Q2 2020 OAK STREET HEALTH, INC. Earnings Call
[music].
Good morning, and welcome to the Oak Street Health Inc. fiscal second quarter 2020 earnings call.
At this time all participants are in a listen only mode. After.
The speakers presentation, there will be a question and answer session in order to ask a question. Please press star one on your telephone keypad to withdraw your question press. The pound key we ask that you limit yourself to one question and one follow up question to allow everyone an opportunity.
Please be advised that todays conference is being recorded.
Hosting today's call are Michael.
If executive Officer, Tim Cook, Chief Financial Officer, and Jeff Price, Chief operating officer the Oak.
The Oak Street Pressrelease web cast link and other related materials are available on the Investor Relations section of Oak Street website <unk>.
These statements are made as of September 17th Twentytwenty. It reflects managements.
Views and expectations at this time and are subject to various risks uncertainties and assumptions. This call contains forward looking statements that is statements related to future not past events in.
In this context forward looking statements often address.
Expected future business and fiscal performance and financial conditions and often contain words, such as anticipate believe contemplate continue could estimate expect intend may plain potential predict.
Predict project should target well or would or similar expressions forward looking statements by their nature address matters that are to different degrees uncertain.
Please refer to Oak Street IPO prospectus dated August 15, 2020, and its quarterly report for the quarter ended June Thirtyth 2020 filed on form 10-Q filed with the Securities and Exchange Commission, where you will see a discussion of factors that could cause the company's actual results to differ materially.
Lee from those these statements.
For Oak Street particular, uncertainties that could cause the companys actual results to differ materially.
The nose expressed in its forward looking statements include the company's ability to achieve or maintain profitability.
The reliance on a limited number of customers for a substantial portion of the company's revenue.
The company's expectation and management of future growth.
The company's market opportunity and the company's ability to estimate the size of its target market.
The effects of increased competition as well these innovations by new and existing competitors in the company's target market and the.
And the company's ability to retain its existing customers and to increase its number of customers.
This call includes non-GAAP financial measures. These non-GAAP financial measures are in addition to and not as a substitute for or superior to measures of financial performance prepared in accordance with GAAP there.
There are a number of limitations related to the use of these non-GAAP financial measures. For example, other companies may calculate similarly, titled non-GAAP financial measures differently.
Refer to the appendix for a reconciliation of these non-GAAP financial measures.
Two the most.
Directly comparable GAAP measures with that I'll turn it over to Mike Pickles CEO of Oak Street, Mike.
Thank you operator, and thank you everyone joining us on todays call first call public company in order to discuss our second quarter results joining with its hard to Cook, our Chief Financial Officer, and Jeff Wright, Our co founder and Chief operating Officer.
Many of you joining today's call have some failure dextrys approached transforming care for older adult adult participating in our recently completed IPO.
For those of you got a new to our story Oaktree fast growing network of primary care centers focused on delivering exceptional care through adults on Medicare.
Older adults in comp what kind of condition represent the highest cost burden on the U.S. health care system.
We believe traditional primary care models are not structured to serve this population effectively as providers are burdened by having to see a diverse array of patients and a one size fits all fee for service reimbursement model.
This model what kind of lives providers to drive volume through the health care system instead of incentivizing improvements in health outcomes.
And effective engagement at the primary level can be some poor clinical and financial outcomes for both patient care.
We found an Oak Street in 2012 to address these dynamics our mission is to rebuild health care and should be in our vision is to provide measurably better health outcomes in all communities we.
We built our model from the ground up combining innovative purpose built technology enabled platform with our focused personalized cracking profit patient engagement.
Our model allows provider spend more time with their patients see them more frequently an average of approximately eight times per year.
In the traditional fee for service primary care sales.
We limit the size or patient panel, so that each provider can spend more time per visit with their patients.
We take the time to listen to our vision in order for a meaningful relationship with them and address their concerns.
There's a large expanding market opportunity for Oaktrees platform.
We estimate the size of our target market is 27 million Medicare eligible beneficiaries with moderate to low income living in suburban and urban areas.
<unk> 27 million bikes translate into a $325 billion annual market opportunity.
And then second quarter, we cared for up to 85000 device.
Which represents less than 5% of the adjustment that occurred population in the markets. The current operate within and even tinier fraction of the overall market opportunity.
Therefore, we believe that substantial amount of room within which we continue to grow.
Approximately two thirds of our patient base is comprised of seniors enrolled in Medicare advantage plans, which.
Which will obviously generate I would love to engage with payers in a value based contracts relationship, where we assume financial and clinical responsibility for the patient care.
We care for our patients 86% of wish of two or more chronic condition.
Through in person visits at our 66 primary care centers as well as through Tele health and home based primary care.
We believe our singular focus on chronically older adults over.
Over 40% up from our dual eligible and approximately half of them, starting with one or more social risk factors, such isolation and lack of accidents wooden housing it's helped us generate strong outcomes.
Additionally.
You don't see success is that our model right value for stakeholders across the health care spectrum.
Our patients, we see significantly higher quality care hospitalization reduce over 50% and a significantly improved patient experience, but oak Street net promoter score of 90 as described in our IPO perspectives compared to the average primary care doctors for free.
[laughter] our model enables our providers to do what they entered medicine to do both.
Focus on keeping patients healthy we.
We provide them with the resources and support they need to care for their patients and pay bonuses on quality parametric not visit volume as is the norm for primary care.
At a time when burned out of a massive problem for primary care doctors, we offer them a sustainable model that the overwhelming they feel they can do their best work with over 90% of our providers, saying they would recommend oak Street as a great place to work.
We help our payer partners across multiple key dimensions as well.
Average model helps grow membership for plan, where she can track it.
Other restaurant performance on quality metrics, we helped drive higher per patient revenue.
And because we take full responsibility for all of our patients not on Cros we.
We walk in our payer parts profit margins.
When our patients providers and payers when Oak Street was improving health outcomes with a growing number of patients to drive economic result of the business.
We believe our greatest strength.
Death and commitment of our entire team hopes you know what we call okay.
Last six months of grid unimaginable historical challenges for our organization and health care system due to the effect of coking 19.
I can't think okay is enough for the work they have done over the last six months in the face of difficult circumstances to keep our patients and all American state in the face of the Coker 19 pandemic.
I want to highlight a number of steps our t. tuck in South Dakota 19, It's I believe these rapid transformation speaks of the capabilities and agility of our teams all strength resiliency and superiority of our model.
During Q2 2020, we made apology.
We transitioned our predominately in person care model to be 90% Hello.
While increasing the number of patients by 12% all within a month.
We completed tens of thousands of bonus checks in social work councils to educate our patients on Carbonite team health and navigate health challenges and remove barriers impeding that from taking steps to mitigate the risks in the basin and Uh huh.
We redeployed our fleet of over 100, Green band, which typically provide patient transportation for patients to get to and from our centers.
Deliver meals from food pantry square patients, who buy secure access to food.
We made over 8000 deliveries of shelf stable milk in Q2.
And we created a covert care program, which is.
Which was published in the catalyst publication of the New England Journal of Medicine to actively monitor our patient or suspected overnight infections with a goal of managing of systems to keep our patient base out of hospital unless until necessary due to the potential risks in the hospital environment.
We were able to quickly pivot in the face of the pandemic continue to invest in our patient care because 97% of books revenue comes from occurring monthly payments are not based on visit volumes.
While many traditional fee for service practice has significant negative impact to their revenue due to lower volume we grew.
We grew our revenue 69% compared to our first six months when I see as Tim will discuss in a minute.
Oh excuse recurring revenue affords us the financial flexibility to continue to be there for our patients and providing the support they need to stay healthy and avoid preventable acute event.
During Q2, we also took steps to ensure the safety of our team members and communities, including temporarily stopping at Richmond and delayed the opening of new centers.
We have since restarting our growth efforts both on the community marketing fronts increased number of patients we serve and the opening of additional centers in new and existing markets.
I'll now turn the call over to Tim Cook, Our CFO, who will provide you with more detailed recap of our quarter from a financial perspective, and some color on our expectations for the remainder of 2020 Tim.
Thank you Mike and good morning, everyone. We were pleased with our second quarter 2020 financial results, which were within the preliminary estimates we provided in our IPO prospectus.
And it was a record revenue despite the challenges of the Cobi 19 pandemic to level set on growth, we expand our platform in two important ways first we seek to drive patient growth in our existing centers and second we strive to expand our network of centers across both existing and new markets in terms of membership total patients grew 36% year over year, while our at risk patient base.
Grew by 42% at the end of the second quarter. We operated 54 centers an increase of 10 centers from the second quarter of 2018, but flat compared to Q1 2020, as we temporarily defer new center openings due to covert 19.
The increase in patients or to help search to drive a 69% year over year growth in total revenue in Q2 to 214.4 million.
Our Q2 revenue benefited from risk adjustment payments in excess of our estimates of $5.9 million.
As a reminder, do our value based contracting model over 97% of our total revenues are occurring as our model is based upon our sheeting fixed per patient per month payments from payers. We believe this model drive strong financial visibility for Oak Street, our payer partners and for our shareholders.
Our medical claims expense for Q2, 2020 of $155.5 million representing growth of 84% compared to Q2 2020, outpacing our revenue growth on a space, However, 15.9 million.
Or 10% of our second quarter medical claims expense represented prior period development related to claims what 2019 or Q1 2020 dates of service. Excluding these costs our growth medical claims would have been more in line with our revenue growth rate for the period I want to.
I want to provide incremental detail on the medical costs prior period development at the end of each period, we make estimates with respect to claims that we will receive in the future for deals that have already occurred.
These estimates reside on our balance sheet and liability for unpaid claims given.
Given it is impossible to estimate these 100% certainty we aim to book these expenses as accurately as we can with some margin of error such that to the extent there is any prior period development. It is favorable that was not the case in this instance, and at some point in the future that maybe the case again, despite our efforts to mitigate the potential occurrence regarding this specific instance, there were two primary drivers.
First approximately two thirds of these amounts related to data challenges with a few health plans, which we were unable to remedy until late June due in part to the planned de prioritization of our data issues amidst cobot 19.
We have sent to resolve those data challenges and revise our medical cost estimates.
The remaining one third was due to greater claims run out than we'd initially estimated it is unclear. All these costs will materialize and what are they will persist.
19 has impacted typical claims processing, both with respect to the speed with which provide or submit claims and the intensity of health plans payment integrity work for the sake of conservatism. We've assumed these costs are real and will persist.
Our Q2 balance sheet as well as our guidance for the remainder of the year reflects the carryforward effect of these costs fundamentally our medical claims expense are still in line with our expectations.
Even excluding these prior period adjustments and unlike many of our health plan partners. We did not book significant savings in our Q2 financials due to lower health care utilization stemming from cover 19 restrictions, which limited access to health care facilities during the period, while we are.
While we have seen some early indications of lower utilization in Q2. There are few key factors that distinguish our patient base, which we feel will result in different different medical claims experience first our patients are generally quite sick as Mike said over 85% of our patients at multiple chronic illnesses. Therefore.
Therefore, while access to care was limited during Q2, our patient base was a segment of the population that was likely able to access to health care system. Despite local restrictions.
Second our patient base has a lower prevalence of elective procedures.
Particularly compared to commercial health plans, the avoidance or deferral of those elective procedures was a key driver a lower Q2 utilization for many health plans.
We are continuing to monitor our key performance indicators, our medical claims, but believe it will be several quarters before we are able to accurately assess the impact positive or negative for medical claims expense related to kill the 19.
Our cost of care, excluding depreciation amortization was $39.5 million for the second quarter, an increase of 26% versus the prior year due to the growth in number of centers, we operated as well as growth in our total patients offset by some benefit due to lower patient volumes at our centers as we transition to telephone sales.
Sales and marketing expense was $10.1 million during the second quarter, representing a decrease of 10% year over year as we temporarily suspended community outreach activities due to cover 19. These acts.
These activities have since resumed as Mike previously mentioned.
Corporate general and administrative expense was $31 million in the second quarter, an increase of 93% year over year. The increase was primarily driven by increased headcount stock based compensation expense in particular and higher legal and professional fees to support the growth of our business I will now.
I will now discuss three non-GAAP financial metrics that we find useful in evaluating our financial performance page.
Patient contribution, which we define as Capitated revenue less medical claims expense grew 36% year over year to $52.5 million, we expect our per patient to patient contribution to improve the longer our patients are part of the extreme platform.
Platform contribution, which we defined as total revenue less the sum of medical claims expense and cost of care, excluding depreciation and amortization was $19.4 million, an increase of 81% year over year.
As the centers patient base increases we would expect both platform contribution dollars end margins to expand given our improving per patient economics in the leverage we generate on our center operating expenses.
Adjusted EBITDA, which we calculate by adding depreciation and amortization and stock based compensation, but excluding other income to net loss was a loss of $17.6 million in the second quarter 2020, compared to a loss of $60 million in the second quarter 2019.
Note that our patient contribution platform contribution and adjusted EBITDA in Q2, 2020, and therefore, our growth compared to 2019 were all negatively impacted by the aforementioned prior period net expenses of $10 million.
We finished the second quarter with $185.5 million in cash and $82.1 million in debt.
Cash used by operating activities totaled $43.2 million in the first six months of 2020.
Our capital expenditure totaled $8 million in the first six months of 2020, as we deferred New center openings as a result of code in 18.
Through our IPO in August we raised approximately $352 million net proceeds we used approximately $86 million. This net proceeds to repay outstanding borrowings and associated interest in prepayment fees given the massive opportunity we see for de Novo expansion, we expect to use the majority of the remaining proceeds towards the continued growth of our network.
I'd now talk about our outlook for the balance of 2020 so.
For the third quarter of 2020, we are forecasting total revenue of between 210 $214 million and adjusted EBITDA loss of between $35 million and $30 million range.
We anticipate having 66 to 67 Standalone centers by September Thirtyth and between 58000 559000 at risk patients.
The calendar year 2020.
We are forecasting total revenue between 843 $853 million, an adjusted EBITDA loss of between 110 and $100 million. We expect to have 72 to 74 Standalone centers opened by December 30, Onest between 61000 63000 at risk patients.
Good point of our full year revenue guidance represents 52% growth over 2018.
Note that our projections and our openings do not include the smaller clinics associated with our recently announced pilot collaboration with Walmart.
For modeling purposes, we would contemplate approximately 249 million weighted average diluted shares in the fourth quarter, giving effect to the 15 million options issued as part of the IPO.
This being our first conference call as a public company I'd like to highlight two dynamics that occur as we scale first.
First as we open new centers. This can pressure our near term profitability since our centers operating loss for a period of time as our profitability ramps as a general statement, we'd expect our adjusted EBITDA to arrive towards the lower end of our outlook as we deliver new center growth at the higher end of our forecasts overtime as our patient base at these centers growth in or underlying unit economics take hold we would it.
These incremental centers to result in greater corporate profitability all else equal in the future.
Second I would emphasize that we today capture a very small piece of very large addressable market and we will continue to invest in sales and marketing to the degree that our model continues to produce the compelling center inpatient economics, we have generated since our inception.
In closing I'd like to find some of the medium and long term targets for our business first as I noted earlier, we are forecasting approximately 52% growth in revenue in 2020, our expectations for average revenue growth of approximately 40% over the near to medium term second we believe the platform contribution margin for our mature centers can reach 25% as they reach capacity.
And third we expect to open approximately 25 to 30, new centers annually over the next several years.
I'd now like to turn the call over to Jeff price, our Chief operating Officer, Jeff.
Thanks, Tim I would like.
I'd like to give some updates on developments since our IPO.
Since our IPO on August six we have kept busy.
The last six weeks alone we have opened 12, new Oak Street health centres across both new and existing markets, including expanding into Dallas Fort worth data.
Hi, Oh in Winston Salem, North Carolina.
Today, we are operating 66 centers compared to 54 on our IPO date.
It has been exciting it is an exciting for our team to bring our model to new communities. After all the challenges we navigated earlier this year.
We've also transitioned most of our care delivery back to in person care to better align with our patients preferences and needs.
Additionally, as Tim alluded to earlier, our team finalized the collaboration with Walmart, which we announced on September 1st.
Our collaboration is initially focused on opening sites in three Walmart locations in Texas.
In the context of the 66 Standalone centers, we have opened today. This represents a small part of our business.
We're excited we are excited about extending our platform into a more rural and suburban setting where Wal Mart is a convenient hub for the types of patients that we target.
And we believe that foot traffic Walmart provides will complement our typical outreach focused growth model.
Our plan is to operate the same patient engagement model at these sites and continue to grow our at risk Medicare advantage patient base. These are simply Oak Street health centres that happened to be in a Walmart.
Okay Health group will retain the same economics in these centers as we do in any of our centers we.
We will be seeing all patient types not only Medicare is it similar to a JV partnership we have with an independent group outside of Chicago We.
We look forward to updating you on our progress on all of this work.
I will now pass it back to Mike for concluding remarks.
Okay.
Thanks, Jeff.
I will conclude by saying how excited our team is.
Continue to execute against our mission at rebuilding help because it should be.
At a time when health disparities are in the spotlight. We are proud of the impact we are making for patients and communities that are far too often underserved by the existing healthcare system.
Good.
We also know that we are just scratching the surface of what we can will and need to accomplish and we are excited to continue on our journey.
That concludes our prepared remarks, we will now take your questions operator.
Certainly at this time, if you'd like to ask a question. Please press star one on your telephone keypad to withdraw your question press. The pound key we ask that you limit yourself to one question and one follow up question to allow everyone an opportunity.
Gary Taylor with Jpmorgan Your line is open.
Hi, Good morning can you hear me.
Yes, okay. Good good morning, I, just wanted to ask a little bit about.
Some of your initiatives around Tele health I know that.
During the coated crisis when a lot of things were shut down you guys move pretty quickly to sort of develop your own capability.
The stay in touch with your pace.
Patients I'm just wondering is there any.
Incremental cost in the quarter the call out that's recurring or nonrecurring what percent of your visits are sort of back to normal in person visits now and then just any.
Any thoughts around changing your clinical model or protocols at all have you have you found this tool to be something that might be.
Recurring portion of the clinical model.
Thanks, Gary Yes.
Happy to happy to talk about that a bit.
So to take a few pieces that question sit today.
Over 80% of our visits are back in person care with the remainder at Tele health neck as Hell out that compares to 90 plus percent.
In the spring being Tele health, so we've shifted largely back to in person.
We do think that tele health will be a part.
A part of our model going forward, we believe that the patient base, we take care of his most suited for in person care in most instances however, thereby.
They are both clinical and patient preference situations, where tele health is appropriate.
In terms of costs.
Costs in the quarter, the tele health costs and the platform reuse where.
Not not material and probably not worth calling out.
Specifically.
We have made some investments there.
Net.
Will allow us to move to our proprietary telehealth platform over the next quarter or two we're currently piloting that so were we think that that will integrate well with the overall XP platform effectively and we're excited that that can.
Make the experience even more seamless for our patients.
So I think a lot more to come here, but we do think as part of our go forward.
Okay, great. Thank you.
Robert Jones with Goldman Sachs. Your line is open.
Great. Thanks for the questions and welcome to the public markets I guess for the first one Tim just to follow on to Gary's question.
But thinking about the back half guidance, what's assumed as far as that dynamic between in person versus Tesla and then maybe just related the how are you thinking about utilization cost trend in the back half as it relates to the to the full year guidance.
Okay.
Yes, Thanks, a lot so with respect to what we have any guidance as it pertains to tell held largely it is still our providers providing the same service. It's obviously a different modality doing it via telehealth means versus doing it in person. So as Jeff mentioned, there wasn't a significant impact to our costs. So as we think about the remainder of the year there isn't really much there won't be much change.
Regardless of whether tele health was 50% or 30% of the total care, we delivered over longer over the longer term to the extent that we can deploy that will help more meaningfully and leverage as it means either expand capacity or we're seeing more patients there might be there might be a benefit but I'd say for 2020, I wouldnt expect any benefit and our guidance doesn't assume any benefit.
And sorry, Bob can you just repeat your second question.
No just the as far as what what what's assumed under the underlying Lee in the guidance related to just utilization medical cost trend in the back half Oh, yes, yes, yes. Thanks, So yes as I mentioned.
Clearly we were we did not expect the negative $60 million of element that we had in Q2.
And we have now.
Our.
Booked expenses, we've now got our balance sheet to point, where we feel as though we are appropriately reserved against any future development related to those periods of time, so for the back half of the year.
We have assumed the business more or less as usual as we had discussed with folks during the road show and for some of the comments I made today I don't think our experience with respect to covert will be the same where there was a significant decrease in Q2 and the law.
MLL R and a significant increase in Latin later period animal ours, and therefore from our perspective.
We'd like to manage it business as usual to we have better data to understand what the effects of cold. It will be so right. Now we are as we sit here today I think we feel very good about where were reserved relative to what we've seen in the data will continue to monitor that as the year rolls on here.
Great. Thanks, so much.
Sean Wieland with Piper Sandler Your line is open.
Hi, Thanks, very much good morning, and congrats on your first first call here.
Just at a high level I want to just have you touch on what do you think some of the aspects are of your model that allow you to drive better outcomes lower costs and why do you think you've been able to figure this out when a lot of other people in health care happens.
Thanks, John appreciate the question.
I think one of the big things that differentiates Oak Street in our model and I think what makes it difficult for others to achieve the same over is also just the the focus and the comprehension nature of the model.
On the focus aspect, we're only caring for older adults on Medicare and that really allows us to fine tune the model for a more clearly clinically home.
John its population and.
The model, we run would be very inefficient unnecessary for healthy commercial population for example, but works well for our population so from a staffing ratios technology cynical pro.
Clinical protocols training et cetera can all be optimizing is one population. So I think that focus is a big enabler of our success and I think the second point that enables our success is.
Really the extent and breadth of our offerings.
And so.
There's no silver bullet right people asking what is what are the one or two things you do that really makes the biggest impact on on your reduction in emissions and as you know we produce we reduced our solutions over half.
They would allow us to do that is.
Really doing a great job gathering and analyzing huge amounts of data on our patients leveraging canopy, our technology platform to get the insight from that data to the proverbial bedside and doing.
And doing the same way every time for every patient based on by clinical needs and.
Now we can combine that with behavioral health longer primary care visits transportation 24, seven call Center support home based primary care for patients that need it and.
And a host of other programs.
So you get the situation, where the the whole is much greater than some of the parts and you're applying all those parts and very consistent manner and very coordinated matter because you have the technology interface.
Thanks for that that's helpful and then.
So as it pertains to.
Walmart in the patient mix what percent here are going to be Medicare and more specifically what.
What percent will be Medicare advantage, and how does that translate to your prior statement around focus is the enabler.
Yes, that's.
Really a big piece that we're going to be testing and the initial sites is what the what the mix will look like the catchments that we are in.
Where the walmarts are located look very similar to Oak Street health catchments that we've traditionally choose so there.
So there certainly are many Medicare patients.
I have a kind of socioeconomic.
Background that we typically.
We typically serve.
We don't and we generally know that they're shopping at Walmart because just about everyone shops at Walmart.
The I think the thing that we don't know is what what will the mix to be in the centers that we serve.
And so that's really why we are thinking about this as a pilot collaboration so that.
So that we can.
Prove out that that model, because we we will need to be.
Need to be focused on on that.
The.
The final thing I'd say on that is from a focus standpoint.
We will run the Oak Street model on the Medicare patients and we will.
This is quite similar to.
A practice that we've partnered with.
Outside Chicago that that sees all all types of patients.
But we really focus on running the Oak Street care model and Medicare patients and then just still delivering a good experience for everyone else.
Which again is I think important for us to be able to do.
Okay. Thank you if I could just squeeze one more quick one in on the third party medical claims expense.
What is the you said a third is due to a lot of that.
The.
Is due to that.
James run out what do you mean by claims run out.
Sure Sean as we look at today at the claims experienced for 2019, what's alleged focus on 2019 for for now.
We made estimates being 2019 that we would have we would receive X million dollars of claims in 2020 related to.
Dates of service that that occurred in 2019 essentially between the claims that we risk Weve received thus far in 2020, and our estimate of future claims that we might receive for 2019 that.
That number is in excess of the of the number we estimated at the end of last year and so when I say run out I just mean, the sort of the run out of claims of the claims that the claims that we've received relative the estimated number of claims but dollar perspective that we thought we'd receive when we closed out the year.
Alright understood. Thank you very much.
Thank you Gillmor with Baird. Your line is open.
Hey, Thanks, Good morning, I wanted to ask about the Mark marketing efforts you had mentioned obviously the resumption of some of the community outreach programs can you give us a flavor for what that looks like going to covert environment versus pre kind of it and also do you have any sense that if these new approaches will have the same effectiveness or is it too early to tell.
Really no.
Yes, I mean, if you go back to a year ago at this time.
We still operated a multichannel marketing approach and so we have what we refer to central marketing channels, such as digital direct response, TV et cetera.
We also have our community based field marketing channels.
A year ago today, a fair amount of that was driven by events in our centers and events out of the center.
Obviously.
Fast forward to today, we're not we're not doing big events with older adults in the community for obvious reasons and so we've had to really figure out over the course of last six months, how do we how do we deploy our community marketing team in a way that can still be part of the community still liaison with older adults, who can benefit from Oak Street care model and Soi educate people love.
The importance of primary care, our NYSE shelf is a great place to get that primary care and so what we've done is really and deployed and redeployed our field force against.
Against working with groups and the community, but instead of working with them to set of events, which is what we did a lot in the past working with them to understand how.
Who in their constituents could benefit from Alex you help and find alternative ways to educate them about Oak Street. So it really tangible example is working with faith based organizations instead of hosting.
Senior branch after after services on Sunday were to work with the past or to have him directly introduce us to his seniors or or send them in order to make an announcement. After after services right et cetera et cetera. So we have the same result in the same benefit actually is a little different mechanism to get people educated in familiar with what.
St Juste.
And so.
So that part of the change obviously, the central things around digital around direction, Ostomy et cetera, that's very similar what we have seen.
It's still relatively early to have a final result, we have seen early is that I think because coven has really put a spotlight on.
Chronic illnesses as risk factors to covet and I think as Covance really put a spotlight on what can happen to access to primary care. Thanks, a lot doctors offices shut down during during the second quarter I think it really has further differentiate oak Street helfand for and further called out the importance what we do.
So I certainly think we are seeing a huge amount of interest from from old Ralph and the communities, while learning about Oaks, Chicago, whether that be interest thats generated by our central channels interest generated by our our field channels.
I think over the course of the year as we use and kind of fully ramp back to.
To the new normal on the patient acquisition front I think we're optimistic rent were achieved strong results, but I think it's too early to report exact what those results are.
Got it fair enough and let me ask one follow up on the Walmart partnership, but I know I know you you said, it's obviously a small piece of the of the much bigger operation.
How long do you think it will take to really assess some of the factors you talked about in terms of understanding the mix and the unit economics before you'd be in a position to make a decision about whether to expand it or not just just kind of curious what that timeframe looks like.
Yes, I think you'd be a relatively quick timeframe I don't think we need to wait wait years to assess longitudinal data I think we feel very confident we can run our clinical model effectively and.
And given the consistency of results that our platform generates clinical metrics across all of our geographies and all of our our location.
We're confident we can do that so I don't think we feel the need to wait.
Months or years to to see the clinical results. So it really becomes a question I think as Jeff alluded to around how fast are we growing patient and if it's a good location to engage older adults educate them about Oak Street.
To provide them the same experience as well as the rest of Walmart shoppers are phenomenal experience we are doing.
We are doing that have experienced very strong and we're able to engage people, which youre going to hypothesis is there going to Walmart allotment every week anyways to shop. So we're excited about it I think we can understand how its working relatively quickly.
And we'll see we'll see this year.
Got it thanks very much.
Ryan Daniels with William Blair. Your line is open.
Yeah. Good morning, guys, Congrats and thanks for taking the question Mike I was hoping to get any comments you might have on direct contracting and any more details or thoughts you have there regarding the opportunity for 2021.
Yes.
Yes. Thanks I appreciate the question.
We're excited about the direct contract you program for those that are less familiar with it.
The new pile.
Pilot program from CMS Bye.
To allow groups like Oak Street help to essentially take risk on their traditional Medicare patients and obviously why that's exciting for us as we you know we have a number of Tricia Medicare patients I really don't dock differentiate our care model. So we were providing them the same really high quality care and if you can see from our prospectus. When you when you invest the dollars and the care model that we do.
RK painting for service.
If the economics don't work in this money so.
We believe we're actually generate a lot of cost savings in those patients because of our care model, we're just not capturing that so.
I think the really big opportunity for us to capture some of those savings.
And so the program is set to begin April 1st.
Yes, the enrollment period, where people can kind of start actively enrolling their patients in the program begins October onest. So a couple of weeks from now.
Our plan is to begin enrolling patients at that time as they come in for their business, just kind of a normal course of operations and.
Yes, really the final piece of the puzzle that we don't know is around some of the economics.
See my I didn't release, some information about that yesterday evening.
It's not a pediatric of on pages I'll be honest I have not asked you to read through in digested all and figure out the implication for Oak Street. So.
So excited to do that by that but again I think it's we're excited about the program, but I think we don't we don't we don't know enough about it it's a new program right now so we're certainly not make any quantitative projection at this point.
Okay. That's helpful. We'll stay tuned and then just another follow up I guess tactically on the Walgreens I'm sorry, the Walmart relationship.
I think the one deviation probably between your centers in your current partnerships is Walmart also has a large pharmacy operation. So can you just speak to how that will integrate as it can be kind of a warm handoff to their pharmacists for things like medication adherence are you actually going to bring that in house too. Thanks, guys.
Thanks Ryan.
We at this point if not.
We don't have any plans operationally on the pharmacy side tactically. This is really from our standpoint and I I believe.
I believe Walmart degree.
About primary care services.
And so that's really the place that we're focused on and that's what we do well and so we're we're really just focused on delivering great primary care.
Okay.
Ricky Goldwasser with Morgan Stanley Your line is open.
Yeah, Hi, good morning, and congrats for first call as a public company.
Question here on the market expansion can you talk a little bit about how you're thinking about the cadence of market expansion, given just kind of like the covance related.
When do you think that you're going to catch up with that and maybe some detail the criteria.
Isn't it.
Expanding to new markets, whether it's.
Payer relationships or the profit.
Thanks.
Thanks Ricky.
As far as the number of centers just to level set expectations I know, we opened up 12 centers.
And a little over a month I wouldn't expect 12 tenants a month here on out I'm going to want to make sure were appropriately set expectations done expect 12 month ongoing.
But I think one of the reason we did up in so many as we didn't away. Some of the Q2 openings. We had some sites are ready to open as soon as we.
We feel comfortable doing that.
I think the rest of the year, you'll see a more more measured monthly opening centers I think Tim Tim provided guidance on.
The overall number for the end of the year.
Then I think we'll see.
Yes.
A step up at a measured pace kind of spreading out the center openings throughout next year and I think one thing that we did learn over the last month month or so is that operation. We can open up a lot of centers very quickly and.
Incredibly proud of our teams we hope.
We opened up 12, new locations, they're still depend data because everyone knows ongoing so hard circumstances, and we were able to fill every provider all we were able to fill.
Every every team roll on day, one from a hiring standpoint centers all.
Centers, all opened on time, no big glitches so.
You shout out to our expansion teams our drilling teams in all of them really appreciate all their hard work to make that happen. So I think that is a good validation for us that we have the ability to open up a lot of centers and so.
As we continue to progress and we can use.
As a result, I think we have the ability to step that up if we if we feel it's prudent.
That's kind of piece one on the second question around how.
How do we select markets.
And I think I think about that in two pieces piece number one is that the.
The the the.
The market itself, you're going to and then I think probably just is probably more importantly is the neighborhoods in the market.
And so I think on a positive froch streets growth trajectory probably.
Probably less so positive for health care overall, there was a huge number of markets that really need Oak Street health and really need to type model. We can provide we have Doug maybe a huge opportunity for older. Adults. So I think we didnt make good decisions in the markets. We're in today.
I also feel that we could have picked in a completely different set of 15 or so markets.
Had a very similar level of success, because we do see really similar success across all the geographies ran and and we see similar demographics across most geographies and really can we talk about large city. There is not a huge difference in the.
Did that kind of overall makeup of those cities demographically.
What's really important though is picking the right kind of neighborhood and community serve within the market and.
And that's where over the years, we've really refined our approach we actually have a predictive algorithms that looking at a host of factors NK kind of.
Yes, the neighborhood predicted three score for for how how attractive that neighborhood as for our model and so thats. The Goto market, we'll look at those and other other data and we're trying to figure out okay, what where is the portfolio of centers that.
That will cover all the neighborhoods, we think Lincoln benefit from Oxford Health, and we can be successful and well over a year or two to bring out to the market is kind of get good coverage over the neighborhoods.
And then as the market Progressive Afinitor set to go off and we'll put more infill centers into it to build more capacity.
So I think there's a there's a very long list of markets were very excited about.
It's a little bit about all of that next year, but over the next couple of years I think theres huge opportunity expansion new markets I think the big opportunity to grow centers in existing markets and again, we feel very good about our ability to put up but our senators and locations, where we can really make a big impact to be very successful.
And then my second question here is that our global Healthcare conference. This week. One thing there was very striking is the appetite for partnerships across the different equity.
Equity stake holder you entered into this partnership with Walmart.
But where else do you see opportunity similar opportunities.
Can expand to expand into how should how do you think about that.
Well first and foremost.
We are really excited about the results of RG Novo model and whether it's looking historically at how our vintages have performed well they're looking at how recent vintage performed and.
And how thats improved compared to earlier vintages again.
Yes, we have a lot of confidence in our ability both to continue.
To continue to put up more centers to QC, great economics from those centers, we think the market for RG noble sites is massive and so I think of the huge bar for us to do anything that is.
Outside that core because the core is working so well and because there is such a huge opportunity continue to grow the core.
Over the next decade and.
That said, obviously, we have the Walmart partnership we are you're willing to.
Pilot things and try things outside the core because we also want to find ways to continue to accelerate our growth even more than we already are and find ways continuing to serve more more older adults and so obviously as Jeff alluded to the Walmart partnership clear that bar the pilot because we feel like we can expand to geography that are slightly.
Rule and suburban then generally kind of that core inner city market, we generally focus on.
As well the fact that frankly, there's there's nothing like Walmart as far as the breadth and percentage of the population that use a walmart and a regular basis. I mean, you you Im sure Youve all seen all the staff it's amazing so we.
So we are really really excited about that partnership and cleared the bar.
Well, obviously always be looking for other partnership opportunities and other ways to continue to leverage our core strength and accelerate our model, but it's a high bar and I think our focus will will definitely remain on on the de Novo mouth is such a huge opportunity to grow that in a meaningful way.
Thank you.
Again, if youd like to ask a question. Please press star one on your telephone keypad, Steve to know with SVB Leerink. Your line is open.
Thanks for asking the question and congrats on the IPO as of Q, but most mostly to follow up on others that have been asked I guess the one Mike you sort of mentioned that you are getting the same results in the same benefit with respect to the sort of the outreach efforts through community organization than such I was a little surprised to hear that pleasantly. So I was going to ask you have you guys tried to.
Think about how much of an impact so that is having on those outreach efforts and if thats limiting growth in total patients in any way or you just really think that it's pretty much the same.
Steve One thing that we take a lot of pride and at Oak Street is continuing to innovate.
Two to improve so our average model certainly not static.
And in an alternative universe without cobot I, certainly don't think that model would've been static we would have I think may.
Made some of the same store.
Strategic investments around training, our team and really building more of an account executive function on the community outreach side that we ended up making for coated.
And so I don't have it is the alternative universe right to see how obviously would have performed.
I wasn't cold and we can integrate those investments.
And so.
Yes, we're missing a key part of what our model with last year, which had community back to back with in our center asset in center.
And again.
Again, it's too early to tell you exactly how we're going to perform year over year on page to push patients per center per day type type metrics because my guess.
Again were we really started ramping up over the last couple of months rebuilding our pipeline getting back into community. So it takes a little time for for that the pipelines to fill up and kind of get people scheduled and all the way through so.
So.
Optimistic I think our view phenomenon with the oil I think they put a ton of work into does.
Designing a model that can be successful in a global world.
Also.
Im optimistic that in the medium term as as the world turns or more normalcy, hopefully we get a vaccine sometime next year, we'll see we'll see how that plays out but.
Happens and events are having to community we can add that back in while also keeping all the things we've expanded such as our digital marketing direct response TV.
Account based field field. So so I think maybe a.
A summary would be.
We are we did lose parts of our model and excited bring those parts of the model back, but we also looked like we innovate and try new things that are showing good result, and so.
We can be successful in this environment, bringing on patients and hopefully even more successful and in future years.
And really continue to drive results.
Forward.
Got it that's great to hear and then maybe just my last question here in direct contracting follow up on some of the comments there I guess.
Can you tell us a little bit more around.
Specifics I guess, what I'm really trying to get to ultimately is an understanding and what governs the number or percent of your fee for service stations that could ultimately move the global cap. Once this program is well underway and so maybe if you could give us some color on their context on have you applied for the professional model or just global habitation.
And I guess, maybe in your minds, what governs that right.
Number of fee for service stations that you could move to global cap under the program is structured today.
So we did apply for the global model.
And.
Obviously.
The focus of our care model with keeping patients helping out to hospitals, though.
Kind of be able to share on the savings from the reduction hospitalizations is important to make our economics work.
On the on the kind of membership attribution side Theres two way from our understanding that they're going to do members retribution wanted.
One is passive and so don't look at past claims and determine where.
Where the where the members getting the predominance of their care and with an algorithm that little bit of black box assign them to.
Two providers.
That is for example, the way the Medicare shared savings program works.
The other way, they're doing it wishes more relevant for Oak Street is active retribution, so essentially whether it's an there's an online portal or just pay performed.
Patients are allowed to phosphate essentially yes. This is Mike provided I would like to be.
Aligned with them in this program and it builds are submitted to CMS. They will align the beneficiaries of the program.
And so if we think about what we think this plays well into our operational strength. It looks you help because that is very similar to what we have to do automatic managed care side. So.
New patient joins US you have a Medicare advantage plan today, we need to contact Medicare advantage plan with the patient have the patient change their primary care doctor to help so we're going to process in a very similar way where patients that were on track for Medicare will go through the same process.
And so we won't we will just run it as part of ordinary course of business most patients come into our center for their visit.
We'll work with them to align.
And there's no reason why a patient wouldn't say, yes to it that I understand I mean, the benefits of the same no network. There's no there's really no change it for the patient how they access.
Medicare Thank you for letting doctor they want anytime so from that standpoint, I don't lose any downside to patient not to do it but this is no we've never done it before so.
I can't tell you today.
What percentage of patients who are anxious for Medicare they're coming for visit will will agree to sign up or not we're hopeful.
Good portion of them and then the last piece around there's a number of exclusion.
That again, it's hard to really quantify the impact of exclusion no one ever done this.
Program before so for example, if a patient minus and its been on Medicare advantage for call. It one month of the year right and dropped out our traditional Medicare They can't a line on this program until the fall of calendar year. So.
To the extent that there is going to drop in and out of Medicare advantage, but you do see with a with a dual BOP patient who is.
Eligible and I think that can have an impact addressable number of additional Medicare patients.
There is a.
There's a couple more exclusions around they are aligned with a different program. Some of these other.
Hi demonstration programs, if they're already lined with an MSP or other Ethiopian mid year and you meet the patient they can't again change that align with and within the year. So so its not like every single one of our patients will be eligible day, one and we can go do a bulk sign up is going to be a process and if the process obviously.
We think fits very closely to process as we run every day. So we feel good about that but but if no.
No I think just to make sure if I didn't say that we have been accepted for the program will be it will be in and it will be beginning enrollment October onest.
Yeah Super exciting. Thanks, good luck, thanks a lot.
There are no further questions at this time I would now like to turn it back over to the Oak Street health team for closing remarks.
Great. Thank you will appreciate all the questions from everyone.
And.
And what kind of how ended the prepared remarks.
Our team and I can speak for Jeff and Tim, but also the broader o'keefe could not be more excited about our opportunity to continue to invest in our patients care investing experience they have.
And we really believe that such a huge opportunity to transform healthcare and really make a difference for patients who really need it and we're excited to be on this journey has been exciting time grocery but in our view. It's just a it's just a a milepost in a in a much broader journey and we're just getting started on what we can accomplish though thank thank you guys for the time and we're excited to be doing that would be for a long period.
Okay.
This concludes today's call. We thank you for your participation you may now disconnect.