Q3 2021 Multiplan Corp Earnings Call
Yeah.
Good day, and thank you for standing by welcome to the multi play Incorporation's third quarter 2021 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded.
If you require any further assistance. Please press star zero I would now like to hand, the conference Oh, British Shawn I guess at a V. P of Investor Relations. Thank you. Please go ahead.
Thank you April good morning, and welcome to multi trends third quarter 2021 earnings call. Joining me today is Mark payback, Chairman and Chief Executive Officer, Dale White, President and Chief operating Officer, and David Redmond, Chief Financial Officer.
This call is being webcast and can be accessed through the investor Relations section of our website at www dot multi pin dot com.
During our call we will refer to the supplemental slide deck that is available on the Investor relations portion of our website along with the third quarter 2021 earnings press release issued earlier this morning.
We will refer to the supplemental slide deck during our discussion. This morning before we begin I'd like to remind you that our remarks and responses to questions may include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 actual results may differ materially from those stated or implied by forward looking statements due to risks and uncertainties.
Associated with our business, which are discussed in the risk factors included in our annual report on Form 10-K for the fiscal year ended December 31, 2020, and our quarterly report on Form 10-Q for the fiscal quarter ended June 32021, and other documents filed or to be filed with the SEC.
Any such forward looking statements represent managements expectations beliefs, and forecasts based on assumptions and information available as of the date of this call. While we may elect to update such forward looking statements at some point in the future. Please note that we assume no obligation to do so.
Certain financial measures, we will discuss on this call are non-GAAP financial measures. We believe that providing these measures help investors gain a more helpful and complete understanding of our financial results and is consistent with how management views our financial results.
A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure to the extent available without unreasonable effort is available in the earnings press release and in the slides included in the Investor Relations portion of our company's website I would now like to turn the call over to our Chief Executive Officer, Mark Payback Mark.
Thank you Shannon good morning, everyone. Let me join in welcoming you to our third quarter 'twenty, one earnings call I'd like to thank our stockholders for their continued support.
Third quarter was an important and busy one for multi plan during the quarter, we refinanced $2 $3 billion of debt extending the maturity of our debt five to seven years, we announced a $250 million share repurchase program to take advantage of the dislocated price of our shares and executed repurchase of over 19 million shares.
At a total cost of $107 million through October of this year.
And above all for the fifth consecutive quarter as a public company, we reported strong operating and financial results.
I also would like to take a moment to convey my deep appreciation and admiration to our multi play and colleagues, whose passion and commitment continued to drive the growth of our business in Q3 of 'twenty. One results continued to attest to the recurring nature of our revenue model and to our considerable cash generation in fact, we deliberate new quarterly records for both.
Revenues and adjusted EBITDA, We also exceeded the midpoint of our Q3 revenue guidance and achieved the top end of our Q3 EBITDA guidance by over $3 million.
As shown on page five of our supplemental deck in the third quarter total revenues were $288 2 million, representing an increase of $28 9 million over the third quarter of 2020, and an increase of four 3% from Q2 of 'twenty, one and as shown on page six excluding the impact of the Covid pandemic.
And the contributions from our recent acquisitions organic growth in revenues was 10, 2% versus the prior third quarter and three 8% versus the second quarter of this year.
Adjusted EBITDA for the third quarter was $218 4 million an increase of 31, 9% from Q3 2020, an increase of six 3% from Q2 of 'twenty one.
Excluding the effects of Covid the contributions of our newly acquired businesses and the incremental public company cost organic growth and adjusted EBITDA was 15, 5% versus the prior third quarter and five 2% versus the second quarter of this year.
Operational excellence and expense control continued to be among our highest priorities.
EBITDA margin was 75, 8% in Q3 up from 74, 1% in Q3 of 2020 and up from 74, 3% in Q2 of 'twenty. One our business continues to generate high levels of cash flow was $167 million in cash flow from operations in Q3.
Very close to the record we set in the first quarter and Unlevered.
Free cash flow from career with conversion of 73% for Q3 dollars 21, and 73% year to date.
Our confidence in our business remains incredibly strong we continue to enhance our services and provide exceptional customer service and customer retention remains excellent.
Continued to prepare ourselves and our customers for the implementation of the no surprise Act as Dale will discuss in a moment. During Q3, we continued to see normalization of the and the effects of the COVID-19 pandemic on our business taking into account our strong business momentum. We currently expect our Q4 revenues and EBITDA to be above that.
As of Q3 for the full year 'twenty, one we are increasing the midpoint of our guidance range for revenues and increasing the guidance for adjusted EBITDA as Dave will review with you shortly.
Summary of the third quarter marks yet another installment of solid performance in our first year as a public company and we remain confident we will continue our progress into Q4.
For beyond into 'twenty two.
I'd like to turn the call over to Darryl White, President and Chief operating Officer to review the business deal.
Thanks, Mark and good morning, everyone as Mark said, we had a terrific third quarter.
$288 2 million Q3, 2021 revenues came in just over the midpoint of our guidance and reflects growth of 28, 9% over Q3 2020.
This morning, I will take you through the highlights of that growth, but first I want to spend a few minutes addressing the topic that I know is top of mind for everyone and that is the no surprises Act.
We now have the benefit of two published interim final rules and more clarity around how the law's requirements will be operationalized with that detail in the hundreds of discussions we held with our customers individually and otherwise we can now speak with some certainty to the X expected impact.
On our business.
We continue to be in deep conversation with our customers.
The newness of the regulation client strategies for implementing the NSA are still firming up and there are still some moving pieces.
That said based on our customer conversations and our understanding of how client strategies are evolving we still do not expect the NSA to significantly change the volume of claims and charges. We received the scope of services. We offer in support of the surprise Bill claim processing, where the fee structure for service.
Those claims.
Let me provide for points of support for this statement.
First it's important to reiterate that the no surprises act targets a finite set of out of network claims emergency services and other out of network services incurred at an in network facility that a plan member Wouldnt typically select such as anesthesiology or radiology they represent us.
Slice only about 10% to 12% of our identified savings for all other claims the NSA you should have no impact.
Second on the whole our customers, including our largest customers will continue to send us surprise bill claims for processing.
While the second interim final rule released early last month instructs the independent dispute resolution entities to presume the Q P. A.
Or the plans the median in network contracted rate is the appropriate out of network reimbursement for <unk> will not function as a Richard payment standard.
This is because payers cannot force providers to charge, we're except for Q T. A S fair payment.
As such payers will continue to need processes for adjudicating surprise spill claims and we continue to expect to play a significant role in providing and administering those processes as we have been doing for these customers for four decades.
At the same time, but no surprises act introduces significant complexity into the reimbursement process for in scope claims.
It used to be a straightforward one or two step process for surprise Bill claims now involve five intricate steps.
These steps include identify whether the claim is a surprise bill.
Calculate the qualifying payment amount toward the Q P E and appended to the claim.
Price and edit the claim taking that into account.
<unk> to negotiate a settlement if the provider rejects the initial payment.
And manage the independent dispute resolution process from intake through decision if the negotiation with the provider is unsuccessful.
This complexity plays to multi plant strengths in fact, the Yenisei presents significant opportunities for multi plan.
These additional claims processing steps call for skills and capabilities that are not always readily available to a payer, but either but that are squarely in multi plans wheelhouse.
Data capture data manipulation and management data analysis claims pricing provider appeal management and case defense.
The payers need and are asking for our support.
To that end, we've been at hard at work building a modular end to end service that helps payers through the five key steps involved in managing NSA related claims to.
Today, we have about 80 active surprise implementation surprise bill implementations and over 100 customer opportunities progressing through the pipeline.
Our customers' needs run the Gambit from full end to end service involving all key steps to targeted assistance that they'll select capability gaps for example.
Our National Health plan will use multi plant to attach the Q P. A to surprise still claims using a Q P. A schedule. It created price the claims based on the Q P E and negotiate a settlement as needed.
Another national Health plan, we use a hierarchy of multi play on services to price surprise bills negotiate a settlement and manage arbitration as needed.
A number of regional health plans will use our new end to end service that takes out of network claims through all five required steps.
Several third party administrators, we use multi plan to identify a surprise bill status and calculate Q P. A when any of its numerous primary networks are unable to do so.
A number of blues plans will use multi plants post payment negotiation and arbitration services for the claims they price.
In short we've modeled developed and tested these services and we are already going to market and we have a healthy implementation pipeline to support each customer's unique needs.
Third given the services and significant value, we bring to processing NSA related claims we believe our savings based pay for performance fee structure remains intact and as such we expect to maintain fees that are with consistent with historical levels.
While there is some potential for certain payers to offer their provider. The Q P. As initial payment and then some of those instances, we will be less likely to help the payer price surprise bills.
We expect those instances to be at least partially offset by fees for new services like identifying surprise bills calculating the Q P. A a pending the Q P. A to the claim and for post payment services, including negotiation and arbitration management.
Yeah.
And the majority of instances, where multi plan will still price NSA related claims on behalf of payers, we believe the opportunity to identify savings remains significant.
Generally we expect the historical methodology used to calculate identified savings will remain unchanged.
That point, we recently compared our data eyesight results to the median in network contract rates for the professional claims of a basket of commercial payers using publicly available data.
The results vary significantly by both geography and procedure, but on balance we conclude the savings yield is likely to be similar to that which multi plan services delivered today.
And fourth.
The market is currently trying to assess the longer term implications of the NSA on provider payer contracting strategies and negotiations, particularly since the second rule proved favorable to payers.
As you know multi plant contracts with 1.2 million health care providers and has a team of over 100 people that interact daily with these providers we have been in discussions with many of these that fall under the scope of the NSA and we have no indication at this point that the no surprise it's accurate.
Spur these providers to rush into payer networks.
The calculus around network contracting is complex and multifaceted for both payers and providers and will remain so under the NSA.
And the NSA has potentially weaken some of their traditional motivations for network contracting.
This includes diminished financial incentives to contract assuming in network and out of network rates converge towards the Q P. A.
It is also likely.
Includes weaker incentives around administrative tradeoffs as providers are likely to be less concerned with came in collections from patients and the risk of bad debt and so we're likely to be more circumstance.
Accepting administrative obligations involved with network participation.
In addition to these considerations it remains to be seen what precedents will be established as payers and providers test the arbitration process over the next couple of years.
The second interim final rules emphasis on the Q P. A is payer friendly but the final chapter has yet to be written providers will appeal for higher charges on the basis of other factors specified by the NSA, which could yield provider friendly arbitration outcomes encourage out of network billing.
And for a store or an equilibrium in which the Q P. A is the expected price.
Undoubtedly providers will become very skillful and presenting requisite clinical evidence to support their billings.
To recap the no surprises act impacts a limited set of claims strengthens the value, we deliver and processing those claims.
Average is all the services, we have offered to the market for over 40 years and significantly expands operational complexity to our benefit.
We have played a significant role in helping each of our barge clients think through their implementations to comply with the NSA given.
Given the newness of the regulation there are still some moving pieces, but based on how based on our knowledge of how clients strategies are taking shape, we do not foresee a significant change in claim volume scope of services utilized core fee structure, we do expect increased opportunity.
Tighter alignment with our customers' operations and an overall deepening of our partnerships with our customers.
Now, let's talk about Q3.
Despite the significant attention our customers began to devote to NSA compliance and the persistence of COVID-19, we had a very strong quarter.
As I said earlier revenues in Q3 grew by nearly 30% over the same quarter last year.
They grew four 3% over Q2, beating our forecast for the quarter.
Moreover, we saw sequential revenue growth in Q3, and all customer segments, including all top customers.
We have a robust and growing pipeline in Q3, we added 99, new business opportunities with an estimated annual contract value of $57 million.
During the quarter 136 deals progress through the pipeline representing over $105 million in ACD.
We closed 27 deals accounting for an estimated $6 4 million in ACD.
The year to date backlog to 87 closed deals and $10 $1 million in ACD.
And we continue to close new business across all service categories. Here are just a few Q3 highlights if I may.
We signed a health plan, new to multi plan, which will use a combination of our primary and complementary networks.
Our Blue plan revised business rules to improve negotiation that success and expand its use of data eyesight, following our analysis and recommendation.
We were awarded and are in the final contracting stages to build a Medicare advantage network for a payer and a number of counties for the 'twenty 'twenty three plan here.
We closed two pre payment integrity services opportunities, one, including a national payer and another for our Blue plan.
Meanwhile, the integrations of our two recent acquisitions discovery health partners in HST continue to progress well and we are seeing excellent opportunities to extend in the marketplace with these assets.
For example, we expanded a regional health plans use of coordination of benefits.
We up sold to revenue integrity services to a national Medicare advantage payer, adding the service category to their mix of multi plant services.
We leveraged our extensive footprint in the third party administrator market cause signed 32, ppas as resellers of our value driven health plan services.
We sold 18, new employer groups, adding nearly 35000, new lives for value driven health plan services.
With that let me now turn it over to Dave who will talk about our financials Dave.
Dave.
Thanks, Dale and good morning, everyone as Mark mentioned Q3, 2021 was an excellent quarter for multi plan with new records for both revenues and adjusted EBITDA Q3 revenue of $2 $88 $2 million was the highest ever quarter in multi plant's history.
Creasing 28, 9% over Q3, 2020, and increasing four 3% sequentially over Q2 2021, we exceeded the midpoint of our Q3 2021 revenue guidance and revenues were $36 2 million or 14.4% Gray.
During Q1, 'twenty 'twenty, our last pre COVID-19 quarter organic growth primarily in our analytics based services was very strong excluding the revenue contributions from H S T and discovery and normalizing the decline and the impact of the COVID-19 pandemic during the quarter.
Revenues in Q3, 2021 were up approximately $26 million or nearly 10.2% over Q3 2020.
And about $10 million or three 8% sequentially, we estimate the COVID-19 related revenue impact in Q3, 2021 was approximately $8 million to $10 million about $1 million lower than the COVID-19 related revenue impact in Q2, 2021 and approximately 32 to 35 million.
Lower than the Covid related revenue impact in Q3 2020.
$8 million to $10 million in Q3, 2021 we estimate approximately five five to $6 $5 million of the impact was really related to our network based service line revenues with similar dynamics impacting our workers comp and auto business and our primary travel network as we saw in Q2 2021.
We estimate.
Less than a million dollar impact.
It was related to our analytics base service revenue, which basically.
Back to where it was pre Covid and finally, we estimate approximately $202 5 million of the impact is related to our payment and revenue integrity service line revenues, driven primarily by a little bit lower mix of volumes of surgical E E D and anesthesia claims.
The total estimated impact of $8 million to $10 million for Q3 2021, primarily reflects trends we are seeing in our claims receipts and does not include indirect costs have COVID-19 on business conditions, such as delayed implementations or have longer sales cycles due to limited in person interactions.
Third quarter adjusted EBITDA expenses were $69 8 million and included operating expenses of HST and discovery of approximately $9 1 million. The increase of 11 9 million over Q3, 2020 was predominantly $5 million of additional public company costs and the remainder in growth.
Initiatives net of some reductions in overhead including costs associated with H S. T and discovery acquisitions as we've mentioned before our annual rate of public company costs is approximately.
$20 million.
Yeah.
The combination of increased revenues and control expenses resulted in an adjusted EBITDA of $218 $4 million in Q3, 2021, our highest quarter in the history of multiplayer Q3, 'twenty 'twenty. One grew 31, 9% from Q3 2020 of $1 65.
$5 million and six 3% from Q2 'twenty one of two O $5 3 million and was up $22.5 million or 11, 6% from Q1 2020, our last pre COVID-19 quarter, our third quarter adjusted EBITDA exceeded by over three.
The high end of our guidance that we set in August and set a new quarterly record for the company, excluding the EBITDA contributions from HST and discovery and normalizing the impact of Covid pandemic during the quarter EBITDA for Q3, 2021 was up $31 million or 15 five per.
<unk> over Q3, 2020, and up about $8 million or five 2% sequentially. Our adjusted EBITDA margin was $75 8 million.
75, 8% in Q3, 2021 versus 74.1 in Q3, 'twenty and 74 three in Q2 2021, the increase from Q2 'twenty, one was primarily due to excellent organic revenue growth and.
Judicious control of our growth in expenses moving to our 2021 guidance as noted in our press release. This morning and on page 12 of the supplemental slide deck, we're increasing the midpoint of our guidance for full year 2021 revenues, increasing and increasing the guidance for fiscal year 2021 adjusted EBITDA.
This change reflects the combination of year to date results, including stronger than anticipated adjusted EBITDA for Q3, 2021, and Cook and continued organic growth in revenues driven by a strong pipeline of surface implementations with customers. We now expect full year revenues of approximately.
$1 billion $105 million to $1.120 billion. This includes revenues.
In 2021 of approximately $47 million to $50 million related to our acquisitions of discovery in HST.
Our revenue guidance assumes a full year 2021, COVID-19 impact of approximately $45 million to $50 million.
We have methodically work through a variety of assumptions, including the ongoing risk from the Delta variant to drive these estimates and we have incorporated these into the guidance range I mentioned a moment ago.
As we've said precept previously given the nature of multi plans business forecasting the Covid impact is always had best in estimation and involves assumptions move.
Moving to adjusted EBITDA as shown on page 12, we expect adjusted EBITDA for 2021 of approximately 800 to $30 million to $840 million. Our full year 2021, adjusted EBITDA guidance reflects an estimated impact from COVID-19 of approximately $36 million to $44 million.
The combination of our revenue and adjusted EBITDA guidance imply an adjusted EBITDA margin in the 74% to 75% range for the full year 2021. This range is a little bit lower than we have achieved historically, but as we've mentioned previously this reflects increased public company costs investments in the new business in the business this year.
And lower incur mark metal margins from discovery and HST for 2020. One we expect operating cash flow of approximately $410 million to $420 million and our adjusted Unlevered free cash flow conversion remained strong at 73% for the quarter and 73% year to date is out.
<unk> on page 13 of the supplemental slide deck and in the press release. This morning for Q4, we anticipate revenues of $285 million to $300 million and adjusted EBITDA of $215 million to $225 million. This includes the COVID-19 impact of $9 million to $11 million in Q4, which is just slightly higher than what we.
In Q3, driven by the surge in Delta variant cases in August and September and the potential for an associated change in claim mix, which we experienced with the six to eight week lag to summarize and reiterate we are very proud of the strong growth we have achieved.
And and.
And we have continued to show growth quarter over quarter, which as Mark said continues to demonstrate the overall strength of the multi plant business with that I will turn it back to Marc Marc.
Thanks, Dave Thanks Bill.
We're going to open up to your questions. I expect you are looking for answers to three critical questions I don't want to comment on those right now.
Regarding the identification of Daves successor, our CFO search is progressing nicely, we were going to were going about it in an orderly and systematic manner and we hope to be announcing a new CFO within the next few weeks so stay tuned.
Second the impact of the no surprise at all.
Market price of our stock appears to suggest that the new surprise Act is the death knell for multi plan.
I can say emphatically that is not the case.
All indications from everything we know from being in the trenches with their customers to work through the implementation of the requirements what they know.
No surprise that as very unlikely to have a significant impact one way or the other on our claim volume.
Net revenues.
They sound like a bold statement to some of you there.
Indeed, some moving parts.
Clients firm up their strategies, but if you listen carefully to dale's remarks, you should have a good idea of why we feel confident in making that statement.
And third guidance for 'twenty two.
As has been our practice for a long time as long as I can remember this is the time of year. When we were working through the bottom up client by client granular forecast and budget for next year as you can imagine it is a bit more complex. This year as we were dealing with the most sweeping piece of legislation in this company's history and we still have some uncertainty.
With respect to Covid and those dynamics on top of the typical puts and takes we must aggregate as we put together our final forecast for next year, what I can tell you is that our customers, including all of our largest customers.
To rely on us in 'twenty one.
Anticipate they will continue to do so in 'twenty two.
While it is still too early to convey any detailed projections at this time at this point in time, we were.
Excited about the growth opportunities deal discussed in his remarks, the impact of the growth.
The income statement next year and 'twenty two we will continue to show this strength.
I look forward to sharing our specific guidance with you after the first of the year.
Operator, let's open it up to questions now.
As a reminder to ask a question. Please press Star then the number one on your telephone keypad.
Our first question comes from Joshua Raskin with Nephron research.
Great. Thanks, two questions actually the first one is do you think any of these no surprise act opportunities that youre talking about in some of these big implementations and helps especially with the National plans do you think any of these are sort of temporary fixes for them do you think the national plans are going to create their own solutions over time, where or is this sort of the same same thing.
We've been saying for 20 years, which is they kind of need multi plan is that independent source within the conversations with the providers.
I believe the compelling value proposition, we've given these customers for over four decades will continue as we continue to rely on us to make them more efficient more effective and drive their success as well.
So your conversations that they're not saying, hey help us get through 2022.
As you you believe are our permanent solutions correct.
Okay and then the second one is do you think theres any.
<unk>.
Requirements are sort of short term issues et cetera.
You know for your payer customers to get aligned with the new legislation I'm. Just curious if you think theres going to be sort of a <unk>.
Temporary impact on claims.
Receipts and and you know savings opportunities et cetera is this kind of comes out relatively quickly.
In terms of how legislation that's been passed.
Historically.
Why don't you comment on their needs today, and what do you anticipate changes may be in and they're coming in coming months or years.
Yeah sure Josh.
Thanks for the question.
<unk>.
Sitting here today.
Remember third.
And with the with the with the regulation itself, but final regulation, just being issued last month and even additional rules yet to come.
Everyone is scrambling to make sure that they are in compliance.
With the law come come December one.
And as I said in my comments, we are we have been in discussions with our payer customers and <unk>.
Continue to be to help them ensure their compliance.
With the law come December 1st and we're not anticipating any any significant disruption early on certainly it's a learning process for both payers large and small.
As they enter into a new.
New environment with new rules and regulations and.
So I expect as we always do with our payers, we're going to collaborate with them, we're going to work with them and we're going to help ensure their compliance and all of US will learn as we move forward throughout the year.
Great Great and then if I could sneak in one more just on the Medicare advantage side I heard the anecdote.
Plan.
Building up their enact their primary and secondary network and a new geographies could you sort of talk to traction or anything youre seeing in there you know we continue to hear the larger national carriers are still expanding their counties, there's new entrants.
Sort of how do we think about that opportunity.
Yeah.
You are spot on in your comments right.
Payers, both large and and and the new the new the new entrants are looking to expand their network footprint.
And multi plans ideally positioned.
To assist in that regard right I mean, we're always in the early innings on this end, but we stand ready and are willing and and and are working with our clients to support their expansion strategies.
And like I said, we were awarded an opportunity to build the Medicare advantage for a payer and a number of counties that spread the 'twenty three plan year. So as you know we're doing all the work this year and early into next so the plan is ready when it has to file in in early 2023, but there's a lot of priority a lot of corporate emphasis on expansion of.
There are footprint beyond where they are today and we stand ready to.
Two ways one we have over 100 people in our network development team that are experts in provider contracting in two.
We have a $1 2 million.
Member provider network that has a footprint in all 50 states that enables us to leverage that asset.
As we as we work with our clients to expand their footprint.
Josh.
<unk> provides a very compelling value.
So those Medicare advantage plans, we bring improved access by virtue of our current $1 2 million with $1 2 million provider network with our ability to build additional networks and as a result of our payment and premium integrity program. We can deal with the quality issues and as you can address the needs of access and quality you are well positioned to grow.
Growth in that business.
Alright perfect. Thanks.
Your next question is from Daniel Carlson gross light with Citi.
Hi, guys. Thanks for taking the question and congrats on another quarter of a plant Mark do you anticipated all of my questions.
I hate to belabor the point on the NSA I just wanted to confirm what I heard but do you think that there is not you don't expect an impact from the NSA on both claims volume and revenue in 2020.
That's correct.
Sorry, we don't believe that's there.
All articulated in his comments, we don't believe that there'll be a meaningful impact on claim volume or charge volume flow flowing to multi plan and we believe that our customers will rely on multi plan for a whole set of an array of services.
Phil articulated in a very complex compliance program.
Resulting from the no surprises.
Got it okay. So claims volume what about revenue for 2022 will there be any impact on revenue for 2022.
Dave do you want to.
We completed our modeling on that.
I think as it relates to the no surprises act, we do not think that the revenue impact has resulted in no surprises that we will have a material impact one way or another.
We.
I always kind of said that it was relatively neutral I mean like like always you may have a little bit up a little bit of down, but not a not a monstrous impact or either positively or negatively on our revenue in 2022, but obviously as Mark said, we're in the process of going through our budgets, we have not finalized that and we're not.
At this point, providing guidance, but we see no basis based on what we know today that will have a <unk>.
Significant impact as a result have been no surprises.
Got you that's helpful and one thing I'm trying to square in my mind is that stat on 10% to 12% of savings will be subject to the NSA.
<unk>.
Fact that the <unk> does well not as rigid as a benchmarking does kind of look like a de facto benchmark. So.
As you kind of look at the space what percent of the claims that are subject to the NSA that flow through multi plan what percent of those claims do you think we will just take the Q P. A.
And what is the revenue model for our multi plan when there is no real negotiation or deviation from the tpa.
Well the revenue model of multi plan.
We will not change we have not seen any indication for many of our customers that our model is going to change regardless of how the <unk> calculated.
So we believe as Dale said in his comments that the model is the same as we said we expect to see roughly the same claim volumes that we have today, where the far and away the primary receiver.
Out of network claims for certainly the big four players.
We do not see a.
A significant change in how savings is calculated.
And how are revenue based on those savings calculation is derived and we did not see.
The exodus of.
Providers moving in network as a result, as a no savings no surprises there.
Gail you can certainly comment.
Yeah, let me bedrock.
Operating officer, and the Chief Financial Officer, probably comment on that but.
No.
Okay.
Yeah, I would just add I would just add book as you know.
I looked at the process itself introduces significant complexity right into the reimbursement process for these in scope claims in and what you said to your point Canyon, where it used to be a very straightforward process, even if they use Q P. A.
There are lots of its just theres now five intricate steps right. It's not only just apply the Q P. A.
<unk> a surprise bill it's calculate the Q P. It's attach it to the clean it's make that initial payment offered to the provider, it's pay reprice and pay that claim it's negotiated a settlement with the provider to provider rejects the payment and understand them and how do you go about managing the arbitration.
Process to achieve.
To achieve success that complexity.
To our strengths and and that's what all of these additional steps calls for skills and capabilities that that aren't always readily available to a payer and but we believe are clearly the things that we do extraordinarily well.
Let me get let me, let me give let me give you a concise reply to a very complex complex question. If I can for you and others on the call.
Look we're exiting 2021 very very strong as you can see from the first three quarters of the performance and the.
And the guidance that we did.
Just issued.
We continue to see strength in 'twenty two.
Reason state Dale articulated in his presentation.
Okay.
Thirdly, we do not see the no surprise act as a regulatory headwind for us as we move into 'twenty, two and we think it will not have a material impact on our claim volume.
On our charge volume or went out on our revenue revenue revenue model.
So we're very very optimistic about the future and we think that continued strength. We've shown in 'twenty. One will continue in 'twenty two and beyond.
Yes, all very helpful color and then switching to the Covid impact for for this quarter and next.
$8 million to $10 million of negative impact this quarter. Some of the volume oriented companies have announced that have announced earnings have actually called out COVID-19 as a as a tailwind and I suspect that it's still a headwind for you guys. Because there is a lag between kind of when you are.
Get a claim and when you're actually generating revenue from it.
So I was just curious if you can just put a finer point on why Covid continues to be a drag for this quarter and next and should we see the because of that lag should we see the bolus of the delta impact really affect for Keith.
Oh.
As we said in our comments, we think the Covid impact in Q4 is roughly what it was in Q3, maybe slightly higher I think we've estimated about $1 million.
I think we said eight to 10 of revenue in Q3 nine to 11 in Q4, partly because Daniel we have.
You know six to eight weeks lie I guess, when we get claim so claims that.
Data services. The first of September will come to us in October and early November and so.
In most parts of the country. The Delta variant kind of peaked in the late August early September timeframe, and we want to be cautious in looking at that but as we said in Q3, our COVID-19 impact was predominantly in our network services business the.
The impact in our analytics business is as you.
Almost back to zero I think we've basically said $1 million and our payment integrity business. It's a couple of million dollars.
I would hope that with some of the tailwind that you are hearing from.
Various providers.
That those numbers pretty much get back to zero.
Don't produce really headwinds or tailwind.
But a relatively neutral going forward I think the biggest factor is the five 5% to $6 $5 million that we talked about COVID-19 in the network space.
And thats primarily related to three things.
As related to the impact that Covid has had on workers comp and auto.
As we use our network for workers comp and auto that continues to be down and we.
We have regional health plans and Tpa is that lease our network for what we call at travel network. So they they have a network potentially in their primary service area, but not across the country. So they lease our network and we continue to see.
Revenues more where the pre COVID-19 levels were without losing any customers, but just based on volumes as a result of travel workers' comp and auto and high I believe.
Obviously, it's subject to interpretation by a lot of people, but I believe we will probably see a little bit of that continue into.
20.
'twenty two.
I would hope that any real impact of Covid in 2022 is really limited to that small aspect of our network services revenue.
Another another concise reply, the residual effect effects of Covid.
As you move into Q4, and possibly Q1 of next year will be.
The claim mix in terms of the volume of testing or vaccines and then the site of care and both of those continue to normalize as we move through 'twenty, one and into 'twenty two.
Very helpful color, Thanks, again, guys and congrats on the quarter.
Yes.
Your next question is from Steven Valiquette with Barclays.
Great. Thanks, good morning, everybody.
So just a follow up obviously on NSA and to the extent that the second interim rule is fairly widely perceived to be favorable to payers and not so favorable to providers, which you guys mentioned as well.
When we do think about the American Hospital Association and other provider backed organizations that have been pretty vocal in their opposition to this what are your current thoughts on the probability that the provider backed lobby efforts can still lead to some.
Material amendments to the second interim rule or is it just more prudent to assume that the finals.
Finalize that we should all just start making our assumptions for 'twenty two based on that.
Yes.
Okay.
It would be.
You are right. There are certainly there have been active.
And.
Lobbying by the by.
And others in the industry to counter an object to the latest round of interim and final regulations.
<unk> been thousands of comments into the federal government.
On the on the NSA Act in the interim final regulations.
We're proceeding and I can tell you from our conversations with our customers.
We're proceeding going into 2022 as if this rule in the interim final rule is what we will operate under.
In the near term I can't speak to if it changes.
It would be speculation, but but I can tell you our payer customers and our clients and multi plan are proceeding as if the.
The rules the two interim final regulations.
Then we understand too that there is still some some comments to be made and there are still some rule, but with some open items that need to be defined by the federal government, but we are going into 'twenty two.
Clearly operating as if what's in place today will be in place for next year.
As evidenced by yesterday's election results, we can't predict the future.
From politics or from a regulatory perspective, but what we can do we can understand the rules of the road as they exist today put our head down.
These capabilities to assure that when our customers come to us and want our assistance and complying we're prepared to do that.
And that's exactly what we're doing for our customers and that's exactly what we're doing for our $1 2 million provider network, because we have the same requirements for aric proprietary network as well.
Okay, Let me real quick follow up is.
Are you aware of any entity that is pushing for a preliminary injunction to halt the implementation of the rule. If it is finalized or is that kind of unprecedented for any sort of a core related interjection into with CMS rule implementation.
There's been there's been a lot of chatter, but we haven't seen any definitive action at this point, but theres been lots of conversations.
You would predict.
Got it okay, alright, great. Thank you.
Your next question is from David common with Jpmorgan.
Very good. Thank you for the opportunity two questions. One is I'm wondering if you could share with us some of what I might call your visibility on sort of the contracting cycle and what that May mean to you know what.
I would call covered lives the run rate of covered lives going into the new year, and then secondly might be a nice break to talk about.
Away from the out of network business the payment integrity business I'm wondering how you're seeing that developing do you see that.
Something that you are entirely happy with your current service offering in business or does it still need some business development. Thanks.
Dale you want to comment first thing at all.
It goes back up.
Sure. Let me take your latter comment first and then Mark you can jump in.
We're we're very excited about.
The addition of discovery health partners to the multi client portfolio widened and deepened our our payment integrity offering.
The addition of services like coordination of benefits subrogation postpaid data mining and others and.
But we still have work to be done we're excited by the pipeline.
We've added multiple we've added.
Almost over 50, new opportunities, there's just this quarter alone for discovery services and so.
It's always a work in progress right, we always wanted to make our products better and deeper and further our penetration in our customer base, but that the with.
With the addition of discovery and HST frankly to our product quote poorly we feel real good about our.
<unk>.
Achieving our extend strategy and deepening our penetration to your point David on in network claims.
Great. Thanks, and then the visibility.
The visibility is.
I think he said membership.
And remember lives going into 2022.
And our payers payers as they as they navigate January one renewals typically January one renewals play for the larger for the ASO customers play a more significant.
More significantly the impact earlier in the year than later in the year.
We don't speculate on the movement of those lives between our customers or where if we see any changes.
In terms of additional lives too because it's impacted two by unemployment.
The unemployment rate lowers and more people are coming back to work or it's more covered lives and just on the in house existing business you can see numbers go up and down.
So youre not seeing anything on your remark.
I don't know.
Not as of today no.
Thanks.
Okay.
Your next Marty did you want to add something.
I'm good I'm good.
Okay.
Your next question is from Frank Garman with Goldman Sachs.
Great. Thanks for taking my questions guys, just a couple one for.
First of all thank you for your clarification on the NSA impact I guess, just based on your guidance that it wont materially impact your business what percent of those 10% to 12% of your Ensco claims that youre, assuming or rejected or sorry.
What percent of those Ensco claims would be potentially rejected by providers and so the transfer to step two of the arbitration process recapture.
A little bit more of a valuable role in and saving spread how are you thinking about.
Yes, just the potential for those to actually go to step two.
I think.
I would say from our perspective again, it's too early to speculate in terms of what what percentage of claims.
The providers will be unhappy.
With the reimbursement I think too early on we expect both payers and providers to <unk>.
Look deeply and as I said in my comments.
The providers will be we'll want to challenge right, we think there'll be smart about how they go about challenging.
The <unk> or the amount paid by the provider in that in that.
With their initial payment and.
We know providers will appeal for higher charges based on that basis theyre going to test the arbitration process that could yield more provider friendly outcomes.
There's arguments remember that <unk> is the primary variable, but there is a set of other variables like provider education provider experience acuity of the patient severity of the injury or illness.
Sort of the attempts made by the provider to be in network. All of those are factors that the provider can you use and their challenge in that process remember theres two steps before arbitration with providers unhappy with the with the amount paid there's a 30 day window for the payer and provider.
Or to negotiate a settlement that's satisfactory to both parties.
And then too.
If that fails then it then it goes to arbitration.
That process has you know happens very quickly.
Okay, and then they did one footnote to that.
It's very difficult to model the number of claims that will be rejected and then go to arbitration, it's going to vary by by customer type and it's going to vary by by this.
Sure.
The specialty of the.
The physician.
It's also a big variable there is also going to be.
Early stages and as if you can.
Call Dale walk through those those five stages, a lot of that appeal process or accepting or rejecting it will be a function of.
Once you identify that it is a surprise bill the actual calculation of the <unk>.
And then editing that claim and then and then presenting that to the provider.
For a discussion and either acceptance association of arbitration. So it's a very complex problem.
It's a complex issue at this point with lots of moving parts as deal.
I would articulate it.
All of the complexity. There is just increased reliance on multi plans capabilities. One of our many competencies is data aggregation and data analytics across a wide spectrum of claims and across a huge spectrum of provider types.
Great. Thanks for that and then I guess, just if I could fit one more in just going back to early July.
United Healthcare to indicated it would no longer cover non emergency services at out of network facilities. If they were out of their their member service area. So just curious given your results this quarter and the guidance update for the full year. It looks like this likely hasnt impacted your business, but just curious if you would agree with that or if this is a timing issue that.
You know it has a greater impact down the road.
The Delta I think there was.
Wholesale misinterpretation.
The United Policy change so Don why don't you just articulate.
I'll start with the same level with the policy change was designed to do and what it was designed to address and how it had no impact on multi plan.
Yes.
There was a policy change that was announced by our customer.
It really had to do with that.
A specific set of claims that claim types in specialties that.
It.
It had nothing to do with the members sort of selection of a provider in network or inside their service area has to do more with that.
They're area or what I'll call destination track destination. It focused on certain types of providers focused on non acute providers step down providers and it was added to our service area and.
As I think we said back in July we didn't expect to have any any impact any material impact on our business. This year.
Okay great.
It's interesting because it.
In the marketplace whenever there is a policy change.
Whenever there is a regulatory change.
The assumption is it's negative for multi plan and in our 40 years of existence, that's not the case.
That's not the case and you can look at the track record of this company.
Quarter over quarter year over year.
We continue to drive revenues expand our margin expand our EBITDA policy changes and regulatory changes are not inherently evil or bad for this company in many cases, they are a tailwind not a headwind.
Yes.
There are no further questions at this time.
Thank you very much. We appreciate your continued support and we look forward to reporting our Q4.
What are the first of the year. Thank you again.
This concludes today's conference call. Thank you for participating you may now disconnect.