Q1 2022 1Life Healthcare Inc Earnings Call
[music].
Good day and welcome to the one Medical's first quarter 2022 earnings results call.
After the Speakers' remarks, there'll be a question and answer session. Please be advised that todays call maybe recorded.
I would like to turn the call over to Ken Golf you may begin.
Okay.
Thank you operator, Hello, everyone and welcome to one Medical's first quarter 2022 earnings call.
Golf head of Investor Relations and I'm joined today by Amir, Dan Rubin Chair and CEO of one medical and Bjorn Thaler, Chief Financial Officer of one medical.
A complete disclosure of our results can be found in our press release issued earlier today as well as in our related form 8-K, all of which are available on our website at investor Dot one medical dotcom.
As a reminder, today's call is being recorded and a replay will be available on our website.
As part of today's commentary, we will make forward looking statements. These statements are based on management's current views expectations and assumptions and are subject to multiple risks and uncertainties.
Actual results may differ materially and we disclaim any obligation to update any forward looking statements or outlook.
Please refer to the risk factors on our most recent annual report as updated from time to time by our other reports and filings with the SEC, including our quarterly reports.
We believe that the COVID-19 pandemic continues to create particular complexity when it comes to providing a forward looking view of the business and we are providing our guidance on a good face to face basis per recent SEC recommendations.
We would like to specifically caution investors that our future performance will be harder to predict for the foreseeable future.
Our forward looking statements are based on assumptions that we believe to be reasonable as of todays date may the fourth 2022.
Information contained in today's statement should not be relied upon as representing our estimates as of any subsequent date.
Of note. It is one medical's policy to neither reiterate nor adjust the financial guidance provided on today's call unless it is also done through a public disclosure such as a press release or through the filing of a form 8-K.
Today, we will discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results.
Historical reconciliation to comparable GAAP metrics can be found in today's earnings release during.
During the call we may offer incremental metrics to provide greater insights into the dynamic of our business. These details may be onetime in nature, and we may or may not provide updates in the future.
Finally, I'll remind you that we closed the acquisition of <unk> on September <unk> of last year, meaning that their results are not included in any comparisons made to the first quarter of 2021 and with that I'll turn the call over to Amir.
Thank you Ken and thank you everyone for joining us.
In the first quarter of 2022, one medical continued to perform innovate and grow with its innovative primary care model built for purpose to delight members with better health better care lower costs within a better team environment.
In terms of financial performance Q1 revenue of $254 $1 million exceeded the high end of our guidance range by more than $4 million for senior health Atmos cure. The medical claims expense ratio decreased by 10 percentage points compared to the fourth quarter of 2021.
non-GAAP profitability measures also outperformed with care margin and adjusted EBITDA, both coming in above the high end of their respective guidance ranges and.
Looking ahead, we continue to be extremely excited about our ability to transform health care at scale across all stages of life for multiple key stake holders including for members.
Employers providers and health networks in terms of numbers. Our total member count grew to 767000 in the quarter up 28% compared to the first quarter of 2021.
This membership count included 728000, consumer and enterprise members up 22% year over year and in the high end of our guidance range. It also included 39000, Atmos members, which was above the top end of our guidance range up more than 80% as compared to <unk> pre acquisition at risk member count from Q.
<unk> 2021, driven by growth from direct contracting a program that began in Q2 of last year as well as Medicare advantage.
With our human centered and technology powered model, we continue to delight. Our members. For example, we continued developing our machine learning models, enabling us to even more seamlessly respond to member inquiries into your test results with even faster response times.
With our senior health at risk care, we continued to see significant improvement in our medical claims expense ratios, reaching 84% in the quarter down a full 10 percentage points sequentially.
As you may recall from last quarter. We showed continued improvements in medical claims expense ratios across all our cohorts of at risk patients on a year over year basis.
We also continued innovating our member experience and care management approach for our most vulnerable seniors through our one medical at home program.
Building upon <unk> previous efforts through one medical at home, we bring together in home care teams in office providers and virtual team members connected through our technology to deliver better outcomes to complex patient.
We leverage our analytic and machine learning models to identify vulnerable members, who could be well served by this intensive model and who on average have nine chronic condition.
One medical at home has allowed us to provide better care, while further reducing avoidable cost and complications for example, compared to matched historical cohorts patients in the program with the highest risk profile had a statistically significant reduction in costs over six months, averaging 26% less spend than non enrollees with its similar.
Baseline spending base.
In addition to delighting our members, we continue delivering outstanding value to existing and new employer accounts, including from national multi market clients.
Is there a geographic footprint grows we continue to see an increase in interest from larger multimarket import a positive validation of our national strategy.
We're also seeing employers further recognized how our primary care hybrid in person and virtual based model can deliver differentiated clinical outcomes and value based care results addressing backlogs of deferred care to prevent avoidable morbidity and costs down the road for.
For example, with a large employer, we've recently further rolled out programs to address chronic disease.
Disease conditions, many of which may be exacerbated by people deferring care during the pandemic.
One such program is one medical healthy heart, which focuses on metabolic and cardiovascular risk and include a risk assessment by primary care provider followed by a series of virtual and in person interactions with a health coach and exercise guide in rolling out healthy heart with an employer, 80% of the participants saw a reduction.
<unk> and low density lipoprotein or LDL also known as the bad cholesterol with 60% of participants experienced a greater than 20% LDL reduction LDL cholesterol is bad because high levels can add to risk of heart attack stroke.
Another program, we recently rolled out with an employer called one medical healthy mind is an expansion of our mindset behavioral health solution set and focuses on mental well being and resilience healthy mind combines primary care visits with cognitive testing wellness coaching and when needed support by a therapist.
Through one medical healthy mind participants at this employer. So on average 52% increase in health confidence scores standardize score that measures confidence and capability and motivation to look after ones health.
Through healthy minded mindset more broadly employers are seeing how one medical can promote employee self efficacy and engagement, which are important steps to improve physical and mental well being.
Given these dramatic improvement level, we are now scaling the healthy heart and healthy mind programs to additional employers. Accordingly, we are demonstrating with these programs just as we've demonstrated with our impact program for diabetes and chronic conditions and our other mindset behavioral health solutions that are differentiated modernized.
Hybrid model of longitudinal primary care can deliver outsized impacts for better health and better value.
In addition to delighting members and employers. We are also transforming health care delivery for one medical providers and staff, we continue to advance our technology team and processes to reduce administrative burdens faced by our providers, allowing them to spend more time focused on patient care, whether working virtually or in person in more markets.
Across the country as.
As we mentioned last quarter when medical was recently ranked by Forbes and statistics as one of America's Best Midsized employers.
Are there more are strong mission driven culture has enabled us to hire more primary care providers in Q1.
In any other quarter ever reported in the history of one medical.
Turning to our health network partners, we continued advancing our partnerships to further AUM the complexity of coordinating care across the continuum of steady on behalf of members and payers and to further deliver value based integrated care experiences.
As mentioned on last quarter's call. We recently entered into a partnership with Hartford healthcare in Connecticut, which will bring us into our 29th in person market.
Additionally, we continue to field further interest from existing and potential New health network partners to partner with us on commercial and senior health opportunities. We also continue to expand our partnerships with more health plans for senior health at risk here, we now have senior health payer relationships in place with nine different Medicare advantage.
Plan with an average of more than four plans per market.
We have also grown our potential for more at risk lives through direct contracting.
All of which together gives us more avenues for member growth and retention in the future. Additionally.
Additionally, we believe we are delivering outstanding results for members and health plan with one of our health plans just noticed notifying US last week that we are a top performer with an equivalent Medicare stars quality rating of four eight out of five stars.
And speaking of that risk, we have been highly effective and ahead of our expectations in integrating I always care management capabilities analytical models technology providers and team into our combined organization.
Accordingly, we believe we are positioning ourselves to uniquely serve every stage of life across the nation under multiple reimbursement models with high quality virtual and in person value based care.
In summary, we are off to a strong start for the year, making impacts for our key stakeholders through a human centered and technology powered model.
<unk> outperformed our expectations in the quarter, reflecting strong execution against our strategic operating plan. We believe we have never been better positioned to serve more people in more markets across every stage of life with better health better care better value and a better team environment now, let me turn it to one medical CFO .
Bjorn thaler.
Thank you Amy.
Everyone joining us on today's call.
Some you discussed one medical today, we reported strong first quarter 2022 results.
It performed on our revenue and non-GAAP profitability metrics.
Continuing to show strong growth across the business.
You are seeing good progress now integration of our commercial businesses.
And we are now positioned to create long term value for our members employees enterprise customers' health network partners.
Overdose.
The highest quality GL did improve health outcomes and helps lower total health care costs.
On this call I will walk through our first quarter revenue drivers.
Discuss our outperformance on non-GAAP profitability metrics.
On our balance sheet and cash position.
And provide commentary on our end.
Outlook for the rest of the year.
I will remind you that would be close to your traditional for you on September 1st of last year, meaning that their results are not included in any comparisons made to fuel this quarter of 2021.
Turning to our first quarter revenue guidance.
We finished the first quarter of 2022 seven.
767000 members representing growth of 28% over last year and coming in above the midpoint of our guidance.
Consumer and enterprise members grew 22% year over year to 720 each.
We were pleased with this performance, which is consistent with the expectations, we had on our last call.
Excluding the impact from approximately 18000 to 25000 makes gene modification members added mostly industrial quarter of last year.
That presents growth of approximately 18% year over year.
As a reminder.
These members by their employers to verify their vaccination status, one medical but have not previously used us fulltime lithia.
Major one in 2022.
Turning to our.
Membership fees.
Finished its water is 39000, Memphis 1000 members above the high end of our guidance.
Then she gets you to actually close in age of 18% compared to the fourth quarter of 2021.
This includes the searching thousands direct contracting members did we discussed on our last earnings call.
Looking ahead.
Keep in mind that we made the decision not to add incremental direct contracting members.
After a year in 2022, and we will instead teach care of these patients on a fee for service basis throughout this year until the next alignment date on January .
2023.
Moving on to revenue.
Total net revenue for the first quarter grew 109% year over year to $254 1 million.
$4 million above the high end of the guidance range, we issued on our last earnings call.
Our growth was primarily driven by the inclusion of our enter this business with Medicare revenues contributing $127 $4 million to total net revenue in Q1.
Just maybe care revenue consists of $124 $6 million you tap your change of the revenue up 29% sequentially compared to Q4 2021.
Given primarily by an increase in.
Mammals.
Also included in our Medicare revenue.
$2 $8 million in fee for service and Medicare revenue.
First quarter commercial revenue came in at $126 7 million $6 7 million above the top end of our guidance and up 4% year over year.
Just kind of national revenue consists of membership revenue of 24.2 million.
A growth of 20% year over year and similar to our growth in consumer and enterprise members.
This fee for service partnership with Avenue.
$102.4 million.
Up 3% year over year.
This modest commercial revenue growth was driven by our strong growth in commercial members and higher than expected reimbursement rates. It was also impacted by year over year decline in Covid related Avenue and by capacity constraints.
Due to providers being sidelined army core values.
Our two year Q1 promotional.
Revenue compound annual growth rate.
It was a strong 27%.
Moving down to P&L medics, the claims expense for the quarter was $105 million.
Relating to an 84% medical claims expense ratio is 10 percentage point improvement compared to the fourth quarter of 2021.
This is despite the impact from the Ali Kahn Valeant.
Can a lead gen and will over the continued impact of Covid infections, you finished here and Mr. <unk> hu ought to Pandemics.
We believe it works.
We are doing to help our members revenge or better manage the indices.
And if we do use avoidable hospitalizations or other people.
Seizures.
Who are purely Dodge mentioned your health status.
US to continue to drive down destination overtime.
Cost of care was $101 4 million in the first quarter up 45% year over year, primarily due to the addition of our senior business.
Continued investments in our peace facing staff.
Ongoing service expansion and opening six new offices into Florida.
Despite skus investments Chia margin came in at a strong 47 point each million dollars.
$2 $8 million above the high end of our guidance range equating to 19% of revenue.
Okay.
First quarter SG&A came in at $119 $5 million or 47% of revenue.
<unk> from 63% in the first quarter of 2021.
Our goal is to continue to show improvements in operating expenses as a percent of revenue as we scale the business and make responsible investments in future growth opportunities.
Adjusted EBITDA came in at negative $28 $9 million into quarter.
One $1 million above the top end of our guidance range driven by our revenue outperformance, while we continued to make purposeful investments in the business.
Yeah.
Turning now to the balance sheet, we ended the quarter with $428 $5 million in cash and marketable securities a decrease of $73 4 million from the end of 2021.
This was primarily driven by $55 $1 million in cash used for operating activities.
Net is about to tackle was the capital he was off $24 $6 million in the quarter, primarily driven by seasonality and the timing of when we receive certain payments.
We also had $19 2 million in.
Capital expenditures over the course of the first quarter as we continue to invest and how would you ignostic expansion and technology.
We continue to believe our cash and marketable security balance together with our ability to moderate our discretionary spending will provide us with sufficient liquidity to fuel our growth.
Now, let's turn to guidance.
For the full year 2022 we are maintaining our guidance range for consumer and enterprise members of 790000 to 810000.
For men.
We are now expecting to land between 41040 3000.
1000 member increase.
Guidance on both the top and bottom end of the range.
We are increasing our 2022 total net revenue guidance by $10 million on both the top and bottom end and now expect to range between $1.055 billion.
And $1.095 billion.
We are raising both the top and bottom ends of our commercial revenue guidance by $5 million to $535 million and $555 million.
And also what do you think the top and bottom end of our Medici has revenue range by $5 million.
The new age being $520 million to $540 million.
Our increased expectations for revenue are also allowing us to raise our expectations for <unk> in 2022.
Now expected to range between $200 million and $220 million, an increase of $5 million on both the top and bottom end of the range.
Looking at adjusted EBITDA, we expect some of the outperformance to flow through to the bottom line, but also reinvesting some of it back into the business.
Such we are raising the bottom end of our range by $5 million.
With the new adjusted EBITDA range expected to be between negative $130 million.
$115 million.
For the second quarter, we expect total members to range between 779000 and 790000 samples.
Consumer and enterprise members I expect it to come in between 740000 and 750000.
And just remember that I expected to be between 39040 thousand.
Total net revenue for the second quarter is expected to range between $255 million and $270 million.
Revenue is expected to come in between $125 million and $175 million.
And Medicare revenue was expected to be between $130 million and $175 million.
Two acute care margin is expected to be between $45 million and $55 million, which implies a margin of 19% at the midpoint.
Adjusted EBITDA is expected to range from negative $40 million to negative $70 million.
Exceeding our revenue and margin guidance as well as continued investments in our people and services.
In conclusion, one medically after a delayed start in 2022, continuing to post strong financial results by growing our membership base employee relationships health networks partnerships and geographic footprint.
We believe that our model of Tiki channels members.
Both in person and digitally.
Both episodic and longitudinally and across all stages of life highlights our ability to support all of our members in whatever way they prefer.
And with that we will open up the call for questions operator.
If you'd like to ask a question. Please press Star then one if your question has been answered and you'd like to room yourself from the queue press the pound key.
First question comes from Ricky Goldwasser with Morgan Stanley . Your line is open.
Yeah, Hi.
Good evening, and and congrats on a good quarter and guidance for the second half of the year I just wanted to get a more context any more color on what youre seeing in the marketplace in terms of.
Poor utilization environment on.
On the on the commercial side and on the legacy one medical and insane for Euro.
Yeah.
Yeah, great. Thank you Ricky and to all of you celebrating made a force to be with you.
But getting to our topic here yeah on the consumer.
Consumer and enterprise side, we're seeing movement more towards I'll call. It a more normalized at primary care utilization experience seeing a decline in the certainly the COVID-19 testing experience.
And progression towards I'll call it more of a normal primary care experience on the.
On the commercial side and on the senior health side the at risk side.
And as we said we were really pleased to see a 10 percentage point reduction in our blended medical claims expense ratio.
We saw some spikes in January due to omicron, but haven't seen those come down and also.
As I spoke about in my prepared remarks, you've done a lot of work in managing complex patient, including real effort on our one medical at home.
Graham, which is a program that had started in the IR days, but we've really built on top of this that risk stratify as our population looks for rising risks very complex seniors and manage them very proactively.
Routine based care, including going into the home.
Okay, and then one follow up we'll get a lot of questions from investors around just kind of like a cash burn and cash position. So if you can just kind of like share with us sort of kind of like your thought in terms of cash position interest.
<unk>.
Sources of how philosophically you think about sort of approach.
Pro tour a capital raise.
Yeah.
So we obviously ended the quarter with a <unk>.
Cash and marketable securities of $428 5 million.
And overall, we feel it would be up.
The capitalized considering our business and also our most goals at this time.
Yeah.
On the last call already we do have several levels.
<unk> to us too.
Moderate our Casper on if that is something that you decided to do for example, we will be always thoughtful about office openings.
Both on the commercial side.
Obviously that is in language that we can pull we can also pull another level alone diavik contracting members.
<unk> decided to exercise our option and not interval dose during the year, but instead, putting them into an entity escalation ship in January of 'twenty suite, instead doors or just some of the things that really are going to help us on the cash side. If there is something that we feel like we need to do.
Probably most importantly.
We continue to make significant strides on just operating and executing in our core business.
We've reduced our medical claims expense ratio by 10 percentage points in Q1 compared to the fourth quarter of 'twenty one.
Continue to create language across our operations, we are continuing to improve our adjusted EBITDA margin.
Negative 18% in full queue of 21 to a negative 11% in Q1 of 2022.
You put it all together and we feel really good about where we are today.
The levels that we have the cash balance did we have the operations and the trajectory and at the same time I'm also certainly dynamically monitor lumpy capital stocks are going forward, and then market conditions and make sure that the maximized our strategic opportunities for long term shareholder call.
Thank you.
Yeah.
Our next question comes from Lisa Gill with J P. Morgan Your line is open.
Great. Thank you good afternoon.
I wanted to dig a little into membership and just get your thoughts on.
Firstly, let's start with the.
Enterprise Ah one medical side of things, we aren't I think last quarter, you talked about you know a little bit longer of a sales cycle. We heard bjorn talked today about the verification that vaccine certification. So my first question would be when we think about the vaccine verification.
One have you been successful in converting any of those members over and then secondly, how do we think about the pipeline conversion when we think about that the commercial market.
Yeah, absolutely and maybe I'll take the first one and then I'll hand, it over to a meal to talk to you a little bit about the pipeline that we're seeing which which continues to be very strong.
On the vaccine verification members.
We obviously are convinced of the value proposition that we have to our members.
Consumer members.
Reminder, they renew with us nine out of 10 times.
Surprise members again nine out of 10 times plus.
So very strong value proposition and we continue to believe that it resonates really really well and I think you see that in our results today.
These members just as a reminder, these signed up with us basically because their employee SaaS usage too. So we are now taking this opportunity to really market to those employees to educate them about one medical and what would be awful and all the benefits that'd be boring, but.
Yes, as we stated earlier at this time, we don't necessarily expect to retain most of these.
I think it will be as frankly as upside relative to two guidance that'd be provided today.
Yeah, and I was in Jama.
In terms of the on the on the commercial side on the enterprise side.
We feel great about our positioning.
We've never been in more kind of conversations with larger and larger employers being invited.
To engage with them.
And that's partly due to R.
Our growing multi market presence and so we think that's very powerful and again those those conversations may take longer if they are larger and larger employers but.
We believe we have just such a differentiated approach here, it's not a single point solution as.
As we talked about today, it's a longitudinal primary care, it's helping on heart health and managing cholesterol and managing not just behavioral health, but.
Overall resilience or as we've talked about in the past at showing we can take down the cost of care as well so we feel.
Great about the commercial pipeline and the opportunities there and the conversations that we're having.
And then just to follow up on that I, just want to understand though we've heard from others that employers still are somewhat focused on getting people back to the office. Obviously, we've already had the vaccine verification they're focused on some other things do you feel like the environment is any different it'll be like the first part of my question and then secondly, when we think about kind of the things he talked about to say like health.
The heart healthy mine.
Is there an incremental P. M. P M caused an incremental cost to the employer for that are that concluded in the current membership dollar amount.
Yeah. Thank you Lisa I'll start with the latter that's included in our current program. So we're just extending kind of the capabilities and reach in our program. We have other things for cardio metabolic disorders.
Diabetes sleep. So these are really addressing the needs that employers and employees are seeing.
Sometimes exacerbated by deferred care, sometimes as much as a couple of years of deferred care. So.
These are just more and more proof point that we can add to our model right. We were good in times of kind of the.
The crunch of the pandemic and help there but were also great at addressing longitudinal care and again. This is largely due to the fact that it's not point solutions right. It's not flavor of the month, we can integrate and we can do whole person care. So in that regard.
We're seeing great enthusiasm in conversations from our perspective for our organization with with employers and like I said.
Never had more with the larger and larger employers that's really been.
A great area of additional conversations and growth.
Thank you for the comments.
Our next question comes from Daniel gross like with Citi. Your line is open.
Hi, guys congrats on the quarter and thanks for taking the question here. It seems like you've been managing your clinical cost quite well, which is little bit different than what some of the large health systems have been saying in one queue.
Particularly with some of their nursing staff some.
I'm curious if you're seeing any wage pressure within your staff, particularly.
Her says.
And how you're managing through those pressures.
Yeah. Thanks, Daniel good to hear from you yeah. Unlike the major hospital systems or.
Our model is not a nurse heavy model.
In terms of staffing, even though we have fantastic nurses and we do use of nurses, but that's not a major component.
Component of our staffing so I'd say that that's different we're obviously not immune to what's happening in the economy and in looking at salaries, but again not not really seeing that in particular.
And again, the nurses are not a major.
Group that we use in our staffing models.
Yeah, but I guess kind of broad or are you seeing any wage pressure within your clinical care teams, whether it's providers are.
Even intake folks.
Yeah, I'd say on the provider front as we mentioned we've never hired more providers than in Q1, and we feel we're well positioned obviously, we have to keep tabs on what's happened market by market, but I think we're.
We're keeping tabs on that and then across other positions, we certainly have to be competitive with the market, but I'd say nothing outsized and certainly all of these things are factored into our our projections in our guidance.
Got it Okay, and then just on the Medicare side of the business you saw a nice uplift in P. M. P. M zone on the capital side I calculate around a 16% sequential increase in capital P. M. P. M. This quarter I just wanted to get your thoughts on.
The reason for that that uplift this quarter and how we should think about the cadence of P. M. P. M for the rest of the year.
Yeah. So I think a couple of seeing sort of going on here.
Obviously in many ways just to sort of in New York right.
A lot of the default killed the pent up demand that you saw last year is sort of starting to make its way into a into reimbursement rates for this year. So that's definitely something that that'd be we're starting to see.
Yeah.
Cohorts that we have continued to mature.
And I think that's another level of debt that you are starting to see here as well.
Yes, I think took the left of the year.
Obviously, you know we have.
We do we expect to continue to sign up new members throughout the year does tend to come in at a little bit of a low sort of average reimbursement because they do tend to to not be bell managed when they come to us early on so.
We will see a little bit of headwinds you might see for the rest of the year, but really what you are seeing things in many ways is the.
The fruits of the labor that all of our providers and team members have done over the last 12 to 24 months and making sure that we take good care of our existing members and as they mature and as their documentation on them getting used.
You start to see that uplift.
Got it thanks for the color.
Our next question comes from Jessica Tucson, with Piper Sandler Your line is open.
Hi, Thank you so much for taking the question. So just at the midpoint of guidance I think it's implying that consumer and enterprise membership is a little skewed towards the last three quarters of the year. So just interested if there are any sort of specific deals to call out and what the reasons might be for that that is somewhat back half weighted strength. Thanks.
Yeah, I don't think any particular thing.
To call out in general, but certainly as we get towards the end of the years and head into the beginning of kind of benefit cycles for certain employers that that's certainly times, where we tend to add life.
<unk>, particularly in the larger employers, but we feel great about the performance growth of 22% year over year and in the top half of our guidance range and as I mentioned before feel really positive about the conversations that we're having with employers, including with multimarket and larger and larger employers. So.
I'd say overall that that's positive and and again just to some of the points I mentioned before I think employers are looking to us as a great benefit that can really differentiate on the recruitment and retention, but also is a great benefit that can help manage the cost of care you know we've mentioned in the past.
This is the study that we published in Jama that showed we took out 45% of the cost of care and we've also mentioned in the past the study that shows we have.
Approximately twice the average impact on reducing blood sugar for diabetes patients living in from uncontrolled controlled.
As today, we talked about with a healthy heart program reducing.
Bad cholesterol on 80% of patients we've.
We've talked in the past about the mindset impacts.
Reducing anxiety and stress greater than <unk>.
50% and today talked about healthy mind, increasing basically people confidence in their ability and resilience to take care of their health and their motivations. So I think all of that portends well for our positioning.
You know.
Going going forward. So we feel we feel really good about it.
Thank you that's helpful. And then just a quick follow up can you just remind us of the seasonality dynamics around medical cost ratio within the Medicare population and it does tend to be the low watermark, where do you kind of.
Stop loss insurance dynamics kick in and around the fourth quarter, what do you expect that to look like.
Each quarter of the year. Thanks.
Yeah.
I think yes.
Obviously lots of lots of valuable and here, including variance in terms of Covid.
Net.
Could cause some sort of near term fluctuations here, but generally speaking we would expect a slightly higher.
Medical claims expenses in the fourth quarter of a year.
And slightly lower ones over Q2 and Q3.
However, it's probably not something that is going to be super pronounced but.
That's probably what you can expect.
Thank you.
Yeah.
Our next question comes from Sarah James with Barclays.
Your line is open.
Yeah.
Thank you.
And as you guys are starting to expand your product offering adding some of these cardio and behavioral aspects is it changing your conversation at all with payers with respect to.
Value based care or where the relationship may go in the future.
Yeah. Thanks for that Sara I'd say, absolutely and in a real positive sense I think what people are seeing is that we add multiple.
Multiple benefits for for employers for payers.
We're a great tool to recruit and retain and as we've said in the past.
We have 40 plus percent activation when we rollout of an employer and we've also shared in the past that.
85% of companies now offer us to dependent.
Also just talked about and per your question Sara the clinical impact that we can have whether it's diabetes or we've talked about HIV care and for example in New York City zero patients last year progressing in.
In Q4 from.
HIV AIDS ranked number one and so managing complex patient.
<unk> talked about here today, how we are leveraging our one medical at home with their most complex at risk senior patients. These are patients with nine.
Chronic conditions very acute and.
We're seeing the benefits of managing than them intensively and been able to.
Reduced their costs on a matched cohort perspective about 26%.
So I think these are definitely things that payers are recognizing and I think if you step back. It's also because we have a fundamentally different model right. This is not a fee for service kind of Uber staffed kind of model. It the salaried model of longitudinal primary care, where you're not just.
Throw point solutions that problems, but can have integrated coal person solutions and I think.
Certainly health plans payers employers are definitely recognizing.
Those differences.
Great. Thank you.
Our next question comes from Sandy Draper with Guggenheim Partners. Your line is open.
Hi, This is mitchell on for Sandy Thanks for taking the question.
So you raised your full year commercial revenue outlook by $5 million, but didn't change the membership outlook. So just wondering what's the biggest change against what you initially set out thanks.
Yeah, Great question in many ways, we obviously outperformed on our commercial revenue guidance for Q1 and in many ways I'm sort of thinking about.
This will be one of the drivers to just base it for you as well.
Just as a reminder, going into a year when we gave guidance for the full year just about 10 weeks ago, We said that we don't see in office visits.
Two of them.
Quite as fast as we had seen in the past and I think directionally. That's still the case. However, we did see.
Yeah, a meaningful increase in a.
Meaningful return to more normal also utilization patterns in Ma.
Which in many ways contributed to the outperformance that we had in Q1 on the commercial revenue side and we are.
Sort of expecting to pull that through the year.
Great. Thank you.
Our next question comes from George Hill with Deutsche Bank. Your line is open.
Good morning, guys and thanks for taking my I'm, sorry, good afternoon, guys and thanks for taking the question up here and I'm going to ask first the flip side of the question you just answered Rich's I imagined as you've seen the in person utilization pick up I guess I was going to ask could you talk about what you've seen in the telehealth utilization kind of starting from January through.
Maybe the end of March or the end of April if you're willing to comment on that and just kind of what the trend has looked like there from a general telehealth perspective.
Yeah in many ways. It really is the flip side. So we certainly see it shift.
Throughout the quarter frankly back from digital to in person.
Yes, certainly we continue to have.
If fair number of visits that all happening digitally and that's obviously a big denial of our.
Member satisfaction, but we have seen particularly in March probably more pronounced to return to the office so to speak.
And that's definitely a dynamic that we've seen.
Okay and two more quick ones is number one the last time you guys gave formal guidance the environment as it related to Covid was still pretty uncertain.
Because we had on our current kind of just thinking are you guys now seeing COVID-19 is kind of a headwind or a tailwind as you think about 2022, and then a mirror. The one I have for you is there's a tremendous amount of chatter right now in the market about companies looking to bulk up their care delivery capability either through partnership or through acquisition.
Would just love any commentary you'd be willing to share about conversations.
The company is having kind of how it kind of how it thinks about where it is in the corporate lifecycle.
Yeah, I mean on your first question on Covid before I hand, it over to EMEA here.
We.
We at this point.
Don't necessarily factor in meaningful.
Two one off of Covid for the rest of the year so to speak.
We saw COVID-19 related direct COVID-19 related volumes.
This testing vaccines et cetera.
Meaningfully drop off in Q1.
We continue to believe that.
You'll see a little more of Covid dynamics COVID-19 related revenue.
In Q2, but.
We see that.
Diminish.
Now quickly walk through rest of the year in our guidance right now does not assume that that's going to come back.
Obviously to the extent that it does a lot of it is going to depend on the details right.
People are going to go back into testing mode, which all else equal it could probably be a tailwind to us.
Are we going to see more hospitalizations that could be could be.
A potential headwind on the at risk business well, how are we going to go back into lockdown. So yeah. There are many different ways. This could play out in our guidance right now does not assume.
Any meaningful contribution one way or the auto of Covid fortinet over the year.
Yeah, and I think the second part of your question I mean, we're focused on growing one medical and making it into the <unk>.
Default option for health care in the United States and I think that's what.
We're hopefully on the path to doing and growing.
Growing as you've heard today really are great and differentiated model that kind of omnichannel.
Right, if you will right in person and digital.
Can address kind of a whole person's need so we feel great about our positioning and the work we're doing.
I appreciate the comments thank you.
Our next question comes from David Larsen with B T. I G. Your line is open.
Hi, congratulations on the good quarter can you talk a little bit more about the 10% improvement in the medical cost ratio for the Medicare business just any.
Incremental detail that you can give on that like did you tighten up the referral patterns was it largely COVID-19 related I mean COVID-19 activity was high in January.
Just any additional color around that would be very helpful and how sustainable is that should we expect another 10% improvement next quarter effects.
Yeah. Thanks for the question.
We feel great about the work we're doing and increasingly this is a common organization as we've mentioned in the past. We've also begun taking risk and if you will legacy one medical markets and we've been really I think ahead of our expectations on where we are on that integration, whether it's our care management capabilities, our technology and building.
Building out programs like the one medical at home program, which is really.
Built on some kernels that we had in Iowa, but really expanding now.
So we feel that we have really great capabilities.
Built into our technology built into workflows.
That are humming as they've probably never hummed before whether that's appropriately capturing documentation, whether it's using machine learning models to identify.
Which patients are rising risk and so that we can proactively reach out to them to help manage.
Manage their condition.
And also our model it leverages digital and in person as we've talked in the past about about still five five to one ratio of digital to in person on the senior health side say.
We believe that those are great opportunities.
For us I think the impact overall is pretty broad based reduction in hospitalizations, certainly COVID-19 specific costs through the quarter. After spikes in January as we talked about.
And.
We believe we will continue to be able to improve that performance of course as you add new cohorts as Bjorn mentioned earlier, then you have to manage those as well.
But.
As you as you heard today the medical claims expense ratio. If you will part of our care margin assumptions and we increased our guidance for care margin.
<unk> by $5 million, so I think that overall, we feel very good about our work there.
Great. Thanks, very much and then let's say MA rates increased by 4% or 8% one $1 23 will we see a four or 8% improvement in your medical cost ratio will you be able to capture a lot of that from a plant or are they going to keep that.
Well I think a lot of that still remains to be seen on plan benefit design and and and and.
What what ends up flowing through them.
So I think it's too early to say.
Okay, Congrats on a great quarter and well done.
I guess as well so thank you.
Our next question comes from Brian Tim Quillin with Jefferies. Your line is open.
Hey, good afternoon, guys and congrats on the quarter its Jackson on for Brian .
Quick ones for you first just want to make sure I understood Bjorn your your comments around D. C E.
The fee for service patients from the Medicare side there so.
If we look at those those patients that you've elected to go the fee for service route. This year is the thought that those are gonna be claims aligned in 2023, and if so can you give us a number on just how many patients we're talking about.
Yeah.
The way I think about it is we are building you're building a great pool of patients that have experience with our service that have experience with our providers that we have great insights into on what is the at their health status and we are building designation.
Great.
And then certainly as.
Open enrollment comes up as the calendar flips into 2023.
Currently we do expect that that is going to be sort of the the first who will that we're going to go to what you were saying Hey, you have experienced us do you want to join us.
Some of them might be claims aligned others of them might voluntarily align to us and say, yes, you all might pull idle.
And then there are others that might end up enrolling in Medicare advantage plans and still say, yes, but I need you one medical to be to be might collateral.
So it could be a couple of different things, but that's really that's really the vessel wall in many ways that I can go to and say you've experienced thus we work well together, we fit well together.
Let's teach.
H T O viewing if will enter into a model.
Okay got it that's helpful. And then obviously early days you know anywhere only been around.
Less than a couple of quarters here I'm.
With you I'll run through the P&L, but as we look at sort of the broader thesis on.
Some of those members aging into Medicare right and converting over to the IR side is there any commentary you can provide on what that looked like.
Over this this first turn to one 122 and any success you've had with thus far with people turning 65 and electing to go the IRR route.
Yeah, well, maybe a few comments just to reiterate what I've said before we're now one blended company with one blended technology team operation, our clinical teams and that's gone really well.
To.
Increasingly what the IRS either when medical side.
It will be harder to disentangle as I mentioned, we have taken global risk appetite and risk at risk.
In quote unquote legacy when medical so specifically to your question, we have and we believe that's performing well and those are folks who have already aged in or aging in and I think we're still in the early days of this but I think we have tremendous opportunities.
To further grow and age people in from under 65 into Medicare as they turn 65 and in general we manage patients really well as you've seen from the clinical outcomes that we presented through the years here on the one medical side, so, they're well managed well care Ford and positions us very well.
They are.
Potentially agent to at risk relationships.
Got it thanks.
Okay.
Okay.
Our next question comes from Ryan Daniels with William Blair. Your line is open.
Hey, guys, Nick speak out for Ryan Thanks for taking my question I guess.
We have kind of a increase in care margin at the same time you guys are now seeing.
You know more and more kind of in office visits and in office utilization coming up just wondering if you can kind of describe.
That dynamic a little bit provide a little color there.
Yeah, I can start there I think what you're really seeing here is thank you.
The benefit of the largely sort of.
On a fully employed fixed cost model that would be a building here at that'd be built.
So as well.
Volumes come back into the offices.
We are paying our providers only fixed salary basis right its not like some of that to amir's point.
Being paid click fees, it's not like they are being paid on on milk style, we use a lot of sort of.
Volume metrics, so as members come back in as we teach them in person.
We really see a change there.
To some extent demonstrably expansion, that's built into the model here by employing providers by making sure that we do device thing by our members by spending time with them.
In.
Other than having sort of a move in boardwalks type model.
That's really what you see flow through the P&L.
As our revenues increase you'll see that language in the rest of the P&L.
And I would just say circling back around to some of their earlier questions that this shows the power of the model right. We have really high engagement, whether it's across our commercial and population consumer and enterprise or senior at risk population. We can manage patients certainly if they have on demand issues that we can manage them longitudinally we can reach.
Each out to them, whether it's digitally or in person.
And this is why we believe we have such a robust model why we believe we can transform health care because we actually can have really high engagement can make an impact on quality metrics.
Can have people come in and if they need to see src them remotely but have these ongoing relationships.
Yeah.
Great. Thanks for the cargoes.
Yeah.
Thank you. This concludes the question and answer session I'd like to turn the call back over to Amir Rubin for any closing remarks.
Well may the fourth be with you all thanks to everybody for joining us today and we'll see you next time have a great great evening. Thanks, everyone.
This concludes today's program you may now disconnect.
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Okay.
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