Q3 2021 Evolent Health Inc Earnings Call
Welcome to Everland Health earnings Conference call for the quarter ended September 30th 2021.
As a reminder, this conference call is being recorded.
Your host for the call today is Mr. Seth Blackley, Chief Executive Officer of Everland helps.
This call will be archived and available later this evening and for the next week via the webcast on the company's website in the section entitled Investor Relations.
Here's some important introductory information. This call contains forward looking statements under the U S Federal Securities laws.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.
A description of some of the risks and uncertainties can be found in the company's reports that are filed with the securities and Exchange Commission, including cautionary statements included in the current and periodic filings.
For additional information on the company's results and outlook. Please refer to its second quarter News press release issued earlier today.
As a reminder, reconciliations of non-GAAP measures discussed during today's call to the most direct comparable GAAP measures are available in the company's press release issued today and posted on the Investor Relations section of the company's website IR Dot Avalon health Dot com.
And the 8-K filed by the company with the SEC earlier today.
At this time I will turn the call over to the company's Chief Executive Officer, Mr. Seth Blackley. Please go ahead.
Thank you and good evening, I'm, Seth Blackley, Chief Executive Officer of everyone's health and I'm joined by John Johnson, Our Chief Financial Officer.
I'll open the call. This evening with a summary of our recent results, including an update on our key investment themes, which are one strong organic growth.
Two expanding EBITDA margins and three efficient capital allocation.
Next I'll share highlights on innovations across the business I'll, then hand, it to John to take us through a more detailed financial review of the third quarter results as well as provide fourth quarter guidance.
Those are the summary of our key focus areas as always we'll be happy to take questions at the end of the call.
We have shared a summary of our quarterly financials and highlights for your reference in the presentation available on the events section of our IR website.
Health Dot com.
In terms of the financial overview and results for the quarter total revenue for the quarter ended September 32021 was $222 $5 million.
Adjusted EBITDA for the quarter ended September 32021 was $13 $8 million.
As of September 32021, we had a total of $14 7 million lives on the platform.
<unk> approximately 3 million lives on the performance suite plus an additional 11 7 million lives on our new century health technology and services suite platform.
Overall, we're pleased with our continued momentum on organic growth and earnings power and we are raising our guidance across both revenue and adjusted EBITDA for the year.
Turning to an update on our three investment themes are revenue result represents year over year growth of 36, 3%, which excludes divested assets as we continue to deliver on our first investment theme of strong organic growth.
Today, I'm happy to announce three new partnerships, bringing our total this year to 10, new partners and exceeding our target of six to eight new partners.
We're pleased to announce that wound care partners continues to grow its ACO network.
And has entered into two new agreements with Sunflower Medical group Medical group based in Kansas City, and Northern Medical Group, a medical group and the state of New York.
Together with the two provider groups announced in August.
Care Partners network on January one 2020 to already be expanded by over 200 providers, a 20% growth from current levels with the opportunity to add additional partners before 2022.
This strong growth is driven by I won't care partners demonstrated ability to increase physician compensation and help providers deliver better care not more care.
These drivers will continue as we expand into new markets and with new practices in 2022.
Additionally, we're excited to announce we entered into an agreement with health, New England, a leading not for profit provider owned health plan to utilize our new century health vital decisions platform.
New century through our vital decisions platform will be offering it's telehealth and digital solutions to help new Englands Medicare Medicaid and commercial members in Massachusetts and select neighboring states. The partnership went live on October one.
And over 180000 health, New England members will have access to the living well program to work with our advanced care planning specialists, who ensure care preferences and goals of care are communicated to families and medical teams and are reflected in individuals' care plants.
This signing along with the future possibility of further integrating new century health in this geography has been validation for the transaction rationale we laid out last quarter.
Second we continue to deliver on our theme of adjusted margin expansion or.
Adjusted EBITDA margin performance was on track and our adjusted EBITDA results for the quarter met expectations.
Third we remain focused on disciplined capital allocation as John will discuss in more detail, we generated significant cash flow from operations in the third quarter are expecting continued cash generation for the balance of the year and we ended the quarter with a total available cash balance of $191 million.
Overall, we continue to execute on our key investment themes and are encouraged by our strong performance and momentum as we head into 2022.
This momentum is driven by our execution of diverse new business pipeline expansion with existing relationships and a favorable macro environment.
To close out this section I do want to share a little more detail on the macro environment.
Value based care continues to gather significant momentum as an example, CMS recently released a new strategic plan, indicating the administration will be doubling down on the path to transforming value based care.
One objective of the strategic plan is ensuring all Medicare and vast majority of Medicaid beneficiaries are in value based relationships by 2030.
As of today, we already have approximately 730000 Medicare advantage lives on our performance suite and our opportunity in this market continues to expand as Medicare advantage enrollment is forecasted to grow by approximately 8% a year through 2025.
Another focus of Cms's plan is to potentially increase mandatory value models within the fee for service Medicare program, which would likely present opportunities for Avon care partners and new century health.
If not more importantly.
We believe private payers will continue to turn to value based models and primary and specialty care to solve longstanding cost and quality issues. For example, oncology cost trends for payers exceed 10% annually and the F. D. A pipeline is filled with high cost oncology therapeutics, creating an ideal macro.
But for the expansion of new century health.
These trends are strong tailwind for everyone and we feel well positioned to play an ongoing role in this important transformation in health care.
Turning to the next section I'll provide updates on our three solutions our growth and profits are a direct result of the value we create in the form of higher quality care.
Or outcomes and lower costs in these three solutions.
A core part of our capital allocation strategy is to continually innovate in these three focus areas, making sure we're delivering on our mission. Let me give you a few examples of this focused innovation.
First in our specialty solution area, New century health, it's not an exaggeration to say that billions of dollars are poured down the drain each year in the form of drug vials that are opened but that are eventually discarded.
Money could've been spent treating their patients for.
For example in 2018 close to $80 million was spent just on discarded units or herceptin, a breast cancer drug that could have covered the Medicare spending to treat close to 2000 additional women with herceptin.
Address this issue new century developed a new program that automatically rounds therapeutic doses to the optimal amount within clinical guidelines based on detailed review of literature, often creating opportunities to optimally treat a patient while opening one fewer vials of therapeutic.
This dose rounding module has the effect of reducing waste lower in clinical toxicity and lowering costs for our partners and their patients. We recently went live with this product module with both Centene and Humana. We're also happy to report that the acquisition of we'll have decisions closed on October one and is now part of the new century health organization.
We.
We believe the combination of vital decisions member engagement ability with new century health physician engagement ability will increase the breadth and quality of service, we deliver to our partners and their members.
Again, the partnership with Health, New England is a great early indicator of vitals growth momentum and while it's still early we are excited to welcome the talented vital team to the Avalanche family.
Next I'd like to share a bit more about the innovation going on in the total cost of care section of our clinical solutions segment of our care partners.
As a reminder, we launched this solution in 2019 with a simple idea to use the capabilities and expertise we developed over the last decade, and which are made available on a fee basis to everyone's health services to enable independent primary care physicians to succeed through our primary care risk model through this.
Evolution definitely care partners, we have the opportunity to serve a much larger market.
At higher margins by directly managing the premium dollar and everyone care partners.
As well as positioning ourselves as an ideal partner for independent primary care physicians looking for a risk arrangement.
Two years in we're very pleased with our early progress in September CMS announced the results for our first year of operation results. The places I won't care partners among the top 10% for first year scaled acos in the history of the ACO program.
The business is built on three principles first opportunity in primary care as large or approximately 500000 primary care providers and just under half are members of smaller independent practices.
Second based on our experience in value based care, we know what works and we focus only on what works are proprietary panel insight solution a module of identify prioritize interventions for care managers and physician practices.
<unk> interventions are one instance of how we drive efficiency for our partners. For example, everyone care partners recently completed a campaign to support our primary care providers in Kentucky, and more annual wellness visits for patients.
These wellness visits came at no cost to patients and had been shown to have positive effects on quality preventative care and chronic condition management.
In the first three months of the campaign led to a 22% increase annual wellness visits based on our experience. These visits are critical to maximizing quality of care and building the foundation for trusted long term relationships between patients and primary care physicians.
This relentless focus on efficiency and maximizing quality of care means that for each dollar invested in directly operated care partners, we delivered $7 of savings in year, one in the form of savings to Medicare increased compensation to physicians and of what profits. We believe this efficiencies.
Highly differentiated at national scale.
Based on our experience over many years of operating Acos the savings rate should increase meaningfully over time for example, our third year of operations with our partner Acos served by the Avalon Health services fee model resulted in an average savings of six 9% as compared to three point.
8% in the first year for Avalon care partners.
This expected evolution could create tailwind in both physician compensation and profits.
Third we grow by affiliating with providers. Its affiliate model means providers can partner with us without giving up their practice changing their system with other unique undue burdens and it means we can grow without significant capital investment.
Overall, its model produced $21 million of gross savings for performance year 2020 for approximately 55000 members today. We have 90000 members with continued growth already contracted for next year.
This growth combined with expected year over year expansions in the savings rates, yes, definitely care partners strong momentum headed into 2022.
Finally.
Everyone Health services continues to provide unique value to health plans and risk bearing providers by coupling our clinical solutions with our end to end administrative solution.
This clinical platform is the same that is deployed in ethylene care partners with powerful results.
T O supported by Avalon Health services in 2000, Twenty's save a total of $106 million and Medicare programs. We believe this technology when integrated with our administrative solutions makes everyone health services, a leading platform for health plan operators and risk bearing positions.
We've been busy in this segment this year driving strong results for our existing partners and implementing our previously announced health plan partnership go in live next year.
We expect this important partnership to support 200000 lives across multiple geographies as we provide our proprietary technology platform identify as well as a broad array of other services. This partnership will have P. M. P inn's consistent with other broad everyone health services relationships.
And importantly, as upside as the planned expands actually.
Further everyone Health services continues to provide important integration value across several supporting both everyone care partners and new century health through technology services and cross selling opportunities.
Overall, our decade of experience, leading the market in value based care, coupled with our clinical and technical innovations are major differentiators for everyone.
We believe our unique solutions deliver improved health outcomes, while lowering the cost of care.
It continues to be a growing focus of the market.
We head into 2022, we're seeing strong momentum as our solutions are delivering differentiated performance for our partners and we have very good traction with new partners I'll now turn it over to John to give you more details about our financial performance in the quarter as well as to provide guidance.
Thanks, Seth and good evening everyone.
Our financial results for the quarter delivered on all three of our strategic goals with strong organic growth profitability and attractive cash flow.
Let me say a bit about each before walking through our results by segment and ending with guidance.
Our revenue year to date is now 35, 6% higher than it was for the same period last year, excluding divested assets demonstrating our consistent track record of growth since 2019 with a CAGR of about 34%.
At the end of the quarter, we had $14 7 million members on our platforms and with the addition of vital decisions on 10, one that number now exceed 17 million.
Our profitability in the quarter was strong, particularly in our clinical segment and driven by shared savings for our Evelyn care partner solution let.
Let me comment briefly on how these shared savings translate to profit to Avalon and I'll reference page seven in the presentation.
In 2020, we created $21 million of savings or about $32 per member per month across 55000 lives.
As Seth mentioned earlier, there's 55000 lives has grown substantially and we would expect the $32 per member per month savings to also grow over time, creating the opportunity for revenue and earnings expansion each year.
Of those savings Medicare keeps the first 25% and we recognize the other 75% is revenue per element care partners.
We then share a portion of the savings after operating expenses with the physician and the network and the rest becomes implement profit.
The revenue in the shared savings models is recognized on a delay as we receive and analyze data on our performance. The bulk of the revenue recognized for that solution in Q3 was for performance year 2020.
We expect this seasonality to persist into next year, leading to elevated clinical solutions revenue in Q3 versus other quarters.
Cash flow in the quarter was strong driven by our EBITDA result, and cash from timing of working capital and we ended the period with $191 million in available cash excluding cash held for passport.
Cash deployed for software development and purchases of PP&E was $7 million net.
Net debt, which we define as the face value of our convertible notes less available cash was $125 4 million at quarter end, resulting in a net debt leverage of two <unk> versus LTM adjusted EBITDA.
As we look at our balance sheet over the next two quarters I would note three main items outside of normal operations first we deployed $42 5 million in cash and our purchase of vital decisions on 10 one.
The $27 million and remaining 2021 convertible notes will mature this December and the holders of those notes may choose either equity conversion or a cash retirement.
And third we expect the payment to us of $23 million in the first quarter of 2022 for the second half of our earn out payments for passports membership.
Now let me take you through consolidated and segment specific results before ending with an update on guidance.
Total revenue of $222 5 million in the quarter represents a decrease of seven 1% year over year more importantly revenue less divested assets at $218 9 million increased 36, 3% from $165 million in the prior.
A year due to growth from new partner additions as well as same store sales growth.
Adjusted EBITDA of $13 8 million was consistent with the same period of the prior year on a lower revenue base. The result of our margin expansion trajectory.
Turning to our segment results within our clinical solutions segment revenue in the second quarter increased 13, 9% to $159 6 million up from $140 1 million in the same period of the prior year <unk>.
Excluding revenue from divested assets clinical solutions revenue grew 51, 3% Q.
Q3, adjusted EBITDA from clinical solutions was $23 9 million compared to minus $1 million in the prior year. This strong EBITDA performance was largely driven by shared savings timing at Abilene care partners with performance at New century health remaining consistent relative to performance during the first half of the year.
Looking at the year over year comparison clinical solutions EBITDA in the same quarter of 2020 was impacted by elevated new century health costs related to Covid.
Membership in our performance suite for clinical solutions was $1 5 million relative to $1 6 million in Q3 of the prior year with a P. M. P M a $34 16 versus.
Versus $29 92.
Membership in our new century health technology and services suites for clinical solutions was $11 7 million relative to $4 9 million in Q3 of the prior year and with a <unk> of 36.
Versus 41.
Q3 of the prior year.
The <unk> decline was in line with expectations consistent with strong growth in Medicaid and commercial membership, which has slightly lower P. M. P M than Medicare advantage.
Within our Evelyn Health services segment third quarter revenue decreased 36, 8% to $63 3 million, excluding revenue from divested assets Evelyn Health services revenue grew seven 8%.
Membership in our performance suite for Evelyn Health services was $1 6 million relative to $1 8 million in Q3 of the prior year with the PMT M. A $13 19.
Versus $17 64.
Adjusted EBITDA from our Everland Health services segment for the quarter with minus $3 4 million compared to $24 6 million in the prior year.
This segment EBITDA was driven by two factors.
First core Everland health services EBITDA was consistent with the first two quarters of the year with continued strong execution.
Second as a part of our sale of passports assets last year, we are eligible for an additional performance payments for 2020 based on plan operating results.
Our original estimates of this amount was $13 million to the positive based.
Based on updated run out of claims we are moving that estimated accrual to positive $5 million.
Each had an overall negative $8 million impact on the quarter.
With well over $100 million of capital returned to date, we remain pleased with performance at passport and they're on track to meet or exceed the high end of our estimates on capital return.
Finally, corporate costs decreased 31, 6% to $6 8 million down from $9 9 million in the same period of the prior year.
This decrease was the result of continuing to execute on our commitment to reduce overhead while still delivering strong operational and clinical performance for our partner organizations.
Turning to guidance, we are pleased with our progress against our financial objectives for the year.
We now expect total revenue for the year to be in the range of $884 million to $900 million. We are forecasting full year adjusted EBITDA to be in the range of $56 million to $60 million.
For the fourth quarter, specifically, we are forecasting total adjusted revenue of 225 million to $240 million and we are forecasting total adjusted EBITDA of $14 million to $18 million with that I will turn it back over to Seth.
Thank you John.
I want to close with a few words on our organization.
First across the organization, we're excited to kick off our fifth annual season of giving program or.
For the next two months, everyone carves out space for employees to reflect celebrate and give back.
Through this tradition community engagement philanthropy and social impact have become a part of our collective DNA culture.
Giving back to our communities is a natural extension of <unk> commitment to improving health equity and social equity in the communities, where we live and serve.
Second.
I am proud to report that our employee engagement scores remain at an all time high of approximately 90% and we have had employee retention rates that are consistent with our last few years of approximately 87% EBIT missed a strong labor market.
And finally.
I'm thrilled to welcome Doctor Tuesday, So Tuesday, the CEO of Blue Cross Blue Shield of North Carolina to our board of directors.
<unk> adds a wealth of experience and important diversity to our board.
In summary.
We're very proud of the value, we're creating for our partners and our communities.
And we remain confident in the execution of our investment themes are one driving strong organic growth and achieving our mid teens growth target to <unk>.
Scaling the business to drive enhanced margins and three efficiently allocating capital.
Thanks, everyone for participating in Tonight's call also before we open the line for questions I want to directly address the recent speculation regarding the company.
I'm not going to comment on market rumors what I will say is that we're open to all paths of maximizing shareholder value.
Our board and management team have been committed to maximizing shareholder value since day, one and this will continue to be our top priority.
With that we'll open it up for Q&A.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question please press star them to.
At this time, we will pause momentarily to assemble our roster.
And our first question will come from Ryan Daniels of William Blair. Please go ahead.
Yeah. Good evening, Thanks for taking the question and congrats on the continued momentum in the business I wanted to talk a little bit more about vital decisions now that that has closed and have started the integration process I'm curious what kind of conversations you're having with your existing customers, especially on the new century health platform, obviously, a lot of synergies there.
With that patient base and several of those disease categories and advanced planning. So I'm curious what early feedback has been or what the pipeline is looking like since the deal closed.
Sure Ryan Thanks, a lot.
<unk>.
I would just say in general the feedback has been very good we've talked to most of our existing partners and obviously lots and lots of other potential partners out in the market about the opportunity for integration and I think the biggest thing Ryan that stands out is just the fact that over 50% of the.
End of life opportunities are around oncology and cardiology and so there is such a high overlap with the work that we're already doing it's just a very natural conversation. So that's kind of 0.1 0.2, just validation that there is incredible.
The challenge here for families for patients for oncologists cardiologists, and other treating physician to pinpoint right that is not being very well solved today by the solutions in the market. So there's been a feeling of thank goodness you brought this up.
We're interested in talking about it and we'd like to talk about it and if you can integrate it with what youre doing because of the overlap that I just mentioned.
That is fabulous and so that's those two themes have been the main two that we.
Here, a lot I'd say, probably pleasantly surprised by how those conversations have gone that have.
Further validated the thesis we had coming in and it also just feels very good right now obviously, we just closed.
Few weeks ago and lots of work ahead, but right now it feels like it's off to a very good start Ryan.
Okay. That's helpful. Then.
As we think about the 10 new partners, obviously nicely ahead of your guidance of six to eight for the year I'm curious if that's just better conversion or quicker conversion of the pipeline, maybe just more opportunity of shots on goal given the broader product offering or if you've pulled forward. Some partnerships that you would've anticipated might have closed.
2020 into 2021, so how do we think about that and then the current status of the pipeline as we look at the potential for 22 sales.
Yeah.
Another good question look I think it's a combination of a number of different factors in terms of the products are creating differentiated value. Ryan I think the teams are doing an excellent job of pulling staff are focused and are executing at a very high standard.
The macro environment is really good. So those are those are the main factors there is a little bit on mix too right.
How many of them are formidable and care partners versus how many of them for new century, EHS and that matters, a little bit too in terms of how many you might see in a given year that obviously, we had a few more this year than a handful more from <unk> care partners and maybe in the past, but generally speaking I think it's just things are firing on all cylinders and things are going well.
<unk> and.
I wouldn't say that we've pulled something forward from next year, that's really not part of part of whats happened in the remaining pipeline that we have to run after for the rest of this year and into next year as it has done a really good place.
Okay, that's great and then.
Just on the margin front, obviously, a good performance, especially given the.
Revenue declined year over year.
Given the divested assets I'm curious if you could remind us kind of what the plant as a blueprint going forward I know you've had some <unk>.
Restructuring in.
Synergies that you've achieved there also you're getting pretty good leverage on same store growth. So what's going to be the driver in 2022, as we think about the EBITDA performance are there more kind of corporate level.
Energies to be had or is it mostly going to be the strong organic growth shining through driving margin performance.
Hey, Ryan its John Good question.
So you may recall, we have three main margin improvement levers cost improvements the second is <unk>.
And the maturation of our new clinical partnerships that mature over time.
And improving their flow through it.
And third as SG&A leverage and what I'd say this year and then as we look forward. Obviously, we're ahead of plan. This year, our midpoint of our guidance now is 120 basis points higher from a margin perspective than when we started the year. So we feel really good about that large.
That is a result of early capture of the cost savings work.
So as we look at moving into next year.
The the opportunity in front of US is principally driven by the maturation of the new clinical clients.
And by continued SG&A leverage.
Over time, we continue to target mid teens adjusted EBITDA margin by 2024.
And feel good about getting there with.
With the pull forward of the cost reductions into this year, probably the year over year expansion into next year is a little lower since we've captured that already in this year's results.
Okay. That's very helpful color. Thank you so much.
Yeah.
The next question comes from Sean Weiland of Piper Sandler. Please go ahead.
Hi, Thanks very much.
So we noticed that TNT is expanding into some new states for next year is that something that.
That naturally you.
As you go along with or is that a new endeavor in every market.
Hey, Sean.
It's an opportunity for us.
As we may be talking about a couple of different times with that partner and several others. We have a handful of states that were already live in and when we have conversations more at the state by state level to expand and so those will be new opportunities that just make that opportunity to expand their relationship with them bigger.
Okay. So those are.
So that's not included.
Alright.
Okay, and then just follow up on what Brian was talking about if youre at the Ah Ah Ah Ah.
Miranda your guidance range on new partnerships is there.
I suspect that you're not done yet for the year and is there a reason to maybe revisit that guidance.
By the end of the year.
I mean, I would just say in general.
Make a couple of macro comments, Shawn and then answer your question specifically.
We have had a good year the pipeline remains very strong and it feels good both on the new partners as well as same store growth we're.
We're not changing any of the targets or metrics right now for host of reasons, but again, we feel good about where we are as we head into next year in February we obviously give guidance for the full year of next year, but we're not not changing a specific number right now.
Okay. Thanks very much.
Sure no problem.
The next question comes from Charles <unk> of Cowen. Please go ahead.
Yeah, Thanks for taking the questions guys.
Maybe follow up of it obviously strong new partnership wins and when we look at the revenue.
Revenue growth performance, particularly in <unk>.
On the clinical side extra divested assets.
You know is this one of the right range of growth, we should be thinking about as we think about next year because it looks like if we're looking at.
Health services kind of growing in the mid high single digits, but obviously much faster in clinical solutions, maybe help us think about.
Given the partnerships you signed and then maybe similar to all along on the EBITDA performance by segment I understand.
About the.
The savings that are captured but.
Is one more thing about just absolute EBITDA dollars will that be driven more by revenue growth any any kind of color there for that would be great.
Yeah, Charles It's Seth I'll take the first one John can take the second one obviously not guiding today, specifically we've had this very very high growth rate.
In clinical and then to your point you know high single digits on the Ministry side. If you look at the last handful of signings, including the one we talked about a little bit today on the Avalon health services side, which we haven't yet name, but we will in February name.
I would expect into next year and the years after that there wouldn't be such a huge difference in between the two segments I still think clinical will grow really rapidly but.
Those numbers would come a little bit closer together over time, obviously, we will provide more detail headed into next year, but that's a.
A qualitative answer for now and ill pass it to John for your other question yes.
On EBITDA expansion for next year, I think really looking at that in two ways. The first we'll certainly be flow through from the growth.
That we see in next year.
In particular as.
Is that also contributes to our SG&A leverage expansion.
And then second we will anticipate some margin expansion from those clinical clients that went live this year.
It will be a combination of both of those.
Okay.
And maybe just a follow up on your comments about this this accrual for the passport performance that you originally estimated at $13 million or are there any other expected payments related to passport.
Either in the fourth quarter or did that might trail into next year at all.
Yeah. Good question.
Principal one is the other one that I referenced on.
The purchase price side.
$23 million payment for the second half of the earn out.
Those are the two primary items that we anticipate from passport at this time.
In terms of payments and then finally as you know as we continue to run out the balance sheets, we will be able to return the remaining capital that's in the plan today.
Today, I believe at around $35 million.
Back to avalanche over the next several quarters.
And can you just remind me again, what the timing for that 23 million. The earn out is that tied to a certain performance or is that a timing issue.
Just timing and we expect it in Q1 of 2022.
Okay great.
Thanks.
Yeah. Thanks Charles.
Sure.
Again, if you have a question. Please press Star then one and.
And our next question will come from David Larsen of BT I G. Please go ahead.
Hi, congratulations.
The good quarter can you talk a little bit about the vital decision. When I think you mentioned in the press reported 180000 members.
Can you give any color around like with the P. M. P M rate might be there.
And is there an infill opportunity for.
Performance services suite P. M P M REIT increase too.
Period of time will will that.
You know account roll onto the platform.
Yes, sure David I can I can take that one.
I think the first point just generally is that we're excited about the signing of this confirmation for what we knew about vital which is a growing business in and of itself I think as we talked about when we announced the transaction that the really important part of this transaction is about the integration with new century and.
Its tied back to all of those same stats I was mentioning earlier about how much of this is cardio in oncology and the like and that's the big opportunity with vital right and so that opportunity is ahead of us with health New England.
<unk> not put any timing on it but that'll be an opportunity the pn P. M for the initial piece on just vital is reasonably modest if you remember when we talked about.
The <unk> for vital by itself. So the big opportunity is really around the conversion that you are referencing and more broadly if you think about what we're doing with vital.
Very rarely going to be sort of taken the market on a standalone basis and much more is going to be around.
Linking it together with new century, so that's that's where our focus and to your point, that's the big opportunity.
So if I do the math on that 180000 lives.
Let's call it $13 per member per month.
That's almost $30 million does that potential.
The comparable David is the new century health Tech and services suite.
The vital <unk> are around seven eight P. M P M.
But okay, but longer term if you were to convert them to performance service customer.
Yeah, and I think if you were thinking about it on a performance basis, David the potential P. M. P M could be significantly higher than $13 that you referenced on a full full performance basis.
When you think about the new century <unk> there.
Sometimes three or four times as high as $13 that you referenced so that's really the longer term opportunity.
And it's similar to I think last quarter, we talked about the conversion.
In Ohio, with Molina, and what that looks like and that's the kind of opportunity that we're really focused on to your point.
Okay, and then just one more quick one.
Revenue on a sequential basis.
It was.
So a little bit behind what I had been modeling, but the guide for the year was increased at the midpoint.
John did you mentioned there was a revenue headwind of like 8 million in the quarter related to some accounting adjustment.
You are correct, yes, the updated accrual for passport shared savings payments was a revenue item.
So that hit revenue requirement.
And that was for how much <unk> 8 million.
Correct.
So revenue would have been $230 million okay.
Correct, Okay very helpful. Okay helpful and then.
Just my last one when I look at the year over year growth rate in revenue for <unk> of 'twenty, one like last quarter for example.
It was up 42% organically, but reported was 2%.
Is the Delta there passport and lighthouse that are still included in the <unk> 'twenty restated numbers for true health is is excluded is that why we're not seeing that 42% revenue growth rate.
Okay.
So if you look at the numbers in the press release all of those are excluding true health, which is now in discontinued operations.
But we do provide the revenue excluded excluding divested assets, which to your point, our passport lighthouse in Miami children's.
To give what we think is the best representation of the year over year growth of the organic business.
Does that answer your question.
It does so when we look at 'twenty one to 'twenty two when it comes time to basically build our models you've been talking about a mid teens top line growth rate sort of what the <unk>.
He is.
But if you were to say deliver 30% organic revenue growth, we would see 30% revenue growth from 'twenty one to 'twenty two is that correct.
That is correct.
Okay. Thank you very much good quarter.
Thank you thanks, David.
This concludes our question and answer session I would like to turn the conference back over to Seth Blackley for any closing remarks.
Alright, Thanks for everybody's time and look forward to connecting soon.
Have a good evening.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.