Q3 2020 Option Care Health Inc Earnings Call
Ladies and gentlemen, your conference call scheduled to begin shortly please continue to stand by and thank you for your patience.
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Ladies and gentlemen, thank you for standing by and welcome to the option to your House third quarter 2020, <unk> earnings Conference call at this time.
Participants are not listen only mode. After the speaker presentations, there will be a question and answer session.
That's a good question during the session you don't need to press star one on your telephone.
Be advised that todays conference is being recorded.
If you require any further assistance please press star zero.
I would now like to hand, the conference your speaker today, Mike Shapiro Chief Michel.
So please go ahead sir.
Thank you and good morning, and thanks for joining us for the option care Health third quarter earnings call I'm joined this morning by John Rademacher, Chief Executive Officer.
Before we begin please note that during the call we will make certain forward looking statements that reflect our current views related to our future financial performance future events and industry market conditions.
Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our comments. We encourage you to review the information in the reports we file with the FCC regarding the specific risks and uncertainties.
You should also review the section entitled forward looking statements in this mornings press release during.
During the call we will use non-GAAP financial measures when talking about the company's performance and financial condition.
You can find additional information on these non-GAAP measures in this mornings press release posted on the Investor Relations portion of our website with that I'll turn the call over to John.
Thanks, Mike and good morning, everyone.
We are very pleased with our progress in the third quarter in terms of our financial results.
Well as our efforts to lay the foundation for sustained growth.
Mike will review the results in more detail, but I'm very proud of the team's execution in the quarter in which we delivered double digit revenue growth.
Our highest EBITDA margin on record.
And expanded our cash on the balance sheet by over $20 million.
A year ago on our third quarter earnings call, which was our first call options there.
We outlined a strategy to drive profitable growth.
Integrating two industry leaders and establishing a truly unique platform to deliver infusion therapy in the alternate site.
At that time, we established four key objectives for the business.
Realized over $60 million in cost synergies.
Delivered organic revenue growth in the mid to high single digits.
Delivered EBITDA growth.
The free time revenue growth.
Operating leverage.
And improved claim cash conversion to drive over $50 million in operating cash flow.
As we sit here today, we clearly executed on that strategy.
Extremely proud of how the hockey team has performed in an extremely challenging.
One of our first priority set the new enterprise, what's to reengineer, a commercial organization and deploy resources for maximum effect.
Well with the admittedly disruptive it first it is clear that our sales team more than 550, it's operating much more effectively.
Finally in capturing new patient referrals.
In the third quarter, new patient referrals increased pre committed levels for both acute and chronic therapy portfolio.
And in fact for many therapies, we are generating solid revenue growth over the prior year.
At the marketplace in Q3.
The Cobi banking crisis in the home and alternate sites outside of the hospital are becoming the site of choice.
We saw very strong results in our chronic therapy lines that focused on specialty drugs.
In the third quarter, we saw broad improvement in most markets with scheduled seekers and position bid that beginning to accelerate off the second quarter low watermark.
Given our integrated technology between our commercial and operational teams our success rate in terms of efficiently converting new patient referrals to <unk> revenue has continued to improve.
Well overall, we have seen encouraging referral trends.
Recovery vary by market and the overall trend we saw in the third quarter is far from Universal.
We're also closely monitoring the recent spikes in COVID-19 cases in hospital distinction that had resurge in many cities instinct.
The team continues to shine through adversity, and the dedication of the over five.
Thousand team members that option care health continue to focus on the patients and family members on the receiving and every day.
Our resilient interconnected in technology enabled network appear management centers.
Provided a strong backbone that has allowed us to adapt to the dynamic environment that we're operating in.
King the dependable consistent our referral sources are counting.
We continue to make progress on integration efforts and while some technology harmonization efforts will continue into the first half of 2021.
We will effectively be complete on integrating the two organizations by the end of this year.
And the more efficient platform. We have created is beginning to unlock operational leverage.
Our EBITDA margin expanded 200 basis points from the third quarter of the prior year through our spending and operational discipline.
The scalability of our network.
The key tenant of our growth strategy going forward and the third quarter underscores our ability to leverage the network efficiently.
Shifting to the pandemic situation by no means are beyond the woods, despite our improving topline results.
Like all healthcare enterprises, we continue to focus on the safety and well being of our team members and the patients that we serve.
We continue to aggressively manage our supply chain for critical personal protection equipment, Michael drugs and medical supplies.
Our technology backbone has enabled us to operate and manage our workforce and inventory effectively across our network and we continue to enhance our technology ecosystem through new software releases and further deployment to enhance our tele health EBIT that and virtual capability.
And with these tools, we continue to collaborate with health systems and physicians to identify patients who could benefit from receiving their infusion services sheet, leaving effectively in their home or one of our dedicated infusion suites.
We know that patients, who had underlying health condition and or our immuno compromised.
Highest risk of severe impacts from the Corona virus.
So our ability to partner closely and then demonstrate our ability to safely serve these patients has only strengthened our position.
I am confident we have solidified many referral source relationships over the past several months as a reliable and trusted service provider.
Going into the fourth quarter, we would anticipate continued momentum in our sales effectiveness.
Although we have seen some markets we track in hospital and physician practices begins to postpone procedures given the recent flair.
Also we continue to actively monitor supply chain dynamics and product and supply disruptions continue to emerge in certain therapy classes and medical supplies.
Finally, as I shared in the past here in pharma manufacturing.
Collaboration.
Critical component of our growth strategy, and we are uniquely positioned as the only national independent provider with a technology enabled clinical advantage.
We've announced a number of new pair collaboration this year and we continue to make tremendous progress.
Hey, I'm very pleased to announce that we have recently entered into a new multi year relationships with both centene instead.
We are excited.
Both of these agreements allow for deeper collaboration with these health plans to actively manage their members who require high quality infusion services at an appropriate cost.
We pride ourselves on our ability to collaborate with both local and national health plans to deliver real value to them in their population.
And while our efforts on who your friends continue I'm extremely proud of the team and the progress that we've made in 2020.
We remain the only provider it that is in network with all major health plan and that is a key competitive strength for us going forward.
We have also highlighted the strength of our platform to provide manufacturers with clinical support and channel access for new product introductions.
In the third quarter, we also announced the collaboration with China Pharma help commercialize recently approved therapy for the treatment of muscular dystrophy.
Neuromuscular therapy is an area of clinical focus for us and we are thrilled to be selected as a key partner in their limited distribution network based on our clinical expertise.
Our business development team continues to actively collaborate with biopharma manufacturers to identify opportunities to utilize our clinical expertise.
And care management platform in support of the commercialization goals.
As we sit here today in the front half of the fourth quarter I'm very encouraged and proud of the oxy care health team.
Both for their resilience and persistence in Russia relentlessly pursuing our shared mission, but also for the tremendous progress we've made in our first full year as a new enterprise.
We will have completed our merger related to integration activities.
Mr. Deepen our new payer collaborations launched multiple new therapies and dramatically improved the financial profile of the company.
With the strength of our execution.
Continued progress against our goals, we announced this morning that we are raising our 2020 full year EBITDA guidance.
Given the positive momentum I've never been more confident in the option care health team or a potential going forward.
In short the team has executed the strategy, we outlined a year ago exceptionally well.
GAAP you didn't responded to a very dynamic and challenging environment and never lost focus on the most important thing we provide.
Provide extraordinary care the changes lives.
With that I will turn the call over to Mike to review the financial results in a bit more detail Mike.
Thanks, John clearly, we continue to generate strong financial results and establish a solid foundation for the future.
The third quarter is also the last quarter in which I must remind all of you that the reported growth reflects legacy option care results up through the merger date August six 2019, and the combined results for the merged enterprise thereafter.
Going forward, our growth profile will be much more transparent.
I will try to provide comparable growth where possible based on our estimated combined prior year result, and the impact of harmonized accounting policies.
Revenue in the quarter of over $781 million represents comparable infusion revenue growth of approximately 13% driven by mid teens chronic therapy growth, which offset relatively flat acute revenue.
Reported revenue growth also benefited from a meaningful improvement in revenue deductions for bad debt, which declined more than a full percentage point year over year to the mid twos.
Our chronic portfolio continues to benefit from the transfer of patients from hospitals, H.O.P.D. and other sites of care to the home or one of our infusion suites.
Acute referrals and revenue did improve modestly over the second quarter in most markets as acute activity in hospitals did sequentially improve.
Clearly, we're pleased with the overall revenue results for the quarter.
Gross profit of $174 million, representing 22.3% of net revenue in the quarter.
Despite considerably faster growth in our chronic portfolio, which represented a little over two thirds of our revenue in Q3, our gross margin is holding tight as our operations team continued to drive efficiencies to mitigate the mix impact.
And spending of $123 million is down slightly from Q2 spending levels and represented 15.7% of revenue and note that it includes approximately four and a half million dollars of integration related expenses, which is detailed in the reconciliation of adjusted EBITDA in this mornings press release.
We expect sustained spending leverage to continue as integration related expenses decline and we leverage the established infrastructure.
Adjusted EBITDA of $59.2 million represented 7.6% of net revenue.
And it reaffirms our conviction in the ability to expand profit margins overtime.
Despite our chronic portfolio growing at a faster pace as expected we continued to demonstrate our ability to expand EBITDA margins and we would expect that trend to continue.
Our March regarding earnings has always been that it only counts if it shows up in the bank accounts rugs.
Regarding cash flow result, we continue to drive meaningful cash from operations and further enhance our capital structure.
Free cash flow, which we define as net change in cash balances was $22 million. Despite the return of $11.7 million in the quarter to HHS related to the cares Act grants.
Year to date, we have generated over $70 million in free cash flow and ended Q3 with $140 million in cash balances.
Additionally, as we disclosed we increased our revolver capacity in the quarter to $175 million with a 165 million available after letters of credit. So we exited Q3 with over $300 million in total available liquidity.
Regarding our leverage profile, we committed a year ago to a consistent deleveraging trend through both earnings growth and cash flow generation.
We emerged at the time of the merger with a net debt to EBITDA ratio of 6.2 times and we exited Q3 and 5.0 times based on the guidance I will review in a minute we expect to be below five times at the end of the year and while we're not in a position to provide 2021 guidance at this time, we would expect to improve.
Our leverage profile considerably next year, and ultimately expect to be below four times in short order.
Finally, given the strength of our results and momentum we are increasing our outlook for the year and expect to generate between 62 and $66 million in EBITDA in the fourth quarter.
Or between 216 and $220 million for the full year.
We also expect to continue generating strong cash and expect to finish the year with more than a $150 million in cash balances.
Or at least an additional 10 million in free cash flow in Q4 with.
With that we will open up the call for Q and a operator.
And our first question coming from the line of Brooks O'neil I'm Electric capital. Your line is now thing.
Good morning, John and my congratulations on a terrific first full year as option care health.
Thanks, Greg.
I have a couple of questions Oh, well I know investors and I are curious about your outlook for 2021, maybe we should start with the outlook for Q4.
I know my comment that a little bit about it but could you comment in particular.
Whether you think you could continue organic revenue growth in the double digit range and it looked like gross margin was essentially flat here in Threeq, you and I'm curious, what's your outlook for gross margin in Q4 might be as well.
Yeah. Good morning, Brooks, it's John and thanks for the call I'll start out and then I'm sure Michael wanting at some some color as well you know I think we're really excited about the progress that we made in Q3 just to remind you though last year was an interesting comparable we were going through.
In amount of teams with the reset of our commercial team in Q3 last year. If you remember and that was a big part of our integration effort, we wanted to get that behind us as quickly as possible and reset the team. So that we had better reach in frequency in the marketplace. So we looked at Q3 is.
Being a a softer comparable than most other quarters because of that disruption.
That being said look we're monitoring closely the situation as we can do you see flare ups across the country with COVID-19.
Spikes in local community.
We do believe that the health care system is much better equipped today to handle both co bid and non co bid related care.
Much better than we were in March when this all unfolded and so we're you know we're cautiously optimistic that we're going to continue to drive our.
Our team to be in a position to capture the referrals that are available to work closely with the providers to identify patients that can come onto service with us and to continue to focus around both the acute and chronic you know patients. They can come on service and I think we'll see that momentum can see.
The new but I do.
I want to say that there is a little bit of caution in both of our voices just with the uncertainty on the the recent layoffs and the increase in hospitalizations that we're seeing Mike.
Right, Okay that makes sense.
Yeah, but you only thing I'd add is clearly with the with the guidance. We're providing for Q4, we're we're signaling in expecting that we'll see a constructive Q4 compared to the momentum exiting the third quarter.
And again as it relates to gross margin we've been very open that you know given the two verticals that that we operate in with our acute and chronic therapies with chronic which we expect to can consistently grow at a faster pace that will have some some downward a margin rate pressure, but again hats off to the operations.
Team, who is driving cost efficiencies and the other thing I mentioned in my prepared remarks that helps our gross margin is we've seen over a full point of reduction in our bad debt reductions from gross revenue and that's really a result of our patient registration and our revenue cycle teams, you know really driving superior collection.
Performance. So that's helped us up to this point, we are not in a position obviously to provide specific.
Gross margin guidance, but rest assured we're fighting for every basis point.
Great and then I'll just ask one more obviously you guys are doing a terrific job would de leveraging and strengthening the balance sheet.
I think I recall.
Hedge and the second lien notes comes off during.
November can you just give us any feel for what you're thinking about in terms of interest expense maybe for Q4 are thinking out into 2021.
Yeah Brooks the the swap as we disclosed in our in our filings we had two swaps on the first thing the second lien and second lien swap does expire actually later this week our initial guidance for the year was we would be at around $105 million to $110 million of run rate interest expense.
When you look at the meaningful pay down in the second lien in a in early August as well as the expiration of that swap we will exit this year with a cash interest rate of around $90 million. So we've taken you know $15 million to $20 million of cash interest out through those two actually.
And and we'll obviously provide more granular thoughts on our next call regarding 2021.
Great. Thank you very much and again, congratulations take care bye bye.
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Our next question coming from the line of Bad luck with William Blair. Your line is open.
Hi, Good morning, obviously, a strong quarter guys. Congrats you reference kind of the category, perhaps taking share in the home in terms of patient shifting out of the hospital and and then maybe capacity, but it also sounds like option care itself is gaining share. So could you maybe help us understand Mr from you.
Your ankle.
Why are you gaining share, particularly right now is it you bet John you referenced the sales force kind of hitting on all cylinders you reference the tech platform integrating bobs you've referenced some new payer contracts. Obviously the scale is an advantage, but maybe just help us parse out what is the broader home infusion category gaining share versus option care itself.
Yeah, Matt Good morning. Thanks for the question look I think what you just mentioned that you are are the keys first and foremost we knew it was going to take it was going to be disruptive and take a bit of time to get the sales force a.
Realigned and and pushing in the right right places and.
No hats off to the team we we've done a lot of training we've refocused the the call points, we've done a lot around the reach in frequency to make certain that we are in the right places working with the right for bikers in order to capture that share and so a lot of it has to do with the.
The Q should Oh Gee, the second thing, we mentioned and I mentioned in my comments is look the technology platform really allows our selling resources and our operations team, especially those in patient registration to work much better together, we continued to see <unk>.
Prudence in the amount of conversions referrals to start right a referral is important but it doesn't really generate revenue until we create a start on it and so the team to continue to focus on that we continue to refine and an upgrade.
Technology with new releases, and we continue to get better with that and you know that that also is something that we feel really good about the last thing you mentioned it.
You know, we continue to cultivate and develop deep relationships with the payer community and we believe that those collaboration are important to serve their members and to make certain that we are well positioned to be a national provider that can cover 96% of the U.S. population and have access to the most plant.
From a health plan standpoint, and so across all of those dimensions, we continue to execute our strategy and we believe that continued to put us in a really strong position in order to capture that one last thing I'll mention is you know we have invested a lot in the technology platform to allow us to do things in a virtual environment.
We are trying to be you know coxless wherever we can using digital documentation and other tools that we have at our disposal to be able to help to.
Capture those those pieces that are transitioning out of the hospital without necessarily having to show up at the hospital and so on.
The work of the team and the use of that platform to do virtual teaches virtual visits E discharges all of that is paying.
Benefits to us as an organization.
Okay Fair enough and then I think the kind of longer term growth algorithm you talked about was.
Growing at least in line with market growth of 5% to 7% in two to three x. off in terms of earnings growth I appreciate that the comp in the third quarter was looking here, but obviously the clock portfolio now I think that's two thirds of the book versus 60% for is there reason to think that kind of that launch and growth.
Algorithm you outlined perhaps you could be more attractive in a post called world.
Yeah, Matt it's Mike So obviously as we emerge we tried to lay out what we thought were very realistic growth profiles and again you know as we generally characterize this this.
This this industry, which is really a portfolio of virtually dozens of different infused therapies.
Ben one of the benefits of a of our model is the balance we have an extremely balanced revenue base across a variety of therapies, some which you know in our Q Ah portfolio are admittedly growing in the low single digits and.
Balanced with you know a a a rapidly growing portfolio of of chronic therapies and so you know the way weve generally characterize the the revenue potential I think remains intact. We've.
We've characterized that broad portfolio is a 5% to 7% baseline.
Proposition and as as John alluded I think our confidence you're sitting a year later with a very well performing and cohesive commercial go to market strategy. I think is is giving us more confidence that that will be growing at a faster pace and again, it's it's not just the existing crop.
Okay therapies, but as John also mentioned you know, we're introducing a couple of new therapies, a year and so that gives us confidence, especially with with that chronic portfolio. So a short when did I answer. Your question is yes, I think that that growth profile remains intact with probably a little more confidence.
Okay. Thank you.
Thanks, Matt.
Our next question coming from the line I'm good at Mcdonald's chose Securities. Your line is open.
Hey, good morning, guys.
Couple of quick questions first Mike can you talk a little bit about working capital I mean, if you look at the cash flows there's obviously been very strong.
You know what in terms of working capitals, maybe got a little bit better where there are continued opportunities and then if we look at the growth of the chronic business relative to acute.
Just looking at the bad debt characteristics of that product portfolio is there an opportunity to kind of further drives that bad debt number down.
Yeah, we've been we've been very active in managing our working capital obviously looking at what we refer to as our cash cap you know our days inventory in our D.S., so offset by our days payable overall, we feel we're in a very strong position it really starts with the Collectability wed.
As I mentioned has driven down our provision for bad debts.
You know where we've we've we've improved the not only the balance or they are if you look at our disclosures. We've we've taken tens of millions of dollars out of our our eight our balances over a over a horizon, where the top line has grown meaningfully and that's really a testament to our patient registration and our and our billing teams who are converting that.
That revenue to cash significantly faster.
That has afforded us to manage and reduce our overall working capital balance is you'll also see with with inventory. They also affords us the ability to make some strategic investments in in P. P E and med supplies in what we think could be some challenge to apply markets going forward.
And so we've been making some strategic elections on our working capital and investments, where we think it's prudent. So overall I think working capital you know you asked the teams out in the field, they're just getting started and they think there's continued efficiency and we would agree with that so overall I think working capital will be you know relatively neutral and.
Probably grow modestly as a fraction of revenues going forward.
You know with the bad debt.
You're absolutely right as we think about the different therapies one of the benefits on the chronic therapies. As these are a higher cost a regimen.
Virtually all of our chronic starts are our prior auth or prior authorized by the the payers and so we typically see a lower bad debt profile for our chronic therapies simply because our patient registration teams are so diligent around following up with.
With payers, who obviously want to have some some.
Some involvement in the treatment regiments for those therapies. So overall with the mix moving forward you know, we would think that there's still some room to to improve on our on our bad debt provisions as well.
And then just.
A quick question on on payers and payer contracting John you mentioned in the prepared remarks, you know deeper collaboration Payors.
And I'm sure you don't want to get specifically into kind of centene or signal, but broadly when we think about these conversations.
You know, we're hearing every payer talking more and more about value based care is there you know when you. When you think about contracting is there an opportunity overtime to move towards more of a construct where you guys are able to drive better outcomes. There is an opportunity to potentially participate or you know are you seeing pay.
As increasingly narrow networks or just any broad commentary in terms of the payer conversations that you're having.
Yeah, Dave look the the the.
Conversations we've been having with payers continues to evolve and to change how you that they are much more productive and in alignment with what you're hearing in the marketplace and that it.
Typically an amount of interest and understanding some of the construct of what a value based care reimbursement model could look like opportunities for us to work.
Work closely with them around managing cohorts of their members.
That.
Required the therapy.
And you know I think as we've disclosed before I mean, you have most of those start out and.
The area of performance guarantee and putting.
At risk dollars or both.
Forward as well as to debt.
On that and we think thats going to continue to evolve we're really excited about the relationship that we announced with Cigna and team. We think that there are solid foundation for us to that build on and I think that this is going to continue to evolve moving forward and I wouldn't be surprised that the evolution would move down the path.
Some risk share for performance and for making certain that we're managing effectively the outcomes for the patients that we are privileged to serve.
Okay.
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And then it sounds like in the chronic therapy is you know you guys called out the ongoing migration to home and alternative site.
And just given some of the reticence, we think we're going to see in terms of you know kind of ongoing cold flares and reengaging with institutional settings. How do you guys think about your ambulatory infusion suites footprint. You know is there some areas where you may put some additional dots on the map.
You know just how you think about that you know in terms of further complementing portfolio.
Yeah, Dave.
As we discussed you know and and I think this goes before we today operate over 130.
Using centers across the country on that we believe that this will be a big part of a growth strategy as we move forward, we continue to focus around utilization.
The existing infrastructure and we're identifying opportunities to make some smart investments where local markets needed demand it and we have the patient volume to to justify it. So I think you'll continue to see a move in that direction. We're thoughtful about it as you would expect.
Looking at how we want to deploy.
The capital, but we're pleased with.
The progress that were making were we believe there is still opportunity for further utilization of the existing infrastructure and we're going to continue down that path to.
To make certain that we have the right to facilities in the right place to capture that demand in the marketplace.
Okay and then just last question for me guys.
Well when the pandemic started you mentioned, a you know a pretty meaningful uptick in terms of new referral sources. When we look at the growth. This morning can you give us a little bit of perspective in terms of.
You continuing to see outsized new referral growth.
Or is you know the vast majority of this being driven by you know just kind of increased death with.
Within your existing referral base.
Yeah, I think it's it's quite balanced Dave and again as John mentioned like what we were thrilled with the revenue performance and the fact that on a comparable basis. We're in the double digits again admittedly with a with an easier comp we did see a sequential improvement.
In both the acute and chronic therapy is relative to the second quarter and I think on the chronic side. You know, it's really balanced there are still a number of of referral sources that are looking to to shift the modality of care, but its also you know their system pent up demand with people going to the specialist for for those chronic.
Additions and so we're seeing you know it's not that the third quarter still you know this wall of site of care shifts, it's really balanced where admittedly still seeing some of those migrations, but we're seeing uptick.
Uptick in some of our you know our newer therapies for minus the near Gravitas and mass as well as you know some of the chronic inflammatory so really good balance in where those starts are coming from.
Okay. Thanks, very much guys. Thanks.
Thanks, Dave Thanks, Dave.
Our next question coming from the line of Kevin Fischbeck from Bank of America. Your line is now open.
Hey, this is Adam run on for Kevin.
A couple of quick questions. So your de leveraging comments kind of imply that you're gonna grow next year, but as you think about 2021.
Should we think about the growth off the base of the new 2020 guidance that you just gave or is there any kind of like one time adjustments that you would adjust out as you think of the jumping off point for 2020.
Hey, Adam its Mike I think the the jump off point for the guidance that we provided is a solid baseline again, our adjusted EBITDA normalizes for some of the integration costs.
As detailed in the in the reconciliation so I think while we're not in a position to provide you know.
I think the the reported adjusted EBITDA for this year is a is a solid base.
Okay. Thanks, and then going back to kind of the contracts with Centene Cigna is there anything.
Additive from these new contracts and new geographies, new services covered or are these kind of more renewal.
Yes. So it's gone you know I would say that it's a it's a renewal for centene. It continues to be a strong partnership.
Partnership that we have there.
The signal is a little bit you in the sense that it is a direct contract with Cigna historically, they utilized here centric as being bear intermediary ER and so you know we're early stages of a you know the relationship with directly with Cigna.
And our hope is that it will continue to develop.
Good luck and deepen as we start to work closely together in a direct basis.
Okay. That's helpful. Thanks, and then maybe one more just kind of curious have you administered rim disappeared any koby patients so far.
And I've seen some reports like Lilly and other manufacturers are working on kind of Colgate infusion treatments and I'm wondering if that was the route that.
We ultimately down is that an opportunity that you would be focused on are more focused on kind of core borrowings.
Yes. So at this point in time, the emergency use for that product is in hospital only and so there is no application or ability for it to be done in the home or in outside of the hospital. So first and foremost it will be done within the four walls of the hot.
Spittle in an inpatient setting you know I think as we're looking forward look we we as an organization continue to work closely with pharma manufacturers wherever we can if we can help provide solutions into the health care system.
By all means we'll look for those opportunities, but at this point in time, there really is no drug or infusion therapy that can be done safely and effectively.
In the home or in one of the two assets.
That that would have any benefit for corona vibrance victims. So our focus is around the core of what we do our focus is around making certain that we are working closely with those hospitals to help with the patient discharge to free up the bad to make certain that they are well equipped to handle any surges for cobi pace.
And to be working with the physician practices to really identify those patients that are on that require chronic therapy and move them on to serve it safely and effectively into home or one of our infusion suites.
Thanks appreciate it.
Thanks, Chad.
Our next question coming from the line of Richard close with Canaccord Genuity. Your line is shopping.
Great. Thanks, Congratulations on a first year, just maybe a follow up to Dave's question.
Just on the strong 13% gross there and strong referrals any thoughts in terms of you know I'm, a gut feeling and whether.
Whether this is like the pent up demand you know from the last couple quarters with co bid.
Versus you know the reengineering of the sales force.
Obviously, the comp was easier because you just started that last year, but any.
Any thoughts in and around that would be helpful.
Sure Richard Bugging me to state the obvious it's been an extraordinary period and when you're looking at all of the variables.
That occurred in the third quarter as well as the the the baseline.
Look there is no science to this if if you ask me I I'd, probably say that are you know our true comparable normalizing for some of the flight. It's probably you know in the high single digits, if you normalize for the comp and.
And some of the transition benefits that we've seen.
Okay. That's helpful. And then you know thinking about your comments you said the results were buried market by market.
Can you provide any more details there like you know may be you know not specific markets, but or any markets down any markets outperforming get on maybe the range that you're thinking about there are saying.
Yes, it's John.
I'll start and then Mike certainly can add color look I think you can follow the trends that you're seeing in where you're seeing the resurgence of corona virus in those local markets. So certainly you know we saw in the third quarter and especially towards the back half.
Continued pressures in the Midwest and some of the southern states in which we started to see some retraction.
Hospitals.
Delaying some procedures as well as piece, it's not going to their physician office visits and so that's where we are.
Our National Network is you know we have that a diverse portfolio, we're seeing kind of a different impact market by market on that but we do follow closely what's happening within the markets and and there is probably a very strong correlation between where you are seeing spikes and corona virus.
Cases in positive and hospitalization and some of the drag that puts on the referral patterns.
Patterns that we see especially from the acute care setting.
Yeah, the only thing I'd add Richard is it it's Mike as we alluded to this on the second quarter calls well look I out of this I I don't have that this episode I think one of the silver linings from our perspective is that on the heels of our technology. We've reached in cast into a lot of newer markets.
Cast a broader shadow into some of the regional areas that we have not had.
Had had boots on the street historically, and so you know the the Peoria, Illinois or they'll across Wisconsin's, where you know through our technology, we can help to seamlessly transition patients and we fortified new referral relationships, even though we might not have commercial resources in that Zip code and so.
On the heels of that while others have a variety of of experiences we've seen across different geographies and metropolitan areas. I think we are encouraged that our referral base has meaningfully expanded during this period and we'd hope to sustain that.
Okay. That's very helpful. And then obviously I spend a lot of time on the virtual tech side of things and I was just wondering if you can dive deeper into you know the technology, you're you're utilizing whether it's or on the E visits and training and you know just.
Thoughts in terms of how much legs. This has going forward in terms of maybe improving revenue or revenue growth or margin improvement for you guys going forward.
Yeah, Richard look the same.
Platform itself is a tool that we have been working to design you know the the interesting aspects I think we've disclosed before as you know a lot of the building blocks that we did.
We utilize our best in class solution. So.
<unk> form itself allows our nurses to do virtual visits to a use.
Seems like video conferencing as well as support tools in order to really enhance that patient experience and support through the the process. It also allowed for digital documentation to quickly and effectively capture the information that's required and then seamlessly provide that throughout the organization. So we can.
Track a patient from the moment that we received the referral all the way through ultimate discharge and have visibility across that entire chain. So we do believe this is going to continue to be an opportunity for us to drive efficiency as an organization. We believe it's an opportunity for us to have a up.
He ability as Mike just said to reach into areas that might be a little bit more remote and utilize the technology in support of those patients in those rural markets and we believe that it's an opportunity for us to continue to look and enhance that overall, a wrapper that we put around the patient to provide them with.
With the comprehensive care. So we're excited about the platform. We're excited about the potential that it has were just really scratching the surface at this point in time.
And you know expectations are that we'll continue to you know to capitalize it capitalize on it as we move forward.
Excellent congratulations again.
Thanks Richard.
Next question coming from the line of like I guess, you would Bang Bang and we said your line is now open.
Good morning, guys. Just a few questions I guess I appreciate the detail on the on the a slight change in the signal relationship.
John can you just speak to I mean was that a.
Relationship in which you guys feel like you were underpenetrated relative to your market share in.
General.
You know I don't know that I would describe it that way look we worked closely with with care centric, but I didn't have that direct relationship with cigna. So our expectations are that you know we we bought vigorously for every one of the Cigna members, we took them on the service.
Even though it was being managed through that third party.
Encouraged about what the future can hold in a direct relationship and potentially looking to expand from that but I wouldn't I wouldn't want to represent that but you know we were under indexed.
On that.
On a historical basis okay.
Okay and my only thing I'd add is I think look if you look at a number of the investments they've made and a lot of the comments that segment specifically has made around their focus on post acute it's quite an innovative team and I think they're looking for you know collaborative partners in the post acute space and I think that's that's the that's what gets us excited from a relation.
Chip development perspective.
Great I guess you know in some other conference calls health care service executives have sort of.
Some have said Hey, you know we we we've had a chance during covert to look at our business in some ways that we probably never would have in the past are there any one or two sort of learnings that have have come directly as a result of the sort of the backdrop of covance. One of the challenges you faced and just looking at the business that maybe in a different way.
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Yeah look.
I think that if you if you go back and you said you know at least for your office based workforce big you'd be working remote and be able to continue to operate at the level. We had been execute at the level that we did I I don't think that that was on anyone's side, drawing board and.
So I think there are things that we're going to continue to take a look at around the use of remote work where appropriate we're going to continue to take a look at you know the need to travel and whether that is.
We need to do it at the extent that we do we do we have invested and make certain that we can train and onboard people in a virtual environment and I think thats going to prove to be beneficial.
As we continue to move forward so I.
I think the fundamentals of the business itself look, we we need pharmacists and pharmacy tax and our warehouse teams to show up into our care management centers, we need nurses to be able to knock on the doors and go into the homes to do home infusion. So you know a lot of the core.
What we do remain but on the edges and on all of the support thing that wrap around it we continue to challenge ourselves to think differently and to capitalize on that technology stack that we invested a ton.
Make certain that we're as efficient and as effective as possible.
Okay, Great and just last one in terms of Ah I I've heard there was an election today and just in terms of Ah [laughter] that issue or are there any.
Any any politicians that had been champions of for the home infusion industry or parties that are more generally sympathetic and you know I guess understanding of the value you guys provide any just any thoughts around the.
The election and.
You know what that can mean for home infusion. Thanks.
Yeah look I think that we're pretty neutral regardless of the outcome of the election today, we do believe that a couple of things just are a self evident number one is we're on the right side of the.
Cost quality equation were providing a service in a site in which makes people want to receive the care and we can do it in a very efficient safe and cost effective manner and so.
I think that all bodes well I tell you that we've had.
You know bye.
Bipartisan support when we've tried to move this more we believe that we've had the legislative intent to expand you know the offering of home infusion you know broadly on that and CMS is the one that at this point in time continues to interpret a in a different way.
And we're cautiously optimistic that look we're on the right side of this argument. We know that seniors are are the most vulnerable to be a severe impact the krona virus and we believe that we have a real solution. That's.
Thats available to CMS and to really.
All of the government programs and we're going to continue to beat that drum and and Chuck that message from them on top.
Great and hey, congratulations on the first year post bioscrip great job. Thanks, great.
Great. Thanks.
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Great well thank you.
I Hope you hear from our update and remarks, we're very pleased with the progress we have made in the third quarter and it was our first year adoption care. How the team has delivered on the commitments that we made and we're just getting started.
We know that we are on the right side of the transformation happening in health care and with our more than 5000 acute care team members focused on providing extraordinary care the changes lives.
We expect to see continued momentum in the fourth quarter. Please.
Please take parents facing thank you for attending our call.
Ladies and gentlemen that that's where our conference for today. Thank you for your participation you may now disconnect.
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