributions from Calcimimetic.
And a favorable onetime resolution of certain commercial claims in the second quarter of 2019.
Offset by treatment growth and the temporary suspension of two months of sequestration. So it was effective as of May 1st.
We're very pleased with the improved collections performance during the second quarter and we believe the momentum in that area should continue due to higher productivity in focus.
Our commercial treatment mix is up slightly year over year and sequentially at approximately 13%.
Our in network treatment, Mexico stable, then it's trending as we expected this year the mid 80% range.
We believe our contracting position with major payers gives us visibility into our commercial book of business as well as a key Medicare advantage payers into 2021.
Turning to the expense side second quarter 2020 patient care cost per treatment were $234, representing a $15 per treatment improvement year over year.
We experienced consistent labor productivity and normal wage increases during the second quarter, excluding cold weather related costs.
We continue to experience improvements in our ancillary costs, including essays in Calcimimetic.
Second quarter call good related patient care costs for approximately 8.2 million.
All of which were offset with cares Act grant funds.
Of the 8.2 million approximately 1.3 million related to expenses incurred in the first quarter.
The additional expense was primarily attributable to higher personnel costs due to hazard pay overtime and additional staffing expense associated with managing cobot and higher so close supply costs, including PPD and infection control materials.
The accounting treatment for these nonrecurring coal good related expenses and balls to use of the grant funds to net against expenses that were attributable to Corona virus.
And met the criteria set forth in the HHS terms and conditions.
Moving over to general and administrative expense second quarter 2020, adjusted DNA expense per treatment was $32.
A $5 per treatment improvement year over year.
We implemented certain corporate expense savings initiatives during 2019 and implemented additional savings initiatives during the second quarter of 2020.
Which may produce increase DNA savings during the second half of 2020.
We estimate second quarter Colgate related <unk> expenses were approximately <unk> point 4 million virtually all of which were offset with carriers Act grant funds.
The aforementioned adjusted DNA expense per treatment figures exclude certain nonrecurring items that are described in the supplemental business metrics schedule in our press release.
Certain legal and other matters expense was 800000 during the second quarter up 2020.
As compared to 8.4 million in the second core.
Prior year and down from 2.3 million during the first quarter of 2020.
We continue to expect these costs primarily related to the restatement a certain prior year financials and other legal matter should decline going forward.
I should also note that in early July we appointed Ernst and young as our new independent Auditor for us fiscal year Twentytwenty audit.
We received a total of approximately 27 million or carriers that grant funds in April 2020.
During the second quarter, we utilized approximately 9.8 million of these funds.
The remainder of the funds are accounted on our balance sheet. We plan to utilize these funds already turned them as appropriate in accordance with the terms and conditions in future periods during 2020.
I will now move onto a review of our balance sheet and cash flow.
At June 32020, we had consolidated cash of 148.7 million.
And consolidated debt 585.1 million net of unamortized discount some fees.
We consolidated cash of 148.7 million includes $65.1 million CMS advanced bonds.
16.8 million up cares Act grant funds and 2.6 million of deferred employment taxes.
During the second quarter of 2020, we repaid 27 million of debt under our 100 million revolving credit facility, resulting in 73.
Million, a borrowings and 27 million of Undrawn capacity under our revolving credit facility as of June Thirtyth Twentytwenty.
During the second quarter of 2020 received approximately 83 million of advanced payments on future Medicare revenue under the accelerated in advance payment program.
Approximately $27 million Cures Act grant funds of which 9.8 million was utilized on the TNL during the quarter.
And approximately 2.6 million related to the cares act provision that permits payments deferral of the employer portion of social security payroll taxes.
As a reminder of the advance payments and the payroll tax deferral will need to be repaid in future periods.
Adjusted for our pro rata ownership of clinic cash and the pro rata portion of the clinic level that we guarantee.
Our adjusted owned net debt was 445.8 million at June 32020.
Representing a 73.6 million sequential improvement from the first quarter of Twentytwenty due to the April mentioned.
Government really programs.
Improved cash collections and margin performance and additional debt reduction.
It's important to note that the Medicare advanced money cares that grant funds and the bulk of the payroll tax deferral money well received at the clinic level. So our adjusted own net that calculation reflects our own portion of the cash related to these government really items.
As of June 32020, we are in compliance with the consolidated net leverage ratio covenant in our credit agreement.
For the second quarter of 2020 cash provided by operating activities was 137.3 million.
Excluding approximately 83 million of advance payments on future Medicare revenue.
16.8 million of available carriers that grant funds and approximately 3 million related to the cares act provision to deferred employer, so security payroll tax.
Cash provided by operating activities was 34.7 million.
As compared to $17.7 million during the second quarter 2019.
Adjusted cash provided by operating activities less distributions to NCR and the government relief outlined above was 22.5 million.
Second quarter 2020 capital expenditures totaled 7.1 million as compared to 5.7 million during the prior year quarter.
During the second quarter, we opened for Denovo clinics.
We are pleased the progress we've made in strengthening our balance sheet and expect additional de leveraging measures. During the second half of 2020 as result of planned divestitures.
Let me conclude by reiterating our outlook for Twentytwenty adjusted EBITDA less NCI to be in the range of 87 million to 95 million.
The framework for our outlook continues to be underpinned by our expectation for revenue per treatment to continue to demonstrate improvement as the year progressive.
Due to momentum with our collections performance and per kilometer related expenses lost revenue to be largely offset by carrier sack grant funds.
From a volume perspective, while we're not providing detailed guidance for treatment volume growth for calendar year 2020.
We are noting that asset sales completed on August onest include four clinics that contributed approximately 50000 in annualized treatments.
As such the impact of these divestitures to how you modeled treatment volume growth could be in the 1.5 to 2.0 range during the second half of Twentytwenty.
These divestitures contributed approximately 16 million and 1.5 million to the trailing 12 months revenue and adjusted EBITDA, respectively.
With that let me turn it back to Joe for closing remarks.
Thank you Mark.
In closing I want to thank once again, our entire team for their contributions in their unwavering dedication to providing excellent patient care.
I am incredibly humbled by how much sacrifice compassion employs our staff has demonstrated during these challenging times.
I hope everyone participating on the call stays healthy and safe.
With that operator can you. Please open up the QNX session.
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One moment, please while we pull for questions.
Thank you. Our first question comes from the line of Andrew Mark with Barclays. Please proceed with your question.
Hi, good morning, and thanks, all the commentary in your prepared remarks.
I wanted.
Yes.
Joe in your prepared remarks, you noted that normalized treatment growth of 3.6% was inline with expectation is that a change in tone or expectations around normalized volume growth from your previous expectation before and a half the 5% which was embedded in the initial 2020 outlook.
No no. Thanks for the question, we've been really focused on improving our balance sheet as we've indicated in the past so although it's a little bit down from previous periods, we felt pretty good about where we were 3.6% normalized growth.
Got it but with that inline with expectations heading into the year with that in line with the quarter heading into the quarter.
Is there any sort of change and normalize treatment growth for the year.
The 3.6%.
His normalize for approximately 1% loss due to co bad.
And also a normalized for the sale of a couple of clinics in the last year.
Got it Okay, and then compared to the 3.6 normalized growth reported 2.1% auto non acquired growth, but there is 150 basis points belt.
Of which 100 basis points, you noted as we await the cobot related Miss treatment.
Are you able to break those miss treatment down between continuing into these patients to help us understand how much of the volume pressure is likely to persist in the back half the year.
John you want to take that one yeah, we really at this point.
You know have we'll stick with a 1% as a total of three buckets between patient law hospitalizations in mis treatment.
Got it okay. So.
Yes.
Difficult I'm, sorry to interrupt is difficult so sort of.
Project, what the pandemic will do in the second half of the year, but.
So we thought broken that down further Andrew.
Got it okay on the sequential RPT improvement can you walk us through some of the action items you took to in the quarter to improve your revenue collections and it would be helpful to understand which payer group was impacted the most from improved collections only think about your revenue mix.
Yes, so we were up $15 quarter over quarter, and I'll turn it over to my purpose to.
Help you will get more information on that Mark.
Sure.
The performance of our.
Increased revenue cycle operations, and cash collection really across all of our payer groups.
We were able to recover previously reserve balances that had an age and that that accounts for about $7 $15 much difference.
The sequestration. It started may 1st was another $2 or that cheap but of that $15.
The we had a negative impacted the calcium metrics of about $3.
And I'm, drawing a blank for the balances but.
Those are the most significant changes for the.
In dollars and one was there was also the only just add to that there was copays and deductibles before at all as I'm sure calls thank you.
Yes, and an increase of about $12 an improved collection.
And I believe Andrew.
Bulk of that within the Medicare.
HM.
Yeah.
Got it that's helpful.
And then moving onto the commercial treatment Mick I know, it's reported at whole numbers. So there's some robbing issues, but commercial treatment mix actually picked up from 12%, 13% in the quarter any dynamics you would highlight as driving the treatment.
Next up sequentially.
Yeah, it's up about 30 basis points, and we Didnt round down to 12 previously in up to 13 in this quarter, but what we've seen our patients that were furloughed and not radar.
And those patients that were laid off.
Chose Cobra to continue their commercial coverage and we also did see.
In the death rate Unfortunately.
Chord with older patients that generally have government programs.
We feel pretty excited about where we are yeah. So sounds like the early indications are that the patients willingness to maintain some form of commercial coverage is pretty high in the form of Cobra So far.
Yeah, I think that they like their commercial coverage.
Got it that's helpful and then on the cost side just open it up year on the cost side can you give a sense of where you had success managing costs in the quarter and maybe differentiate between some of the planned cost reduction initiatives versus real time cost flexing or cost savings realized.
Those are the pandemic.
A box you want to take a crack of that one.
Sure.
As we indicated as I indicated my comments, we have continued experienced improvements across the board. It we're managing productivity, we had normal wage increases for the quarter.
We had improved or lower usage, yes age.
Calcimimetic was.
Was in line.
We had in the second quarter a reduction in our.
Health benefit costs.
Again, it's reflecting the.
In closing so many businesses and operations physician offices, so our healthcare claims significantly declined in the second quarter. So we were able to recognize that impacted Q2.
And of course, we also had less peto taken so that increased our liability slightly but we the impact of our expense program expense management program from last year. It continues into this year we've added.
A couple of additional initiatives in the second quarter that will pan out progression here.
Great. Thanks Walter.
Well the color guys.
Sure. Thanks Sandra.
Our next question comes for line of Tito triggering with Deutsche Bank. Please proceed with your question.
Hey, good morning, guys take that taking my questions here a couple of couple of years overview in a few modeling questions.
First one is Medicare advantage obviously.
Those rules came out early June just curious how would you think about Medicare advantage pricing going forward do you think that you make your advantage mix could accelerate under the new ruling from CMS.
No. Thanks, Pete So that's a good question as you know in 19, we ended the year about 20%. It was up moderately over 2019 and in the quarter Medicaid Medicare advantage I was at 21% and what the new rule in 2021, we expect that we'll continue to.
The increase into 2021, but we think it will be moderate and we think that.
Patients on may choose to retain their Medicare fee for service plans, but through the coordination of care of Medicare advantage. There are some areas, where we think that patients that you're starting patients will benefit.
Except as you know up to the patients and what's best for their themselves and their families going forward.
But from a pricing perspective, because any plans can now.
Oh.
It's easier for them to see that they have.
A large enough.
Great. Good clinics at this there's just some concerns on the investor community that it could be some Medicare advantage pricing pressure for 2021 to 2022 is that is at risk in your conversations with but they may plants, well when we were not I'm pleased with CMS This decision to.
Not allowed dialysis patients essentially to with with network adequacy too.
Acquire the plans to develop their adequacy and just.
Throughout a station so we've looked at all of our locations and we feel that we cover individual geographic markets.
Pretty well for time and distance.
So.
We would hope right. The dialysis patients would have the same rights of other patients to two through network adequacy. So we.
We don't know if it's necessarily a risk it'll have to unfold in 2021, but.
We think that Medicare advantage benefits might be.
Practice starting patients.
Okay, and moving onto Calcimimetic Qs refresh us on what the revenue was in to Q and also the cost which we've been was into Q.
It also what percent of your patients are seeing Ivy versus oral.
Yeah, I don't think people we've ever we've disclosed that in the past.
At the end of the day at American renal the patients the physicians that take care of the patients will write the prescriptions for you know whatever whatever medication as necessary and.
We know that obviously calcimimetic memetics will go into the bundle.
We certainly will be prepared for that.
Last year, and we'll have discussions with our physician partners, but the other ones that right the prescriptions at American Reno.
Follow their lead us to what's best for the patients.
Okay, and then back two years questions on commercial for a second because you're talking I'm, sorry, I'm, sorry, I'm sorry, if you know Don do you want to add on no. That's exactly right. I mean, we have the best decision between for the patient is between the patient and physician.
At a local level and we truly believe our partnership allows the physician to make the best choice at the time and so that's that's how we have done it and that's how we will continue to allow the positions the autonomy to choose whats right for the patients and I think people. It's hard to give you any more color on that because we don't have them number one.
Vendor pricing solidified number two we don't know what the CMS you know they talked about $12 going into the bundle, we think that will come down into fourth quarter. So we're happy to address that in future quarters with your for sure.
Okay.
A few questions on any of his questions on commercial he's we're talking about what you guys saw in terms of furlough furloughs layout layoff and co grow NDF unemployment stays at these levels didn't lose any concerns for commercial pricing mix for 2021.
Yeah, what we saw that in 2008, right commercial mix went down or as I recall, but now yeah, we're pretty weak we feel pretty comfortable with what's what's taken place. Thus far if the pandemic continues for the rest of the yes, certainly there's a risk that commercial mix My my mind tail off right now we saw a 30 basis.
Point increase quarter over quarter, So we felt pretty good above that and our folks in our organization have told us that.
We look at this very closely that most of the patients have been furlough not laid off so they can write retain their commercial coverage and and patients I think like their commercial plans for themselves on them for their patients for their families. So.
His thoughts at least there are electing cobra.
Okay, and then couple of quick modeling questions or.
On the 10-Q, you guys talked about the IPO foot liabilities that grew from 10 million to 16 went into the Q2 Q. It looks as though you routine so kits or refresh us on what happened on the IPO put liabilities and how should the muddied the remaining 110 Linde ours.
Liability on the balance sheet.
My coworkers, who want to we had my purpose might take that one.
Mark.
Okay, sorry, I was on your mute.
So having.
Put liabilities.
That was.
Well it was the last one we had go ahead mark.
Right, we resolve that.
At the end of the second quarter with the payout occurring.
Just after the end of the second quarter. There are no further IPO what options available. So that will still last one going forward altogether minority interest subsist, but are not IPO related.
Put options for our operating.
Okay perfect Super quick quick ones on this one.
The share count grew 6.6 cents sequentially at 34.6 million shares to walk through what changed now we should think about share count the rest of 2020.
[noise] would you like me to answer that Joe.
Yes. Please.
Yes, indeed, the increase is due the exercise of some shares that were going to expire at the end of the second quarter.
So we don't see any additional.
Activity like that going forward for the balance it here.
Okay, and then people here yeah, it's Joe I just wanted to apologize Mark is out in Chicago, So, we're having a little bit of.
Oh.
Difficulties there okay.
We are all remote these days so so.
I didn't say.
And then last one here is in the 10-Q, you guys talked about refunds due to payers grew from 20 million into 2018 25 million into first quarter in 20 million into two view.
Sure refreshes and with a means of why the number keeps going up and should then numbers for stabilized.
Thanks, so much.
My curve as you can take though.
Sure I expect it will stabilize and come down slightly as we are.
Activating.
Issuing refunds.
We tried to balance that with of its seed.
Our Medicare bad debts from our recent costs for filings to minimize the cash will impact at the individual clinics.
Okay.
So why was it increasing I guess you know what.
That all Medicare or is that there was no no. It's all across the board we have a couple of our commercial payers, but we're out of network that pay us are billed charges that we have to refund the difference.
So what we Oh so.
They are just anomalies that take place during the year and none of it is directly related to any of the government payers timely it clearly knows refunds and credit balances.
Great. Thanks, much guys.
Thank you Peter.
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Our next question comes from the line of David Mcdonald. The Truest. Please proceed with your question.
Good morning, guys I'm, just a couple last ones just want to come back to commercial mix for a minute Oh, you talked about the pandemic you expect you know similar or slightly higher activity in the back after the year wouldn't that all else equal kind of suggested you see continued improvement actually in commercial mix.
As mortality skews more towards government pay and I would assume.
Mr visits were also.
Skewed towards Medicare population, so there would think about.
No. Thanks for the question, David we've actually seen.
This is anecdotal we've seen actually the <unk> vacancy rate decline a little bit uncoated.
And we were up 30 basis points, where now 85% roughly in that work and we saw a commercial mix increase.
My only hesitation, Dave It is the second half of the year with.
The pandemic err on the incline in some parts of the country and so that's why we're a little bit hesitant, but I think we feel pretty comfortable with where we are with our commercial mix.
You know in years past, we were a much higher percentage out of network and were in network now and we've got I think good relationships with our payers.
Okay. A couple of other quick ones, just you mentioned $7 at $15 of revenue per treatment.
Was recouping some previously reserved rather.
The receivables is there still a decent chunk of receivables out there that you know have been previously reserved you guys can grab or is most of the kind of below hanging fruit and been realized at this point.
I would tell you David that were working it every day, we're happy with our increase from Q1 to Q2, and we're going to continue to focus on it and so with that I'll turn it over to Mark Herbers.
Ah, yes, clearly what the the long hanging fruit came in in the second quarter.
Sure so additional work to be down.
Okay. I think it's it's just really belts and suspenders somewhere, but the but but I will also add that what processes. We have in place of replicable going forward.
Okay, a lot less to for me.
Can you just talk about the remaining.
Clinics that may be sold.
You know can can you size that in terms of you know what types of revenue is such a adjusted EBITDA minus anti those clinics are doing currently just as we kind of think about heading into 2021.
Any divestitures that we make will make in cooperation with physician partners and where it makes sense. So I'm. A goal is obviously to continue to improve our balance sheet.
And we'll make those decisions on one off basis going forward and so it'll be I think where where we do divest clinics.
We did with Pennsylvania minimal.
EBITDA less NCR with a decent with a good return on our cash so.
Mark do you want to add some color to that.
No I think you covered it pretty well.
Okay.
Okay. Thanks very much.
Thanks, David.
Our next question is a follow up some Andrew Mark with Barclays. Please proceed with your question.
Hi, Thanks, So I turn it back in just a quick follow up on home dialysis treatments grew 14% year over year on penetration ticked up from 10.8% in Q1 to 11.1% in Q2 have you seen any evidence to date that suggests that the pandemic has accelerated adoption on dialysis or that's just the continuation.
Strong momentum into home dialysis that predated the pandemic.
Dawn will take that one yeah, Andrew that's a that's a very good question and as you can tell we've had a very strong trajectory coming out of 19 into 20. So full year growth in 2019 was 10% and as you said it into Q2, we were at 14%.
And so it's very hard to parse that how much of that may be just toby related versus just a continuation I can tell you that the number of coven patients that we've seen in our experience in the home population has been much less than those that are in center. So.
So you know you would think that there would be some.
Which by the patients to to migrate to home, but honestly I can't tell you how much of that growth is related to covert versus just the continued strong.
Trajectory, we had before I, let me just add I would tell you Andrew that our physician partners are focused on home therapies, and though as we are and through education at the local level without physicians with our staff corporate on down and from the bottom line up and we think that home therapies will continue to grow.
Great. That's helpful. And then just a quick numbers question do you have the spot number four in network mix at quarter end.
In network mix.
And was 85% of only 85%.
Okay, great. Thanks for the color.
Thanks, Andrew.
We have no further questions at this time I would now like just turn the floor back over to management for closing comments.
Thank you operator, and thank you everybody for your interest in American Reno, and I wish you, a certainly stuff the best going forward and during the summer and please stay safe we're going to continue to focus on good quality care and make sure that I patients in our staff and physician partners will say so thanks very much everybody.
Take care.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.