Q3 2021 R1 RCM Inc Earnings Call
Good morning, My name is Julie and I will be your conference operator today.
This time I would like to welcome everyone. There are one or C. N Q3, 2021 earnings conference call. Thank you. That's it Investor Relations you may begin your conference.
Good morning, everyone and welcome to the call good morning, everyone.
During this call maybe considered in the statements made during this call may be paid in outboard engines of the private Securities Litigation Reform Act of private and 95 in particular any statements about our future growth plans and performance, including statements about our strategic and cost saving initiatives, our liquidity position our growth opportunities and our future financial performance are forward looking statements.
These statements are often identified by the use of words, such as anticipate believe estimate expect intend design May plan project would and similar expressions or variations investors are cautioned not to place undue reliance on such forward looking statements. All forward looking statements made on today's call involve risks and uncertainties.
May elect to update these forward looking statements at some point in the future. We have no current intention of doing so except to the extent required by applicable law, our actual results and outcomes could differ materially from those included in these forward looking statements as a result of various factors, including but not limited to the potential impacts of the COVID-19 pandemic and the factors discussed.
Under the heading risk factors in our annual.
Annual report on our latest Form 10-K annual latest report on Form 10-Q.
We will also be referencing non-GAAP metrics on this call for a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts.
Please refer to our press release now I'd like to turn the call over to Joe.
Thanks, Todd Good morning, everyone and thank you for joining us I'm pleased to report another solid quarter with revenue of $379 7 million and adjusted EBITDA of $89 $3 million driven by strong operational execution contribution from our technology investments and a recovery in patient volumes.
Our team continues to perform exceptionally well and deliver excellent results for our customers with our strong performance in the third quarter. We are updating our adjusted EBITDA guidance for the year to $337 million to $343 million.
While COVID-19 continues to present, some uncertainty volumes have generally recovered to pre COVID-19 levels across our customer base providers are much better prepared and have managed well through recent flare ups in COVID-19 cases in some parts of the country our value proposition is resonating well as it addresses many long standing revenue cycle challenge.
<unk>.
Recent conversations with prospective customers have been increasingly focused on our ability to address tighter labor market conditions and wage inflation, we believe our significant scale technology investments and global shared services footprint give us a structural advantage versus our competitors and in house revenue.
Cycle operations I will discuss this in more detail in a few minutes, but I'd like to first provide an update on our commercial activity.
Our end to end pipeline remains very active and grew almost 50% over Q2, we are in the contracting stage with prospective customers and expect to exceed our $4 billion NPR charter for 2021. If these contracts are signed by year end in.
In addition to activity in our <unk> pipeline, we are seeing strong traction across our full spectrum of offerings.
One of the areas, we have strategically invested in over the past several quarters as infrastructure to enable providers to manage value based contracts.
London mentally there are direct parallels from the core operations that we perform daily for customers under our fee for service contracts with those needed to serve value based arrangements for example.
<unk> engagement referral management and intake activities translate to preventative care metric compliance and site of service management for value based arrangements or.
Our clinical documentation and acuity capture capabilities are relevant to clinical quality data capture and risk adjustment accuracy.
And finally member eligibility reconciliation and claims administration under value based arrangements are analogous to activities, we perform related to revenue integrity and payment administration. We've leveraged these capabilities and added new functionality to serve the needs of value based providers with this backdrop I am very pleased to announce.
That village MD, a leading provider of value based primary care services has selected us to drive for revenue cycle performance across a rapidly growing footprint under this end to end operating partner agreement, we will interface with village Mds Athena health EMR system to drive improvements in revenue cycle performance while supporting.
Village Md's efforts to scale from their current 145 locations to unexpected 700 locations over the next five years.
By partnering with us to reengineer and scaled our revenue cycle workflows across fee for service and fee for value payment models village MD can focus on delivering high quality clinical care to patients, while ensuring accurate revenue for the care they provide.
The capabilities, we have developed position us very well to serve the needs of emerging high growth value based providers and further build on the $1 7 billion of value based payments. We currently manage today. One additional example, as a new revenue cycle partnership with <unk> health and innovative health care provider specializing in value based senior care.
Next with the launch of our entry platform over the summer we have seen increased interest from health systems seeking comprehensive digitized patient facing capabilities ranging from scheduling the payment while our deployment efforts potentially are primarily focused on our end to end operating partner customers over the next 18 to 24.
<unk>.
We are pleased with two recent notable wins.
Memorial Sloan Kettering cancer care center, the world's largest private cancer care center selected us to implement a personalized digital financial experience for patients.
And via our partnership with Cerner, The Veteran's administration selected us to provide our digital patient intake solution across at least 14 in up to all 18 of the VA integrated service networks over the next couple of years, we expect this contract to ramp to approximately $10 million in annual revenue with high flow through to EBITDA.
After the implementation phase given the SaaS nature of the contract.
On the physician front last week, we announced a 10 year extension of our agreement with American physician partners or <unk>, a leader in hospital based emergency medicine with annual NPR approaching $1 billion.
Since the inception of the relationship in 2019, we generated significant improvement in Acp's collections per visit via our built for purpose emergency Department Billings system, which now leverages robotic process automation to automate more than 20% of all back office tasks. We've also simplified the patient.
Experience via mobile functionality and predictive outreach solutions, given our track record of strong performance and Adp's growth the extension and simplification of the contract is a win win for us as well for ABP.
Overall, our expertise and scale in the emergency care setting along with our technology investments position us well to serve the needs of providers in this segment of the market.
Now, let me provide an update on our ongoing onboarding activity onboarding activities at light point, Matt Magnox are progressing on schedule.
He's one of light points is expected to conclude by the end of November and phase two is scheduled to be completed in early 2022.
As III, which commenced in July as more than 50% complete and on track to be fully on boarded by mid 2022.
Overall, our relationship is very collaborative and we are pleased with the pace of progress satellite point.
At <unk> Onboarding activities commenced immediately after a contract announcement in May.
And are progressing on schedule and we welcome the first wave of Med next leaders to our one in mid October and are in the process of welcoming an additional 250 associates in November we are on track to complete magnox onboarding activities in the second quarter of 2022.
Next I'd like to provide an update on our automation and patient experience technology as I mentioned earlier current labor market conditions are presenting new challenges to providers. These challenges are ever evidenced by higher vacancy rates longer time to fill open roles and wage inflation are significant scale.
Global shared services footprint and technology, particularly our recent investments in automation and patient experience capabilities presented us with unique levers to sustainably address labor related challenges was 80% of providers in house revenue cycle cost typically spent on labor. We believe there is a substantial.
Actual opportunity for technology, driven productivity improvement in the industry.
Our intelligent automation capability, which is an extension of our core technology platform positions us to digitize the wide range of complex processes found in the revenue cycle and thereby reduce the reliance on manual labor. Our automation center of excellence is dedicated to uncovering opportunities for automation and.
<unk> innovative solutions that improved revenue cycle performance for our customers.
Since 2018, we have systematically automated more than 60 million manual tasks in our operations, including approximately $10 million additional tasks in the third quarter.
One of the guiding principles of our automation center of excellence is to develop solutions in a modular manner, which allows complicated workflows to be automated reusing and combining various modules. Our library of modules now stretches across customers in all 50 states as well as all major host systems.
Providing us with a strong foundation and building blocks to drive further automation froth.
The vast coverage of processes is also important when we conduct new customer assessments as it allows us to constantly underwrite the financial performance, we can deliver for customers at our desired profitability goals.
We are extremely bullish on the value we can create for providers VR and intelligent automation solution and continue to invest heavily in this area from.
From an internal talent standpoint, the ability to redeploy existing team members from lower complexity work, which can be readily automated to other tasks provides us with immediate capacity. Additionally, this shift to more complex rewarding work nicely positions us to differentiate our one as an employer of choice.
For top revenue cycle talent, but also allows us to rapidly deploy automation, which is particularly important in the current environment.
In addition to intelligent automation, our entry platform, which empowers consumers to access and plan for care quickly and simply via digital self service also reduces many of the manual and redundant activities performed by revenue cycle employees, we believe <unk> market leading capabilities across scheduling registration.
<unk> financial clearance and payment are a game changer for the industry.
We've seen some transformative results as we've rolled out entry to our customers more than 60% of patient registration and counters are performed on a self service basis.
Scores were above 75, and then we have cut patient time spent on administrative tasks in half.
These results are fueling further innovation to recent advancements to our entry platform include the integration of financial clearance and authorization into the scheduling processes and the ability for providers to schedule and their patients across care settings.
With the uptake we've seen that in a recent health system deployments. We believe entry is effectively one of the leading digital front door platforms on the market since our formal launch of entry in August.
Received significant interest from health systems.
Our near term priority is to deploy <unk> across our base of events and IBM customers to unlock the significant operational financial and exponential efficiencies presented by entry in Q3, we went live with entry at three large health systems and anticipate four go lives in Q4 with further acceleration.
<unk> as we look out to 2022.
As we deploy entry across our base, we've seen our unit economics improved with each new installation, giving us incremental confidence in our 30% long term adjusted EBITDA margin target.
Additionally, the acquisition of visit pay prevents us with new opportunities to further differentiate our offering since the completion of the acquisition on July one we have been focused on three near term priorities.
First support the visit paid team and fueled strong momentum we're seeing in the market.
Second integrate and deploy the visit pay platform across our IDM customer base to achieve targeted synergies.
And third drive further innovation in the health care payments Arena.
We see a large unmet opportunity in the market to deliver innovative financial products that improve health care affordability for consumers alleviate friction in the financing of medical costs and simplify financial interactions between large providers and their patients.
Overall, the integration of <unk> is progressing well and the team has maintained strong momentum in the market.
We look forward to updating you on activity on the innovation front in the future.
In closing, we remain very optimistic about our growth prospects with the investments we've made in technology in recent years. We believe our one is distinctly positioned to deliver superior financial outcomes for health care providers and an exceptional experience for their patients.
<unk> customers are recognizing our differentiated technology driven value proposition and selection decisions are increasingly driven by appreciation for our technological capabilities. These attributes along with current labor dynamics and the macro environment position us well for future growth now.
I'd like to turn the call over to Rachel.
Thank you Joe and good morning, everyone. We're pleased to report another strong quarter with revenue of $379 7 million up 23, 6% year over year, and adjusted EBITDA of $89 3 million.
77, 2% year over year.
Adjusted EBITDA margin for the quarter was 23, 5% up 710 basis points from 16, 4% in Q3 2020, and then if.
Continued strong execution by the team and recovery in patient volumes.
Where do you think the results in more detail net operating fees of $308 5 million increased 21, 6% year over year, and eight 2% sequentially with growth primarily due to recovery in patient volume.
As a reminder.
Experienced the peak of Covid related pressure on our net operating team in Q3 2020 in Q3 2021 net operating fees reflect volumes effectively at pre COVID-19 level.
In addition to the recovery in patient volume revenue from new customers, mainly like point also contributed to the growth in Q3 net operating fee.
Incentive fees of $41 5 million were up $16 4 million over the prior year and $4 million sequentially driven by strong operational execution as Joe mentioned, we are pleased to have extended and simplified our contracted ACP under the new agreement, we expect economics associated with incentive.
Under the prior agreement to ship to net operating fees and incentive fees on a go forward basis.
Other revenue of $49 7 million increased $1 $3 million year over year, driven by a recovery in physician advisory services volume and contribution from the debt pay partially offset by the EMS divestiture.
On a sequential basis other revenue was down $1 million as revenue from the E&S transitional services agreement tapers off positively offset by revenue from it is a pay acquisition.
The non-GAAP cost of services in Q3, with $267 5 million compared to $236 $2 million last year up 13, 3% driven by the Onboarding of life point. It is it pay acquisition and our automation efforts.
Our non-GAAP cost of services as a percentage of revenue continued to decline and proving by approximately 640 basis points year over year, driven by recovery in volumes and productivity improvement.
Non-GAAP SG&A expenses of $22 9 million were up $2 $3 million year over year, primarily driven by the <unk> acquisition and higher healthcare claims and compensation costs versus 2020.
Adjusted EBITDA for the quarter was $89 3 million up $38 9 million or 77, 2% year over year. This increase was driven by recovery in patient volumes higher incentive fees and productivity improvements accentuated by our automation efforts.
Lastly, we incurred 11 4 million and other costs in Q3 down $4 3 million year over year with this reduction primarily due to lower expenses related to strategic initiatives and lower real estate rationalization charges.
Turning to the balance sheet cash.
Cash and cash equivalents inclusive of restricted cash at the end of September were $159 2 million compared to $165 4 million at the end of June we generated approximately $90 million in cash from operations in Q3, driven by adjusted EBITDA growth and working capital improvements.
We remain focused on generating strong cash flow from operations, but expect our cash from operations in Q4 to moderate slightly due to payments and deferred payroll taxes related to the cares Act.
Our balance sheet liquidity positions remained strong providing us with flexibility as we consider various opportunities to deploy capital.
Beyond maintaining adequate liquidity to run our operations. Our primary use of capital is organic and inorganic investments to drive differentiated capability and long term growth.
We intend to use excess cash in our balance sheet to pay down debt or opportunistically repurchase shares.
During the third quarter, we repaid $20 million on our revolver and repurchased $31 7 million worth of shares at an average price of $20 69.
Which equates to over one 5 million shares.
<unk> to Q3, we completed our $50 million share repurchase program and today announced our newly authorized $200 million share repurchase program.
We intend to remain opportunistic with regards to share repurchases and we'll be responsive to market conditions and other macro factors.
The combination of the recent dissipate acquisition along with this quarter is $20 million debt paydown of $31 7 million share repurchase demonstrates our balanced approach towards capital allocation.
As of September 30, our total liquidity was in excess of 500 million consisting of cash and cash equivalents and $350 million of capacity on our revolver.
Our improved liquidity is a reflection of our strong EBITDA and cash generation supported by our refinance revolver.
Turning to our financial outlook.
Our strong performance in Q3, we now expect 2021, adjusted EBITDA of $337 million to $343 million.
This equates to a $5 million increase at the midpoint relative to the midpoint of the prior range, which we had also raised on the Q2 call.
We continue to expect revenue of 1.46 to $1 four 8 billion likely closer to the midpoint in the range given the timing of employee transitions related to any of our customers.
In closing I'm proud of our team's strong execution reflected in our adjusted EBITDA and cash flow from operations this quarter.
Our financial strength provides sufficient liquidity to not only run our operations, but also provides flexibility to pursue our growth initiatives and opportunistic return of capital to shareholders.
We feel very confident that our long term growth prospects and are pleased to be in a position to pursue multiple avenues for capital deployment.
Now I'll turn the call over to the operator for Q&A operator.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from Charles <unk> from Cowen. Please go ahead.
Hey, guys, it's James on for Charles.
You've noted that the tighter labor market conditions and the wage inflation in your prospective customers are seeing is driving greater activity in the sales pipeline can you talk about how these factors are impacting our one is it impacting your ability to increase deployment capacity to $5 billion by year end at all.
Do you see this.
Constraining ability to flex up deployment capacity.
Beyond 'twenty one.
Thanks James.
I think well let me let me first cover kind of your question relative to <unk>.
Tight labor market and how does that affect our deployment capacity and then I want to answer it from a little bit different dimension.
Right now.
The tightness in the labor market.
No doubt, it's making it harder for our HR teams and our operating leaders.
Two to get and fill roles across all of our profile.
Demand or profile levels within the organization, but what I would say, it's more acute what we are seeing thats much more acute in the hourly workforce in the professional workforce.
We've been not as impacted and I would say, we're carrying the capacity that we need to deploy 5 billion of impact when you look at the deployments we have underway.
Between life points Mad Max.
Village MD and others that capacity is in place and is primarily allocated to demand we have right now and looking forward, we feel good about our deployment capacity and the plans we have around that.
The labor markets are affecting us in the hourly workforce and I've commented this on other calls.
One of the very clear proof points from my standpoint of the impact of technology driven automation.
As is.
We've had to move wages up we've had to work around the constraints and that hourly workforce and even with absorbing that let's call. It a headwind we've been in a position to raise our guidance twice over the course of this year.
And again, we feel very good on our ability to navigate this dynamic looking into 'twenty, two and Thats really the area of emphasis and a number of our discussions with prospective customers in the commercial pipeline of pursuit process. So again, it's across the board no doubt, but where we're seeing at the <unk>.
<unk> and our hourly workforce.
On the professional side.
I would not emphasize that as margin to the point on deployment, we feel good about the capacity. We've added we're pleased we added that coming out of last year going into this year and looking into 'twenty. Two we feel good about deployment of capacity in our our projections around now.
Okay and.
<unk> automated 10 million tests per quarter each of three quarters. This year. So it seems fair to say that that level of incremental automation is sustainable.
This pace you would have a 110 million automated task by the end of 'twenty, two compared to the target of greater than 60 million.
So how do we think about adjusted EBITDA contribution by 'twenty two.
Could it be nearly double the expected 40 million.
From the targeted $60 million of automated tasks can you help us kind of unpack that.
Yes, I don't think its going to be nearly double but based on base.
Based on the projections, we have right now to your point.
We are ahead on on tasks, we've automated coming out of 'twenty, one going into 'twenty two our plan right now would be to reinvest that overage.
To fuel the future use cases in the future.
The returns that we feel very very confident and so right now we're.
We're in the midst of finalizing all of those things.
For our for our financial plan on 2022, and that's our current posture, we will use a little bit of that overage to offset what we expect to be continued tightness in the labor markets, but primarily.
The strategic use of kind of excess short term financial benefit we will reinvest that into into the platform and a big area of emphasis for US is more advanced automation levers, we've talked about that a number of times, we've got pilots running right now and we're quite bullish on.
Kind of the impact.
Those techniques will have looking out to 'twenty, three and 'twenty four.
Okay. Thank you.
Thanks James.
Your next question comes from Michael Cherny from Bank of America. Please go ahead.
Yeah.
Good morning, Thank you for taking the question congratulations on the strong quarter firstly.
Clarification on the village MD agreement will that be counted as your traditional and then revenue or how should we think about that in terms of how it builds into the model.
Yes.
And our definition that will be an end to end operating partnership in line with other end to end.
Agreements, we have in our physician care setting.
The second point.
Michael is relative to my comments that we're in contracting and assuming we get those contracts done by the end of the year, which is the joint plan with our customers.
We would exceed our NPR target not including village MD. So we haven't really thought about how to include it. We're just delighted to have that engagement and we're also delighted with.
Where we sit right now visa VR advanced pipeline discussions.
One of the reasons.
We're not including it as village MD is a private company, we're not going to disclose their NPR.
But what I would point to.
In the public domain is there grow.
Both projections and so we do view village MD.
As a meaningful customer looking forward on a strategic dimension and then also just on a pure size dimension.
Based on those projections.
Yes, I mean, given the amount of time they are new partner spent highlighting them I can imagine that this is a very nice way and given their growth characteristics. So congratulations on that one and I guess, just along that lines about the pipeline clearly a lot of these prospects I've seen the world turned upside down tied to Covid as you.
Think about that potential to get to the finish line whether it closes in November December January and February and some of these deals are you seeing any other reasons that are different than historical as to the timing on some of these closures or what is that last gating factor that these prospects need to overcome prior to onboarding themselves to you.
No we're not seeing.
We're not seeing any real difference in the pipeline process. If you think about the major stages of our commercial pursuit, whether it be the initial discussions whether that would be.
Impact assessments.
More due diligence on.
Post that impact assessment, whether that'd be referenced Jackson and visits to sites and info SEC processes. All of those things, we're seeing play through pretty consistently no material change really as a result of COVID-19.
Just say a lot of the pursuits. We're looking at right now are on the larger end of the spectrum.
And.
Thats good I mean, there's a lot more calories when we get those over the finish line.
But there are more complicated organization. So so just working through the various stakeholders.
In that sense.
That's not oriented to COVID-19, that's more oriented to just the level of complexity.
Any particular, IGN, which continues to be the primary focus for us.
In the market.
So that's really kind of some of the characteristics, we're seeing along those lines.
I am encouraged once we get to a contracting we generally have both sides investing meaningful allocation of their internal time as well as external advisers in that process.
Perfect. Thanks, so much.
Thanks, Michael.
And your next question comes from Donald Hooker from Keybanc. Please go ahead.
Great. Good morning, Thank you for the questions here.
Maybe first one for Rachael from a modeling standpoint, you alluded to this new agreement with ABP, resulting in some shifting fees is it possible maybe for you to dimensionalize that a little bit. So we don't get whipsawed piece I guess.
And our modeling year, because I guess the incentive fees are really really risen a lot over the past few quarters, what is that going to settle out going forward.
Yes, so for the ACP. The prior contract did have a lower net operating fees and we're very pleased and ADP is really pleased with our performance to date, we've exceeded performance targets in recent quarter. Some given the outperformance in AVP of rapid growth and potential changes related to surprise billing, we're pleased with that term.
The new contract so the magnitude of the incentive fee shift to net operating fees.
I would expect incentive fees on a go forward basis to build from Q1 'twenty one level. So that's a good way to think about that from your modeling perspective.
Okay. Thank you for that and I guess, you just briefly touched on one of my follow up question's around surprise billing.
And some of your relationships with Standalone ER companies, I guess like ACP and I guess others.
Can you talk about how our surprise billing may or may not impact.
Our when our cm in 2022.
Yes.
Dan This is.
This is Joe.
I think surprise billing and and and and kind of all the.
The dynamics around that I think I think we're actually in a very very strong position just given.
The level of visibility we have on.
On billing points in general.
A partner of choice.
As you look at.
Edie physician companies that are not yet working with us and so that's the way I think about it I think we've demonstrated that expertise on many many dimensions. So that's kind of the thought process along those lines.
And maybe one last one for me real quick and I'll hop off but you guys have some large health system clients that are certainly expanding which is great for you, but I guess there was some recent news.
A meter that joint venture being being potentially.
It's split up I guess, which I guess might be a headwind for you.
You're probably not going to want to give commentary around specific clients, but how do we think about sort of health system clients of our when our same expanding and contracting kind of when does that show up in revenues.
Yes, I mean, the first thing I would say is if you look at our our installed base and our customer footprint. We're very very encouraged we have not consolidators and I think that's played through with.
All of the kind of announcements you have seen from our customers.
And that is a consideration as we think about where are we targeting in the market.
The second thing is we're not going to comment on on M&A.
Items from our customers.
Thank you would appreciate this into all of those are done and closed in and the main focus for US is just serving those customers.
And there are strategies for continued growth.
As best we can and then the final thing I would say Don along those lines is we have a very sticky relationship. When you look at our operating partner model and the transition of operational control that occurs there.
Definitely.
Is.
Yeah.
As a benefit and a positive attribute I believe of our commercial relationships with customers. So those are the three things that I would highlight as you look at.
Acquisitions and divestitures across our customer base.
Great. Thank you so much.
Thanks, Don.
Your next question comes from.
Joseph <unk> Butler from Baird. Please go ahead.
Hey, Thank you for taking the question I just wanted to start with a follow up one of the prior questions. I mean, you mentioned that you are in the contracting phase with a number of prospective <unk> customers to reach the $4 billion. This year.
I understand I mean, how often do deals that are in the contracting phase that flows meaning is there any reason to think that there's risk to the 4 billion other than just timing at this point.
Well theres always risk until it's done I mean, I mean, that's that's just the reality.
What I would say is.
Once we're in contracting.
And that's normally on the heels.
A significant amount of energy and time and organization has invested in evaluation.
That's a pretty strong marker for us.
And we we put a lot of.
Priority and emphasis on getting into that phase.
So so I would think of it along along those lines.
Okay, Great and then maybe just as a follow up you mentioned that the end to end pipeline is up about 50% since the second quarter.
I just wanted to clarify is that in terms of the number of clients in the pipeline or in terms of NPR and then I guess just based on the visibility that you have at this point I'm curious if you can offer any early thoughts on what the magnitude of NPR wins could look like in 'twenty two based on the pipeline right now thanks.
It's based on NPR, and we feel good about our NPR guidance.
The models that we've put out so you look at that progression from 'twenty, one to 'twenty, two and we feel.
Very good about the coverage that we have in the pipeline on an NPR basis to support those growth projections kind.
<unk>.
We've communicated.
Okay, great. Thank you.
Thanks.
Your next question comes from Steven Valiquette from Barclays. Please go ahead.
Thanks, Hey, good morning, everybody.
Good morning, one question I wanted to ask about was one that was just touched on a little bit just on the $4 billion target for this year.
Yeah, without having just rigid deadlines on the calendar year or does it just makes sense to think about it as $8 billion over two years between 'twenty, one and 'twenty two.
Hypothetically if you came in a touch below this year, let's say three $5 billion target $4 5 billion next year, just as 8 billion in the right way to think about it over two years.
Can you just have less focus on just hitting a number by the end of the calendar year and I have a separate follow up question and I'll, let you address that one first.
Yes.
That's the right way to think about it. So you have any myriad of scenarios, we ended up at three and a half.
We have plenty of coverage in our pipeline to support on a two year basis that $8 billion into my comment on the other question.
Just say listen we also have plenty of coverage to support the progression we've communicated on year over year NPR growth.
The other scenario.
We signed the deal January 5th as an example.
From our standpoint, and the way, we think about the business that fits into the same overall model. So.
Right now we've got a joint plan.
Got.
Detailed schedules that supports an in year.
Kind of closure so to speak but.
But in the same regard and.
And I think more importantly, we're just very very encouraged with the commercial progression in the market.
And how that bodes for this year's NPR target, but also for the NPR growth models, we've laid out looking forward.
Okay great.
And then separately just from some of our recent survey work when health systems state that they're not planning to outsource RCM.
And the number one most consistent reason is the high cost of outsourcing.
I guess I'm, just curious with some of the changes taking place in the labor market in the back half of 'twenty one.
This impact on the Delta just on the cost of outsourcing versus providers keeping it in house. If at all and are you also having to change any of your own pricing dynamics in light of the current labor market dynamic.
One of the things that I would say.
Absolutely accrues to our benefit as our commercial value prop or our financial value prop. So so.
Because of our global scale core technology.
As well our intelligent automation investments.
For the better part of the past 24.
Months, we've been in a strong position.
As part of our operating partner agreements two to run a lower cost revenue cycle at a higher quality.
Quality.
And that's been recognized in almost all of our commercial pursuits.
So so I would start there.
And that value prop is only emphasized.
Looking at the current labor market, because most of our health systems are coming to the reality that.
The inflation on wages and their revenue cycle costs are going up on a year over year basis, and that only makes our value props stronger in comparison to that.
Status quo.
Perspective that they have or or standalone perspective that the health systems have.
Got it okay. Thanks.
You.
Your next question comes from Sam <unk> from Jpmorgan Chase. Please go ahead.
Hey, guys. Thanks for taking the question.
Spoke to investing back some of your margin outperformance back into the business I was hoping you could provide some color on potential areas of investment that you see.
Going forward.
Yes, so so two two big areas of investment that I would highlight and.
I will start with intelligent automation, the big area of investment there is going to be more.
It's more predictive.
Modeling on our operational activity. So if you think about it what we've really been focused on is <unk>.
Starting with just using basic automation techniques.
To automate manual tasks.
We're starting to do what we've got pilots underway right now start to think about the rich data set we have and how can we use that data set and machine learning techniques and predictive modeling techniques.
To predict work or predict work that doesn't have to occur. So that's a big big area of emphasis for us and there is opportunities and use cases across the entire revenue cycle. So that's the first area of investment.
That that we will redeploy.
Favorable performance on the second area is just making sure. We are laser focused on integration of our core technology <unk>.
<unk> heard us talk about that as it relates to the patient experience. Our recent visit pay acquisition, we see a we see a significant opportunity to integrate that code base into the entry platform at a deep level and that overall guiding principle that integrated technology.
Is is very very important across the process flows to get a differentiated outcome as the other core area of investment.
That's certainly the integration of the.
Integration of that technology also allows us to uncover new use cases on automation just because we're seeing.
At the at the technology level the process.
At a deeper level.
That's great. Thanks, and then maybe just one more I was hoping maybe you could speak to the integration anticipate how that's going so far and does the cross sell opportunity look any different now that you've had some more time with it.
Yes, so from a from a visa pace at the standpoint, that's going.
Very very well.
We're three months into it and I would say.
The cross sell opportunity.
<unk>.
Is greater than we assumed when we looked at the business and what's been encouraging for me is that the engagement within the provider organization that visit pay has for this value prop is that the C suite level. So it's either at the CFO level at the Chief digital.
Officer level, but it's at the C suite level and I mentioned that because that's very important for us as.
As it relates to our broader value prop. So we've been encouraged.
With that.
Dimension. The second thing I would say is I'm very very encouraged with.
With the integration of that platform into our core operating partnerships in a very short period of time.
We've seen digital adoption up we've seen patient statements down.
And we've seen patient satisfaction.
And payment model adoption.
Improving as well, which will bode well for our cost to collect as well for our yield or TPI incentive fees on this dimension and that was a very very important priority for us as.
As I mentioned in.
In my prepared remark remarks.
Looking forward. So we're generally encouraged with.
With where we sit right now vis vis our original plans on that acquisition.
That's great to hear thanks, so much.
Thank you.
Your next question comes from Stephanie Davis with <unk>.
Pete.
Please go ahead.
Hi, This is joy Zhang on for Stephanie. Thank you for taking my question I was wondering if you saw any change in the tone of conversation with customers given that one of your larger competitors have gone through a public process.
Did you see any benefits the competition within that added margin your competitors slate or has it made for a tougher environment.
Perhaps around it.
No change no change in our customers' discussions as a result of.
The competitive process and I continue to believe.
That this end market will support a number of high performing.
Players and revenue cycle partners and again, we're just encouraged.
With the end market the prospects for growth.
And <unk>.
And how the competitive set.
Could evolve and unlock further validation of this model because that really is the.
The priority when you look at the the degree with which.
This process is still today managed.
By the providers and we don't think that.
That makes a ton of sense.
Looking out into the future.
Thank you and as a follow up can you rehash your thoughts on what's your differentiation versus our competitors.
In a recent focus for investors.
Yes so.
I think if you look at our value prop. The first thing I would start with is is.
The scale and technology investments that we have achieved.
And delivered on really manifest themselves in our ability to offer <unk>.
Contract economics that are significantly favor favorable to their operation on a standalone basis.
The second thing I would say is we.
We have a very credible solution that is an area. That's a high priority for them to solve and that's everything related to the patient experience and I would say the physician or the physicians care team experience engaging in this process.
And then finally if.
If you look at the alignment.
Round the partnership.
Percent of fees that we put at risk on performance and our demonstrated track record of executing against those projections.
Those three things I would say are at the heart of kind of a value prop that differentiates us to the peer set in the market right now.
Super helpful. Thank you.
Thank you very much.
Your next question comes from Sean Dodge from RBC capital markets. Please go ahead.
Thanks.
Good morning.
Maybe just staying on.
The competitive set.
You've talked a lot about.
The investments Youre, making in technology, but as we look across the landscape.
Atlanta vendors, making similar claims.
Can you just give us maybe an overview of a.
Maintenance explanation.
How what are one is doing there how you approach and in the way you're using technology is differentiating you.
Yes, I think I think there is there are three guiding principles that I would highlight on kind of why why our technology investments.
Have a higher relative impact on our customers' performance than the general market.
The first thing I would say is.
As we are pursuing an integrated technology strategy.
If you look at any part of our technology, we just fundamentally believe to eradicate the friction the unacceptable friction that exists in this process. It is not enough to build a great module of technology and compartmentalize. This we really believe strongly and this is borne out of our view.
Operating at significant scale and complexity.
That friction cost dissatisfaction originates at the interface points of this process.
The second thing I would say is operational enablement is just underappreciated by the broad universe of technology players. So if you look at all of our solutions.
We by and large do not sell a technology on a standalone basis, we sell it on a solution basis, and we believe strongly that we've got to invest as much in our operating standards and are operating.
System, so to speak to unlock the full potential of that technology and the third thing and it's just the reality the contractual control that we achieve in our partnerships.
Does not make us beholden.
Two the decision making framework.
In an idea.
And I say that because a lot of.
Our.
<unk> does not see the light of day, because change management is not able to be achieved so when you think about that from our standpoint.
We fundamentally believe the fact that we're pursuing and integrated technology strategy.
We're investing as much in operational enablement to two to unlock the capability in that technology, and we have a degree of control and in return for that control, where underwriting performance that we're able to change the processes on behalf of the health systems and so.
When you compare that to a traditional point solution technology vendor.
We think over the long term that value proposition will emerge as the winter.
Okay. That's very helpful. Thank you.
Then on going back to the EBITDA outlook.
<unk> presentation. You also have 16 five of your 41 billion of NPR under management during the margin ramp phase.
Is there any way you can quantify if we step back and say all else equal you don't add another new client is that remaining $60 5 billion of NPR gets optimized can you put some bookends around how much incremental EBITDA that would be worth.
Yes, yes, we would we would see we would see that.
Very much in line with our.
The models, we've put out the models on year, one year two year three of that progression, but also the models we've put out on the medium range and long term range EBIT guidance. So the teams have done a good job in partnership with our finance organization.
Two to stay stay focused on on those models and those projections as it relates to our commercial pursuits.
Okay. Thanks again.
Thanks, Sean.
And there are no further questions at this time I will turn the call back over to Joe Flanagan for closing remarks.
Julie first thanks, so much for help for your help today moderating the call and thanks, everybody for joining us.
As I mentioned before we're pleased with execution and the momentum we're seeing in the business. We look forward to converting the opportunities our pipeline as we go into the close of the year and updating you on future calls regarding our ongoing process. Thanks, so much for your participation.
This concludes today's conference call you may now disconnect.
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Okay.
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