Q3 2021 Signify Health Inc Earnings Call

Hello everyone, and welcome to the signify Health. Third quarter 2021 earnings conference. Call. My name is Seb, and I'll be the operator for your call today. There will be an opportunity to ask questions, and if you wish to submit a question, please press star one on your telephone keypad. If you change your mind and wish to withdraw your question, please press star 2. I will now hand the floor over to Jennifer diberardino, head of investor relations and Treasurer, please go ahead. Good morning, and welcome to signify help.

Conference call. This is called being webcast live and a recording will be available on the events page of our investor website at signify health.com through January 10th, 2022. Throughout the call this morning. We will be referencing the financial tables that appeared in our press release dated November 9 2021. And in addition, the third quarter earnings called summary, slide presentation. We have posted to the events page of the IR website.

Right. This morning. We will discuss signify Health business Outlook. And we will also make certain statements about our future performance, including projections, about our future financial performance. Our anticipated growth strategies anticipated Trends, in our business and our Outlook including estimates for total Gap Revenue. Total adjusted ebitda, in-home evaluations program size and weighted average savings rate. These statements are only predictions based on our current expectations and projections about future events.

And constitute forward-looking statements within the meaning of the federal Securities laws. There are important factors that could cause our actual results level of activity, performance or achievements to differ materially from the results level of activity, performance, or achievements, expressed or implied. By the forward-looking statements. Please note the cautionary language about our forward-looking statements as presented in our earnings, press release and in our quarterly report on Form 10-Q, which will be filed later today.

That same cautionary language applies to the statements made in this conference call.

We will also discuss.

Certain non-gaap Financial measures including adjusted ebitda and adjusted ebitda margin, reconciliations to the relevant Gap numbers for these. Non-gaap measures are included in the earnings release filed on form 8-k yesterday, and also in our Form 10-Q, which will be filed later today.

As a reminder, we intend to participate in industry or Southside sponsored conferences in lieu of issuing, a press release to announce each conference. We will be posting our conference attendance on the events page calendar of our investor relations site at signify health.com. I encourage you to register for alerts on the investor site that so that you receive an email notification. Each time. We add a conference other event or other updates to the IR calendar.

Joining me on the call today are Kyle armbrester. Chief executive officer and Steve son of President and Chief Financial Officer. Kyle will provide a business overview followed by Steve with a financial overview. We will have an operator facilitated question and answer session after our prepared remarks. Now, I will turn the call over to Kyle for care and enabling the

The value-based care, our current strategic, focus is expanding to as many unique homes as possible. We also build Diversified service offerings, that help to identify and close care, gaps and drive better patient outcomes. Yesterday evening. We announced strong financial results for the third quarter and first nine months of 2021. Through September Revenue, grew by 42 percent to five hundred and ninety two million dollars and adjusted ebitda increased 52% 231 million dollars from the now.

Nine month period. A year ago, largely driven by in home evaluation or ihe volume growth in our home and Community Services segment.

In the first nine months of the year. We performed over 1.4 million. Ihe is exceeding. The number per firm performed for the full year, 2020 or 20 21 results to date or driving positive momentum into 2022 with continued in home. Demand expected to fuel HCS growth diversification of our services in the home and our episode weighted average program size. Moving from approximately 5 billion to six billion dollars next year.

We're given this performance. We are projecting 20% plus top-line growth in 2022, and corresponding adjusted ebitda growth, which is expected to benefit from improving operating leverage. Clients are increasingly asking us for expansion of our transition to home and analytic services for the other value based programs, which review is another positive trend.

A testament to our value of our in-home evaluations. We have received new customer commitments for ihe volume, that will continue to drive substantial growth momentum and into 2022. We have seen several notable clients move and expand volume to signify and away from Legacy or in Source programs. Realizing the value that we bring to their members. We remain confident in our belief that the risk of insourcing our space is low, given our unique data and analytics platform Nationwide clinical Network.

Remember density.

Our strong customer relationships as we look ahead to Future years. We're very bullish about our HCS business, the value of RN home evaluations, for both our customers and Medicare Advantage members, who receive ihe that no cost has increased tremendously. We're doing more in the home than ever for our clients, by helping to connect their members back into the health system. Each and every day. We also have made substantial progress on the social terms of health front, connecting members more than three hundred ninety thousand times.

With social services in their community.

We are working to connect members, many of whom have not been under the regular care of a provider back to a primary care physician and their community and even scheduling appointments, when possible, we provide the PCP a comprehensive summary of their patients, clinical and social evaluation highlighting issues that require attention. In fact, approximately 72 percent of members who receive an ihe from signify Health return to an outpatient care setting within a year after their ihe,

While our doctors and nurse practitioners are in the home. They perform various screenings to help close care. Gaps. We are proud to have earned the National Committee for quality assurance or ncqa Healthcare Effectiveness data and information or heat is certification for several of our in-home screening services. Such as diabetic eye exam diabetic, kidney disease, monitoring colorectal, cancer screening, and osteoporosis management and women.

Test results are also shared with the number. The plan and the respected primary care physician to provide another data point for any identified health issues and appropriate treatment plans.

We continue to successfully expand our clinician Network to support our growing ihe volume. Despite recent concerns and other part of the industry around the difficulty at hiring healthcare workers. Well, we have seen some capacity challenges in certain Geographic, areas, a significant benefit of our flexible network is that we credential our providers and multiple states allowing us to deploy them wherever evaluation, demand requires including rural communities, our model and Technology, make it easy for providers to do what they value. Most spend quality time with

Asians instead of dealing with administrative issues and a facility setting, as a result. We believe we have not experienced the same clinician staffing issues as reported by some others in the industry.

Using the home of the key venue to activate the care Journey. We Believe, coordination of care will be one of our strategic pillars. Going forward. Our future service expansion includes medication management chronic condition management remote patient monitoring and following services to improve the health and well-being of beneficiaries. Almost, all of our customers are asking for this expansion of our work, realizing the value of our engagement and their members wives while in their home.

This represents a tremendous opportunity for us to expand our and home market share and continue to diversify into new services to drive better outcomes for the millions of lives. We Touch annually, we frequent conversations with our plan customers and Regulatory and legislative constituents about the current state of in the Future Vision for health care in the United States. Generally and the Medicare Advantage program, specifically, Medicare Advantage is important program. Providing about 27 million individuals, high quality care with

Are benefits at a lower beneficiary, cost, we compared to?

For service, we believe that the risk adjustment process with all the appropriate checks and balances is critical to the functioning of value-based care and Medicare Advantage. Appropriate risk adjustment, including in-home evaluations levels, the playing field to provide Broad and Equitable access to care for the most vulnerable ma members. As I've outlined this morning. The value of our ihe is to our customers and Medicare Advantage. Members is tremendous and is an essential service that provides insights coordination.

And critical member touch points and we have a roadmap to expand our capabilities in the home. As we focus on opportunities, to support our clients and their efforts to address Health. Disparities to ensure Health Equity moving forward. We believe there will be further adoption of value-based payment programs, and Medicare Medicaid. And across the entire Health System, currently approximately 40 percent of Medicare fee-for-service payments, 30% of commercial payments, and 25 percent of Medicaid payments, are made through some sort of value-based arrangement.

As we advance value-based payment models through our excellent work in both our home and Community Services in episodes of care services. We expect signify Health to be a significant part of this movement and episodes of care. We are the largest convener in the CMS bundled payment program today. And as such meet regularly with CMI to provide feedback through thought leadership on the current bpci, a program and its future State. We look forward to the next iteration of the bpci, a program and believe that it will likely have a

The tree aspect Liz, Fowler the head of semen. I recently spoke publicly at a briefing hosted, by The Alliance for Health policy and indicated that cmmi is actively engaged in exploring bundled payments that go beyond post-acute care to move Upstream, to engage specialist, in managing patients, to avoid and or reduce acute events, this Focus nicely dovetails with our non bpci episodes of care. We can support not only procedure based models, but also conditions, such as maternity.

Diabetes and substance abuse. We are continuing our focus on diversification of Revenue. Through continue discussions related to a CEO programs and other targeted models like, radiation oncology.

We continue to make cessful successful in Rhodes and arn on bpci a business in October. We jointly announced with our customer, the state of Connecticut that their program was approved by CMS as an all payer Advanced alternative payment model. This is an important designation for the episodes of care payment model administered by signify through our networks of Distinction, eligible Services include in these included in these programs could span as much of 60% of the average Health Plan spend.

And include episodes such as knee replacement, colonoscopy cataract surgery care, related, pregnancy and more CMS is ongoing efforts and commitment to affordability, quality and outcomes has been of significant benefit to patients providers and taxpayers alike. We're excited that the best practice from federal value. Based programs, will be extended to commercial health plans, and we are proud to be a part of this Catalyst for continued adoption evaluates Care by innovative.

Rider organizations.

In closing, we are pleased with Arthur.

And year to date results. Our long-term vision is to drive positive outcomes for our partners, and their members, as their platform, for value-based care. We simplify participation and highly compact payment, programs and enable health plans and Health Systems to successfully transition to value-based payments over time. We may supplement, our strong capabilities with Acquisitions or Partnerships with other companies to add further functionality and Innovation to our platform to drive increase value for our customers and for pay

Patience. I will now turn the call over to Steve to walk you through the third quarter and year-to-date Financial results.

Thanks, Kyle. Good morning. Everyone. Strengthen our home and Community Services. Segment is driving our strong performance in the third quarter and year today in episodes of care services. We continue to deliver. Strong savings to our partners across the bpci program, while ensuring individuals receive excellent care within their episodes results. For ECS in the third quarter were in line with our expectations as we await the next bpci program reconciliation in the fourth quarter during my commentary, I will

Be referring to the tables that appeared in the earnings press release issued yesterday, as well as the earnings presentation on the events page. As you can see in table 1, we had total revenue in the quarter of a hundred ninety nine point two million dollars in increase of 29 percent when compared to the same period last year Revenue strength, in the quarter was, primarily driven by HCS growth of 47% to a hundred and sixty nine point 1 million dollars. Total valuation volume for the third quarter was approximately 480.

Thousands, including virtual, evaluations virtual valuations is the percentage of total valuations, continue to decline through the first nine months of 2021. Reflecting customer preference to perform the evaluations in the home. Although we saw an uptick in September in certain geographic regions, which we attribute to local COVID-19 spikes.

HCS segment Services also include Diagnostic and preventive testing services and we continue to see attachment rates increase.

As a reminder, we expect fourth quarter ihe, volume to be aligned with historical patterns as the lowest core of the year and to be lower year-over-year. Comparison from the 2020 fourth quarter due to last year. Having the COVID-19 related catch up as we previously, discussed still on table one, third quarter, 20 21. ECS Revenue was Thirty Point. 1 million dollars. A 25% decline compared to the same period last year. The decline was related to the adverse impact of COVID-19 on program size and our savings rate.

Additionally, we recognize 9.2 million dollars of Revenue in the third quarter of 2020 related to new information. Received ahead of the reconciliation, doing the fourth quarter 2020. The new information received reflected the impact of COVID-19 on bpci program size and a subsequent. CMS impose change has offered to providers. That had an overall beneficial impact on savings rates.

It's, as I mentioned, we will receive the next bpci reconciliation in the fourth quarter, which will reflect the final performance primarily from the first half of 2021, as we discussed last quarter. We continue to monitor patient case, mix adjustments and the next side of care issues with skilled nursing facilities, and we'll have more information when we receive the next reconciliation and report on it with our year and results, our data indicates that utilization continue to improve in the third quarter, despite the prevalence of the COVID-19, Delta variant. We remain on

Actor in the year and a six billion dollar.

Run rate for program. Size setting our episodes business up for a strong 2022.

Moving to table for total company, adjusted, even up for the third quarter, increased 46 percent to 42 million dollars compared to twenty eight point seven million for the third quarter of 2020 driven, primarily by the strong growth in Home and Community Services. Back to table one. Third quarter total, net income was twenty nine point three million dollars, compared to a loss of Thirteen point three million for the same period a year ago.

Net income attributable to signify Health with 20 point two million dollars in the third quarter of 2021 or 12 cents per share on a fully diluted weighted, average share basis. There is no meaningful year ago. Comparison, do the IPO and subsequent reorganization in February 20. 21 are strong operating performance. In addition to the twenty seven point, three million dollar quarterly re-evaluation of our Equity appreciation rights or ears drove. Net income. This quarter we

Ears to Market, each quarter and the credit in the quarter, reflects the current lower value of our stock price, even excluding the impact of the ears. We achieved positive net income in the third quarter and encouraging signs of the trajectory. We are on.

You're today results through September 30th, 2021 largely reflect the continued overall strength in our home and Community Services. Segment with strong. Ihe, volume for the first nine months of 2021 of over 1.4 million. As I mentioned. We did see a slight uptick in Virtual ihe since September. But we still expect virtual evaluations as a percentage of total ihe volume to continue to be lower than 20/20. Pandemic levels episodes of care services results for the first nine months of

Everyone continue reflect the COVID-19 impact on Health Care. Utilization savings rate and discharge patterns reported in connection with the reconciliation received in June.

Soon, moving on. As you can see in table 2, we ended the quarter with six hundred and seventy eight point eight million dollars in unrestricted, cash and increased from the second quarter, primarily related to cash receipts from the second quarter bpci, a Reconciliation. We ended the quarter with debt outstanding of 350 million dollars and 173 million. A capacity under our new revolving credit facility. Given our strong cash position at September 30th, 2021, which exceeds our debt levels, we ended the period.

Negative, net. Leverage.

Given our strong results for the nine months. Ended September 30th 2021. We are raising total revenue and adjusted ebitda guidance ranges for 2021 as follows. Total Gap Revenue in the range of seven hundred fifty five million to 770 million dollars and total adjusted ebitda in the range of 160 million to 170 million dollars. We are providing updated estimates for our key performance, indicators for the full year 2021.

Reporting continued strength in Home and Community Services. We now expect ihe and the range of approximately

One point eight one five to one point eight five, five million reflecting the ongoing impact. COVID-19 on episode of care services. We are maintaining our estimates of ECS segment weighted, average program size of approximately four point nine to five point 1 billion dollars and ECS segment weighted average savings rate of approximately 6.1% 26.4%, referring to slide, 2 6, and our third quarter, earnings presentation.

I would like to point out that, when we gave guidance for 2021, in March of this year. We're projecting about 20 percent Revenue growth and with our updated 2021 guidance. It could now be as high as 25%. As Kyle mentioned. We're looking at strong top-line momentum heading into 2022. With expectations for overall 20% plus Revenue growth, and corresponding adjusted either growth, which is expected to benefit from improving operating leverage taken altogether. This is a testament to the incredible work done across the company.

Me, we plan to provide detailed, 2022, guidance on our fourth quarter, 2021 earnings call. Now. I'd like to turn the call back to Kyle for closing remarks. Thanks Steve. I would like to take this opportunity to thank our team and signify for their positive and compassionate. Focus on the individuals. We serve signifiers, consider the whole person and helping health plans and providers close gaps and care so that people can remain in their homes and enjoy more healthy, happy day.

Days. As I've mentioned, our current strategic focus is expanding to as many unique homes as possible while we also build Diversified service offerings, that help to identify and close care, gaps and drive better patient outcomes. I would also like to thank all of our stakeholders, who are on this journey with us for the value. We expect to generate over the long term.

Now, I will turn the call over to the operator, to take your questions, operator.

Thank you as a reminder. If you would like to ask a question, please press star one on your telephone keypad. If you change your mind, I wish to withdraw your question, please press star 2. Our first question comes from and Samuel at JP Morgan, please go ahead. Hi guys, congrats on the great quarter and and thanks for taking the question. Really appreciated, the color on 2022. Growth expectations. I was hoping, maybe you could provide a little bit more color about what head winds and Tailwinds are included within those assumptions.

Yeah, Steve. Yeah, we typically I wouldn't guide to 2022 this early but we just see, you know, tremendous momentum's. I'd say the two big things. Are we seeing a lot of momentum on ihe volume? So as we look into next year, we have a lot of visibility. We're doing all that planning today with our plan members, are their plan payers and then also the six billion dollar the confidence we have in the having the six billion plus exit run rate.

ECS. So when you combine those two, we felt confident that we could lean in and give a little bit of a signal that we feel like we're going to have another great year in 2022.

That's great. And then maybe just a follow-up to that. How should we be thinking about, you know, some of the labor inflation impact on your savings rate? As we think about next year.

Here.

We're labor rates. Are you talking about just labor rate inflation that other companies are facing because that's not really a great. Yeah. I think the uniqueness of our Network today allows us to to avoid some of those same challenges that our companies are having so

We've continued to maintain a very strong Network. We owe our biggest challenge is just the growth. The growth is so significant, making sure we keep up with that. So there's a few markets that we, you know, have had to make sure that we can deliver in those markets, but the flexibility is always been. We've got Physicians and nurse practitioners are condemned, sold across different markets. That allow us the flexibility to move people around and so that's a big advantage that we have.

Great. Thank you.

Our next question comes from Michael cherny from Bank of America, please. Go ahead.

Ed, good morning. Thanks for taking the question. Maybe just to follow up again on the twenty, two numbers. And I know Steve, as you mentioned, is typically isn't when you give a lot of color, but you want to make sure I understood Kyle's comments, correctly, regarding ebit. Ah, I couldn't really tell. Are you expecting ebitda margins to expand? Next year is ebitda least of the preliminary site expected to grow in line with or ahead of Revenue based on what you see currently.

Yeah, my fair question. Like I said, we're not going. We're going to save all the details for the next quarter. But yeah, what were signaling is 20% plus, you know, Top Line growth for comfortable with and you know, our model as we continue to grow. We do have room for ebit expansion as well as investing back in the business. So it's a nice part of our business model is we can do both.

With to make sure I heard the comments correctly and that's helpful. And then I guess intra quarter. Obviously the oig report came out that had some questions about the market as a whole and I know that the company's been very vocal and putting forward their explanation. I think, in this venue as well. I would love to hear a little bit more about your reaction, you know, Kyle Steve to the oig report and why signifies differentiated versus some of the commentary that was made. And some of the approaches that we're taking,

Relative to the view of the Medicare Advantage carriers that were noted in the report.

Art, yeah, absolutely. I go happy to take it. The most recent report that came out really wasn't anything new and it was focused on 2016 data and it was largely the same as the report that they put out in 2020. So they were pretty consistent and what they're really focused on more than anything was in a plan oversight. And I would just share, they were obviously focused on a single plan. And what that plan was doing back in, 2016 was groundbreaking Innovative, and it's become commonplace throughout the industry. Now.

So this whole notion that, you know, there's any gamesmanship or anything I think is totally unfounded. Number one.

Number two, the big recommendation from the report which we've been doing for a long time. It's just when you're touching ma members or you're going in and identifying conditions or closing care, gaps is to make sure that your reconnecting them to care, both social and clinical, and we spend a lot of time sending medical records to primary care. Doctors, getting appointments booked. So, folks can get back to see a specialist or a primary care doctor. As you know, we mentioned in the script. We've

Over 390,000, you know, social condition issues. There's can be food shortage issues Transportation. So I think it's actually, you know, are the fact that in homes exist for the Medicare Advantage, population is remarkable right there provided for free to the beneficiaries. And we go in and do as I just mentioned, a battery of different work. And you know, the other thing I would say is our model is really absent moral hazard, right? We are clinicians, go in and get paid.

The same amount of money, regardless of the work that they do inside the home. And our whole focus is on activating and getting those folks re-engage in their care. So, many of them haven't seen a primary care doctor in a long time. Have a lot of chronic conditions that are going on manage and typical fee-for-service ignores them. Right. Typical fee-for-service Waits until they show up in the emergency room, or you know, run into a negative Health outcome. What's the beauty of Medicare Advantage in the model that we brought forward and that so many of our plan clients are deeply engaged.

Done and it's genuine. Preventive medicine, right? We're moving away from just sick care and this country and instead taking care of folks and making sure that their conditions and diseases are being managed more appropriately. And the last point I would make we've, you know, while the report focused on risk adjustment that is a very small percentage of the total work that we do inside the home. Right? As I mentioned were doing chronic condition management, a battery of gas and Care closure, closing out.

Social determinants of health issues and we're super proud of that the and we done that, you know, and with the other beauty of Medicare Advantage, it extends to rural markets and really help solve a bunch of Health Equity issues were folks aren't able to get carry easily and affordably. And so it's a great model that we need to continue to expand on. But if anything, I've you some of the you know, commentary in the report is a Tailwind for us. The reports pushing for more services to be done in the home and each and every one of our

I help my clients is looking to do the same right more condition management. More engagement to help make sure that we're driving Better Health outcomes for the members lives that they serve. Yeah, I think people misunderstood others report would actually impact us. We, we view this actually as an opportunity as Kyle mentioned. So just to reiterate, you know, getting them rescheduled back to their PCP connected to the Community Resources, making the referral to the healthcare management issues. These are all things we're doing today and plan to do more of in the future.

ER,

er got it. Thanks so much.

Appreciate it.

Great. Thanks.

Our next question is from George Hill at Deutsche Bank Securities, please go ahead.

Ed. Yeah, good morning guys, and thanks for taking the question and Kyle. I actually want to follow up on Michaels line of questioning which is really I guess. Is there anything more that you guys can do to highlight? The you know, I loved your quote, the absent moral hazard line about the services that you're providing in the HCS segment is a both kind of is the way to differentiate like show that there's a real arms-length transaction transaction between you guys and the mcos in the carriers and that there's a real value to using a third-party provider just because I think it'd be very helpful both for the business growth and for the stock.

And then I guess, just for a quick follow-up and therefore Steve, you know, as we read a lot of depth of the great resignation, I guess, can you talk about how you're thinking about kind of Labor inflation and employment and kind of just like, the, the, the number of people that you have in the field as we're seeing kind of a very tumultuous employment environment? How that kind of impacts margins, as we think about 20, 22,

To. Yeah, I'll tell you first and Steve can touch on your second question. Yeah, the more Hazard piece is important. So I mean, let's start from the top, you know, first and foremost these visits. It's so folks are selected in the Medicare Advantage seniors on their own right? Like they're choosing to go into the program and then they choose to receive these visits which is free health care in their home. It's a pretty amazing value proposition. And what we've been excited about is that we have been focused on providing those all of

Services as a flat fee to the health plans, regardless of the work that we do inside and you're right. It's an arm's length, transaction. That gives the health plan and the member peace of mind that we're going into, do genuine high quality, diagnostic work and then ensuring that we're connecting them back to care. It's why we're not using home health workers. To do this work. We're using medical doctors and top of the license nurse practitioners, you know, as we're going into these homes, and so, it's a real opportunity to see

Health Care where it really happens, which is inside the home, right? We're spending 20 minutes going through their medications that they often can't afford and helping them to figure out better ways to make those meds more affordable for them, by connecting them back to benefit services. At the plans offer. We're contacting their primary care. Doctors, should them sending their medical information to the primary care doctors. So they can see that they're not taking their meds or that they have a transportation issue or that their chronic condition is gone completely. Unmanaged their A1C levels through the roof, right? And so, all of that

Being done as a free benefit to these members. And Ma is really something that's special and something that we need to be leaning more in as a country. I think crossed other populations, which is why we're excited to see our service model. Pretty dramatically expand into Medicaid, and it's a commercial populations as well. And so, the plans are leaning in and almost all of them that, you know, as a strategic pillar have home access and expansion of Home Services is a core differentiator for the current and future state.

Date of their businesses and we're a key partner driving that success for them, secondarily in something that's really important. We are year-over-year. Rebooking rate is very high and numbers, C extreme value and that's coming in and helping again to solve problems where Healthcare really happens inside their homes, right? We're able to lay eyes on their broader, social clinical in behavioral environment and then provide all that information back in a safe secure way to the

And, and to their primary care, doctors. And then

Really just on the moral hazard. Peace our doctors and nurses do not code, right? They go in and do a totally focused clinical evaluation of individuals lives. They touch, we have a totally separate team that goes through and does the coding and any documentation work related to the visit and I'm super proud to say that that team has consistently, you know, quarter over quarter year after year had a 98 99 percent plus positive audit rate on

All of the work that we do so we are delivering a highly compliant, super valuable touchpoint, that's having a very positive impact on millions of seniors. Many of who are in, you know, dramatic need the lives throughout the country. And so I've dried preciate a question, George and I think that, you know, to answer your, you know, the second point about the stock price and everything else. I mean, I said, we're focused on consistent delivery and execution, and we are more bullish than ever on the value that we deliver to seniors and to focus.

Medicaid and Commercial and the Deep connectivity we have with our plans who are Askew knows each and every one of them to expand our services, you know, in the home and better connect to these members lives.

And Steve, will you take those again and then go back to the yeah. Back to the employment situation, you know, our network is as I mentioned earlier continues to be strong 9,000 plus and as we look across the company, we are spending a lot of time as a management team focusing on engagement. Making sure this is a great place to work, but virtually and and safely back in the office when appropriate, we spent a lot of time talking about the mission of the company and you start off our meetings with a lot of mission moment. So

That you know, a lot of that stuff goes goes, a long way of really being excited to work for the company that you have that we're at. So, you know, like everyone we have two challenges, but as I mentioned in my previous comment, we still expect next year, even with a lot of the noise around labor, and, and pressure to continue to expand our margins. And so it's again, back to our model is, as we continue to scale. We will see margin expansion.

Thanks, man.

Yep. Thanks Roger.

Our next question comes from Sarah James at Barclays, please. Go ahead.

Ed, thank you. I was hoping that you could kind of level set us on how you think about seasonality of earning. So what were some of the unusual items that impacted this year and how do you see typical seasonality laying out?

Out. Well, the the typical seasonality is for I for the S business, you're typically going to have a stronger first half and in the back half of the year. It's going to be a little bit softer because as you go through the list, the member list and and get the in-home engagement, that starts to trickle down in the back, half of the Year Q. Four, as we've said, since we had the IPO, and the Roadshow is always ours.

This quarter and, you know, there's a variety of reasons for that. We're winding down.

Holidays, whether typically and then you know, we start again for the following year. So that's the biggest thing in the ECS business. If the only, the only things are a little bit different, there is typically when we get the Recons and and Q2 and Q4, there could be. There could be some true up there that would give it a bump. And then you've also, we've got the the 13th month, extra month. It gets booked their, the way, the revenue recognition works. So other than

Than that. That's that's that's probably the quickest way to explain our. She's now auntie.

At it and thinking through the head ones and Tailwind that you mentioned for 22. So far. It seems like there might be a little bit more headwinds in in the beginning of the year Tailwind in the end of the year. So is that the right way to think about the the shift in seasonality and 22 versus a typical year?

Here. Do I look? I think there's nothing in 22 that I would see any different that we would start off, you know, strong again on ihe Prime. We're gonna have all our new list and we'll, we'll go at it will have the the higher program sighs. There's to start the year with the exit run raised six billion. So 2022 should should we should be off to a strong start to be a typical seasonality year were, you know, first half a little stronger than the back app and keep fours.

What would be the softest quarter?

Great. Thank you.

You as a reminder, to submit any further questions, please press star one on your telephone keypad. Our, next question is from Sean Wyland at Piper, please go ahead.

Ed thank you, good morning. You touched briefly on the possibility of mandatory bundled payments. Wanted to get your perspective on for your business. Is that a good thing or a bad thing? Considering CMS? My play a greater role as the convener.

Hey John, good to hear from you. Yeah, we ironically had a great call it yesterday. With almost all of our very large bpci, a participants talking, just about this subject and just future the program, Etc. So I've got some good perspective from the field. I would say two things one. We've had as I kind of mentioned on the script great consistent engagement with CMS. They are focused. I would say three fold on the future of the program one.

They want to get more into Specialty Care. And so that's up, you know, Upstream from where we are today, was we operate predominately in the post-acute. And so that's helping to make site of care, decisions on where you're going to get your knee surgery done, or it gets your heart valve replaced excetera versus just the discharge moment. So that's a great opportunity for us. That's everything that we've been doing out in the non bpci, a bundle space. So, that's number one.

Number two, they are looking at and we're having frequent meetings with them about the expansion into chronic condition inclusion, into the bundles as well, which obviously increases potential program size dramatically because a lot of spended associated with chronic condition management and then finally, on the future of mandatory. And we also lump in there. The overlap is a CEO, is another big Focus point for them. I would say that they've been

Assistant that they want, better engagement between a CO.

And bundled payments in the future. So more understanding of attribution and largely, that's because they're focused on a mandatory. And then, I believe this is my speculation, probably involuntary component as well. And I would say, almost all of the big Health Systems we had on and and hospital as pgp groups yesterday on our client Advisory Board. All agree with what I just said, we play the role as convener sometimes and often don't play the role as convenient with others. We're an analytics and data.

And service company that helps you manage the post-acute today. And so the status of being a convener or not is not critical to our future, in the program would be the direct answer to your question. And our model is flexible to work with folks, regardless, who, who is convenient. I think we had a lot of value convening today and have helped. I deeply believe, push forward all the great success that we've seen in bpci a across the country, but we don't view that as a headwind to us. If that

Was to shift in Direction longer-term.

Answer your question. Yes, that does. Thank you. And then you also mentioned in your prepared remarks. The ncqa heat of certification. Is that new? Is that an expansion of the addressable Market? What are your thoughts there? Yeah. Absolutely. Yeah. Great question. Thank you for picking up. One of my clinical quality team will be thrilled. We have a great team there. Jennifer kobzar leader who's really leaned in and taking, you know, that bull by the horns. I would say one of the big macro Trends inside the health plans and this goes to buy.

Earlier comments, the risk in quality and clinical groups have all started to merge together. And many have our clients. You're like, Hey guys, you're in hundreds of thousands. If not approaching a million of our members homes. We need you to be doing more. And so, the quality teams have really leaned in and we've worked in concert with them, to start to bring in more quality Centric, gaps in care device, you know, work into the home. So just to be clear all a lot of that work has

nothing as I mentioned before to do with risk adjustment, but it's more focused on gaps in care, closure Etc. And so we want to do that at the highest possible. Standard ncqa obviously is the Platinum standard in the industry. So it's helping us get heated certification and other work and we're doing this in concert by opening up. This totally new Avenue of doing more of this gaps in care closure inside the home. Some plans are even pushing us towards just gaps in care visits into the future with different populations.

And so it is an expansion opportunity, Sean and one that we're very excited about.

Awesome. Thanks. Kyle.

Yep. Good to hear from you.

Call. Nice question, is from Matt LaRue at William? Blair. Please go ahead.

Yeah, good morning. One of the things like management. How much is that? You see is capabilities that you feel you have today, but maybe just need to figure out payment structures versus capabilities that you could expand to either group in our technology development or Ma.

Yeah, good question, Matt.

I would say it's on Med management, chronic condition management. We have great capabilities today. So I'll touch on those two first. So, on the med side, the largest percentage of time we spend in the home is Helping Seniors understand their medications and it is, it's frankly frequently a mess. Right? They don't understand. The pills are taking metal met interactions. This pill makes me nauseous. And I, you know, don't have enough money to afford food necessarily to eat with this type of pill, like the doctor recommended. So working through all that is such a big

Big part of what we do. The plans also have comprehensive many reviews, MTM services and connection back to their PBM workflow. We're in talks of expanding into all of that. Given that great Rich really golden medalist that we're producing outside of the home with all of the surrounding social Financial, whatever, they may be issues. So we are in the catbird seat. I think to make a real positive impact for seniors to get their meds cleaned up once and for all. And this is a

Across the senior population today and I think signifies in a great position to make a positive impact there. So that's well, under way, we've been doing a lot of work there and it's been will be a great expansion opportunity for us next year, on The chronic condition management side. It's a big Synergy between the two businesses. And so what we've been building out for years. Now on the episode of Care Division is the ability to manage chronic conditions for a period of time to get them back in, check right with clinician social workers, you know, all of

the patient identification work we do. We are now wanting to bring that capability set more into the home. And so we already do all the identification work obviously on the chronic condition. What we want to push forward into, we're in talks with, you know, numerous plans on how to Pilot best pilot. This is to go in and pick diabetes, chronic heart failure. Some of these conditions that really are playing in seniors and making a positive impact connecting the back to caregivers taking on some risk ourselves as a part of that so that I would say that's more in the pricing figuring out.

To do the Met economically and Actuarial analysis, and remote patient monitoring front. We're doing a lot of that today, telephonically. And so we as a part of our transition to Home Services were spending a lot of time, engaging and making sure that we're monitoring folks remotely. I think there's an opportunity to expand our device in time or passive remote. Patient, monitoring. Excuse me, work inside the home as well. CMS recently approved a pretty dramatic expansion of deeper.

Service billing on the RPM side remote patient monitoring side. That's an opportunity for us obviously is bpci as a big fee for service population. But I think that the Medicare Advantage plans are leaning in here too. And we're again we're in a great position to activate and to Monitor and provide following Services as a result of that region, the home. So we're pretty excited, you know about that roadmap. And and I think that, you know, as I characterized earlier, what are the plans asking us to do more of it?

Into that.

Bucket of work, I would say more than anything. The final thing that you'll see continued, you know, Innovation from us. We're spinning up a team that's focused just on deeper connection back to Primary Care and to specialist out of the home as well. And so, we've been doing that for years, but we're now wanting to dig in more using our court data platform and assets to push information via our fire apis push digital scheduling and we view ourselves as a big. Activation Hub to really get folks more engaged.

Their care and I the plans are super excited about that Innovation from us as well and getting folks back to, you know, their care providers. It lowers readmissions. It allows them to have more happy healthy days at home, which is our mission, and it's something that we're laser focused on next year as well. Thanks the question, Matt.

Yeah, thanks a lot cow. That's really helpful. What they want us off from your comments. You mentioned that the ihe strength this year. Next year is related to, you know, not to share taking but but more movement from in-house volume and I'm curious, you know, the oig report perhaps with an applicable to you and the services you provide before wondering. If you think it's changed, the thought process, or kind of the risk calculus is pairs are going through as they consider in-house versus third party.

Yeah, I think I think that it's it really plays into this arm's length, you know, moral hazard thing. They, you know, you want to have a completely independent, highly compliant, 99% plus audited and, you know, partner to help you deliver these super critical services and and number one, number two. I mean there they. We have the best data asset and the best Logistics and routing platform to be able to pull this off at

Scale, and they're consistently seeing this. And we saw several of our large and medium and small clients, expand their programs. Number one. So move this two more members because they're seeing all of the benefit of positive outcomes to those members. Number one. And number two. We saw the sun setting and move away from several in Source programs. And so, I deeply believe we have no real risk of in, in source, which is

As always, you know, something that folks say, inside payers Services businesses, why wouldn't they just insource themselves? I think our prepare clients. We have extremely strong relationships with them and it would be nearly impossible. I believe for them to stand up Nationwide scale like we have and so, it's been fantastic. Instead conversations focused on. Hey guys. We need you to do more in the home. Like we want to drive more of an impact, and as I've kind of mentioned, you know, extensively in the call. We want deeper and deeper engagement from you all. Because you've got a really trusted

Ship with these folks like what's more trust than allowing a clinician to come inside your home right and spend you know an hour with you trying to solve some really complex health problems and there's more work we could be doing on benefit explanation and connecting them to, you know, other programs that the plans are running and pushing forward on the supplement of benefit side. To is something we've talked a lot about. And so I do think we're going to continue to see an expanded Tam by the moving into, as I mentioned medic.

Jade and Commercial and touching more and more. Medicare Advantage. Lives number one, but number two, I we see no risk in the foreseeable future of insourcing and in quite the contrary, folks are leaning and more than ever and asking, signify to do more than ever to make a positive impact on these individuals lives were touching.

It makes a lot of sense. Thanks for all the

Great detail cow.

Thanks, Matt. We appreciate it.

It has we have no further questions on the call. I will hand back to Kyle to conclude.

Dude, thank you all very much for a wonderful quarter, and thanks to the whole team for leaning in. It's been amazing to see us dive into more homes. As I mentioned, expand our services. We're very bullish on the expanded program size and seeing episodes continue to drive positive outcomes. Both for the bpci, a population, as well as the episodes of care, the non bpci population. Thank you all very much and I will talk to you guys all soon. Take care.

This concludes today's conference call. Thank you all for joining. You may now disconnect your lunch.